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. The opposite is true today. Railroads and trucking companies are now allowed by statute to establish less than full value limits of liability. All of the larger ones have done so. For example, most motor carriers have established a limit of $25 per pound; however, many have also put into place a limit of $1 per pound for so-called “expedited shipments.”
Thus, in the absence of an individually negotiated contract, a shipper now has 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 products.
If a particular carrier’s standard limit of liability is insufficient to cover the product shipped, then a shipper must consider possible solutions. 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.
Similarly, time limits for filing claims and lawsuits for refunds for overpayments of freight charges are also subject to time limits. Again, these vary from mode to mode and from carrier to carrier. It’s up to the shipper to learn what they are as the carriers are not known for initiating such conversations.
You can be assured that the carriers are well organized and have effective advocates and lobbyists in matters that affect them financially. Carriers have a definite advantage in that transportation is the core business of their company while for shippers, such as manufacturers, transportation is often viewed as a necessary evil rather than as a critical part of the supply chain.
Thus, a transportation manager has to not only advocate a shipper’s position with respect to the outside world, but also with respect to the management of their company. This means that transportation managers have to continually ensure that senior-level management understands the significance of what the transportation managers are doing.
A good example is in the area of claims management and recovery. Figure 1, prepared by Bill Augello, illustrates the importance of recovering claims for loss and damage and shows how unrecovered claims can erode a company’s profitability.
|A claim for|
|If you operate at net profit of||$50||$100||$200||$300||$400||$500||$1,000|
|Equals sales of|
Figure 1. It is important to recover claims for loss and damage claims can erode a company’s proﬁtability.
Shippers also need to educate top management as to the economic affect that proposed legislation may have on the company. Shippers may lobby for or against legislation by working individually with their state or federal legislators or collectively through trade organizations. When shippers are acting through an organization, the organization is only as strong as the support the members give the organization.
This is an issue that will be with us indefinitely and affects shippers, intermediaries, and even carriers who “hire” motor carriers—especially truckload carriers. As recently as September 2007, a U.S. District Court in the case of Jones v. D’Souza ruled against CH Robinson in a situation very similar to that of the Schramm case. Any transportation professional involved in selecting and monitoring carriers must know and implement measures to minimize its company’s exposure to such claims.
Also in 2007, the Surface Transportation Board (STB) issued a bombshell ruling determining that the antitrust immunity for Tariff Bureaus was no longer appropriate. One consequence of this is that the National Classification Committee (NCC) entirely reorganized itself into the Commodity Classification Standards Board (CCSB) going forward. Shippers whose company’s freight charges are based upon the National Motor Freight Classification (NMFC) system need to closely monitor further developments arising from this fundamental change.
The other development was in a decision entitled “Simplified Standards for Rail Rate Cases.” In this case, the STB announced a new, less expensive procedure for small shippers to challenge the reasonableness of a carrier’s rates that are subject to regulation.
It is expected that the convention will be approved by the United Nations General Assembly in the fall of 2008. If ratified by the United States in its present form, the convention will be a significant change from the Carriage of Goods by Sea Act (COGSA) that now governs loss and damage claims against ocean carriers.
On balance, the changes appear to be favorable for shippers. Accordingly, shippers affected by this change should closely monitor future developments. In particular, shippers should pay close attention to monitor any enabling legislation introduced into Congress to see what the final form will be and to decide whether or not to support its passage.
In the Treiber case, a jeweler shipped a piece of jewelry worth $107,000.00 but only declared a value of $50,000.00. The Court found that UPS was not liable as its tariff contained a provision stating that it would have no liability for packages tendered with a value in excess of $50,000.00. The Court went on to rule that the shipper was also not entitled to recover under the insurance policy it purchased through UPS since the policy terms mirrored the provisions of the UPS tariff.