Shipper Load and Count, Broken
Seals and Terrorist Threats in
the Foodstuff Supply Chain
2008 Refrigerated Division Annual Meeting
July 9-11, 2008
Hyatt Monterey Resort
Monterey, California
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Henry E. Seaton
Seaton & Husk, LP
2240 Gallows Rd.
Vienna, VA 22182
www.transportationlaw.net
Henry E. Seaton is a graduate of Duke University (A.B. ’70) and
Vanderbilt School of Law (J.D. ’73). He has practiced law for 30 years
in the Washington D.C. area representing motor carriers of brokers. He
is a member of the Vienna, VA based law firm of Seaton & Husk. The
firm specializes in freight claims, freight charge collection, contracting
issues, carrier representation before the FMCSA and bankruptcy issues.
.
Mr. Seaton writes a monthly column on transportation law for the
Commercial Carrier Journal (CCJ) and is the author of Protecting Motor
Carrier Interests in Contracts. He serves as commerce counsel for the
National Association of Small Trucking Companies. He was the Delta
Nu Alpha Transportation Professional of the Year in 2001 and is a
frequent speaker and lecturer regarding cargo claims, freight charges,
contracting and risk/insurance issues effecting carriers and brokers.
Mr. Seaton can be reached at HESeaton@aol.com. For articles and 2
other information, please see www.transportationlaw.net.
Summary
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The shipper load and count statute
The presumptions
The effect of seal on presumption
Hours of service and shipper load and
count in the 21st Century
Use of shipper load and count and other
limitations in rules tariffs
Dealing with theft
Acts of the public enemy
TSA and shipper inspection issues
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The Statute
49 U.S.C. §80113 provides:
A common carrier issuing a bill of lading is not
liable for non-receipt, misdescription or improper
loading and (1) the goods are loaded by the
shipper; and (2) the bill contains the words
“shipper’s weight, load, and count,” or words of
the same meaning indicating the shipper loaded
the goods.
SL&C or words of similar import must appear on
bill. See Allied Tube & Conduit Corp. v. Southern
Pac. Transp. Co., 211 F.3d 367, 377 (7th Cir. Ill.
2000)
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Two criteria:
• the shipper must load the goods; and
• the bill of lading must contain a notation to
that effect. See Leigh Ellis & Co. v. Payne, 274
F. 443 (D. Ga. 1921), aff’d 260 U.S. 682 (U.S.
1923).
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The Presumptions
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Shipper load and count versus presumption of
good order at time of pickup:
• Under shipper load and count, carrier is liable for
damage caused by improper loading only if defect in
loading is patent.
• If defect is not apparent to the ordinary observation of
the carrier, carrier should not be held liable. Modern Tool
Corp. v. Pennsylvania R. Co., 100 F. Supp. 595 (D.N.J.
1951).
• Carrier under “shipper load and count” bill of lading is
not liable for damage due to improper loading, Robinson
v. New York C. R. Co., 282 N.Y.S. 877 (N.Y. App. Div.
1935), aff’d 270 N.Y. 659 (N.Y. 1936).
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When shipment moves as shipper load and count and is
delivered to consignee in damaged condition, a shipper
must submit adequate proof that the product was in good
condition when delivered to carrier to overcome the
presumption that damage occurred at origin. See Minat v.
B&O Railroad, 558 F.2d 1277, 1280 (D.C. Cir. 1978).
The ordinary presumption of good order at point of pickup
is reversed and the shipper has the initial burden of
establishing its prima facie case. See Frosty Land Foods
International, Inc. v. Refrigerated Transport Co., 613 F.2d
1344 (5th Cir. Ala. 1980) .
Omission of the term “shipper load and count” does not
impose liability as a matter of law on carrier for damage in
transit, but does shift the burden to the carrier to show the
damage was due to the fault of the shipper. Modern Tool
Corp. v. Pennsylvania R. Co., 100 F. Supp. 595 (D.N.J.
1951).
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In Cargill, Inc. v. Merit Distrib.
Servs., 2003 Tex. App. LEXIS 4598
(Tex. App. Austin May 30, 2003) the
Court found:
• Shipper held liable for metal shavings in
poultry / load shift in transit on SLC
load, improper packing and breaking or
inherent vice was proximate cause
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Security Ins. Co. v. Old Dominion Freight Line, Inc.,
391 F.3d 77 (2d Cir. N.Y. 2004)
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Interesting Facts: SLC load of cigarettes, sealed
before driver could inspect. Load stolen and only
part recovered (or destroyed by shipper because
of “quality concerns”)
Court Found:
• “…where the contents of a shipment are not visible or
open for inspection, as may be the case when cargo is
transferred to the carrier in a sealed container, a clean
bill of lading is not sufficient to establish delivery of the
goods in good condition.”
