Top 3 challenges shippers face and how to overcome them
At this time of the year, with the holiday season in full swing and the retail business at its busiest, freight transportation volume also reaches new heights.
Considering the amount of transported goods and the number of fully loaded trucks on every motorway many things could go wrong. How can you, the shipper, be sure that your cargo will reach its final destination intact? Fortunately you can be proactive by choosing trustworthy freight brokers and reliable carriers. It does help to be aware of various situations that may arise. Here’s what to be aware of so your shipment can be protected either by the freight surety bond or federal regulations.
Common risks of the shipping business
On 1 October 2014, a hefty increase of the freight broker bond from $10,000 to $75,000 went into effect in the USA. The Obama administration explained that the drastic jump is the due to the need to prevent fraudulent practices. Just like with any business, the transportation industry faces its own unique challenges.
1. Payment delays.
Shippers usually select brokers based on their vast knowledge of the industry, including most reliable carriers. However, many shippers are unaware that if their freight broker or freight forwarder doesn't pay the carrier they hired to haul a shipper’s cargo, the carrier can come to the shipper with the final bill. It could happen even if the shipper has already settled their payment with the broker or forwarder.
The freight broker bond, also known as BMC-84, protects the shipment and all parties involved. Last year's new regulations required the freight forwarder to be bonded as well. If the bond principle operates as both a broker and a forwarder, it needs two bonds to legally stay in business.
In the case that industry regulations are not followed and there's a delayed payment claim going, the surety will step in and cover all claims.
2. Liability for bad loading securement
Let's say that you wanted to ship live load on a standard B/L (bill of lading). The load, however, wasn't properly braced or blocked, and during transportation fell and it was damaged. Who is responsible; the shipper, the carrier, or some third party? Does that solely depend on the initial shipper-carrier agreement?
Even if you were there to assist in the loading, based on the federal safety regulations, stipulated in 49 CFR 392.9 and 49 CFR 393.100, the carrier bears the primary responsibility for the safety of the load. Moreover, under the Carmack Amendment, unless the carrier can prove that the cause for the damage was due to an act of God, shipper's fault and not a result of negligence, the carrier is liable for loss or damage of goods.
3. Shipping trailer catches fire during transit
You can file a claim for the entire shipment, but is liability limitation enforceable, and when? First of all, make sure that the bill of loading indicates the carrier's tariff and you get a copy of it. Usually the court decision for enforcing liability limitation is based on certain requirements that need to be met:
- A notice of a tariff limitation found on the bill of loading;
- A tariff applicable to the price asked for the shipment;
- Rates equivalent to the liability assumed by the carrier.
If you meet these criteria, it makes no difference what caused the loss or damage.
The impact trucking industry has on the economy
Towards the end of November, the American Trucking Association (ATA) reported that the seasonally adjusted tonnage index for October 2014 rose by 4.5 percent compared to the same time in 2013. The ATA was optimistic for the fourth quarter. It said that the increase coincided with a nice rise in factory output and retail sales for the same month.
The ATA's report also states that last year trucks hauled 9.7 billion tons of freight. In monetary terms, that means $681.7 billion for motor carriers, which amounts to 81.2 percent of total revenue earned by all transport modes. In other words, trucking is a “barometer of the U.S. economy, representing 69.1 percent of tonnage carried by domestic freight transportation, including manufactured and retail goods.”
What is your story?
Every shipper has a story to tell. Share with us your experience of hardships on the road and unusual occurrences. How did you overcome them, and were there any regulations that you found helpful in the process?
Many of your fellow shippers may benefit from your advice, especially now, with the busy holiday season upon us. Let us know in the comments below or @Supply ChainD on Twitter!
Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps freight brokers get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.