LTL Regs 101
This paper is intended to address the interstate
“less than truckload" (LTL) segment of the US trucking industry. Though much of the information pertains to all cargo movement in the US, small parcel carriers, full truckload carriers,
intrastate (in state only) carriers, household goods carriers ("moving companies"), and international transporters each have unique rules & regulations that are not addressed here.
Historic Background
Regulation: Congress began regulating transportation services in 1887 by passing the Interstate Commerce Act. The
Interstate Commerce Commission (ICC) was then created to regulate all
transportation of goods (including what was to become the trucking industry).
The industry was strictly regulated by the ICC until the late 1970’s when it’s
regulatory scope was gradually curtailed in an effort to encourage competition. Revolutionary,
deregulatory changes began in 1980, culminating with the elimination of the ICC in 1995.
The Transition to Deregulation / The Undercharge Issue: Early
deregulatory actions spurred on fierce competition, and the practice of
discounting rates (rates that were supposed to be “filed" with the ICC). Many carriers were unable to survive
the newly competitive environment, and in the ensuing years, several thousand
trucking companies went bankrupt. The trustees of many of these defunct carriers
began billing former clients for freight bill "undercharges". The undercharge claims
were based on the trustee's contention that the discounts were not applicable
because the carriers had not properly filed them with the ICC (as was required
by law at the time). While the undercharge claims had only limited success in
the courts, many businesses decided to pay or settle the claims to avoid
litigation. The relative success in collecting revenues encouraged the trustees
of other defunct carriers to follow suit, and by 1993, the total amount of
undercharge claims reached over $3 Billion USD. Congress finally acted to address
transportation issues with the "Negotiated Rates Act" of 1993, the "Trucking
Industry Regulatory Reform Act" of 1994, and the "Interstate Commerce Commission
Termination Act" (I.C.C.T.A.) effective Jan. 1
1996. .
Today: The legislative actions of the mid 1990’s not only addressed the undercharge issue,
but also reduced the remaining regulatory oversight of the industry. Most
importantly, the ICC (and all of it’s consumer protection functions) was
eliminated. The following is a summary of these important
changes, and their effect on the modern purchaser of transportation services.
Published Tariffs
Tariffs are schedules of rates, and rules that a carrier uses to define the terms of sale of
their services. At one time, public notice of these tariffs were required
by filing them with the ICC for approval. Public notice is no longer
required, and carriers are free to change their tariffs unilaterally and without
notice. In most cases a shipper (the person or company that initiates the sending of goods), will receive notice of tariff information only when they
specifically request it. Carriers typically
have one or several rate tariffs, another rules tariff, and another liability
tariff. These tariffs generally refer to one another, the National Motor Freight
Classification tariff (N.M.F.C.), and the tariffs of other carriers with which
it may interline (transfer). Any or all of these tariffs may be applicable to any given
shipment.
Note: I.C.C.T.A. Public Law 104-88, section 13710(a)(1) requires a
motor carrier to furnish all information relating to pricing, rules, and
practices upon request. When a consumer
requests a copy of the rules tariff, they usually receive an
abbreviated version with references to the much larger, and more complex,
governing publications.
The Bill of Lading:
The “Uniform Bill of Lading" (B.O.L) is used as a "contract" of carriage however, the only “uniform" aspect of
the B.O.L. is the fact that it binds all parties involved to the very un-uniform
tariffs. Carriers rules tariffs generally state that regardless of what type of
B.O.L. is used, the “Uniform" B.O.L. (as outlined in the N.M.F.C.) will govern
all shipments tendered. The purchaser of transportation services may wish to
spend some time reading fine print on the back of a uniform B.O.L. Then spend a
few weeks gathering and reading all of the referenced publications. It is not
surprising that most of today’s “multi-tasking" managers do not have the time to
read several hundred pages of lawyer-speak. It is also not surprising
therefore, that the US domestic trucking industry remains fraught with
misunderstandings.
Contracts:
A properly drafted
contract drawn by an experienced logistics professional, or transportation
attorney would address any concerns regarding transportation services however,
a consumer’s ability to acquire favorable contracts is limited by market
forces. Large shippers, such as General Electric, Halliburton, or the Federal
Government, benefit greatly from transportation contracts, other shippers
generally do business under the terms in the carrier’s tariff (as
referenced in the Bill of Lading Contract). Worth noting is that a
transportation “agreement" supplied by the carrier, that includes a reference to
tariffs, or other publications is simply an agreement to do business under the
carrier’s tariff rules, perhaps with a few exceptions.
