B-231357, Jan 15, 1991, 90-2 CPD ***

B-231357: Jan 15, 1991

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

PROCUREMENT - Contract Disputes - Shipment costs - Freight charges DIGEST: The cost to repair two damaged items in a shipment of household goods belonging to an Air Force member was greater than the replacement value of those items. The Air Force determined that the two items were legally irreparable and that. Freight charges did not have to be paid for their delivery. Since the Air Force has not shown that the items were damaged to the extent of no longer existing in the form in which they were tendered to the carrier or that they were useless for the purpose for which they were intended or that they had so little salvage value that they were useless. They were not totally "destroyed" within the meaning of 49 C.F.R. 1056.15.

B-231357, Jan 15, 1991, 90-2 CPD ***

PROCUREMENT - Contract Disputes - Shipment costs - Freight charges DIGEST: The cost to repair two damaged items in a shipment of household goods belonging to an Air Force member was greater than the replacement value of those items. The Air Force determined that the two items were legally irreparable and that, therefore, freight charges did not have to be paid for their delivery. Since the Air Force has not shown that the items were damaged to the extent of no longer existing in the form in which they were tendered to the carrier or that they were useless for the purpose for which they were intended or that they had so little salvage value that they were useless, they were not totally "destroyed" within the meaning of 49 C.F.R. 1056.15. Thus, the carrier is entitled to the freight charges.

Aalmode Transportation Corporation:

Aalmode Transportation Corporation /1/ appeals our Claims Group's denial of its claim for refund of freight charges deducted by the Air Force as part of the damages for damage sustained by a chest and a book belonging to an Air Force officer that were transported by Aalmode. /2/ We allow Aalmode's claim.

BACKGROUND

In the process of settling the officer's claim against Aalmode for several articles of household goods that were damaged in the move, the Air Force determined that even though the chest and the book had been delivered and the damage they sustained could have been repaired, the cost estimates to repair them exceeded the cost to replace them. The degree of damage to the chest and book noted on the inventory at the time of delivery was that the chest was broken, rubbed, and badly worn and that the book was dented and torn. The Air Force claim analysis chart prepared after its damage investigation said that the book had its "leather covering dented and torn, pages damaged and crinkled" and that the chest had its "finish worn off to pressed wood underneath on both sides and border strips ripped and inner draws (sic) apart." A repair estimate stated that the chest was not repairable to its original condition. The record includes no repair estimate for the book.

The Air Force concluded that it was not economically feasible to repair the articles, and thus they were legally irreparable. The Air Force further concluded, therefore, in addition to Aalmode's liability for the damages, it was not entitled to the freight charges it had been paid for transporting the chest and book since those charges were for useless transportation services. On that basis, the Air Force recovered these freight charges from Aalmode.

Aalmode does not protest its liability for the damage done to the articles. It does, however, contest the Air Force's collection of its freight charges, arguing that the shipper may recover such charges only if the goods are destroyed, and these goods were not destroyed.

ANALYSIS AND CONCLUSION

Freight charges due carriers for transporting household goods do not have to be paid if the goods are "destroyed" in transit. 49 C.F.R. Sec. 1056.15 (1989). In explaining when an item is "destroyed" under that section rather than merely damaged (in which case the freight charges would have to be paid), the Interstate Commerce Commission has stated:

"The term 'destruction' as we have used it in this report and as we intend it in our regulations, implies that goods are beyond repair or renewal, that they no longer exist in the form in which they were tendered to the carrier, or that they are useless for the purpose for which they were intended. ... Loss of value will not automatically qualify as destruction of the object in question. On the other hand, the shipper need not demonstrate that the tendered goods have been totally demolished to establish that they have been destroyed for the purpose of these regulations." Practices of Motor Common Carriers of Household Goods (Collection of Freight Charges on Household Goods Shipments Lost or Destroyed), 126 M.C.C. 250, 270 (1977).

Even before the Interstate Commerce Commission issued the statement quoted above for household goods, we held that delivery of freight that was economically valueless and in an irreparable condition was in effect no delivery at all and would not support the payment of freight charges for the transportation. B-166882, Nov. 18, 1969. However, that case involved house trailers that were destroyed to the degree that they were not restorable to a condition to be lived in again. They were useless for their intended purpose, and the carrier retained the minimal salvage proceeds of $792 for the house trailers.

The documents of record in this case do not indicate that the chest and book were totally destroyed or rendered useless for the purposes for which they were intended. We do not believe that the single standard used by the Air Force of the goods being legally irreparable because of economic feasibility is sufficient to determine that freight charges do not have to be paid, in view of the standard articulated by the Commission. Obviously, the repair cost and replacement cost are indicators of the degree of damage to the household goods. However, in this case the goods were left in the possession of the service member owner, and the record does not establish that the goods were useless for their intended purpose, nor does it show the extent of the salvage value, if any. /3/ Thus, although the chest and book were not repairable for less than their replacement cost, the record is not sufficient to determine that they were "destroyed" within the meaning of 49 C.F.R. Sec. 1056.15. The freight charges for these two items, therefore, should be repaid to Aalmode.

/1/ Represented by Colin Barrett, Transportation Consultant.

/2/ The claim was denied in Settlement Certificate Z-2865092(1), Oct. 6, 1987. The shipment consisted of goods belonging to Second Lieutenant Michael D. Grenier and was transported in August and September 1985 on Government Bill of Lading DP-557218.

/3/ In Interstate Van Lines, Inc., B-197911.4, Dec. 2, 1988, a somewhat similar case to the present case, we denied the carrier's claim for its freight charges. In that case, however, although not stated in the decision, the record included the Air Force's conclusion that the damaged goods had no salvage value.