Less-than-truckload carriers shift cargo liability to shippers
For over a century, the Carmack Amendment has provided liability protection for motor freight shippers. But a carrier group's unilateral policy change last summer upends decades of what many thought was settled law.
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Since 1906, the federal law governing liability for lost or damaged cargo has been the so-called Carmack Amendment, authored by Edward Ward Carmack, a Tennessee lawmaker, lawyer, and publisher who in 1908 was gunned down by a political rival on the streets of Nashville in what is still regarded as the city's most notorious murder.
The amendment, attached to the landmark Interstate Commerce Act signed into law 19 years before, holds a carrier responsible for proving it wasn't negligent in its handling of in-transit cargo that was lost or damaged. The shipper's sole obligation is to show the cargo was in good condition when it was tendered. To avoid liability, a carrier must demonstrate that loss or damage was due to one of five events: an act of God, actions of the shipper, the "authority of laws" such as a government edict, the presence of a "public enemy," and the "inherent vice" of, or a defect in, the shipment itself. The amendment, which became so familiar through the decades that it was simply referred to by the author's last name, was designed to eliminate a hodgepodge of state laws that made it difficult for shippers or carriers to determine their rights and obligations in a given situation.
For decades, the amendment has been a basic tenet of the uniform bill of lading, which is the default—and still widely used—contract of carriage between a shipper and carrier. But the road has been a rocky one. Carmack survived numerous challenges in state courts before the U.S. Supreme Court in 1964 finally upheld Carmack on grounds the amendment rightly protects shippers who can't travel with the carrier and have no way of knowing how their goods were being handled or how they were lost or damaged.
Carmack held firm until last July 14. On that date, the National Motor Freight Traffic Association (NMFTA), a 450-member carrier body that oversees a system of freight classifications used to set tariff rates mostly for less-than-truckload (LTL) services, announced a series of changes to the uniform bill of lading, all of which took effect Aug. 13. The most far-reaching was to shift to shippers the burden of proving carrier negligence. NMFTA also added "riots, strikes, or any related causes" to the list of carrier defenses to a cargo claim. Opponents have argued the change runs counter to more than a century of settled law, including the core position taken by the Supreme Court in upholding Carmack, and puts shippers at an extreme disadvantage in liability disputes.
Other NMFTA changes didn't sit well with shippers either. One put the liability burden on the carrier whose name appears on the bill of lading, rather than on the carrier in physical control of the goods. Dealing with two different carriers could delay the recovery of a loss-and-damage claim should the carrier that caused the damage argue that the shipper must pursue the carrier listed on the contract, according to industry experts.
Another change shortened the nine-month window for filing a claim on a loss by starting the clock from the bill of lading date, instead of from a reasonable time after delivery should have taken place. Altering the deadline for filing a claim before it is time-barred would hurt shippers that generally want the expiration date to be as late as possible so they have more time to investigate the incident, shipper advocates say. "I've been involved in claims on both sides that turn on whether or not a shipper has made a timely claim," said Marc S. Blubaugh, a Columbus, Ohio-based lawyer at Benesch, Friedlander, Coplan & Aronoff.
The cumulative changes will affect millions of shipments that move under the uniform bill of lading. Though LTL carriers account for most of NMFTA's membership, truckload carriers are also in the group. In addition, many parties rely on terms of the uniform bill even if they are not part of NMFTA, according to Blubaugh. The changes have "broad implications for shippers, brokers, and carriers involved in truckload as well as less-than-truckload shipments," he said.
IN THE DEAD OF NIGHT
The NMFTA disclosed its changes with no prior public notification and with no input from stakeholders, according to shipper and broker advocates. The Transportation and Logistics Council, a group of practitioners and attorneys, asked the U.S. Surface Transportation Board (STB), the agency that oversees what is left of economic regulation of the transportation industry, to block the rules' implementation. The board denied the request but said it would conduct an investigation to determine if it has the statutory authority to intervene. The matter was still pending as the calendar turned.
NMFTA has argued that the STB has no power to grant relief because there is no agreement in place that falls under its jurisdiction. Opponents, unsurprisingly, disagree with that assessment.
The STB's involvement in trucking issues has been nearly nonexistent since its forerunner agency, the Interstate Commerce Commission (ICC), was sunset by Congress in 1995 and virtually all the ICC's motor carrier responsibilities were transferred to the U.S. Department of Transportation. Perhaps the agency's last notable truck-related action came in 2007, when it stripped rate bureaus of their long-held antitrust immunity to collectively set rates.
