Moore on Pricing: What is the CCSB doing now?
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If you hate paying extra for baggage on flights, you will be unhappy with this news. The Commodity Classification Standards Board (CCSB), a voluntary rules committee representing 845 motor carriers, has passed a ruling that classifies pallets as a commodity subject to density rules and therefore potentially higher rates.
Classification of products based upon weight, density, value, and other factors helps determine rates in the National Motor Freight Classification (NMFC). Pallets that were previously Class 70, or the class of the freight on board, are now a separate variable classification with a maximum class of 400.
If this is upsetting, note that this classification published as Subject 10 2012-3 is subject to NMFC Rule 170 that states that if the shipper fails to specify the density or class on the Bill of Lading it will automatically be subject to the maximum classification—in this case 400.
This means that many shippers will be subject to a price increase that didn’t see coming. But to avoid this economic pain, shippers need to act quickly. This rule was already approved by the CCSB and will go into effect December 1, 2012.
The CCSB is a holdover from the days of legalized rate collusion by carriers and is an affiliate of the NMFC. This is just the latest in a series of CCSB collective moves to raise rates indirectly through classification changes; and the impact will be felt most by the shippers that don’t understand the classification system.
Many shippers use a standard Bills of Lading that includes language that reads:
Received, subject to individually determined rates or contracts that have been agreed upon in writing between the carrier and shipper, if applicable, otherwise to the rates, classifications, and rules that have been established by the carrier and are to the shipper, on request; and all the terms and conditions of the NMFC Uniform Straight Bill of Lading, NMFC Item 360.
In other words, what’s not specified in a contract between the shipper and carrier becomes subject to the rules as published in the NMFC.
At this stage, many shippers don’t have the capability of treating a pallet as a commodity with full separate description on the Bill of Lading. In fact, many will need to make a quick scramble to re-program their transportation management systems.
To avoid being caught in this trap, shippers can check the density of their pallets. The new provisions make the pallets subject to the NMFC density table shown. Note that for many popular pallets of approximately 7.5 lbs./cubic foot, this means Class 125. Rates for Class 125 are approximately 50 percent higher than class 70 rates.
The new provisions do have an “out.” The current version known as NMFC 100-H states that: “Participants are neither constrained nor compelled to use or abide by these provisions, as they always have the free and unrestrained right of independent action.”
Shippers should immediately open negotiations with their carriers to exempt themselves from this new provision. But if your carrier has already dropped participation in the NMFC then you won’t be affected by this new provision.
This last point is critically important: The NMFC and the CCSB are anachronisms that need to be put to sleep. Carriers and shippers can and should be contracting for services based upon actual product properties and today’s dynamics such as capacity, backhauls, insurance, fuel costs and over 20 other factors.
About the AuthorPeter Moore Peter Moore is Adjunct Professor of Supply Chain at Georgia College EMBA Program, 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 [email protected]
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