The shipping terms for your deliveries and sales may not draw your attention until there’s an accident and some of your products or the ingredients you’ve ordered are damaged and you can’t use them or the purchaser rejects them (consider $12,000 in hops or wine that got too hot and cooked in transit). This type of damage is a guaranteed occurrence and when it happens, you’ll wish you’d paid attention to your shipping terms.

In addition to knowing the difference between different FOB standards like these:

FOB Terminology Which Party Pays Freight Which Party Bears the Cost Which Party Owns the Freight In-Transit Which Party Assumes Transit Risk
FOB Destination, freight prepaid Shipper Shipper Shipper Shipper
FOB Destination, freight collect Receiver Receiver Shipper Shipper
FOB Destination, freight collect and allowed Receiver (deducts from invoice) Shipper Shipper Shipper
FOB Origin, freight prepaid Shipper Shipper Receiver Receiver
FOB Origin, freight collect Receiver Receiver Receiver Receiver
FOB Origin, freight prepaid and charged back Shipper (adds fee to invoice) Receiver Receiver Receiver
FOB Destination, freight prepaid and charged back Shipper (adds fee to invoice) Receiver Shipper Shipper

You’ll want to understand what other arguments you may have that the person or company you paid to transport your products, or bring you your ingredients is wrong when they respond to your first request to “make it right” by claiming they’re not responsible.

You may not just have regular UCC arguments, but statutory shipping laws might also provide you some arguments and rights you didn’t know about.

A recent case from the 3rd Circuit Court of Appeals regarding the destruction of some bottles (chocolate liqueur bottles) in transit provides some guidance for conditions to keep an eye on ordering and directing your shipping.

In Tom’s Confectionery v. C.H. Thompson, the manufacturer contracted delivery of its products through C.H. Thompson and when its products, chocolate liqueur bottles, arrived at their destination damaged, Tom’s made a claim to C.H. C.H., denied the claim arguing that under the Carmack Amendment, it was just a broker of freight and not a carrier, so it owed no duty and had no liability to Toms. After Tom’s insurance company paid out and subrogated the action, it sued C.H., arguing that C.H.was actually a carrier, and the District Court and now the Appellate Court agreed that C.H undertook certain responsibilities that made it liable to Tom’s.

Here’s what the Court said in finding for Toms about what you’ll want to look for.

If an entity accepts responsibility for ensuring the delivery of goods, then that entity qualifies as a carrier regardless of whether it conducted the physical transportation. Conversely, if an entity merely agrees to locate and hire a third party to transport the goods, then it is acting as a broker. This distinction “tracks longstanding common-law rules” and derives from the “commonsense proposition that when a party holds itself out as the party responsible for the care and delivery of another’s property, it cannot outsource its contractual responsibility by outsourcing the care and delivery it agreed to provide.” The Department of Transportation, which is responsible for interpreting the Interstate Commerce Act (of which the Carmack Amendment is a part), has similarly instructed that motor carriers are not brokers just because they “arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.” In sum, if a party has accepted responsibility for transporting a shipment, it is a carrier.

So even though C.H. claimed it was a broker and refused to pay, the facts bore out differently.

The Takeaway: Check the bill of lading and your agreement, your invoices and purchase orders. Terms and conditions related to shipping can create circumstances that may be favorable, such as listing someone as a carrier and designating responsibility for delivery.