Shippers Liability

Can I be held responsible for damages in a commercial truck wreck if I’m just THE SHIPPER?

 

When there is an accident that involves a large vehicle, such as a 53’ Dry Van, used during the course of business and/or for the transportation of commercial goods, any person or entity can be sued for causing the accident. Here’s is how YOU as a shipper could be held responsible:

 

If you retained control of the commercial truck at the time of the event

It will be essential to determine the type of employment relationship between the TRUCKER and the SHIPPER or FREIGHT BROKER in order to determine the degree of control a broker or shipper has over a truck driver and, consequently, whether the broker or shipper can be held responsible for the trucker’s actions (or lack of action).

In general, there are two types of employment relationships between a broker/shipper and a trucker: principal-agent relationship and independent contractor relationship.

In an independent contractor relationship, the trucker (or “owner operator”) is hired to produce a specific result (i.e., make a delivery). Under an agreement like this, the broker or shipper does not have the authority to control how the job is carried out, therefore a broker or shipper’s liability is limited should a trucking accident happen.

Under the terms of a principal-agent relationship, the driver would be acting as an “agent for the shipper (the principal), meaning that the shipper (instead of the carrier) would be retaining control of the load and the driver, and could be held responsible for damages. Some of the factors that determine whether the shipper kept control at the time of the event are:

  • whether the driver was contracted directly by the shipper,
  • whether the driver was paid directly by the shipper,
  • whether the shipper set parameters for how and when a delivery should be made (created deadlines) and
  • whether the driver had to regularly check in with the shipper.

 

It is important to point out that a contract between a broker or shipper and a truck driver will not necessarily determine the relationship between these parties accurately. The most common arguments are that the trucker may have been misclassified, or that there might be an actual principal-agent relationship with the broker/shipper, based on how the relationship played out during the course of employment.

The evidence needed to prove that a principal-agent relationship exists between a broker/shipper and a truck driver include: the original contract between the broker/shipper and the truck driver, the truckers’ log books, shipping or cargo receipts, records maintained by the broker or shipper, and/or copies (or recordings) of communications between the broker/shipper and the trucker.

 

If you are found guilty of negligent selection

Another common accusation against a shipper is “negligent selection”. A shipper is responsible for choosing a competent and safe contractor to do business with, and may be liable for damages in a commercial truck wreck if it can be proven that they did not choose properly.

This is where we introduce the term “sophistication”. It refers to the amount, frequency and size of shipments. The more sophisticated a shipper is, the higher the duties will be if they are found responsible for failing at proper selection of a competent carrier.

The most common defense against negligent selection is that the shipper chose a specific carrier based on its satisfactory rating with the FMCSA. The most common argument is that the employer should have performed a deeper research to make sure that the carrier is not manipulating business practices to avoid unsatisfactory ratings, however, this is a weak argument, since it would require a never-ending investigation.

 

If you failed to advise of the hazmat nature of you load

This scenario would only be applicable if the shipper failed to advise the trucking company of the hazmat nature of their goods, and if injuries resulted because of this. Essentially, it comes down to the shipper’s duty to inform.

As a matter of fact, anybody can be sued for causing a truck accident. Including the truck driver and the trucking company, the owner of the truck, the shipper, as well as any other drivers, people or entity who in any way contributed to the accident, such as the manufacturer of one of the vehicles involved, the manufacturer of a tire or the owner of any public or private property whose negligence contributed to the accident. Liability can even be shared among the parties involved and you should always take the correspondent State’s laws and regulations into account.

 

How common are truck accidents?  

There are approximately 5,000 deaths, 100,000 injuries, and 500,000 trucking accidents every year in the USA.

As a shipper, no matter how well you complies with cargo safety standards, you will never be exempt from truck accidents. However, there are always safe and reliable ways to protect you and your goods when using EP America’s transportation solutions.

Want to learn more? Contact us now and we will give you a complimentary consultation.

Strategic Health Check

It is the beginning of the year and it is the perfect time to pay a visit to the doctor to make sure you are ready to tackle the 2017 new year head-on.  Just as everyone should have an annual physical check-up, businesses should also take a moment to assess their business goals for the year ahead, including a supply chain health check.

Given the supply chain is the backbone of many businesses, it’s never a bad idea to perform a quick health check regardless of how well you think you are doing. Additionally, it wouldn’t hurt to have an external opinion that might as well help us identify and tackle some opportunity areas that could lead us to improvement. You can start by asking yourself the following questions:

  • Have you identified any gaps in your process (as small as they look) and are you doing anything about it?

