COACHES CORNER: Shippers- Six Elements to Drive Accountability into your Broker Agreement
In many small to midsize shippers, the contract that exists between shipper and broker is a broker generated contract the Transportation Intermediaries Association (TIA) supports for its associated members. The TIA contract is a preferred agreement that allows for a broker to formalize its relationship with the shipper. Throughout the past decade many larger shippers have begun formalizing their broker relationship with their own agreements just as they do for their asset based carriers.
A number of shippers have started to use their specific broker-shipper agreements to implement more accountability into the broker party to include cargo liability. This erosion of a broker’s protections under the Interstate Commerce Termination Act of 1995 (ICCTA) and the Carmack Amendment may provide a false sense of security for a shipper depending on the size and financial strength of the broker.
A broker-shipper agreement should be reviewed by your legal team to ensure conflicts are thoroughly vetted between Federal and State laws. Notwithstanding the legal review, there are key elements shippers can add into their agreements that promote greater accountability. In turn, vetting the accountability with a thorough review of your broker and their operations ensures your broker can support your operational requirements.
Key elements to ensure the legal and operational side are adhered to:
- Qualified Carriers must meet the requisites of operating authority and safety rating. The broker must have a formalized carrier onboarding process that also includes a continuous process to ensure qualified carriers are meeting the requisites at the time of tendering.
- Requirement of the broker to provide an annual financial statement. In conjunction with a year end income statement, monitoring a shift in the payable party to include any factoring company as a payor for the broker may signal potential financial challenges.
- Communication of any “on-hand” freight, delays, accidents or cargo thefts should be clearly outlined within the agreement.
- Diversion and reconsignment should not be permitted by the broker except when authorized by the shipper.
- The broker should have exclusive control over the carrier to perform the service requested and may not co-broker shipper loads.
- Should the broker not pay the carrier, the shipper shall have the right to pay the selected carrier.
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References
William B. Cassidy, (2021 February). Yellow consolidating brands into “super-regional” LTL carrier. https://www.joc.com/trucking-logistics/yellow-consolidating-brands-‘super-regional’-ltl-carrier_20210205.html
Greg Knowler, (2021 February). Maersk posts $2.9 billion 2020 profit, expects even stronger 2021 https://www.joc.com/maritime-news/container-lines/maersk-line/maersk-posts-29-billion-2020-profit-expects-even-stronger-2021_20210210.html
William B. Cassidy, (2021 January) UPS Freight sold to Canada’s TFI for $800 million https://www.joc.com/trucking-logistics/ltl-trucking-logistics/ups-freight/ups-freight-sold-canada’s-tfi-800-million_20210125.html
Max Heine, (2021 February). The tens of thousands of drives with drug violations likely to leave trucking for good. https://www.overdriveonline.com/regulations/article/15042924/thousands-of-drivers-with-drug-violations-may-leave-trucking
The Maritime Executive, (2021 February). Retail Imports Expected to HitMonthly Records in 2021. https://www.maritime-executive.com/article/retail-imports-expected-to-hit-monthly-records-in-2021
Fareeha Ali (2021 January). US e-commerce grows 44.0% in 2020. https://www.digitalcommerce360.com/article/us-ecommerce-sales/
