CSA2010 has made all shippers, brokers, and FFs responsible for the carriers that they choose to use. As a broker re or double brokering a load, there is no way to be 100% sure the broker that you have chosen to move the load that you are brokering will be as diligent in their carrier selection as you are (you ARE diligent, aren’t you?). As a shipper, if you have not explicitly prohibited re or double brokering, you have even less control than you had when giving the load to a 3rd party.

Should that driver be involved in a collision that causes fatalities, the ‘fault’ will travel up the supply chain and eventually reach and harm the shipper (who, though they had no information about the carrier used, may be no less at fault, in the eyes of the court). A broker’s duty is much like that of a doctor, to do no harm to the shipper as a result of their actions.

Bottom line, in my opinion, a broker’s job is to find a motor carrier to move a shipper’s  freight, not to find a broker to find a motor carrier to move the shipper’s freight.

Links:

http://www.joc.com/trucking/liability-award-slams-ch-robinson

Rob Swyter

Question: I just finished reading something about the Japanese government setting up a 50-mile hazard zone around the nuclear power plant that had all those problems after the earthquake, and it got me thinking.

Our less-than-truckload company has a terminal within 50 miles of a U.S. nuclear power plant. I know this isn’t very likely, but suppose my area got hit by the same level of earthquake that Japan had. Suppose the plant had the same kind of destruction, and was emanating the same kind of radiation.

Well, that kind of event would pretty much zap any freight we have in our nearby terminal. I mean, nobody would want their stuff to glow in the dark and give people radiation poisoning, right? And with the earthquake messing up the roads and everybody who can
clogging up what’s left of them, trying to get out, there wouldn’t be much of a chance we’d
be able to move the freight out before the damage to the nuclear plant let out all that radiation and zapped the stuff.

So would we, as a carrier, be liable? I’m thinking we wouldn’t, that it would be an act of  God, which, as you know, is one of the excepted causes that get a carrier off the liability  hook. I mean, if an earthquake isn’t an act of God, what is? But I thought I might ask you  about it to be sure.

Answer: Well, the law is a little unsettled here — you’re postulating circumstances that have never occurred in this country — but I’m sorry to say I have to disagree with you. I think your carrier would indeed be liable.

Remember the legal aftermath when Hurricane Katrina clobbered New Orleans in 2005 and the levees gave way? Well, lots of homeowners there had regular insurance, which included coverage against storms up to and including hurricanes, but a lot fewer carried flood insurance. So the insurers quickly came up with a legal gimmick. All this damage, they argued, resulted from two events, not just one. Event No. 1 was the hurricane itself; if, like the big bad wolf, it blew your house down, the regular insurance covered you.

Most folks, however, didn’t lose their homes to wind but rather to flooding. Aha, the insurers said, well that was a separate event — admittedly caused by, but not the same as, the hurricane itself. So unless you also had flood insurance, you didn’t get a stinkin’ penny.

And the courts bought into that argument big-time. That meant the insurers were mostly off the hook, most homeowners who lost their homes couldn’t collect a thin dime, and what passes for justice in our country of legal nitpicking was nominally done. Your hypothetical situation is even more obviously segregable. You postulate two events: the earthquake and the resultant, but not necessary, breakdown of the nuclear reactor. The first is indisputably an act of God — “something in opposition to the act of man; … such act as could not happen by the intervention of man, as storms, lightning and tempests;” Forward v. Pittard, 1 T.R. 27 (1705).

The breakdown of the neighboring nuclear reactor, however, is a whole ’nother ball game. Whatever you care to call it, it isn’t an act of God, and nor does it fit comfortably into any other excepted cause to carrier liability. So, as a carrier, you’d be liable. Is that fair? Of course not, but it’s the law.

A while ago, I published a column discussing the Carmack Amendment to the Interstate Commerce Act, as relevant here 49 U.S.C. Section 14706, which the magazine saw fit to headline as “Carmack’s Broken Model?” (Feb. 28, 2011). Well, this is one of the reasons many believe the Carmack standard of carrier liability is “broken.” U.S. law, alone in the world, holds carriers liable irrespective of fault or negligence, even “though the force be ever so great, as if an irresistible multitude of people should rob him, nevertheless he (the carrier) is chargeable” — i.e., liable; Coggs v. Bernard, 2 Ld.Raym. 909 (1703).

Sure, the basic precedent is more than three centuries old, but it’s still the law of our land. And it means that if your nearby nukes go up, you’re liable for any damage to freight in your custody. It is, as you say, a pretty unlikely scenario; even Japan’s 50-mile radius is super-cautious; all they say is, stay indoors. But if escaping radiation did damage your freight, I’m afraid you’d have to pay.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com.

