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Q: I have heard of the term 3PL but exactly what does it mean?
A: Actually it is quite simple, don’t forget that trucking is not rocket science. 3PL refers to “third-party logistics”. Over 40% of companies plan to outsource more from 3PL provider over the next five years according to what I read. Major companies such as Ford, Procter & Gamble, General Mills, DuPont and CVS are all outsourcing various logistics-related tasks, from transportation management to fleet management. In the case of Ford, for instance, the automaker uses a 3PL who manages its import and export trade throughout North America. TRUCKING EDUCATION 101 In this series, we are going to try to answer some of the questions that I have come across my desk. Hopefully, we can pass on some of this knowledge to our readers.
Q: We are primarily a warehousing company, however, we have a transportation program where we act, we believe, as a broker, in arranging the consolidation of Less than Truck Load (LTL) orders from various shippers into Truck Load (TL) routes via contract and regular carriers, on a regular schedule, in order to reduce the cost of transportation for our customers. We want to be in the business of transportation, so we are looking toward providing more complete services. First, We need your advice on the services above, are we legally acting as a freight broker. We did get a brokerage license. Second, if we are paying the carriers and billing our customers (the shippers) for freight (at guaranteed, all-inclusive rates), can our customer withhold payment or deduct from future freight bills for a los or damage shipment? Can we do the same to the carrier? We do not believe either practice is legal, but we cannot find the code. Assuming this is not legal, is it therefore our responsibility to file the claim with the carrier since we arranged the transportation? If we do not have to file the claim, but if we do want to offer the service of handling the claims for our customers, what is the “right and professional” way to handle the customer’s credit for loss or damage received?
A: It sounds as though you are providing services that fall into the category of a “freight forwarder”. The fact that you are consolidating shipments for one or more shippers, and using the services of a motor carrier, fits more within the definition of a freight forwarder. As a forwarder, you would be assuming liability for loss or damage in the same way as if you were a carrier. In the freight forwarder relationship there are really two contracts of carriage: between the shipper and the forwarder, and between the forwarder and the carrier. Thus, you would be liable to the shipper for the loss or damage, and you would have to file your own claim against the motor carrier. As far as setting off freight charges against loss and damage claims, this is a common practice and is not “illegal”. If you want to avoid this problem, the best way is to cover it in a written transportation agreement with your customers.
Q: I’m a 3PL who is using common carriers and household goods carriers to deliver items to residences. Do I need a broker’s license? If I do, where can I get one?
A: The definition of a “broker” is found in the FMCSA (formerly ICC or FHWA) regulations at 49 CFR Part 371, and provides: (a) “Broker” means a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bon fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport. On the other hand, (c) “Brokerage” or “brokerage service” is the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor or consignee. If your activities fall within the definition of a broker, the Interstate Commerce Act requres that you must register with the Department of Transportation(FMCSA) 49 U.S.C. Sections 13901 & 13904. This registration requirement replaces the former statutory requirement to ontain a license from the ICC. Brokers holding licenses from the ICC as of December 31, 1995 were “grandfathered” and deemed to be registered under the new law, 49 U.S.C. 13905. The FMCSA has established regulations for registration under 49CFR Part 365. Application forms (Form OP-1) are available from the FMCSA, 400 Virginia Ave SW, Washington, DC 20590 or you can get your license either online at www.fmcsa.dor.gov or through NTA. I would suggest that you consult an experienced transportation attorney through the Transportation Lawyers Association (est. 1937) at www.translaw.org. They have listing throughout the United States.
Q: We send shipments out by air freight and will declare a value of $1,000.00 per shipment, which is the amount of our insurance deductible, even though the value may be greater. The question is, have we prejudiced our ability to collect the invoice value from the insurance company.
A: Yes, by declaring a lesser value, you have hampered your insurer’s ability to recover the full invoice value from the carrier. You need to review your insurance policy as some have a released rate or limitation of liability and some do not. Is the shipment domestic or international. The liability differs. Domestic could be 50 cents per lb or per piece or $9.07 per lb per piece. International is now about $10.41 per lb. Per piece.
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Remember, tell those who doubt your profession, " If you've got it ….A TRUCKER BROUGHT IT ! Until next month, " Drive Safely - Drive Smart ! "
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