NEW RULES FOR A NEW AGE
NMFTA said its changes are consistent with the framework of a modern-day trucking industry, noting that much of the language that was revised last July dates back to 1936. Shippers and carriers today have access to various contractual alternatives to the uniform bill of lading where specific terms and conditions, including those involving liability, can be negotiated, according to the group. What's more, the uniform bill of lading doesn't apply to the overwhelming number of truckers operating in interstate commerce because most are not part of the system that NMFTA administers, the group said.
Opponents concede that shippers have contractual alternatives available to them. Yet the majority of shippers still rely on the uniform bill of lading as their contract, they maintain. "Many shippers today are unaware of any other bill of lading and are unaware that they are not required" to use it, the shipper group NASSTRAC told the STB in August. Even shippers who have pursued outside contracts discover that many shipments, such as those arranged by brokers and other third parties, still move subject to the uniform bill of lading, the group said.
Brené Primus, a Minneapolis-based attorney who represents shippers, brokers, and a handful of carriers, said in a phone interview that a carrier is unlikely to negotiate contracts outside the scope of the uniform bill unless a customer tenders at least $1 million worth of freight a year. Even deep-pocketed shippers with the power to negotiate separate contracts often find that carriers don't want to deviate from language contained in the uniform bill, Primus said.
Primus said NMFTA is acting as a prudent steward of its members' interests by attempting to limit their collective liability exposure and push more of the responsibility onto the shippers. "From their point of view, it is smart business practice," he said.
Blubaugh of the Benesch law firm said the new rules will widen the divide between large, sophisticated shippers that negotiate contracts that supersede the uniform bill of lading or carriers' tariffs, and shippers that operate on a transactional basis—or largely in the non-contractual, or spot, market—and who rely on the uniform bill as their contract of carriage. The latter group "would have to change their contract management and administration in significant ways" to migrate toward nonstandard contracts, Blubaugh said in an e-mail.
Shipper and broker groups contend that last summer's actions are another step in NMFTA's efforts to tilt the playing field toward its members. In 2014, the association decreed that disputes relating to loss and damage claims, as well as rates and charges for shipments subject to the terms of the uniform bill, be submitted to arbitration instead of litigated in court. Meanwhile, most major carriers have added a provision to their tariffs barring class actions of any type. Critics contend that few shippers have the knowledge or the resources to challenge the association's actions, given the arbitration provisions and the tariff language barring class actions, both of which inhibit shippers' ability to muster a legal challenge.
Primus said the changes to the uniform bill of lading, in aggregate, amount to what lawyers refer to as a "contract of adhesion," defined as a standard contract drafted by the side with stronger bargaining power and generally accepted by the weaker party because it has no leverage to negotiate modifications. There will be few shippers with the clout to resist the NMFTA's contractual changes now in effect, he added.
This article appeared in our February 2017 print edition under the title "NMFTA: Hit the road, Carmack!"
Economic activity in the logistics industry expanded in January, growing at its fastest clip in more than two years, according to the latest Logistics Managers’ Index (LMI) report, released this week.
The LMI jumped nearly five points from December to a reading of 62, reflecting continued steady growth in the U.S. economy along with faster-than-expected inventory growth across the sector as retailers, wholesalers, and manufacturers attempted to manage the uncertainty of tariffs and a changing regulatory environment. The January reading represented the fastest rate of expansion since June 2022, the LMI researchers said.
An LMI reading above 50 indicates growth across warehousing and transportation markets, and a reading below 50 indicates contraction. The LMI has remained in the mid- to high 50s range for most of the past year, indicating moderate, consistent growth in logistics markets.
Inventory levels rose 8.5 points from December, driven by downstream retailers stocking up ahead of the Trump administration’s potential tariffs on imports from Mexico, Canada, and China. Those increases led to higher costs throughout the industry: inventory costs, warehousing prices, and transportation prices all expanded to readings above 70, indicating strong growth. This occurred alongside slowing growth in warehousing and transportation capacity, suggesting that prices are up due to demand rather than other factors, such as inflation, according to the LMI researchers.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
As commodities go, furniture presents its share of manufacturing and distribution challenges. For one thing, it's bulky. Second, its main components—wood and cloth—are easily damaged in transit. Third, much of it is manufactured overseas, making for some very long supply chains with all the associated risks. And finally, completed pieces can sit on the showroom floor for weeks or months, tying up inventory dollars and valuable retail space.
