Supply Chain News / Risk & Compliance

New Calif. Reefer Container Law

December 20, 2012

According to attorneys Attorneys Andrew Spector and Robert Borak, in this bulletin from Arnall Golden Gregory LLP, freight brokers and forwarders arranging transportation of cargo in California must be prepared for new legislation to take effect on Jan. 1, 2013.

The California Air Resources Board (CARB) recently approved a series of amendments to the Transportation Refrigeration Unit Airborne Toxic Control Measure (ATCM), which shall have a significant effect upon all entities which utilize reefer containers in California, including freight brokers, forwarders, motor and rail carriers, as well as shippers and consignees.

The new law requires all transport refrigeration units (TRU) to be tested and registered with CARB. All motor carriers carrying such units must comply with the new requirements.

Further, any freight broker or freight forwarder, no matter where they are located, which makes arrangements for the transportation of perishable goods which will be carried on any highway or railway in California must ensure that the carrier retained or dispatched is utilizing a container which is registered with CARB. The broker/forwarder must also provide its contact information to the carrier so that this information is available to the driver in the event such information is requested by authorities.

Under the law, a broker or forwarder can be held liable for up to $1,000 per violation. Even worse is that the shipper and/or consignee may also be fined penalties of $1,000, which is in addition to any penalties assessed against the forwarder, broker and carrier. No doubt that in such an event, the shipper and/or consignee will hold the broker or forwarder liable for not confirming that the carrier was compliant.

The broker/forwarder should consider proactive efforts to mitigate potential violations arising from the new law, such as:

  1. Mandate that all carriers provide certification of compliance with the law.
  2. Verify, prior to any load, that a carrier has registered online with the California Air Resources Control Board (ARBER), www.arb.ca.gov, and is in full compliance.
    1. This verification should be kept on file for the load.
  3. Confirm that the container for which certification is provided is actually being utilized by the carrier for this load.
  4. Include provisions in all carrier contracts mandating that the carrier shall be certified with CARB.
    1. The carrier should be required to indemnify and defend the broker/forwarder, as well as its clients, for any violation of the law.
  5. Advise its approved list of carriers periodically that only those carriers which are listed on the ARBER database as being compliant will be utilized for loads moving in California.
  6. When posting a load online for bid, identify that such load requires a TRU which is compliant with the California board.

Such protective measures will necessarily require the broker/forwarder to educate all personnel as to the regulation and the broker/forwarder verification procedures, as well as make updates to instruction manuals and best practices.

Issues may ultimately surface as to the enforceability of the California regulation as invading the province of interstate commerce and federal law, as preemption by federal law, such as the Carmack Amendment, has overturned several state laws seeking to regulate transportation entities. Indeed, the definitions under the California regulation of a carrier, broker and freight forwarder mirrors the Carmack Amendment.

The Carmack Amendment does permit states to maintain laws which protect the health of its citizens. Since this law is designed to protect the environment, and given the economic realities of doing business in California, such a challenge may face an uphill battle. It remains to be seen if the new law will be challenged at some point, if other states will follow with similar legislation, and what impact it will have on transportation entities. Regardless, at least for the immediate future, brokers and forwarders must be cognizant of the new requirements regarding reefer containers and establish and maintain protocols to minimize the potential liability for themselves and their clients.

This regulation highlights the need for brokers and forwarders to take an inventory of risk management protocols and, where appropriate, revisit and update contractual agreements, and terms and conditions to prepare for the myriad of issues that may arise.

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