Model truckload contract spurs similar agreements with brokers

Model truckload contract spurs similar agreements with brokers    The joint development of a model contract between shippers and motor carriers has served as a template for both transportation industry groups to try and ink similar guidelines spelling out their contractual relationship with freight brokers.
   In June, the American Trucking Associations and the National Industrial Transportation League adopted a model agreement to help shippers and truckload carriers structure their contracts. The model, hammered out in one year, is designed as a starting point for negotiations and can be customized and filled in to include specific rates, terms and service obligations. Provisions related to rates, charges, limitation of liability, level of carrier insurance and other related areas are left blank and must be negotiated to avoid any antitrust issues.
   On the heels of that success, the NIT League has quickly begun negotiations with the Transportation Intermediaries Association on a model contract governing relations between shippers and brokers, said John Gentle, who heads the NIT League’s Highway Committee.
   Meanwhile, the TIA is working with Truckload Carriers Association to develop a similar document that would cover business relations between brokers and motor carriers, Chip Smith, a TIA representative and president of brokerage Twin Modal, told the Highway Committee, which met Monday in Toledo, Ohio.
   Gentle, who heads global transportation for Toledo-based building materials manufacture Owens Corning said the NIT League hopes to respond to the second draft of TIA’s model contract by the end of the month and roll out a final document at their joint annual conference in November.
   “We wanted the shipper-broker contract done first because the intent is that they (the three model contracts) all dovetail,” Smith said.
   Companies should have an easier time negotiating a contract that has been endorsed by major industry trade associations, he said.
   The key benefit for the shipper is knowing what the carrier is representing to the broker as its service obligations, according to brokerage industry executives. Until now shipper contracts treated broker intermediaries and motor carriers the same. Shippers, lacking the understanding of the brokers’ duties, have tended to simply substitute their standard motor carrier contract and tell brokers to make any needed changes.
   By the time you make some changes to insurance, liability and other provisions, “Pretty soon you are rewriting the whole thing,” said Jeffrey Tucker, executive vice president of the Tucker Co., a Cherry Hill, N.J.-based freight broker and logistics provider.
   The current broker-carrier draft addresses the issue of re-brokerage, a practice that occurs when a motor carrier accepts freight and then subcontracts haulage to another carrier. The TIA is concerned about what it calls “unauthorized brokerage” conducted by carriers who do not carry a brokers’ license or bond. Under the model contract, carriers take responsibility for the load even if they re-broker.
   “In a properly done brokerage you know who has control of the load,” Smith said.
   NIT League officials said the shipper-carrier model contract serves as a useful education tool by explaining the legal, financial and other responsibilities of both parties in clear language, even if a company decides not to update its contracts right away.
   It is not clear how many companies have decided to adopt the voluntary model contract in some form, but Gentle stated that Owens Corning intends to start employing the contract in negotiations by as early as the end of August. Owens Corning will likely keep 80 to 90 percent of the boilerplate language intact and modify or add some provisions as needed for the remaining 10 to 20 percent of the contract, he said.
   “It would have been a crime if we couldn’t get together” and develop a common starting point for contract discussions, he said.