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Offsetting Freight Payments

A couple of years ago we published an article titled “Holding Back Unrelated Invoices”, which described a scenario where a buyer deducted their losses from a seller’s unrelated undisputed transaction.

That article focused on a produce transaction between a shipper and a receiver. In this article we will focus on a transportation scenario based on the following FOB transaction. “A transportation company has an account with a receiver. The receiver uses the transportation company regularly to haul produce from their suppliers to the receiver’s facilities. The receiver files a claim against the transportation company for failing to maintain desired temperatures during transit, high pulp temps at arrival and deteriorated condition. After the receiver salvages the product, they have incurred a $10,000 loss which does not include the unpaid freight bill.  The receiver decides not to pay the freight bill and additionally, does not pay a few unrelated freight bills to cover their loss.”

DRC Transportation Standards reflect the industry norms, where the transportation of fresh fruits and vegetables do not fall under the general transportation laws, such as a receiver is not obligated to pay the freight while there is an ongoing transportation dispute. Any transit-related damages are deducted from the freight invoice. 

Technically, unless the receiver and the transportation company have an agreement to offset accounts, the receiver is not automatically entitled to offset their losses on unrelated freight invoices. The receiver should be sending an invoice to the transportation company collecting any damages which exceed the freight bill.

As with produce transactions, each freight transaction is its own contract, and each contract must be addressed separately, especially when there is a dispute.

Provided that the receiver and the transportation company are DRC members, if losses are beyond the invoice price plus freight, and the transportation company refuses to pay, a claim can be filed with DRC.