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Ergo…
• When a carrier is prevented from independently
inspecting cargo, the plaintiff must present
additional evidence, either direct or
circumstantial, in order to establish the initial
contents and condition of the cargo.
See examples:
 A.I.G. Uru. Compania de Seguros, S.A. v. AAA Cooper
Transp., 334 F.3d 997, 1004 (11th Cir. Fla. 2003)
 National Transp., Inc. v. Inn Foods, Inc., 827 F.2d 351,
354 (8th Cir. Neb. 1987)
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Summary Judgment for shipper’s insurer
reversed for shipper’s failure of proof of
good condition
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The Effect of Seal on Presumption
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Statute does not mention the term “under seal”
yet the establishment of delivery with seal intact
is important to the shipper load and count statute
because:
• Continuation of the shipment under seal makes it more
difficult for the shipper to reverse the presumption and
show that the carrier was negligent because:
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The possibility of pilferage, theft, or inadvertent shortage
at cross-dock is eliminated; and
The possibility of damage due to top loading, rehandling, or
tampering with cargo is removed.
• Where SLC is listed on bill of lading and shipment is
delivered with seal intact, shipper is left to show upset in
transit to overcome presumption that loss or damage
was not result of:
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Inherent vice; or
Act or omission of shipper in loading and counting
shipment
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Hours of Service and Shipper Load
and Count in the 21st Century
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Increasingly, product is shrinkwrapped, making piece count
impossible
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Hours of service change has led to spotted trailers which are
loaded without driver present and unloaded after delivery
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Because of worker’s comp claim, many warehouses refuse to
even allow driver to be present on freight dock when shipment is
loaded
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Loading of shipments by tow motor precludes accurate count or
confirmation of loading practices
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Shipper, not truck driver, is most familiar with fragility of product
and best loading procedures
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As a result, SL&C should be the norm for truckload shipments
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Use of Shipper Load and Count and
Other Limitations in Rules Tariffs
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By contract and by tariff, truckload carriers should utilize the
following provision or similar:
SHIPPER LOAD AND COUNT
All shipments shall be loaded by the consignor and unloaded
by the consignee. Carrier’s drivers are instructed to sign bills
of lading as shipper load and count or “SLC”. Inadvertent
omission of this notation shall not result in a presumption
of carrier liability for shortage or damage (in the absence of
upset or accident) where the driver was either not present or
not allowed to observe the loading and unloading.
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Many carriers use “pallet count” rather than piece count specification,
i.e. “22 pallets said to contain 1416 pieces” to conform with reality
Truck driver should be instructed to place “SL&C” on every bill of
lading in which he was denied the opportunity to count or observe
the loading of freight
Why? Because many warehousemen break warehouse shortage over
carrier’s back
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Dealing with Theft
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The $80 billion elephant in the room
• Theft of cargo heightens issue of seal
integrity
• Both “mysterious disappearance” and
theft are included in carrier liability but
excluded from many cargo policies
• Possibility of risk of loss due to theft
raises importance of SL&C and seal
integrity
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The Importance of Seal Integrity
in the Post-9/11 World
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Shippers have an absolute duty to accept a
shipment unless “practically worthless”
When 1 or 2 pallets have been pilfered, the
shipper should accept the other 20 plus pallets,
then file a claim only for those which are not
delivered
Yet, shippers involved in the foodstuff supply
chain wrongfully believe the USDA requires
destruction of an entire truckload of product
when seal integrity is compromised due to “fear
of terrorists” (e.g. One Fine Pickle)
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The Bioterrorism Act of 2002 contains no such
limitation on the acceptability of foodstuffs
There has been no precedent for concluding that
the compromising of seal integrity is indicative of
anything other than petty thieves who could not
fence the foodstuffs they discovered
In Security Ins. Co. v. Old Dominion Freight Line,
Inc., the Court held that destruction of recovered
portion of shipment because of “consignee quality
concerns” undercut shipper’s assertion that goods
were in good order at origin. A shipper’s
quandary:
• “So what is wrong with the goods that require their
destruction?
• Who is responsible?”
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The Role of “Act of Public Enemy”
in the Defense of Such Claims
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President Bush declared “War on Terrorism.”
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Al Quaeda is a “Public Enemy.”
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If product is destroyed solely because the seal
was broken and shipped, it is because of “fear of
act of terrorism.”
Doesn’t the common law defense become
relevant?
