Date: Oct 14, 2015

A very frequent question I am asked is about what to do when a load arrives at contract destination and the buyer deducts from your invoice alleging that the cartons ordered, shipped and acknowledged with a signed bill of lading at shipping point were not all accounted for at time of unloading at contract destination.  Who is responsible and how do you handle with your buyer?

In a FOB transaction the buyer assumes all in transit risk, which includes shortages on arrival.  In order to enforce your FOB contract it is imperative that the truck driver has the opportunity to witness the loading of the cartons at your shipping facility and when signing the bill of lading he or she is certifying that all cartons were in good condition when loaded and that the carton count is accurate. With that signed bill of lading you have a legal document between you and the carrier.

To ensure that the driver has the ability to agree to the count, you should allow the truck driver to have access in order to witness the loading of the trailer and therefore agree and sign off as to the carton count.  I know there may be safety issues to consider, however you need to arrange for a safe method that will allow the truck driver to witness the loading of the trailer as to count.

When your customer attempts to deduct from your FOB invoice where the trucker has signed the bill of lading as to count, you need to advise your customer that any shortage claim would be resolved with the trucker and not the shipper, and that you are expecting payment in full as invoiced. As a practical matter, the buyer is in the best position to resolve the shortage claim at time of arrival while issuing payment for the transportation that they would typically arrange.

I realize that some customers may refuse to honor this requirement of the FOB contract because they can, but the situation of chronic shortages is something that must be addressed in a professional manner.  As shippers, you need to recalibrate the relationship with the buyer and agrees to the fact that a signed bill of lading is the binding document of what was loaded on the truck.  Any subsequent count discrepancy is the responsibility of the buyer to resolve when paying the truck that they hired.  I know those are sensitive discussions, but maybe no more sensitive than the demands certain buyers place on you as shippers for quality, safety and price.  When you fulfill all of these specifications for the buyer and have documentation confirming carton count, there is no reason you should not be paid in full.

Remember, on delivered sales you as the shipper are responsible for all the in transit risk, which includes carton count.  In those circumstances, you are responsible to reconcile any shortage with the carrier.

If you have a question on this topic or would like to offer a subject for a future blog, please forward your questions or suggested topics to TommyO@wga.com.

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