-Colin’s definition of double brokering vs re-brokering—on double brokering he claims the broker knows but the shipper does not…then later when defining re-brokering he states re-brokering too “won’t always be unauthorized”….    most brokers don’t even know it’s happening until something very bad goes wrong. There are hundreds of reports on watchdog and freight guard of attempted & actual fraud + total loss claims from uninsured surprise actual carriers-not to mention the possibility of what could be called Schramm Scam!-fraudulent trouble brokering with a tragic Schramm/Puckerin case like accident.

-I think the questioner has it right that consented and authorized co-brokering is the “well setup and authorized” involvement of a 2nd broker- though the shipper may still not know or have given its blessing. The TIA recommends shippers give advance consent (to co-brokering) in the TIA’s release of their Co brokering agreement though I seriously doubt any of the brokers doing this are sharing the need for another broker to their shipper.

Most brokers and their shippers commonly at risk right now!
It is good that this “dirty little secret” of the brokerage industry is getting some attention.
Brokers who are serious about their SOP’s for carrier hiring need to address operational disciplines to help deter unknown intermediaries. Following these likely tricky/picky operational safeguards will not be popular with sophomoric brokers little interested in their company’s long term security and name and more interested in transaction by transaction margin.

Brokers that operate loosely in the lanes loaded with brokers posing as carriers (Like Long Haul to/from CA or Chicago) will be putting themselves and customers at grave risk. Certain region to region pairs are loaded with 1 truck “carriers” who double/re broker hundreds of loads a day to unsuspecting or not interested brokers. Surely their interest will increase the next time they bear the fruits of this risky behavior. One way to identify the high probability scam artists is to note, when vetting the carrier’s safety, if a “carrier” has no safety rating, no inspections, no MCS-150 miles filed with the FMCSA and no BASIC CSA safety scores-yet they have a full staff of people working a 1 truck operation-give me a break!

Colin is definitely correct when he speaks about (sloppy) brokers misplacing their “shipper’s trust”.

Brokers interested in ever continued excellence can help engineer the solution by demanding (by process) direct contact with the drivers on every load.  Someday soon drivers will all be hopefully Skype enabled with their smart phones. Doubting Thomas’s like me (who need to see before believing) need to not only go over their no unauthorized re/double brokering clauses of their carrier broker agreements with at a minimum the carriers most likely to violate it and ask BOTH the dispatcher and the driver “Do you have XYZ Carrier’s MC number on the door of the tractor?-my shipper checks this (even if they don’t)”.

One of my past shippers demands the actual carriers name in writing in advance whenever a load is brokered and their security guard will not allow anyone else in for the load-a great practice to help thwart this troublesome epidemic.

Check out related articles from:
Henry E. Seaton, Esq.
Seaton & Husk, LP
www.transportationlaw.net
about this subject-he is one of the best industry experts when it comes to the incredible tangled webs brokers can unknowingly create where loads can involved 2, 3 and even 4 brokers!  A single intermediary has enough trouble establishing & keeping control of a shipment. Things can only get exponentially worse when there are (unauthorized) more than just one intermediary in the equation!
Steve Balint
Taylor Logistics


Answer: There’s an old movie called “What’s Up, Doc?” in which actors Barbra Streisand and Kenneth Mars have this exchange following a rather long and tendentious dissertation on a fairly abstruse technical matter by the Mars character: Streisand, rather patronizingly: I think you’re oversimplifying.

Mars, very indignantly in the vaguely Teutonic accent he’s adopted for his character (Hollywood is big on stereotypical accents that never come very close to the real thing): Ovairsimplifying? I nefferovairsimplify!

Vell… er, well (that bogus accent thing must be contagious), your explanation a bit oversimplifies the distinction between double- and re-brokering, but you’ve got the general idea. They’re pretty close to the same thing, but not quite exactly.

Double-brokering occurs when a shipper hires a broker to arrange for transportation and, rather than doing the job himself, that broker hires another broker to handle it for him. If it’s “unauthorized” it’s done without the shipper’s knowledge, although not all double-brokering, as you point out, fits that description. At first glance this may seem curious; isn’t all double-brokering “unauthorized?” I mean, why would a shipper hire one broker who merely hires a second one, rather than dealing directly with the second one and cutting out the unneeded middleman?

The reason, of course, is that the shipper may not know, or even know of, the second broker, who may have expertise needed or helpful in getting the shipment moved. This is not uncommon on international shipments, and may also apply on specialized goods such as hazmats, refrigerated goods, unusually heavy or bulky freight, etc. I also might point out that “unauthorized” is a pretty inspecific term. Double-brokerage may be “unauthorized” in the sense that the shipper hasn’t explicitly approved it in advance and may even be unaware of it; but if the shipper hasn’t forbidden it (and many don’t), it isn’t necessarily improper as a matter of law.