We often run into different types of flaws in our processes, but due to lack of time, manpower or any other type of resources, we simply ignore them or even worse, get used to them! Performing a cost benefit analysis and translating these flaws into business objectives might lead us to considerable time and costs savings in our process. You might not see a big difference until you put all of these tiny gaps together that may seem harmless alone.

  • Is there any double handling happening in our process we could avoid?

How many times are your orders touched before they are released? There are many places where double handling can occur and we might have not even noticed yet. Identify these occurrences and try to automate as much as possible.

  • Are there any non- added value processes we can get rid of?

Sometimes, there are processes in an organization that could be taken out or added as a part of another process in order to simplify, but it might be easy to think “it’s just a part of doing business”. Well, can it be done better and more efficiently in turn being more cost-effective? An audit of processes can give you the answer.

  • Is it time for a technology upgrade?

Even though not all businesses, processes and operations have a budget for a complete technology refresh, there are certain solutions that can be achieved without having to generate a greater expense. For example, adding online tools to your website such as online forms for quotes, will always be seen as added value in the eyes of your customers, and it can be used to simplify requests processing. This additional feature may eliminate the likelihood of entry errors as well.

  • Have you checked on, aligned and evaluated you KPIs lately?

As obvious as it sounds, keeping your indicators up to date and aligned as your processes and organization evolve is vital to control improvements. So take your time to think them through.

  • Are you sure your transportation strategy is as efficient as possible?

Yes, all businesses have their own requirements, but it might not be such a bad idea to evaluate your transportation options once in a while as this industry is constantly shifting and you don’t want to be left behind or worse, miss out on opportunities to improve your process.

  • Have you effectively sorted out your suppliers?

When was the last time you performed a benchmark? Do you often try to negotiate based on performance? Do you keep back up options handy? Vendors are always looking to be a step ahead, maybe it’s time to take the high ground.

  • How well are you taking care of the heart of the organization?

Do you often provide your staff with training and certifications? Have you made sure you have the right people in the right positions making the most of their skillset? Is communication effective throughout the organization? Are leaders translating challenges into business objectives? We might be too caught up in our pursuit of success at times that we could end up neglecting the engine of the business.

  • Last but certainly not least… our customers!

Follow up, feedback, surveys! There are tons of ways to make sure your clients are happy. You cannot start an engine without fuel. Criticism or negative feedback might be a little scary, but think of it as an opportunity for improvement and proactively respond to the suggestion. Would you rather end up thinking: “If only they would’ve told me” after a customer has stopped ordering?

Just as a medical check-up, there a lot of excuses to avoid doing it, but at the end of the day only those who give it a shot, will be closer to success. Let’s be honest, who wouldn’t like an improvement? It is in the best interest of your organization to identify any problems or inefficiencies early on in order to thrive and succeed in an ever-changing industry.

At EP America, we have helped companies to identify growth opportunities in their logistics strategies based on our extensive expertise in various transportation modes, our sense of time urgency and our dedicated customer care.

The TRUTH behind Cargo Liability in Cross-Border Shipments

Often, U.S. and Canadian companies doing business in Mexico question, and even fear, the liability of Mexican Motor Carriers for cargo loss or damage. Most of the time the challenge is the inability of Carriers to purchase the same level of cargo liability coverage for shipments traveling in Mexico, there is almost no market to do so. It’s important to arrange additional cargo insurance for the Mexican portion of the journey, which you can usually do through your logistics service provider.

While Carriers in the U.S. and Canada are required by law to carry cargo insurance, Carriers in Mexico follow a very different law landscape. Despite this, not offering any coverage for loss and damage in Mexico is generally not a viable legal option, commonly US Carriers offering door-to-door service have limited or no liability coverage for shipments once they cross the border into Mexico.

Under the North American Free Trade Agreement, cross-border shipments between the United States, Canada, and Mexico were intended to be subjected to the cargo liability requirements of the nation of origin. Here is a comparison of coverages between countries, note the inequality of liability between them.

  1. For shipments originating in Canada have a maximum cargo loss or damage value of $2.00 CAD per pound.
  2. For shipments originating in Mexico have a maximum cargo loss or damage value of $0.025 USD per pound.
  3. For shipments originating in the United States, Carmack applies, and unless shippers otherwise have limited your cargo exposure lawfully, carriers could be liable for a $1 million cargo loss if an expensive machine originating in the United States was damaged beyond repair.

So, you can now see the existing imbalance; let’s take a closer look at what happens in Mexico.