In other words, the furniture market is ripe for disruption. And John "Jay" Rogers wants to be the catalyst. In 2022, he cofounded a company that takes a whole new approach to furniture manufacturing—one that leverages the power of 3D printing and robotics. Rogers serves as CEO of that company, Haddy, which essentially aims to transform how furniture—and all elements of the "built environment"—are designed, manufactured, distributed, and, ultimately, recycled.
Rogers graduated from Princeton University and went to work for a medical device startup in China before moving to a hedge fund company, where he became a Chartered Financial Analyst (CFA). After that, he joined the U.S. Marine Corps, serving eight years in the infantry. Following two combat tours, he earned an MBA from the Harvard Business School and became a consultant for McKinsey & Co.
During this time, he founded Local Motors, a next-generation vehicle manufacturer that launched the world's first 3D-printed car, the Strati, in 2014. In 2021, he brought the technology to the furniture industry to launch Haddy. The father of four boys, Rogers is also a director of the RBR Foundation, a philanthropic organization focused on education and health care.
Rogers spoke recently with DC Velocity Group Editorial Director David Maloney on an episode of the "Logistics Matters" podcast.
Q: Could you tell us about Haddy and how this unique company came to be?
A: Absolutely. We have believed in the future of distributed digital manufacturing for a long time. The world has gone from being heavily globalized to one where lengthy supply chains are a liability—thanks to factors like the growing risk of terrorist attacks and the threat of tariffs. At the same time, there are more capabilities to produce things locally. Haddy is an outgrowth of those general trends.
Adoption of the technologies used in 3D printing has been decidedly uneven, although we do hear about applications like tissue bioprinting and food printing as well as the printing of trays for dental aligners. At Haddy, we saw an opportunity to take advantage of large-scale structural printing to approach the furniture and furnishings industry. The technology and software that make this possible are already here.
Q: Furniture is a very mature market. Why did you see this as a market that was ripe for disruption?
A:The furniture market has actually been disrupted many times in the last 200 years. The manufacturing of furniture for U.S. consumption originally took place in England. It then moved to Boston and from there to New Amsterdam, the Midwest, and North Carolina. Eventually, it went to Taiwan, then China, and now Vietnam, Indonesia, and Thailand. And each of those moves brought some type of disruption.
Other disruptions have been based on design. You can look at things like the advent of glue-laminated wood with Herman Miller, MillerKnoll, and the Eames [furniture design and manufacturing] movement. And you can look at changes in the way manufacturing is powered—the move from manual operations to machine-driven operations powered by steam and electricity. So the furniture industry has been continuously disrupted, sometimes by labor markets and sometimes by machines and methods.
What's happening now is that we're seeing changes in the way that labor is applied in furniture manufacturing. Furniture has traditionally been put together by human hands. But today, we have an opportunity to reassign those hands to processes that take place around the edges of furniture production. The hands are now directing robotics through programming and design; they're not actually making the furniture.
And so, we see this mature market as being one that's been continuously disrupted during the last 200 years. And this disruption now has a lot to do with changing the way that labor interacts with the making of furniture.
Q: How do your 3D printers actually create the furniture?
A:All 3D printing is not the same. The 3D printers we use are so-called "hybrid" systems. When we say hybrid, what we mean is that they're not just printers—they are holders, printers, polishers, and cutters, and they also do milling and things like that. We measure things and then print things, which is the additive portion. Then we can do subtractive and polishing work—re-measuring, moving, and printing parts again. And so, these hybrid systems are the actual makers of the furniture.
Q: What types of products are you making?
A: We've started with hardline or case goods, as they're sometimes known, for both residential and commercial use—cabinets, wall bookshelves, freestanding bookshelves, tables, rigid chairs, planters, and the like. Basically, we've been concentrating on products that don't have upholstery.
It's not that upholstery isn't necessary in furniture, as it is used in many pieces. But right now, we have found that digital furniture manufacturing becomes analog again when you have to factor in the sewing process. And so, to move quickly and fully leverage the advantages of digital manufacturing, we're sticking to the hardline groups, except for a couple of pieces that we have debuted that have 3D-printed cushions, which are super cool.
Q: Of course, 3D printers create objects in layers. What types of materials are you running through your 3D printers to create this furniture?
A: We use recycled materials, primarily polymer composites—a bio-compostable polymer or a synthetic polymer. We look for either recycled or bio-compostable [materials], which we then reinforce with fibers and fillers, and that's what makes them composites. To create the bio-compostables, we marry them with bio-fibers, such as hemp or bamboo. For synthetic materials, we marry them with things like glass or carbon fibers.
