B-239199, May 3, 1991, 91-1 CPD ***

B-239199, May 3, 1991, 91-1 CPD ***

PROCUREMENT - Payment/Discharge - Shipment - Carrier liability - Amount determination DIGEST: In shipments where the carrier handles all transportation, the general rule is that the carrier is liable for loss or damage unless the firm proves otherwise. However, where both the government and the carrier had transportation responsibility, the parties share equal liability for damage to a shipment if it is not readily apparent when the damage occurred, so long as the carrier accepts the government's settlement offer within 120 days and does not attempt to break out individual items; otherwise, the carrier waives the sharing arrangement.

American VanPac Carriers, Inc.:

The Air Force requests that we reconsider our Claims Group's settlement of October 26, 1989, which found the Air Force liable to refund $355.69 that the agency offset against American VanPac Carriers, Inc., to satisfy a claim for loss and damage to a service member's household goods. The settlement and request involve two issues: whether, in view of the nature of the shipment and a government industry arrangement the carrier should be held liable for only half of the loss/damage in general, and the proper liability assessment for damage to three individual items in the shipment.

We reverse the Claims Group's decision on the first issue, and on one of the three items involved in the second.

The goods were transported from Germany to Maryland as a Code T shipment, which means that both the government and the carrier had transportation responsibility. Specifically, the carrier was responsible for containerization and transport to the military terminal in Germany; the Air Force provided air transportation to the military terminal in the United States; and the carrier then was responsible for final transport to the member's new quarters. Upon delivery in Maryland, it was discovered that some items had been lost, and others damaged.

In shipments where the carrier handles all transportation, the general rule is that the carrier is presumed liable for loss and damage unless the firm proves otherwise. For Code T shipments, however, the government and the carrier industry have agreed to share equal liability where it is not readily apparent whether the damage to the goods occurred while in the possession of one or the other of the parties. This rule, called the "50- 50 Rule," reflects an industry government compromise to reduce the administrative costs of pursuing claims in which it is difficult to determine where the loss or damage occurred.

The record shows that on December 7, 1987, the Air Force mailed American VanPac a demand for $224.93, representing half of a loss of $445.86. The agency reminded the carrier of the claim by letter of January 7, 1988, advising that more than 30 days had elapsed. By letter of January 8, the carrier informed the Air Force that page 3 of the Report of Loss was illegible and requested another copy. The Air Force provided a copy on January 21, and the carrier mailed a check for $202.14, or $22.79 less than half of the claim, on April 15, which the local Air Force office received on April 19. By that date, however, the local office already had forwarded the matter to Headquarters for full set-off action.

To expedite the Code T settlement procedure, the Air Force has established a period of 120 days after receipt of the government's offer during which the carrier must accept and pay the claim, or else face the possibility of being held liable for the full amount. The 120 day requirement is set out in paragraph 6-62 of Air Force Regulation 112-1, which also provides that the carrier waives the rule if it tries to break out individual items. The Air Force refused American VanPac's offer as late, and for being less than demanded, and offset the full amount against the carrier.

In response to the offset, the carrier argued that its liability under the 50-50 rule should be based on paragraph 328 of the International Personal Property Rate Solicitation under which the shipment moved (not on the Air Force regulation), which sets out the liability split without any mention of a government offer of compromise or a timeframe in which a sharing agreement must be effected. The Air Force referred the matter to our Claims Group, which agreed with the carrier to the extent that the Air Force regulation does not alter the basic 50-50 compromise agreement as stated in the Rate Solicitation. The Air Force, in requesting reconsideration, maintains that the 120 day requirement should apply.

We agree with the Air Force. It appears from the record that the 50 50 Rule initially came up in 1972, and was formalized by the Air Force in a 1975 agreement with the Household Goods Forwarders Association of America, Inc. By the terms of that agreement, an Air Force offer to accept a 50-50 compromise would be "predicated upon prompt acceptance by the carrier and payment of the government (Air Force) offer." The Air Force regulation evidently implements that provision, both by setting out a 120-day time limit on the Air Force's compromise offer and by defining the offer as applicable to all items involved (that is, it may be retracted if the carrier disputes liability for items otherwise encompassed).

