Become a critical vendor
32 Commercial Carrier Journal November 2008 Q As a small carrier, we increasingly feel like an unsecured lender. Our customers insist on 60-day pay terms, waiver of all liens, and surrender of recourse. It seems like the system is rigged so that only the big can't fail. What options do we have? A Increasing bankruptcies across industries clearly are a warning sign to small carriers. Margins are too tight to finance customer receivables and make a profit, and default of a major customer can lead to a small carrier's bankruptcy. Typically, debtors who file for reorganization are allowed to pay critical vendors those suppliers and carriers that are essential to their reor-ganization. The standard is not whether the receivable is essential to the small carrier, and as a result, a small carrier can be left out at the whim of the bankrupt. The space allotted here does not allow a full discussion of credit and collection strategies, but here is a list of five items to consider: By contract and/or rules tariff, insist that interest be paid on delinquent accounts and provide for attorney's fees if you are forced to sue. As an unsecured creditor, you need these tools to police your receivables and to ensure that you are paid in the ordinary course of business, or else you may have to give back whatever you collect within 90 days of bankruptcy as a preference. Most circuits recognize that a carrier absent contractual waiver has recourse to not only the customer with whom it dealt, but also the consignor and the consignee under the bill of lading contract. All too frequently, your customer will seek waiver of this recourse in its contract with you. Surrender of these important collection rights can leave you with only a single source of collection. As a carrier, you have a statutory lien for payment of freight charges for shipments in your possession that can be exercised upon customer default or bank-ruptcy. Warehousemen, on the other hand, typically provide in their warehouse receipts for a so-called spreading lien that allows them to hold shipments in their possession for payment of past as well as present freight charges. Sophisticated 3PLs, when extending credit to economically challenged customers, increasingly are insisting on contractual spreading liens that create for them a prior-ity in bankruptcy and ensure their inclusion as critical vendors. Carriers should consider this contractual lien option as a way to assure payment by a debtor in pos-session and their inclusion in the debtor's so-called first day motions. By waiving all lien rights in shipper or broker contracts, you give up this valuable tool. Small carriers increasingly are forced to finance or factor their receivables in order to pay the cost of fuel. Typically, you are financing agreements with recourse. This means if your customer does not pay the lender, the money advanced to you Become a critical vendor Don't go unpaid if a customer goes bankrupt n for the amount of additional mortgage payments and lost profit resulting from the moving company's failure to live up to its promise to move them by a certain date, the U.S. Court of Appeals for the Third Circuit ruled in September. A lower court erred in concluding that claims were not determin-able under the Carmack Amendment just because they were not for specific dollar amounts, the appeals court said. n fines to several truck fleet operations for violations of diesel truck emissions regula-tions. The largest was $305,250 imposed on Bimbo Bakeries USA of Fort Worth, Texas part of Grupo Bimbo, an international bakery leader for failing to test its diesel trucks for excess emissions at 58 fleet facili-ties across California in 2006 and 2007. n Celadon Trucking Services Inc. lost a $1.5 million judgment rendered Sept. 30 in a jury trial in Ellis County, Texas, in a case involving a lane-change accident that occurred in July 2006. The jury found that the automobile driver was partially responsible. We are reviewing the jury verdict, and are considering our options regarding an appeal of the decision, said Steve Russell, chairman and CEO of Indianapolis-based Celadon. n attempt to establish that Palm Beach County, Fla., had violated its equal protec-tion and due process rights by allegedly treating complaints against White Lion differently than those directed at mov-ing companies that were members of the county's Division of Consumer Affairs Moving Task Force. The U.S. Supreme Court let stand a U.S. Court of Appeals for the Eleventh Circuit ruling on the issue. in brief law henry seaton hseaton@ccjmagazine.com A contractual lien can help ensure payment.