Subscribe to our free, weekly email newsletter!

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).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Companies used to compete on price and service. The future of supply chain, according to Steve Melnyk, is culture. In fact, innovators like Apple, Google, and Unilever are already leading because of their cultures. Your company can too.

As evidenced by the widening gap in the United States trade deficit, which has seen imports far outpacing exports for years on end, the September edition of the “Global Trade Pulse” from global maritime and trade consultancy Hackett Associates paints a similar picture for trade activity in North America, with some overlapping themes apparent in the report’s European data, too.

Kurt Nagle, president and CEO of the American Association of Port Authorities recently voiced his endorsement of this trade legislation

While many auto executives expect more industry recalls in 2015 and 2016, just 8 percent use advanced predictive analytics to help prevent, prepare for, and manage recalls, according to a recent online poll from Deloitte.

Purolator white paper highlights common Canadian shipping mistakes. From failing to appreciate the complexity of the customs clearance process to not realizing that Canada recognizes both French and English as its official languages, U.S. businesses frequently misjudge the complexity of shipping to the Canadian market. This often results in mistakes - mistakes that can come with hefty penalties and border clearance delays, and that can result in lingering negative perceptions among Canadian consumers.

Article Topics

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


Post a comment
Commenting is not available in this channel entry.

© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA