Whose Freight Is It Anyway? Consignee Liability for Unpaid Ocean Freight( continued from page 9)
by the applicable bills of lading or the obligation to pay freight. The district court granted summary judgment to the carrier based on the carrier’ s argument that the consignee had impliedly consented to be bound by the bills of lading by accepting the cargo.
Alternatively, acceptance of bill terms can be implied by a consignee’ s longstanding course of conduct vis-à-vis the carrier. If a consignee repeatedly received cargo from the carrier in the past and acted per the carrier’ s bill terms, the consignee is effectively estopped from later denying those same provisions should not apply. 8
A consignee can also become a party to a negotiable bill of lading and thereby assume obligations under it by presenting the negotiable bill of lading to the carrier and accepting the goods under it. The act of presenting the negotiable bill serves to adopt the bill’ s terms. 9
Finally, if an agent of the consignee negotiates the bills of lading on the consignee’ s behalf, traditional agency principles permit courts to find that the consignee impliedly consented to the bill’ s terms. 10
So, Whose Freight Is It Anyway? In the case described at the outset of this article, the original negotiable bills of lading were not available when the vessel arrived. Instead, the carrier released the jet fuel based on a letter of indemnity issued by the shipper / charterer, who ultimately did not pay the freight due to the carrier and instead entered into a foreign debt restructuring action. The consignee denied any liability for the unpaid freight, noting that it had purchased the fuel under a contract placing the costs of shipment on the seller, who was not the shipper, and arguing that it had neither presented the negotiable bills nor otherwise demonstrated any affirmative“ consent” to be bound
On appeal, the Ninth Circuit clarified that the key case relied upon by both the carrier and the district court did not go as far as they believed. The Court of Appeals explained that States Marine International, Inc. v. Seattle- First National Bank, 524 F. 2d 245( 9th Cir. 1975), had only“ modestly extended freight rules established in railroad cases to ocean carriers‘ operating under tariffs’— that is, from railroad common carriers to ocean common carriers.” In those earlier railroad cases, courts holding consignees liable for unpaid freight for goods shipped pursuant to non-negotiable bills had been primarily concerned with ensuring that publicly filed tariffs( i. e., standardized shipping rates set for common carriers) were evenly enforced, to avoid potential rate discrimination. But the jet fuel in this case had been shipped under private( and not common) carriage, such that States Marine did not apply and no implied obligation to pay the outstanding freight arose on the part of the consignee based on receiving the cargo. The Ninth Circuit accordingly reversed and remanded, given that the consignee had neither expressly nor impliedly consented to be bound by the applicable bills of lading.
This case points out the risk of potential double liability exposure to a consignee of goods when the shipper / charterer fails to pay freight costs to the ocean carrier. Consignees may wish to consider including indemnity language in their purchase contracts requiring the seller to indemnify the consignee should the carrier make a demand for freight at delivery. If not, and the consignee takes delivery of the goods upon presentation of the bill of lading, the consignee may subject itself to unexpected liability. p – 2025 BLANK ROME LLP
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