Q: Does producing goods via 3D printing allow you to customize products easily?
A: Absolutely. The real problem in the furniture and furnishings industries is that when you tool up to make something with a jig, a fixture, or a mold, you tend to be less creative because you now feel you have to make and sell a lot of that item to justify the investment.
One of the great promises of 3D printing is that it doesn't have a mold and doesn't require tooling. It exists in the digital realm before it becomes physical, and so customization is part and parcel of the process.
I would also add that people aren't necessarily looking for one-off furniture. Just because we can customize doesn't mean we're telling customers that once we've delivered a product, we break the digital mold, so to speak. We still feel that people like styles and trends created by designers, but the customization really allows enterprise clients—like businesses, retailers, and architects—to think more freely.
Customization is most useful in allowing people to "iterate" quickly. Our designers can do something digitally first without having to build a tool, which frees them to be more creative. Plus, because our material is fully recyclable, if we print something for the first time and find it doesn't work, we can just recycle it. So there's really no penalty for a failed first printing—in fact, those failures bring their own rewards in the form of lessons we can apply in future digital and physical iterations.
Q: You currently produce your furniture in an automated microfactory in Florida, with plans to set up several more. Could you talk a little about what your microfactory looks like and how you distribute the finished goods?
A: Our microfactory is a 30,000-square-foot box that mainly contains the robots that make our furniture along with shipping docks. But we don't intend for our microfactories to be storage warehouses and trans-shipment facilities like the kind you'd typically see in the furniture industry—all of the trappings of a global supply chain. Instead, a microfactory is meant to be a site where you print the product, put it on a dock, and then ship it out. So a microfactory is essentially an enabler of regional manufacturing and distribution.
Q: Do you manufacture your products on a print-to-order basis as opposed to a print-to-stock model?
A: No. We may someday get to the point where we receive an order digitally, print it, and then send it out on a truck the next day. But right now, we aren't set up to do a mini-delivery to one customer out of a microfactory.
We are an enterprise company that partners with architects, designers, builders, and retailers, who then distribute our furnishings to their customers. We are not trying to go direct-to-consumer at this stage. It's not the way a microfactory is set up to distribute goods.
Q: You've mentioned your company's use of recycled materials. Could you talk a little bit about other ways you're looking to reduce waste and help support a circular economy?
A: Yes. Sustainability and a circular economy are really something that you have to plan for. In our case, our plans call for moving toward a distributed digital manufacturing model, where we establish microfactories in various regions around the world to serve customers within a 10-hour driving radius of the factory. That is a pretty large area, so we could cover the United States with just four or five microfactories.
That also means that we can credibly build our recycling network as part of our microfactory setup. As I mentioned, we use recycled polymer stock in our production, so we're keeping that material out of a landfill. And then we tell our enterprise customers that while the furniture they're buying is extremely durable, when they're ready to run a special and offer customers a credit for turning in their used furniture, we'll buy back the material. Buying back that material actually reduces our costs because it's already been composited and created and recaptured. So our microfactory network is well designed for circularity in concert with our enterprise customers.
Generative AI (GenAI) is being deployed by 72% of supply chain organizations, but most are experiencing just middling results for productivity and ROI, according to a survey by Gartner, Inc.
That’s because productivity gains from the use of GenAI for individual, desk-based workers are not translating to greater team-level productivity. Additionally, the deployment of GenAI tools is increasing anxiety among many employees, providing a dampening effect on their productivity, Gartner found.
To solve those problems, chief supply chain officers (CSCOs) deploying GenAI need to shift from a sole focus on efficiency to a strategy that incorporates full organizational productivity. This strategy must better incorporate frontline workers, assuage growing employee anxieties from the use of GenAI tools, and focus on use-cases that promote creativity and innovation, rather than only on saving time.
"Early GenAI deployments within supply chain reveal a productivity paradox," Sam Berndt, Senior Director in Gartner’s Supply Chain practice, said in the report. "While its use has enhanced individual productivity for desk-based roles, these gains are not cascading through the rest of the function and are actually making the overall working environment worse for many employees. CSCOs need to retool their deployment strategies to address these negative outcomes.”
As part of the research, Gartner surveyed 265 global respondents in August 2024 to assess the impact of GenAI in supply chain organizations. In addition to the survey, Gartner conducted 75 qualitative interviews with supply chain leaders to gain deeper insights into the deployment and impact of GenAI on productivity, ROI, and employee experience, focusing on both desk-based and frontline workers.
