A freight agent working for a freight brokerage provides an invaluable service in that he or she matches shippers that want to transport their goods with trucking companies that are qualified, ready, willing and able to haul it for them. Freight agents and freight brokers have access to numerous motor carriers and can easily obtain the proper equipment for the move which can save the shipper valuable time in getting their product to market.
The services provided by a freight brokerage are ideally suited for small and mid-size companies that don’t have dedicated personnel responsible for making transportation arrangements. In fact, depending on their shipping requirements, many companies can save huge amounts of money yearly by outsourcing their shipping needs to a qualified freight brokerage or a third party logistics company (3PL). Very large companies can also benefit from the services of a freight brokerage or 3PL solutions provider as the amount of goods being shipped on a daily basis may exceed the capacity of their internal logistics department, resulting in shipping delays and cost over runs.
Shippers that contract with motor carriers directly may inadvertently hire unauthorized, unsafe, or under-insured carriers which can often result in unlimited liability for shippers in the event that there is any damage, loss or accidents leading to serious injury or death caused by the carrier.
According to a ruling by the New Jersey Supreme Court, shippers may be held liable for “negligent hiring” of motor carriers. Shippers must now be able to prove that they have done their due diligence to the same extent that 3PL’s do. It is critical that shippers hiring motor carriers understand what the courts look for when determining what constitutes negligent hiring. Shippers can significantly reduce these and other liability risks by hiring an experienced freight brokerage that has already implemented sound carrier qualification procedures.
Here are some sound carrier qualification procedures that all shippers should follow:
Check Motor Carrier Authority and Insurance Filings
Create a data file for each motor carrier you utilize and review it thoroughly before tendering shipments for the first time and every time you re-hire that carrier. The file must contain a copy of the carrier’s operating authority and insurance filings as well as the carrier’s safety rating with the FMCSA. Verify if the motor carrier’s authority is active and the authority type is for common or contract. Also, verify that a BOC-3 agent for service of process has been appointed and properly filed.
Check motor carrier safety ratings by acquiring a copy of the motor carrier’s Safety Rating from the Department of Transportation. Carriers having “Unsatisfactory” ratings should not be used. Look at the carrier’s Safety Evaluation Area (SEA) scores. A SEA rating over 75 is regarded as poor; consequently, carriers with SEA ratings over 75 should also not be used. If the carrier’s safety rating is Satisfactory, validate their business references, contact their insurance providers to verify that all their policies are current and up-to-date, and get a signed motor carrier agreement before tendering any loads. If the carrier’ Safety Rating is Conditional, acquire a copy of the report given to the carrier showing its safety rating is “Conditional” and the reason why. You should ask the carrier about what specific steps they are taking to remain in complete compliance and have their rating restored to Satisfactory. If the carrier’s Safety Rating is “Unrated” or “None”, check how long the carrier has been in operating. If the carrier is brand new or the owners recently owned or operated another transportation company, inquire what happened and whether the other company is still in business or not. Furthermore, ask about the carrier’s procedures and policies relating to safety including controlled substance testing, medical exams, driver training regulations and driver compliance with hours of service regulations for every motor carrier. Also, it is a good idea to request references and verify the carrier’s service record with those references.
Check carrier liability and cargo insurance. Always speak to the carrier’s insurance provider and verify that insurance coverage is, accurate, and up-to-date for each and every motor carrier. Obtain a listing of exclusions that are present in its insurance policies. Make sure the carrier’s name on the insurance certificate and on the FMCSA operating authority are exactly the same, and ensure that there is an authorized signature at the bottom of the insurance certificate. It is also a good practice to verify that the truck and trailer listed on the insurance policy is the actual truck and trailer being driven by carrier at the time of load pickup, and not one that is uninsured.
Perform regular carrier review and protect against double brokering. Motor carrier data files have to be kept current. New details obtained have to be filed immediately and the file should be examined frequently to check for potential changes in authority, safety ratings, and insurance policy coverage. Find out if the motor carrier also has broker authority. Some motor carriers with broker authority have been found to double broker loads to other carriers who could possibly be unauthorized, unsafe, and under-insured to transport cargo shipments. This can present a huge problem for shippers who are unaware that their merchandise is being transported potentially unsafely, in most cases may not even know who is actually hauling their freight.
Although there are invariably challenges when selecting motor carriers, the implementation of carrier qualification policies and procedures can substantially reduce your risk of liability. Consider utilizing an experienced freight agent working for an established freight brokerage or 3PL, it can help free up a great deal of your company resources, and most importantly help you to avoid very costly litigation in the event of a catastrophic accident caused by a carrier you selected without performing the proper due diligence beforehand.