A way to avoid the pallet "penalty"

By Ray Bohman -- Logistics Management, 5/1/2000

Shippers go to great expense to palletize many, if not all, of their shipments. Palletization provides all kinds of benefits to shippers, carriers, and even consignees by facilitating mechanical handling, securing multiple packages and thereby cutting down on both loss and damage, and reducing labor costs associated with loading and unloading. As time goes on, therefore, more and more shipments are likely to be palletized.

Unfortunately, some shippers-namely, those shipping articles rated Class 77.5 and higher-pay a rate penalty for using pallets, even though they bear the expense of purchasing pallets as well as the cost of loading and securing merchandise to them.

If you use carriers that participate in the National Motor Freight Classification (NMFC), you'll be interested to know that according to Item 680, Sec. 5-"Definition of the Term In Packages' "-the term "in packages" includes articles securely fastened to elevating truck platforms, lift-truck skids, or pallets or unitized quantities. This means that if you are shipping articles subject to a single class in any container or in any other form on a pallet, the pallet is considered to be part of the package and is rated at the same class as are the articles.

As an example, let's say you had eight cartons of articles rated at Class 100 secured to a wooden pallet. Under the above-mentioned rule, those articles and the pallet would all be rated Class 100, even though wooden pallets, by themselves, are rated Class 70 under Item 150390, Sub 4 of the NMFC.

Although the rule in the NMFC calls for rating palletized shipments in this manner when articles that are subject to a single class are secured to a pallet, it doesn't mean you are barred from seeking relief. [There's a different wrinkle for rating palletized articles that are subject to two or more different classes under Item 640, Sec. 3(b)(3).] In fact, there's no reason why you couldn't go to your carriers and attempt to negotiate an arrangement under which you would show two different classification descriptions and weights on your bills of lading-one for the articles and the other for the pallets-and rate each of them separately. Using the example shown above, the articles secured to the pallet would be rated at Class 100 and the wooden pallet at Class 70.

We know of one major carrier that already rates shipments in this manner, provided that the different descriptions and ratings are broken out on the bill of lading. To make absolutely certain you are legally covered, we strongly recommend that any agreement reached along these lines be clearly spelled out in a pricing agreement between you and your carriers.

Of course there are two sides to every coin, and that is indeed the case here. Lest anyone accuse me of providing a one-sided view of this topic, I want to point out that shippers of articles rated classes 50, 55, 60, and 65 clearly are getting a break when they palletize such articles.

Ray Bohman is a well-known consultant and author. Mr. Bohman is editor of several highly successful newsletters on transportation and is a consultant to a number of national trade associations. He is president of The Bohman Group, consultants and publishers in the freight-transportation field. His offices are located at 27 Bay Lane, Chatham, MA 02633. Phone: (508) 945-2272.