AEMCA

This article is prompted by KPX, LLC v. Transgroup Worldwide Logistics, Inc., a case in which a federal judge in Arizona found an air freight forwarder liable on a cargo claim for violating the Carmack Amendment requirements applicable to regulated surface transportation. The Judge went so far as to impose attorney’s fees under the self help provision of the Act and to assert that the air forwarder misrepresented the nature of the traffic by using a “air waybill.” The case, which is on appeal to the Ninth Circuit, points out the latent confusion in the vestiges of regulations dealing with “ex air” or “expedited” freight.

The transportation of expedited LTL shipments falls into at least three categories, which have similar transportation requirements and service conditions. These categories are (1) shipments having a prior or subsequent movement by air; (2) “substituted motor for air” shipments which, like ex air traffic, are typically consolidated at airport locations but move from origin to destination by truck; and (3) “hot shot” or door-to-door expedites.

All three types of shipments require special expedition and typically move on a unitary pricing basis, which traditional LTL shipments does not consider in deriving rates, freight classification or bureau tariffs.

Of the three, only “ex air” is actually exempt from the registration requirements of the FMCSA. A property broker’s license, a for-hire carrier certificate or permit, or a freight forwarder’s license is not necessary to be involved in the transportation of this traffic. Yet if the same shipment is handled by the same expediter, and moves in a similar manner through airport locations in substituted motor for air service which is not weather related, the registration requirements apply and all of the involved parties have to be licensed, insured, and registered on the FMCSA “License and Insurance” web site.

Thus, the air freight forwarder who must comply with indirect air carrier requirements when arranging for prior or subsequent movement by air, is free from that burden, but is subject to special surface transportation rules and regulations when arranging for “substituted service.” This dichotomy is what trapped Transgroup.

Understandably, it used the same shipping documents for its customers regardless of whether the shipment saw the belly of an airplane. That document was called a “air waybill” and imposed the standard 50¢ per pound limitation which is used by the domestic airlines and which has become the expected limitation when the same shipment is picked up and delivered to the airport by the ex air cartage agent. Although by custom and usage the same 50¢ pound limitation is applied by the air freight industry to both "ex air" and substituted "motor for air" shipments, the Court drew a distinction based on the conflicting statutes and stuck Transgroup with full value liability under the Carmack Amendment.

Clearly, there is nothing wrong with contracting for a 50¢ per pound release rate under surface transportation law, but KPX stands for the principle that the devil may be in the details.

KPX is troubling because it suggests that expediters need not only be concerned about the new TSA rules, they need to ensure that their operations comply with the vestiges of surface transportation regulations as well. An air freight forwarder needs to ensure it is qualified as a regulated surface transportation property broker, forwarder or carrier, depending upon the nature of its holding out.

Filing deadlines and suit time limits must either be complied with or properly waived and the60¢ per pound limitation, while still achievable as the standard holding out must be perfected by proper notice, choice of alternative rates and default mechanisms.

Although the surface transportation regulations do not define any particular nomenclature for a receipt of goods and do not require any particular terms or conditions other than the shipment-specific items like consignor-consignee, description of commodity, piece count and weight, it might be wise to delete the term “air waybill” if the document could be used for all truck moves. Be sure that your procedures comply with the old surface transportation laws as well as the new federal security measures applicable when air service is involved.

By Hank Seaton
Law Office of Seaton & Husk
(703)-573-0700
www.transportationlaw.net.