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!"
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.