Re-brokering involves the same general set of facts, with the shipper hiring a broker, the broker hiring one party (a carrier ordinarily) to haul the goods, and that party farming out the actual work to someone else. This time, though, the chain is differently constituted; whereas in double-brokering the original broker set up the three-party linkage, in re-brokering that was done by the party hired by the broker.Again this won’t always be “unauthorized.” For example, the broker may hire a general-freight carrier to handle specialized freight knowing that carrier can’t do so itself but must re-broker to a carrier better equipped for the work; but the broker doesn’t have good connections with the specialist, while the carrier it hired does. And once again the amorphous nature of that word “unauthorized” may complicate the issue. Unless the original broker said to his hired carrier, in essence, “I expect you and only you to haul this load,” the re-brokering may not have been specifically authorized and may even be done without the broker’s knowledge but may still be legally proper.Both double- and re-brokering have come to have bad names in the industry. The practices set up long and convoluted chains of responsibility (I’ve even seen them extend one or two further links), making it difficult to pinpoint liability if and when things go awry.

In addition, they usually put people in the awkward position of doing business with strangers, never a good idea. When he hires a broker the shipper is trusting the broker to engage a carrier known to it (though not necessarily the shipper). But when you get into the multiple brokering end of things, the shipper’s trust is misplaced; the broker, too, may well not know the carrier who actually winds up taking custody of the shipment and moving it. The longer the chain gets, the more fragile it becomes.Thus, it’s generally advisable for both shippers and brokers to expressly forbid further brokerage down the line. Brokers are generally a lot more diligent than shippers about this in their dealings with the carriers they select, but sometimes even they fail. The old saw is that too many cooks spoil the broth. That holds true as well in multi-partite transportation arrangements.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455, phone (843) 559-1277, e-mail BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.

Well, my comment is this: No, we would not want to adopt any model that sets a unilateral value of $2 per pound, as you say is the standard in Canada. That is an unrealistic value. It doesn’t even make sense. My company manufactures many product types and categories, all of which are valued at far more than $2 per pound, so taking a socialistic approach to liability limits would shift the burden of cost to me, the manufacturer.

This is backwards. It defies logic why you would think the one responsible for the safe cartage and the one responsible for the damage —the carrier — shouldn’t bear the burden of cost for keeping it safe. The manufacturer should have to pay for additional insurance in case the carrier falls short of their responsibility or mishandles the goods. Why do you think I should have to pay extra to ensure the carrier does what I paid it to do? When I hire the carrier and agree to its rate, it’s supposed to be the rate it charges for safe cartage to destination. Are you saying I should have to pay the carrier’s rate for safe cartage but it doesn’t fully include getting my shipment there safely?

Are you saying the rate paid to the carrier is only a partial rate? The burden of cost to get the product delivered safely to destination should be on the carrier. After all, isn’t that its job in the first place?

My job is to manufacture a safe product. How preposterous would it be to expect consumers to beware that my products are just kind of safe, or in other words my product is only safe up to a limit and the buyer must purchase insurance with my product to ensure it’s totally safe!

Answer: Well, actually no, I’m not saying any of those things; it was the reader who wrote me who said some — and only some! — of them and solicited my comments. He thought it would be a good idea to have a single liability standard across all three North American countries, and if it were possible it’s not the worst idea I ever heard.But, as I said originally, possible is something it’s not — and your rather energetic diatribe pretty much says why. You’re far from alone in your views, and I’m sure your comments are garnering loud applause from many shippers and shipper organizations.

Allow me, though, to inject a small dose of economic reality. First, I’ll bet big bucks your products are not, in fact, “totally safe.” They’re not safe against robbers who might steal them from your customers. They’re not safe against misuse. They may not even be safe against recommended use, as seen in the product recalls reported almost daily.
Yet transportation carriers (alone among all commercial entities) are obliged by law to guarantee their services against all of these things and anything else besides. “For though the force be ever so great, as if an irresistible multitude of people should rob him, nevertheless is” the carrier liable under both the Carmack Amendment to the Interstate Commerce Act and the U.S. common law; Coggs v. Bernard, 2 Ld.Raym. 909 (1703).
Thus, it isn’t that the carrier necessarily “falls short of their responsibility or mishandles the goods,” but that the carrier is liable for loss or damage regardless of the cause, with only five (very limited) exceptions. That’s U.S. law.

As I said originally, we’re the only country to still impose such extraordinary non-fault-based liability on carriers. Would you, as a manufacturer, care to accept the same?

And if you did, or had to, wouldn’t you bump your prices up a notch or two to cover that potential liability? Do you think carriers are so dumb that they don’t?