Note: This paper is
intended to address the “less than truckload" segment of the US trucking
industry. It refers to the historical definition of “common
carriers". Relatively simple transportation contracts are still commonplace
in the full truckload segment of the industry. The smaller “Truckload" carriers
do not typically maintain independent tariffs.
Third Party Shipping:
Though a third-party freight service provider may offer a useful service, shippers
should understand the relationship so they can make informed business
decisions. All third-party freight services that arrange for the truck transportation of cargo belonging to
others, without actually taking possession of it, are defined by the US Dept of
Transportation (D.O.T.) as a freight "Broker". A Broker negotiates their own
pricing, and rules of carriage, with for-hire carriers who provide the
actual transportation service. Unless a legally binding contract is
executed, brokers do not assume responsibility for cargo, and have very little
legal liability for any problems that may arise from the transportation service.
Shippers that transport their product using brokers are generally subject to the
tariffs of the carrier providing the service. In addition to the contents
of the carrier's tariff, the financial stability of
the broker is another area that should be of concern when shipping via
third party transportation providers. All major LTL carriers address that
issue by clearly stating in their tariff that if the broker fails to pay them for their service,
both the shipper and the consignee remain liable for the freight charges. In
other words, if the broker doesn't pay them, you do (even if you've already paid
the broker). All Brokers (including on-line "freight quote" type operations) must be licensed by the D.O.T. Prospective shippers should be aware of recent scams involving internet based "shipping companies". If you choose to use a freight broker, be sure you know who they are, and that they are licensed by the D.O.T. to provide that service.
Cargo Liability:
Shippers should not
simply assume the amount stated on a cargo insurance policy is applicable to a
shipment tendered to a carrier. The I.C.C.T.A section 14706(a)(1) states that
liability is for the actual loss or injury to property caused by the carrier.
However, section 14706(c)(1) provides for a “shipper waiver" which allows for a
limitation of liability by written agreement between the shipper and carrier.
Carriers interpret the Bill of Lading (in which the parties agree to the
“classification, tariffs, and rules in effect at the time of shipment") as a
written agreement. Since this “written agreement" contains a reference to the
rules tariff, the shipper has agreed to the liability limitation specified in
the rules tariff. Under current regulations (or lack thereof) carriers are free
to create, and amend liability limitations unilaterally and without notice. It
should be of no surprise that, as carriers struggle to maintain rising costs,
they have been increasing the limitations on liability specified in their
tariffs.
Note: Many carriers now
sell cargo insurance. Purchasing additional cargo insurance does not guaranty
payment for damaged shipments. It would be wise to consult with an insurance
provider when shipping high value items.
Billing Practices:
Legislation closed many
doors to the collection agents of bankrupt carriers seeking to collect
“undercharges". Most
collection agencies will no longer attempt to collect “undercharges" based on
rate tariffs. They will however, be inclined to bill shippers based on the
timeliness of bill payments. All carriers have penalties in their rules tariff
for payments received after a specified period of time (generally between 15-30
days). The form of penalty is usually either a loss of the otherwise applicable
discount, a fixed percentage of outstanding freight bills, or both. Some of
these penalties have been found by the courts to be excessive, and recent
decisions indicate questionable enforceability unless the carrier specifically
states the terms on their freight bill. Carriers selectively
enforce the most extreme provisions when they no longer wish to do business with
a slow paying client. Trustees of bankrupt carriers are not concerned about
future business. Collection agents for trustees can, and do, review payment histories, and apply the
applicable penalties. Both overcharge, and undercharge claims must be filed
within 180 days. The 180 day rule does not over-ride bankruptcy law. An
attorney should be consulted with regard to bankruptcy applications.
Off-bill Discounting:
Off bill discounts are
not allowed for shipments paid by government agencies however, this law does
not provide the same level of protection for the private sector. The person
directly responsible for payment must be advised if any reductions or allowances
were paid to another party. The payer need not be informed of the exact
amount of payment, just that a payment had, or will occur. In other words
if your freight bill contains a notation of
“allowances", a third party has received some type of payment, or compensation related to that shipment.
Author:
Joe Deasy is the President of United Shippers Corporation of NY, and the
author of www.uscargotools.com.
He currently spends his time developing the US Cargo Tools product line, and
providing the logistics experience required to offer "free shipping" on pallet
trucks, pallet scales, platform trucks, and other items that ship via LTL trucking service providers.
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