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Old El Paso
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Shipment delayed in transit due to driver
malfunction – seal intact, attempted delivery 10
days later, rejected by broker, shipment
reconsigned
Carrier’s insurer deserts the load
Upon reconsignment entire product dumped
although seal intact
Shipper alleges delayed delivery “violates its
quality control and production standards”
No inspection
Broker sues carrier in Ohio
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Citrus World
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Shipment tendered to carrier under seal
Thieves broke seal, took 2 cases, could not fence
the rest
Load put in warehouse, balance tendered to
consignee, consignee claimed load would be
rejected due to USDA regulations
As counsel for insurer, I issued on-hand notice
requiring consignee to accept load
Consignee rejected shipment examined and
certified as fit, balance of load in boxes, in
tamper-proof containers
Consignee required destruction
Carrier made clear claim would be honored only
for missing cases
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Intermodal Loads/Pepperidge Farm
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Seal integrity damaged, consignee
accepts load subject to inspection
Carrier sends in USDA expert to
inspect balance of load
Carrier maintaining balance of load is
fit for human consumption and
should not be destroyed
Case in progress
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Effects of Forthcoming TSA Regulations
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50% screening rule by next year will
provide packing security measures,
i.e. tamper-proof tape, locks, etc.
If good enough for air freight, should
be good enough for perishable and
other commodities
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Suggestions
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Insist on shipper load and count
Establish supply chain/seal integrity procedures:
• Photograph shipments at time of loading
• Take pictures of all shipments delivered short
• Establish seal integrity records including affidavits from
drivers when seals are broken by police for inspection,
etc.
• Inspect wrongfully rejected product, including sampling,
take pictures of undisturbed containers, cartons, bottles
and jars
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Use technology where appropriate:
• Trailer tracking
• RFID scanning to be encouraged
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Avoid Shipper Drafted “Waiver of Mitigation
Language” in Contracts
Objectionable Language
“Neither shipper nor its customers
shall have a duty to mitigate damages.
In the event of damaged, branded or
labeled goods, shipper’s customer may
determine, WITHIN ITS SOLE
DISCRETION, whether all or part of the
shipment may be salvaged and the
value of such salvage.”
Acceptable Language
Delete and incorporate Service
Conditions which contain
salvage rules – Bill of Lading
also includes the shipper and
consignee common law duty to
mitigate unless agreed
to the contrary.
Reasons for Objection
Objectionable language makes “wrongful rejection” legal
Consignor has duty to accept shipment unless its “effectively worthless”
Don’t let one broken pallet cost you a truckload
“Distress sale” of rejected shipment will produce losses a consignee can avoid by using
undamaged product in stream of commerce
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Issue on-hand notice and get an expert
Use Rules Tariff Provisions Effectively
(1)
(2)
(3)
(4)
(5)
Count and Pulp Provision
Temperature Recorders as Evidence
Duty to Mitigate
Payment without Offset
Disposition of Contested Cargo Claims
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(1) Count and Pulp Provision
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Where spotted trailers are loaded and
sealed by the consignor at point of origin
or where carrier’s employee is otherwise
precluded from counting or, in the case
of refrigerated product, pulping the
cargo at time of load, there shall be no
presumption of tender in good order.
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(2) Temperature Recorders
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Evidence of the temperature maintained
during transit and the laws of
thermodynamics shall be given probative
effect in assessing inherent vice and
alleged acts or omissions of the shipper
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(3) Duty to Mitigate
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Duty to Mitigate - Foodstuffs and Related
Products. Consignors and consignees shall have
the bill of lading and common law duty to
mitigate carrier's loss including the obligation to
accept partial shipments tendered in their original
shipping containers, boxes or shrink-wrap
notwithstanding the absence of trailer seal
integrity unless otherwise agreed in writing. Any
decision by a customer to require the destroying
or dumping of product in the absence of proof of
damage, unfitness for human consumption, or
deterioration in quality shall be non-compensable
by carrier."
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(4) No Offset Provisions
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PAYMENT WITHOUT OFFSET
• Consignor and/or Consignee shall pay all
freight charges when due without offset for
any cause, including but not limited to, cargo
claims. All claims for loss or damage shall be
governed by this Circular and following and
neither consignor nor consignee shall deprive
carrier of proper cargo insurance adjustment
by unilateral deduction of claims from payment
of freight charges due.
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(5) Disposition of Contested Cargo Claims
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Unless the parties agree to voluntary alternative
dispute resolution, disputed claims will be subject
to 49 U.S.C. §14706 (the Carmack Amendment)
subject to any applicable released evaluation.
Claimant waives any right to setoff or offset of
contested and unliquidated cargo claims against
freight charges otherwise due to carrier as a
precondition of service. Claimants agree to
forfeiture of any contested claim asserted by it as
a setoff after notice and demand for freight
charges.
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