Inside Logistics

Learning Curve: Legal considerations for truckers and shippers

This issue’s Learning Curve column features a conversation with Richard Lande, transportation lawyer and a longtime business colleague, in which he explains some important legal considerations for truckers and shippers to consider


May 4, 2020
by

Tracy Clayson is director of client development at
In Transit / CPC Logistics Canada. t.clayson@callcpccanada.com

Q. How should a carrier avoid disagreements with shippers?

The basic premise of the shipper/carrier contract is to outline service level expectations. The carrier’s role is to transport the goods and deliver them in the same condition as they were received. The onus is on the carrier to cover any damage, as spelled out in the Carmack Amendment, which is a U.S. law that truckers liable for the full cargo value, except when they use the “released value”, which can considerably reduce their exposure as low as $0.50/lb.

To help avoid the liability of a freight claim, a carrier should take a very close look at the contents of the shipper/carrier contract to see if the shipper has attempted to dictate unrealistic expectations and/or expose the carrier to an overwhelming claims liability burden.

Q. What are some potential or typical contract-related problem areas for carriers?

Sometimes the carrier isn’t bold enough to challenge the terms of the contract. It is important to remember that ignoring or accepting onerous terms in the shipper/carrier contract is a dangerous practice.

With a bit of effort, the carrier can easily source legal advice or tackle the language of the contract and try to introduce more favorable options. A disciplined approach to the negotiating process with shippers and brokers is a critical component of a well-run carrier operation. These agreements should be a formality if there is truly a good working partnership. And carriers should resist the temptation to jump into a compromising business relationship with unsavory shippers.

Q. What are the principal differences in the event of cargo damage between U.S.-origin and Canadian-origin loads?

First, cargo claim rules are vastly different in the U.S. and Canada. When cargo claims occur with freight exported from the U.S. into Canada, the carrier may be held liable for the entire value of the shipped product while in Canada.

On the other hand, products shipped into the U.S. would have a claims value based on a certain dollar amount ($2.00 on average) per pound of the weight of the shipment. These entirely different rulings are important considerations for carriers based in Canada that are taking on back-haul loads on behalf of a U.S.-based shipper with freight destined for Canada.

Q. What insurance limits should manufacturers insist upon when drafting carrier contracts?

Flat-deck operators that haul goods could suffer damages due to both load securement and protection from weather conditions. Also, trucking companies hauling metal products might be subject to insurance claims involving the incidence of rust due to exposure to water, or dampness.

Some provinces have a statute of limitations for a set period – up to six years in some jurisdictions. So, if the truck driver involved is no longer at the company by the time the claims action is initiated, it hampers the carrier’s ability to provide testimony or evidence of the strapping or tarping of the metal products, for example.

Carriers should initiate a policy whereby each driver takes photos of loads to ensure that what they picked up, transported and delivered was not damaged.

Some legal cases have also involved shipments that are not correctly described or valued. To prevent problems, either the broker or the shipper should always verify that the carrier is covered with enough insurance to compensate for the replacement value of the product should it be damaged or lost.

Q. Are shippers liable in the event the carrier does not pay their WSIB or has a poor CVOR (commercial vehicle operator registration) rating?

Both the shipper and broker need to ensure that the trucking services they source demonstrate financial viability, high-level operations qualifications, and a positive CVOR safety rating.

The CVOR rating should be no less than “Satisfactory” and there should be a program of demonstrated safety practices and WSIB coverage and training for the truck drivers.

There should also be an understanding that if the rating is downgraded to conditional, the carrier must report that change of status to the shipper. At all times, due diligence with shippers, brokers and carriers and a mutually beneficial contract should be the goal.