In tough times, shippers may try for the moon
law in brief Q Several months ago, we responded to a major brewery's request for bids that contained 30-day payment terms. Last week, we received a letter that said payment terms for all suppliers would be changed to the next 120 days, and unless we accepted the revised terms, our bid would not be considered. What options do we have? A Just say No. You do not have to haul their freight, and you do not have to drink their beer. Since no contract has been awarded, the shipper is not required to award you the traffic based upon the bid you submitted, but likewise it cannot bind you to the terms of your submission and change the credit terms unilaterally unless you acquiesce. During the days of regulation, payment terms for common carriers were net 15 days, and regula-tions still support this time limit (see 49 C.F.R. 377). By tariff and contract, most carriers now extend 30-day payment terms, yet giving a ship-per 120 days to pay invoices is unreasonable. If you are forced to factor your receivables, your factoring costs alone easily can exceed your profit. Beer sales may be fairly recession-proof, but in my opinion, no vendor can assume an unsecured 120-day credit risk. Carriers are not too big to fail, and there will be no TARP bailout for you in the event of shipper insolvency. While I am aware of no legal prohibition that keeps a shipper from demanding excessive payment terms under the circumstances you outline, I view this request as outrageous. I would be surprised to learn that even in these hard times that any sophisticated credit manager would accept these terms on a take-it-or-leave-it basis. As I have written before, motor carriers are general unsecured creditors who can ill-afford to be lax in the extension of credit. If anything, the old term cash and carry should be a carrier's credit posture, not the extension of four-month interest-free loans. Since I received this question, I have heard from two other suppliers for this shipper; one never received a cram-down notice, and the other one just objected and negotiated a more reasonable term. Henry Seaton is a transportation lawyer who represents carriers. 46 Commercial Carrier Journal April 2009 Don't be left crying in your beer In tough times, shippers may try for the moon n warned that there has been another round of fraudulent letters purporting to be issued by USDOT sent to contractors and potential contractors and requesting they submit company financial information on a release form entitled Authorization to release financial information. n Feb. 25 by a federal court in Memphis to 20 months in prison for his role in selling bogus freight bills to a factoring com-pany while he served as a manager at a now-defunct trucking company based in Dyersburg, Tenn. Hernandez also faces three years' probation and more than $310,000 in restitution. n in late January by a federal court in Maryland to 21 months in prison and nearly $344,000 in restitution for filing false claims for fuel tax credits in the names of several trucking companies and other affiliated corporations. n Feb. 27 in a New Jersey federal court to a variety of charges related to evasion of about $138 million in federal and state motor fuels taxes. Misulovin, who had returned to the United States after nearly 13 years as a fugitive, had oper-ated wholesale fuel distributorship Kings Motor Oils, which had resold through shell entities hundreds of millions of gal-lons of tax-free home heating oil as diesel fuel for highway use. The taxes collected were distributed among conspirators. n (www.jjkeller.com) says its 520-page ADA Compliance Manual is designed to help human resources professionals under-stand the legal definition of a disability and ensure their company is compliant with the new ADA Amendments Act, which took effect on Jan. 1. henry seaton hseaton@ccjmagazine.com The Small Business Administration's Office of Advocacy added duplicative back-ground checks for commercial truck drivers to its top 10 federal regulations that should be reviewed and reformed. The office of advocacy said the Transportation Security Administration should eliminate the current requirement that a driver who holds a valid Transportation Worker Identification Credential must undergo a dupli-cative security background check when applying for a hazardous materials endorse-ment. For more information, go to www.sba.gov/advo. Duplicative background checks targeted