The Rate Solicitation on which American VanPac and our Claims Group rely was issued by the Military Traffic Management Command (MTMC), the traffic manager for the Department of Defense (DOD), and covers the DOD sponsored international movement of personal property. By its terms, the Rate Solicitation provides the rules and specifications for such shipments, and by submitting and certifying rates in response to it a carrier acknowledges that it will abide by its contents if selected for a shipment. Paragraph 328 of the Rate Solicitation provides:

"The carrier and the Government will each assume claims liability of 50 percent of any loss or damages for Code ... T shipments when such cannot be determined to be solely the responsibility of the carrier or the Government. ..."

Although the Rate Solicitation is silent as to the duration of a government compromise offer, we do not think the Rate Solicitation can be read outside of the context of the framework that surrounds it. The 50-50 rule as stated in the 1975 government-industry agreement and in the Air Force regulation clearly includes a time limit in which the carrier has to accept or reject a government offer: according to the agreement, the carrier must act promptly, and according to the regulation the carrier must act within 120 days.

Moreover, MTMC has furnished our Office a copy of a signature sheet executed by American VanPac in which the carrier agrees to accept and provide service under the terms of MTMC's Tender of Service. The Tender of Service specifies that the carrier agrees "to acknowledge receipt of 'Letter of Demand on Carrier' filed against me within 10 days of its receipt and to pay, decline, or make a firm settlement offer in writing to the claimant within 120 days after receipt thereof." Although the Tender of Service does not specifically mention the Code T compromise situation, we view it as a recognition and confirmation of a general rule that claims settlement offers must be responded to within 120 days. In this respect, MTMC also advises that the MTMC Directorate of Personal Property says that its intent in drafting paragraph 328 of the Rate Solicitation was not to vary claims rules and regulations, but rather to provide information on the 50-50 rule.

In sum, the government-industry agreement on the 50-50 rule requires a prompt response; the Air Force regulation defines the timeframe in issue as 120 days; and American VanPac committed itself through the Tender of Service to respond to settlement offers within 120 days. We think it would be unreasonable to disregard those factors to establish an absolute sharing rule irrespective of how long the carrier takes to respond to a government compromise offer, simply because the Rate Solicitation is silent as to timeframe. We therefore agree with the Air Force that American VanPac lost the option to accept the government's offer of a 50- 50 settlement by failing to respond within 120 days.

The second issue involves the proper measure of carrier liability for damage to three items, two of which were shipped in cartons. The calculation of carrier liability for such damage is based on the Joint Military-Industry Table of Weights, which is mandatory for use in adjusting claims for military shipments of household goods, and which was developed to minimize costly and time-consuming administrative procedures attendant to claims actions where the weight of an item was subject to question.

The Table of Weights, in addition to prescribing weights for a host of individual items, provides that if an item was in a carton at the time of loss or damage the carton's weight applies. The Table prescribes weights for cartons containing a few specified items, and for cartons up to 6-1/2 cubic feet. It provides that the weight of larger cartons should be based on 7 pounds per cubic foot.

Item 100 was an 8-cubic-foot carton that contained a picture.

The Air Force assessed liability of $33.60 for the picture based on the prescribed weight (40 pounds) of an 8-cubic-foot carton. The Claims Group found the carrier liable for only $15, because the Table of Weights specifies that a picture carton is deemed to weigh 25 pounds. In view of the specific direction in the Table of Weights for picture cartons, we agree with the Claims Group's calculation.

Item 102 was a desk that was shipped in a 30-cubic-foot carton. The Air Force assessed the carrier's liability at $126 based on the weight prescribed in the Table of Weights for a carton that big (30 x 7 pounds per cubic foot, or 210 pounds). The Claims Group, however, relied on the Table's prescribed weight for a desk (70 pounds), to reach a liability of $42. It is unclear why the desk was shipped in a carton, although we understand that carriers routinely configure cartons to fit odd-shaped articles. In any event, since the item was a desk we agree with the Claims Group that the specific prescription in the Table of Weights should apply.

Item 108 was a "schrank top." The Air Force assessed liability of $150 based on the prescribed weight of 250 pounds, but limited actual liability to the cost of repair, $35. The Claims Group assumed the item weighed 40 pounds, so that the carrier was liable for only $24, irrespective of the repair cost. Since the Table of Weights supports the 250-pound figure, and we see no basis in the Table for the Claims Group's assumption, we agree with the Air Force on this item.

The Claims Group's determination on American VanPac's liability is reversed, with the exception of the decision on items 100 and 102.