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Moore on Pricing: More unintended consequences

I want to draw your attention to developments in Washington that threaten to overwhelm shippers with new liabilities that carriers have traditionally controlled.
By Peter Moore, Adjunct Professor of Supply Chain
March 01, 2012

I want to draw your attention to developments in Washington that threaten to overwhelm shippers with new liabilities that carriers have traditionally controlled.

As most logistics professionals know, a transportation agreement and a bill of lading have been the cornerstones to a successful shipper/carrier partnership. Historically, these documents have been recognized as the documents that separate the liability of the shipper and carrier.

Over the many years, there has been an understanding that the carrier is strictly responsible for the cargo or lading and for the behavior of their crews and drivers. Recent federal and court actions have changed that and the legal wall is crumbling thanks to our friends inside the beltway. In fact, shipper liability for poor safety practices of the carrier is being established in court cases referencing new federal safety regulations.

Federal Motor Carrier Safety Administration’s (FMCSA) Compliance, Safety, Accountability (CSA) Safety Measurement System (SMS), or CSA/SMS, is a federal program designed to establish a public safety rating system for carriers. The intent was to encourage carriers to get feedback based up their operational performance against a safety standard or scorecard. Law enforcement would use the scores to remove unsafe drivers and highlight systematic behavior by carriers.

Recently, a few tort attorneys have been successful in convincing the courts that the shipper should use this publicly available information for carrier and driver selection—and if they fail to do so should be liable for damages if the carrier has an accident. 

This change has been creeping up since the 90s when shippers’ employees who loaded hazardous materials on trucks became regulated and subject to training and personal liability.

The regulations and subsequent court actions have made the shipper and the shipper employees a part of the transportation liability picture—at least for hazardous materials. Now comes liability for the actions of a carrier on the way to the destination for all types of cargo.

Am I being overly concerned? Well, if you’re doing business in Australia you know how this story goes. That country now has “Duty of Care” language and several new federal agencies looking closely at transport safety for all modes. For Highways there’s the Office of Road Safety (ORS).  For other modes there’s the Australian Transport Safety Bureau’s Civil Aviation Safety Authority (CASA), the Australian Maritime Safety Authority (AMSA), and state and territory rail safety regulators. 

The Duty of Care principle, which grew out of similar safety ratings as our CSA/SMS, has been interpreted in court cases to mean that carriers and shipper, both companies and individuals, may be held liable for accidents throughout the move if they are judged to have had some control over the incident. 

For example, a shipper loads a carrier late in the day and the driver, unbeknownst to the shipper, pushes through to the destination resulting in an accident due to fatigue. In court, the shipper may be held liable as a party to the accident. The closer the shipper to the driver (a broker or dedicated fleet shipper), the easier it is to establish a Duty of Care. This idea will have tort attorneys salivating and could establish a precedent for our friends in Washington. 

As shippers, we need to take a fresh look at the carriers we choose, at the language in our contracts, and at the ratings of our carriers—especially when brokering cargo through third parties—to ensure adequate protection.

In attempting to promote safety for the carriers they regulate, regulators have opened the door to a reshaping of the relationship between shippers and carriers. Once again: unintended consequences.

About the Author

Peter Moore
Adjunct Professor of Supply Chain

Peter Moore is Adjunct Professor of Supply Chain at the University of Denver Daniels School of Business, Program Faculty at the Center for Executive Education at the University of Tennessee, and Adjunct Professor at the University of South Carolina Beaufort. Peter writes from his home in Hilton Head Island, S.C., and can be reached at .(JavaScript must be enabled to view this email address).


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Article Topics

Columns · Trucking · March 2012 · Transportation · CSA · Regulation · SMS · All topics

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