FUEL SURCHARGES

CAN CARRIERS PASS ON FUEL SURCHARGES TO SHIPPERS?

Reproduced with the Permission of Miles L. Kavaller

On Tuesday, April 16, 1996 in the Los Angeles Times Business Section the headline announced: "Diesel Joins Gasoline in an Upward Price March in Southland." The article noted recent increases in diesel fuel prices at the pump in Southern California from $1.23 just two (2) months ago to $1.60. One of the two trucking firms interviewed stated that it might add five percent (5%) to its rates as a result of a twenty-five percent (25%) increase in monthly fuel costs. If carriers do add a surcharge can shippers refuse to pay?

As of August 26, 1994 motor carriers were no longer required to file rates with the ICC. Existing tariffs for all but household goods carriers were declared null and void under the Transportation Industry Regulatory Reform Act. This change was preserved in the ICC Termination Act effective January 1, 1996. (See 49 U.S.C. 13710(a)(4)). Accordingly, carriers choosing to increase their rates by adding a fuel surcharge are free to do so by simply changing their prices for services. Many carriers maintain rates, rules, etc. in tariffs. By changing its tariff a carrier can add a surcharge to its rates.

Shippers are entitled under the ICCTA to receive a copy of the carrier's rates, charges, rules and classifications upon request. (See 49 U.S.C. 13710(a)(1)). Accordingly, shippers have access to the rates which the carrier will charge for its services. Moreover, some carriers who plan to add a surcharge have mailed notices to their customers. Others are advising customers at the time of requests for service.

While it is likely that most shippers will voluntarily pay the surcharge, regardless of prior notice or agreement, undoubtedly there will be some who will object. Although it is impossible to predict, I suspect that most courts will side with the carriers if suit is filed to collect fuel surcharges. This conclusion is based on the provisions of ICCTA, 49 U.S.C. 13710(a)(1) and the bill of lading which most shippers and carriers continue to use.

The uniform domestic straight bill of lading and other similar versions refer to and incorporate the carrier's tariff. And while issued by the carrier, it is typically on a preprinted form prepared by the shipper. The bill of lading is the contract of transportation and thus governs the transaction. Further, the shipper has a right to obtain a copy of the carrier's rates under the ICCTA, a right the prudent purchasers of services would be expected to exercise. It is therefore expected that upon receipt of the carrier's rates, including the surcharge, a shipper would choose to accept the carrier's rates or reject them by not using its services.

Application of a fuel surcharge may not come to the shipper's attention until a post-shipment audit is performed. This may well be too late to resist payment of the carrier's freight charges. We'll have to wait and see what the courts do when the issue is presented.