Gartner’s data showed an increase in productivity from GenAI for desk-based workers, with GenAI tools saving 4.11 hours of time weekly for these employees. The time saved also correlated to increased output and higher quality work. However, these gains decreased when assessing team-level productivity. The amount of time saved declined to 1.5 hours per team member weekly, and there was no correlation to either improved output or higher quality of work.
Additional negative organizational impacts of GenAI deployments include:
Frontline workers have failed to make similar productivity gains as their desk-based counterparts, despite recording a similar amount of time savings from the use of GenAI tools.
Employees report higher levels of anxiety as they are exposed to a growing number of GenAI tools at work, with the average supply chain employee now utilizing 3.6 GenAI tools on average.
Higher anxiety among employees correlates to lower levels of overall productivity.
“In their pursuit of efficiency and time savings, CSCOs may be inadvertently creating a productivity ‘doom loop,’ whereby they continuously pilot new GenAI tools, increasing employee anxiety, which leads to lower levels of productivity,” said Berndt. “Rather than introducing even more GenAI tools into the work environment, CSCOs need to reexamine their overall strategy.”
According to Gartner, three ways to better boost organizational productivity through GenAI are: find creativity-based GenAI use cases to unlock benefits beyond mere time savings; train employees how to make use of the time they are saving from the use GenAI tools; and shift the focus from measuring automation to measuring innovation.
According to Arvato, it made the move in order to better serve the U.S. e-commerce sector, which has experienced high growth rates in recent years and is expected to grow year-on-year by 5% within the next five years.
The two acquisitions follow Arvato’s purchase three months ago of ATC Computer Transport & Logistics, an Irish firm that specializes in high-security transport and technical services in the data center industry. Following the latest deals, Arvato will have a total U.S. network of 16 warehouses with about seven million square feet of space.
Terms of the deal were not disclosed.
Carbel is a Florida-based 3PL with a strong focus on fashion and retail. It offers custom warehousing, distribution, storage, and transportation services, operating out of six facilities in the U.S., with a footprint of 1.6 million square feet of warehouse space in Florida (2), Pennsylvania (2), California, and New York.
Florida-based United Customs Services offers import and export solutions, specializing in remote location filing across the U.S., customs clearance, and trade compliance. CTPAT-certified since 2007, United Customs Services says it is known for simplifying global trade processes that help streamline operations for clients in international markets.
“With deep expertise in retail and apparel logistics services, Carbel and United Customs Services are the perfect partners to strengthen our ability to provide even more tailored solutions to our clients. Our combined knowledge and our joint commitment to excellence will drive our growth within the US and open new opportunities,” Arvato CEO Frank Schirrmeister said in a release.
And many of them will have a budget to do it, since 51% of supply chain professionals with existing innovation budgets saw an increase earmarked for 2025, suggesting an even greater emphasis on investing in new technologies to meet rising demand, Kenco said in its “2025 Supply Chain Innovation” survey.
One of the biggest targets for innovation spending will artificial intelligence, as supply chain leaders look to use AI to automate time-consuming tasks. The survey showed that 41% are making AI a key part of their innovation strategy, with a third already leveraging it for data visibility, 29% for quality control, and 26% for labor optimization.
Still, lingering concerns around how to effectively and securely implement AI are leading some companies to sidestep the technology altogether. More than a third – 35% – said they’re largely prevented from using AI because of company policy, leaving an opportunity to streamline operations on the table.
“Avoiding AI entirely is no longer an option. Implementing it strategically can give supply chain-focused companies a serious competitive advantage,” Kristi Montgomery, Vice President, Innovation, Research & Development at Kenco, said in a release. “Now’s the time for organizations to explore and experiment with the tech, especially for automating data-heavy operations such as demand planning, shipping, and receiving to optimize your operations and unlock true efficiency.”
Among the survey’s other top findings:
there was essentially three-way tie for which physical automation tools professionals are looking to adopt in the coming year: robotics (43%), sensors and automatic identification (40%), and 3D printing (40%).
professionals tend to select a proven developer for providing supply chain innovation, but many also pick start-ups. Forty-five percent said they work with a mix of new and established developers, compared to 39% who work with established technologies only.
there’s room to grow in partnering with 3PLs for innovation: only 13% said their 3PL identified a need for innovation, and just 8% partnered with a 3PL to bring a technology to life.