In today’s world of transportation contracts and pricing agreements all freight carriers including parcel, trucking, international ocean and domestic air carriers have varying provisions regarding the length of the contract term, rates, charges, liability and penalties. It is incumbent on the shipper to have a thorough knowledge of these contract terms preferably BEFORE they sign on the dotted line. Here are some examples you should be aware of:

· Most parcel carriers will issue contract agreements for a two or three year period. During the term of the agreement the parcel carrier agrees to maintain the provisions as it relates to discounts and incentives. However, the parcel carriers are free to increase the base rates each year as part of their general rate increases. What most shippers do not know is that while the contract agreement is for a 104 or 156 week period, the contract can be voided in 30 days by either party giving written notice to the other party. This provision is critical for a shipper to know since their volume might increase during the contract term and the incentive revenue bands may no longer provide the pricing incentives the shipper deserves based on its shipping characteristics. By the same token, if their volume decreases it will also want to “Re-Negotiate” the agreement to lower the tiered incentive levels. The important issue here is knowing you have an option.

· Most motor carrier pricing agreements will base their rates on the carriers “list” rate and then discounts are deducted to reduce the net rate. Shippers should be aware that rates vary greatly from carrier to carrier. Therefore, no two carriers can be measured from a pricing standpoint based on the discount they have published. Most shippers do not know they can have all of their LTL carriers publish a standard base rate and then have them discount from that base rate. This would allow a shipper to clearly discern which carrier has the lowest net rate based on the discount percentage published. To give an example of this, we recently completed a negotiation for a shipper that had a 79% discount with its primary LTL carrier. We negotiated a new contract for our client using a different base rate scale and the same carrier has now offered a 55% discount. The net result is that the new rates are 43% lower than the carrier’s prior net rates. Before signing what looks like a good deal make sure the net rates are appropriate and do not be fooled by the discount game.

· Most ocean contracts provide pricing based on the number of TEU’s (Transportation Equivalent Units) the shipper agrees to tender to the steamship company. What most shippers do not know is that if the shipper does not fulfill that commitment it can be charged a “penalty” fee for each unit it is short within the contract period. This is important because many shippers will embellish the number of containers it actually ships to obtain a lower rate form the carrier but, as you can see, this can come back to bite the shipper, you know where, if it does not meet its commitment.

· Most domestic air freight forwarders have provisions which drastically reduce their limits of liability in cases of loss or damage. In most cases these domestic air forwarders will limit their liability to $0.50 per pound if the freight is lost or damaged in transit. The sad fact is that most shippers do not know this until there is a claim and they find out they are left holding the bag. These liability provisions, by the way, are usually clearly spelled out on the back of the forwarder’s air waybill which the shipper fills out, but very rarely reads. It is also important to point out that by signing the air waybill the shipper is agreeing to ALL the contract terms and conditions.

The list of these contract and pricing agreement terms and conditions goes on and on. The clear message here is “Caveat Emptor” … Let the buyer beware!