Motor Carrier Contracts Annotated, SECOND EDITION

Shipper-Motor Carrier Contract Template

When a shipper uses a motor carrier, they should always have in place an individually negotiated contract to supersede the motor carrier's terms and conditions written by themselves. These terms and conditions usually have lower limits for liability for loss and damage to cargo, accessorial charges, late payment penalties, and other items a shipper would not knowingly agree to.

Shipper-Broker Contract Template

One of the most important things for a shipper to know when contracting with transportation brokers is that a broker is not a motor carrier. This means that you cannot simply take a shipper-motor carrier contract and do a global replacement of "motor carrier" with "broker"... yet this is exactly what many people do.

The shipper-broker contract template in the newly released Second Edition of Motor Carrier Contracts Annotated places several requirements on the broker to require specific things from the carriers that they use. This component of a shipper-broker contract would be completely missing if one simply replaces "carrier" with "broker" in a shipper-carrier contract.

Further, the shipper-broker contract template provides for the broker to assume liability for loss and damage to shipments. As a general proposition, brokers are not liable for damage to cargo, unless they assume liability by contracts such as the one in Motor Carrier Contracts Annotated. For a shipper this is the preferred way to go since they can then pursue their claims for loss and damage directly against the broker without having to chase the carrier.

NEW! Shipper-Provider Contract Template.

The 2011 edition of Motor Carrier Contracts Annotated contained just two contract templates. One was for a shipper to use with a motor carrier and one was for a shipper to use with a broker arranging for motor carrier transportation. There were just two templates because, generally speaking, that was how contracting was done at that point in time.

That all changed with the passing of the 2012 Highway Bill (Moving Ahead for Progress in the 21st Century Act or MAP-21) and an unanticipated consequence of its provisions.

As MAP-21 went into effect and the industry became aware of it, large, national transportation providers would add language into the shipper-carrier contract saying, “We reserve the right to use our brokerage authority for the shipments tendered to us pursuant to this contract.” While this would satisfy the legal obligation of the providers, simply adding this language to a shipper-carrier contract does not adequately address the many issues relating to using as a broker.

This all gave rise to a need for another contract template which would provide for one shipper to contract with one corporate entity who held licenses both as a motor carrier and as a broker. In Motor Carrier Contacts Annotated, Second Edition it is called a Shipper-Provider Contract Template.

NEW! Shipper-Provider Contract Including Intermodal Template.

When an intermodal service is offered by a regulated motor carrier, it can do so by issuing a through bill of lading from origin to destination. When this is done by regulated motor carriers, it is often referred to as “substituted service”.

In 1977 the Interstate Commerce Commission (ICC) used the authority granted to it by Congress to exempt intermodal services. This gave rise to a new type of provider known as Intermodal Marketing Companies or IMCs. However, it is important to note that companies that customers think of as being a motor carrier or truck broker will also offer these exempt or unregulated services without using their motor carrier or truck broker license to do so.

The template titled “Shipper-Provider Contract Including Intermodal for Transportation by Motor Carrier AND Brokerage of Motor Carrier Transportation” is drafted to cover these service variations.

"Just one of the reasons you need to have a contract" Without a well drafted motor carrier contract in place with the companies used by you, your subsidiaries and affiliates, you are likely not compliant under GAAP (Generally Accepted Accounting Principles) and SOX (Sarbanes-Oxley). Companies are required to reflect contingent liabilities on their balance sheets. However, if your organization uses trucking companies without a contract in place, your company faces substantial contingent liabilities for late payment penalties which most companies are unaware of and thus don't report them. The late payment trap... and how it can be avoided Most medium and large size trucking companies quote their rates in terms of a discount off of their standard rates. In today’s market, these discount ranges are typically in the range of 60%, 80%, or even higher. When there is no individually negotiated contract between the trucking company and its customer, the transactions are governed by the carrier's standard trading conditions and tariffs. These tariffs typically provide that when a payment is “late”, that is, not received by the trucking company within 30 days, there is a late payment penalty imposed of the loss of discount. For example, if a company had an 80% discount with its carriers, had an annual freight spend of $1,000,000 and paid all of its invoices 31 days or more after receipt, it would have a contingent liability of $4,000,000! This liability can be imposed whenever the carrier chooses to impose it. For instance, if your company were to take its business to another carrier or if the trucking company went into bankruptcy. With a properly drafted individually negotiated contract in place between your company and the trucking company, such late payment penalties can easily be negotiated away and replaced with commercially reasonable service charges.