What are undercharge claims and how can you avoid them?

I I NDERCHARGES usually surlJ face when a carrier files for bankruptcy and a trustee appointed by the court begins to gather the assets of the business.

An audit of the carrier's freight bills, tariffs and other records may show instances where a rate charged was lower than the carrier's tariff rate. Then an attempt is made to collect the difference between the rate originally assessed and the tariff rate assertedly applicable.

There have been incidences of carriers publishing a clearly applicable rate only later to cancel it unilaterally without notice to the shipper. Carriers also have been known to provide shippers with a copy of a tariff with the appropriate rate and Cate. but deliberately not file it. This nas been used later to blackmail the shipper by demanding huge undercharges when he wanted to change carriers.

Shippers can minimize their exposure to claims by following the following recommendations issued by the National Industrial Transportation League.

(l) When you negotiate a rate with a carrier. insist that you be supplied with a copy of those parts of the tariff that will govern your shipments. Be skeptical of a carrier that resists that request on grounds that there will be some administrative delay in obtaining a copy of his tariffs. The carrier must file the tariff with the Commission before he accepts tender of your movement in order for it to be effective.

(2) Insist that the tariff clearly describe the commodity that you are shipping.

(3) Insist that the carrier expressly specify, in writing, the existence of all conditions applicable to a discount or commodity rate. Questions to which a carrier should respond are whether the rate is restricted to or by: a. Certain origins? b. Certain destinations? c. Single line routings? d. Maximum shipment weight? e. Minimum shipment weight? f. Receipt by the carrier of a letter of participation? g. Shipments where the bill of lading contains specifi ed notations. h. Freight collect shipments? i. Prepaid shipments? j. Specific payor of the freight bill? k. Timely payment of the freight bill?

(4) Evaluate the financial strength of carriers seeking your business by requesting that they provide you with copies of appropriate financial reports. Keep in mind that the likelihood of your being confronted with undercharge claims becomes a near certainty if you have done business with a carrier that later goes bankrupt or ceases operations.

(5) Consider using contract rather than common carriers. However, take care to assure that the service qualifies as contract carriage [49USC 10102 (15) (B)1, and that you have a contract that satisfies the Commission's requirements [49 CF'R Part 1053]. In order to qualify as contract carriage, a carrier must either provide service to you in dedicated equipment or service designed to meet your distinct needs. Contracts must be in writing, must be between the carrier and a particular shipper or shippers, must impose specific obligations on both the shipper and carrier, and must cover a series of shipments during a stated period of time.

(6) Retain for a period of five years copies of tariffs, letters of participation and all other documentation that shows the terms under which you have done business with a carrier, including documentation of any identifying code that a carrier may have assigned to you and which formed the basis of your discount. This is because under the Interstate Commerce Act and the bankruptcy statute, a suit can be filed against you as long as five years after a shipment was actually moved.

(7) Use the resources of the Interstate Commerce Commission. lf you feel that you are being subjected to unfair, harassing or otherwise objectionable collection practices, contact the Commission's Office of Compliance and Consumer Assistance and provide them with the details of your concerns. You can also contact the Commission's Section of Rates and Informal Cases to obtain an informal ruling on tariff interpretation disputes.

Story at a Glance

Ways shippers can avoid being forced to pay undercharges when a carrier files bankruPtcY tips on negotiating rates and defending yourself against fraudulent practices.

If in spite of taking precautions, a shipper should become involved in a demand for undercharges, he should hang tough and ignore the claims,. hoping that he will not be taken to court. Records show that 100% of rill cases referred to the ICC for a ruling by the courts have been decided in favor of the shipper. The theory is that it is unreasonable for a shipper to pay carrier undercharges for shipments handled according to the parties' negotiated rate agreement.

Shippers also should be aware that it is against the law to cut a deal and settle for less than the tariff rate. Anyone suggesting this is breaking the law.