New law defangs freight undercharges

INDUSTRY shippers embroiled in Ifteight undercharge claims won a majm victory wben hesident Clinton signed the Negotiated Rates Act of 1993.

After strenuous lobbying by many organizations including the North American Wholesale Lumber Association and the National Lumber & Building Material Dealers Association, freight undercharge relief legislation is finally law. Building materials shippers will benefit and be protected from future freight undercharges by bankrupt trucking finns, the associations cliaim.

The law will help shippers by voiding any liability for busihesses with $10 million or less in gross sales, and limiting liability for others to 25Vo of the difference between freight cbarges paid and freight charges filed with the IntersCate Commerce Commission (ICC) between 1991 and now.

Liability is specifically waived for claims from 1981, when trucking deregulation was passed, to the 1991 Supreme Court decision that the filed rate was the legal rate. Overall liability will be cut from $30 billion to less thurZ1%o of $3 billion.

Nicholas R. Kent, executive vice president, North American Wholesale Lumber Association, says, "This law represents a gigantic success for shipp€trs."

His organization identifies three critical points:

(1) Designed to fix past wrongs, the law sunsets in two years.

(2) This law in no way deregulates trucking. Trucks are still highly regulated.

(3) The new law more clearly strtes the provisions of contracts used for contract carriers. Contracts such as NAWLA's should be used until the ICC provides guidelines. There is no spot market for trucks.

The stage for undercharge clains was set when Congress deregulated the trucking industry in 1980. As a free market for trucking services developed, many price changes occurred. Although trucking companies were still required to file negotiated rates with the ICC, they often failed to do so.

Trouble for shippers started as trucking companies began to file for bankruptcy. Lawyers representing their creditors focused on the filedrate doctrine. They audited invoices and when they discovered a negotiated ra0e lower than the filed rate, they

Storyata Glance

sent a bill for the difference to the shipper. Although shippers had been billed for and paid in full a quoted rate, they were asked to pay more for "mistakes" over which they had no control.

The ICC ruled this practice unreasonable. After a long, involved legal dispute, a Supreme Court ruling, Maislin Industries, U.S. v. Primary Steel, Inc., basically said the only legal rate that a corrmon carrier could charge was the filed rate. After this decision, trustees representing bankrupt carriers began to send out bills for undercharges even when adjusted rates had been filed. Using technicatities, they argued filed rates were invalid because bankrupt caniers had

Shippers win malor victory with Negotiated Rates Act of 1993 Billions of dollars in liability cut ... difference between filed and negotiated rates waived for most claims. violated ICC contract or credit regulations.

The most significant "technicality" involved shipper account codes. Trustees argued that when an ICC filing didn't list the full, proper name of the shipper, the filed rate was invalid. On March 25,1993, the Ninth Circuit Court of Appeals rejected this argument, but the U.S. Supreme Court has refused to review this decision.

Trustees also claimed shippers could not seek ICC review of undercharge claims without first paying them. When the shipping community challenged this, the U.S. Supreme Court ruled March 1993 that shippers do not have to pay in advance in order to have a dispute considered.