OK, I think I made my point. You’re paying for the legally imposed (here) carrier liability, you’re just blissfully unaware of it because it’s built into your base rates. If it weren’t, you’d pay for it more knowingly as separate insurance. But you’d likely pay about the same, total.

As the Cockney expression goes, “You pays your money and you takes your choice.” But don’t delude yourself into thinking you’re getting a free lunch. Too many shippers lose track of that.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, SC 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the compiled edition of past Q&A columns, published in 2010

NATIONAL CLASSIFICATION COMMITTEE
VALUE GUIDELINES
Class Maximum Average Value
Per Pound
50 $ 1.11
55 $ 2.17
60 $ 3.28
65 $ 5.44
70 $ 8.20
77.5 $ 10.93
85 $ 16.42
92.5 $ 21.85
100 $ 27.33
110 $30.08
125 $ 34.17
150 $ 41.04
175 $ 47.87
200 $ 54.71
250 $ 68.38
300 $ 82.04
400 $ 109.40
500 $136.76
Hank Mullen hmullen@transolve.usl
- By Hank Mullen on 3/25/11

Answer: I’m sure you won’t be surprised to learn that you’re by no means the first (nor, I’m sure, will you be the last) to suggest such a change in the law.

In fact, the U.S. is the only country in the world to assign full value liability to its domestic surface carriers, as is done under the Carmack Amendment to the Interstate Commerce Act (presently 49 U.S.C. 11706 as to railroads, 14706 as to motor carriers and domestic freight forwarders). All others, including Canada, have monetary ceilings; if you want more coverage, you buy insurance.

Carmack is indeed a leftover from a bygone era. It derives from the common law as inherited from Britain (though Britain has since abjured its rigors), whereby a carrier was deemed liable “against all events but acts of God and of the enemies of the King” (Coggs v. Bernard, 2 Ld.Raym. 909 (1703).

But it’s pretty firmly established is both law and commerce by now–so firmly that when Congress directed first the old Interstate Commerce Commission (1980-81) and subsequently the Department of Transportation (1996-98) to consider revising the standard, neither thought it should be changed. It ain’t broke, they basically held, so don’t fix it.

The Canadian model is favored by many carriers. It allows carriers to limit their liability unilaterally by tariff provision, and sets a fairly low ceiling–about $2 (in Canadian dollars) per pound–for motor carriers. In other regards, however, Canadian law (which is far less federalized than in the U.S.) varies sharply from one province to the next, so it’s at best an incomplete model.

In addition, adherence to a Canadian “scheme” wouldn’t put the U.S. in any closer compliance with the regimes of other countries. Probably the closest thing to an international “standard” is that of the European Economic Community, which has conventions limiting rail and motor carrier liability.

They’re a far cry from Canada’s approach, though. Railroads are liable for up to $10 or a bit more per pound, motor carriers a little over $5 a pound, and there are exceptions to carrier liability that go considerably beyond those allowed in the U.S. or Canada. And many other countries outside Europe–in particular, throughout Asia–don’t subscribe to anything like that, creating yet more variance.

Which brings us to your dream of a NAFTA standard that might at least apply throughout North America–the U.S., Canada and Mexico. Bluntly, forget about it; this simply isn’t going to happen.
Though Canadian and U.S. law diverge pretty sharply on this issue, the differences are as nothing when you bring Mexico into the picture. Mexican motor carrier cargo liability is capped by law at between two and three cents–that’s right, pennies–per pound, even less on small shipments, and the law’s biased against a shipper trying to collect even that pittance.

As to Mexican rail service, the whole situation is kind of unsettled since railroads were only recently privatized in Mexico. Basically shippers negotiate the best deal they can get with their railroads and otherwise buy separate insurance.
Even here, though, the shipper’s at a disadvantage. Only Mexican insurers are recognized in that country, and peculiarities of Mexican law place severe obstacles in the path of anyone trying to file an insurance claim.

You can pretty well bank on it that Mexico isn’t about to drastically expand levels and degrees of carrier liability to match even those of Canada, much less the U.S. Those two will of course not cut back to Mexico’s level. There’ll never be a NAFTA standard.
Nor is a cutback of the U.S. standard even to Canada’s level in the cards. If you haven’t noticed, NAFTA isn’t politically real popular these days; in an economy marked by high unemployment, it’s held in conservative circles to be responsible for job losses abroad. You won’t garner votes for a liability regime change by citing NAFTA.

All of which leave us with… Carmack. Antediluvian it may be, but it’s what everybody’s used to. It works. There’s no serious groundswell against it, and no widely accepted international standard for a beacon. So it’s here to stay for the foreseeable future.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455, phone (843) 559-1277, e-mail BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.