Mexican Law Background

Article 66 of the Mexican Law provides that: “…When the user of the service does not declare the value of the goods, liability will be limited to an amount equivalent to 15 days of the minimum daily wage in force in Mexico City per ton or the corresponding proportionate part of a metric ton that was damaged or lost…”

At the current U.S. Dollar/Mexican Peso exchange rates, this amount is the equivalent of about USD $0.025 per pound. Obviously, shippers should be concerned about such a low liability limitation in the event of damage, theft, pilferage or hijacking of trucks carrying their goods. Unfortunately, U.S. Dollar/Mexican Peso exchange rates have made an impact since the Mexican Peso has been devalued significantly during the last 5 years.

Under the Law of Roads, Bridges, and Federal Motor Transportation, if the shipper chooses to declare the value of the goods, it must agree to pay an additional charge so that the carrier may secure insurance coverage for the goods. If the shipper exercises the option to declare the value of the goods (and pays the higher rate), the carrier will be liable for the loss or damage up to the value declared, even when the cause is due to force majeure or fortuitous cause. Article 67 establishes the value declaration requirement, but it does not specify where or how the declaration needs to be done.

Options to consider:

Although some Mexican carriers believe that the value of goods must be declared on the bill of lading itself, a blanket declaration of value in a contract between the parties is sufficient to hold a carrier liable for the higher amount.

The FIRST option is to negotiate a transportation agreement with a logistics provider with a footprint in Mexico, where their carriers provide either full liability or a more acceptable limitation related to the value of the goods, such as $25 per pound or $100,000 per trailer or container.

SECOND option is for the shipper to obtain its own inland marine (cargo) insurance. Most U.S. policies do not cover transit loss or damage in Mexico, but it is possible to obtain an endorsement for this coverage. In order to cover for the value of freight while it’s in Mexico, many shippers add a separate endorsement to their global insurance policy for cargo coverage.

THIRD option is to arrange additional cargo insurance for your cross-border shipments as a whole or even only for the Mexican portion of the journey, with your logistics provider.

Third-party logistics companies, freight brokers, freight forwarders and/or customs brokers can manage more coverage options than your common Carrier, and better still if they have a footprint in all three areas.

Key considerations by service type and transport mode:

Full Truckload

  • Shortages within pallets, missing pallets, and damages can remain hidden until the product is unloaded at its destination when using Direct Services (same trailer all the way), therefore, it is quite complicated, and lengthy, to prove where the OS&D incident originated.
  • When using Transloading Services (different trailers), shortages within pallets, missing pallets, and damages can be discovered at the border by the company performing the unloading/loading, which can be the Carrier (if they offer those services), or a warehouse or a freight forwarder, but more often, this occurs at customs broker facilities. The condition of the cargo should be documented and reported immediately to the shipper for claims before the cargo crosses the border.

Less-than-Truckload

  • Shortages within pallets, missing pallets, and damages should be discovered by the freight forwarding or customs broker company that receives the cargo before crossing the border. If there is any OS&D incident, it has to be reported immediately to the LTL Carrier, so they can send an adjuster in order to recognize the event. If you cross it, shipper loses the ability to file a claim.

When the unexpected happens within Mexican territory:

  1. The Mexican Carrier’s Legal Representative files a police report immediately for its trailer and tractor. The police report stays open indefinitely until they find it; they may find the tractor but not the trailer.
  2. The owner of the cargo can file a claim to the Carrier for total theft including cargo cost, weight, and dimensions.
  3. With this claim, the Carrier has the obligation to pay the limited liability dictated by Mexican Law.

Best practices

  • Remain calm and contact your logistics provider immediately after an incident notification.
  • Open a dialogue with your logistics provider to have the facts straight.
  • Learn about their procedures; most carriers have a special team to handle unexpected situations.
  • Talk to them about expectations.
  • Check your own insurance coverage and theirs.
  • Be patient until the police finds the trailer and cargo, keep in mind GPS trackers are for tractors, not for trailers, if only the trailer is stolen, it’s going to be more difficult to find your cargo.
  • Set a contingency plan, you don’t know how long it will take to find your cargo or when there will be a final resolution.

EP America can work with your company to set a plan to mitigate as much as possible the risk of shipping freight to/from/within Mexico. Some of our cargo coverage solutions for your Truck & Rail Shipments to/from/within Mexico are very affordable with premiums as low as 35.00 USD minimum for new general merchandise.

SOLAS

Still haven’t figured out the new SOLAS regulations? Don’t worry we got you covered… but first of all, what does SOLAS mean and what is it?

Read More

Understanding Mexican Business Culture

We know The US economy has always seen Mexico as an ocean of new opportunities due to its territorial proximity and the high potential as commercial trade partner. We’ve seen many guides and articles that aim to help understanding Mexican business culture and etiquette, but due to our over 12 years expertise, we spotted some recommendations that are not up to date or just completely out of context. Read More