Knowledge Is Still Power

William J. Augello was one of the country’s foremost transportation lawyers and a champion of shippers’ rights. In this column we attempt to answer readers’ questions as we believe he would. Past columns, as well as those of Bill Augello, may be found in the ‘Content Library’ on the Parcel website (parcelindustry.com).

I have now had the opportunity to author six installments of this column. We have looked at topics such as carriers’ liability for loss and damage, insurance, carriers’ tariffs, and contracts. In this installment I will summarize what I believe to be the most critical areas of concern for shippers. First, however, I would like to address a question that some of you may have asked yourselves: ‘Why in the heck do I need to know all this legal mumbo jumbo anyways’?

The short answer is ‘knowledge is power’, just as it always has been. With respect to the company you work for, knowing and understanding the laws relating to logistics and the supply chain are essential tools to minimize risk, decrease costs, and maximize profits.

With respect to an individual Parcel reader or transportation manager, Bill Augello firmly believed, as do I, that this same knowledge can lead to a higher salary, a promotion, or, better yet, both. With this in mind, the following four areas are those where I believe that all transportation professionals, as well as shippers, should first focus their attention.

  1. Establishing and documenting a carrier’s rates and charges. A shipper must fully understand the basis for the carrier’s calculations of its freight charges. Are the rates based on a carrier’s published tariffs and rate schedules OR on an individual negotiation’ If based on a ‘published’ schedule, where is it to be found? What are all the details, variations, and permutations of the schedule? Are there things that a shipper can do --- for example, altering the size, shape or weight of the basic ‘shipping unit’ --- that would result in lesser charges?

  2. If based on an individual negotiation, has the negotiation been properly documented? However documented, are there other documents or publications ‘incorporated by reference’ that could affect the pricing? An example of such a publication would be a carrier’s rules tariff or the National Motor Freight Classification. If so, a shipper needs to know exactly what is being incorporated and how it will affect the final charges of the carrier.

  3. Determining of the limits of liability. As a general proposition, during the era of regulation of air carriers and motor carriers, the ‘default provision’ for recovery of loss and damage claims was the actual loss or injury, that is, a full monetary recovery by the shipper. This meant that there was no affirmative action required of a shipper at the time that the goods were tendered to the carrier in order to later make a full recovery in the event of a loss. Just the opposite is true today.

  4. Airlines were deregulated long ago and trucking companies are now allowed by statute to establish less than full value limits of liability. For example, many ‘traditional’ LTL carriers have established a limit of $25 a pound, however many have also put into place a limit of $1 per pound (!!!) for so-called ‘expedited shipments’. Parcel carriers such as UPS, FedEx and DHL typically have a $100 per package limitation.
    Thus, in the absence of an individually negotiated contract, a shipper usually needs to take an affirmative action, that is, declare a value at the time of tender to the carrier, as well as pay a higher charge, in order to obtain a full or higher recovery in the event of loss. Shippers must realize that limits of liability vary from mode to mode, and, within a mode, individual companies can establish their own limits of liability. Further, a particular carrier may establish different limits of liability for different commodities.

    If a particular carrier’s standard limit of liability is insufficient to cover the product shipped, then a shipper must consider alternatives. This could include declaring a higher value for all or some shipments, negotiating a higher limit of liability, or obtaining some form of shippers’ interest cargo insurance policy.

  5. Determining when insurance coverage is needed for cargo loss and damage.
    Another consideration is that even if a recovery was not barred by a limit of liability, there are situations where the carrier is not liable at all, e.g., an act of God, act of the public enemy, act of public authority, inherent vice, or act of the shipper. Or, a carrier may not have adequate insurance or may be financially unable to pay a claim even if clearly liable.

  6. This means that shippers, and especially shippers of higher value products, must establish criteria within their own organization to determine when to purchase shippers’ interest cargo insurance rather than relying only on the carrier’s legal liability for loss and damage.

  7. Determining time limits for filing claims for overcharges and for loss and damage. Just as the carriers of various modes have established different and varying levels of liability, they have also established varying time limits for filing claims. Generally speaking, the time limit for filing a loss and damage claim against a motor carrier is nine months from the date of delivery. For air carriers it can be much shorter, e.g., 30 days or even less.

Similarly, there are time limits for filing claims and lawsuits for refunds for overpayments of freight charges. Again, these vary from mode to mode and from carrier to carrier. It is up to the shipper to learn what they are, and not rely on the carrier to tell them.

All for now!!
Brent Wm. Primus, J.D., currently serves as the General Counsel for the Freight Transportation Consultants Association and is the CEO of transportlawtexts, inc. and Primus Law Office, P.A. Your questions are welcome at brent@primuslawoffice.com.