Freight Carriers Association / North American Transportation Council
April 1997
RATE SIMPLIFICATION ISSUE IN THE FOREFRONT
By: Micheline S. Tansey
Shippers want rate simplification so they can manage rate quotations effectively and make significant economies. How prepared are you to help your customers achieve this?
NASSTRAC (National Small Shipments Traffic Conference) self styled as “A National Association of Shippers Dedicated to Saving Money on LTL Shipments”, represents primarily large shippers of small shipments (package and LTL). At its recent annual meeting the recurring themes, from shippers and carriers alike, were:
Sound familiar? While the majority of shippers and carriers claim to seek simplification, it seems every individual is determined to attain it his own way, thereby creating more complexity and confusion. Only a relatively unified approach will produce results. For rate simplification to be achieved, shippers, receivers and carriers will each have to sacrifice a little in order to achieve the common goal. Local and regional carriers, must bear in mind the importance of maintaining consistency and compatibility in the base rates used for local, regional, national and transborder shipments.
Some shippers and receivers have begun to simplify their RFQ (request for quote) and rating processes by creating their own unique base rates. Others have adopted existing base rates because, while the structures may be flawed and overly complex, it is the devil they know. The result? Several carriers currently have to maintain in excess of 80 base rate levels in their automated rating systems so they can quote and bill customers a discount off the base rates of their choice. Unless carriers start to move NOW towards returning to uniform base rates, they will be faced with having to cope with base rate structures that will multiply exponentially.
We recently had hands-on experience with a large shipper who is a clear example of the present situation for a large number of shippers. In this case, functions related to motor carrier selection, pricing, auditing and freight bill payment for several divisions, previously handled at regional locations across Canada, were consolidated. A team of FOUR individuals will administer well in excess of $10 Million of truck transportation in every market across Canada. How will four people be able to manage this? By reducing the number of carriers used regularly, and by standardizing the RFQ and rating processes.
The first of many tasks was to adopt a uniform base rate level compatible with others in North American markets (this is a multinational manufacturer with very large operations in the US). Since a number of carriers presently handling their freight were using or were familiar with FCA rates, the logical approach was to adopt present FCA rates. We developed a computerized RFQ for them and they requested about one third of their present 100 plus carriers to quote. Carriers were requested to determine their discounts off the rates contained in a diskette (allowing different levels for direct or indirect points and primary and secondary markets) and to submit a quote in spreadsheet format to facilitate analysis and evaluation of the proposals.
The carriers who quote stand to secure a significant increase in the volume of freight from this customer if they are selected as an “Approved” or “House” carrier. The results of this initial RFQ? “Underwhelming” according to this large shipper. Carriers who are currently enjoying some of this business (some of whom are significant players in their core market) elected not to quote. Some wanted to use their own rates or gave different discounts by lane and by weight break to replicate rates they are familiar with. Others simply did not do their homework and quoted without examining how the prices they developed with this new RFQ method compared with their current prices (both on the up and down side). Unfortunately for them, competitors who submitted solid quotes stand a good chance of being awarded the business.
This is but one example of what will become the standard in our industry. There are hundreds more shippers re-engineering their processes and implementing similar changes to reduce their costs. In our example, the carriers were fortunate in that this shipper adopted a rate level developed with considerable industry participation and input. He could have created his own and imposed yet another set of base rates on his carriers.
Whether or not carriers want it, the RFQ process will be simplified. If carriers do not elect to become part of the solution, they automatically become part of the problem. The consequence of carriers NOT accepting and supporting uniform base rates is being forced to deal with thousands of base rate levels created by individual shippers to meet their specific needs.
This industry is fortunate in that it has procedures and a forum under which carriers can meet to discuss and find solutions to common problems, with input from shipper groups if desired. Why not then use the tools available to us and become part of the solution?
On a different level, senior management of motor carriers must be certain their personnel is computer literate and has the necessary tools to comply with PC driven RFQ’s and electronically transmitted quotes. Often in our software technical support, we run across motor carrier employees who have to work with antiquated equipment and/or out-of-date software that can barely support simple PC applications. Some shippers have begun to E-Mail their RFQ’s over the Internet and are requesting quotes be submitted in similar fashion. Is your personnel ready to accommodate these customers?
Part 2 of our Compensation Benchmarking Survey is under way. Part 2 measures the compensation provided to linehaul drivers, P & D drivers and dock workers (both company and contract).
If you are interested in participating in this survey and have not received a copy of the survey, please contact Sonia Habinski at (905) 994-0560 ext. 212.
In the US three protesting shipper associations have submitted arguments to the Surface Transportation Board (STB) in opposition to changes to the Uniform Bill of Lading. The changes have been proposed by the National Classification Committee (NCC). The proposal was published in the National Motor Freight Classification (NMFC) bearing an effective date of October 28, 1997. However, as a result of protest filed by these shipper associations, the STB suspended the proposed changes. The NCC proposal has two parts.
First, the language “lawfully filed” would be eliminated from the preamble to the Bill of Lading to: “RECEIVED, subject to the classifications and lawfully filed tariffs in effect on the date of issue of this Bill of Lading.”
Second, the proposal adds a new definition of “tariff” to be: “Tariff means any classification, charge, price, rule or rate established by a carrier or carriers.”
Carrier groups contend that elimination of “lawfully filed” will remove confusing language from the Bill of Lading. The confusion stems from the elimination in the Interstate Commerce Commission Termination Act of 1995 (ICCTA), of the tariff filing obligation previously required of motor carriers of general commodities.
The addition of “lawfully filed” to the Bill of Lading in 1987 was opposed by these shipper groups. The purpose of adding the language at that time was to provide clarification in light of the undercharge litigation. The definition of “tariff” was originally submitted by a shipper. The NCC contends that the proposed changes result in no substantive differences. The shipper groups disagree.
The NCC points out that the current law provides that, upon request, the carrier must furnish the shipper with a written copy of the applicable rate or the agreed basis. The NCC notes that, prior to ICCTA, tariff provisions such as “inadvertence clauses” traditionally served to “automatically” limit carrier liability without written shipper agreement. The NCC contends that, since tariffs are no longer filed, the Congressional intent behind ICCTA was to clarify the carriers’ right to unilaterally establish and maintain their own binding individual tariffs, rates, rules and classifications, including liability limiting provisions, subject to the shipper’s right to receive any pertinent tariff provisions upon request.
The NCC denies that the proposal constitutes unlawful collective action on rules to limit liability, as the proposal does not establish any tariff provisions involving released rates.
The shipper groups argue that the intent of the NCC proposal is to “...tilt the scales of liability in favor of carriers and against shippers ...to use the Bill of Lading to perpetuate the equivalent of filed tariffs ...and to unilaterally defeat the purpose of the Carmack Amendment.” The Carmack Amendment provides for carrier liability for the full actual loss or damage to the property transported.
Shippers agree that revision of the Bill of Lading may be appropriate, but alleges that the NCC rejected requests for shipper-carrier negotiating sessions. They suggest that the proposed Bill of Lading could cause “mass mischief” by possibly allowing carriers to argue that individually determined rates apply rather than a contract rate or an orally agreed upon rate.
The shipper groups further contend that the effect of the proposal is to permit carriers to unilaterally impose released value liability on shippers in violation of the Carmack amendment.
CANADIAN BILL OF LADING CHANGES
The Canadian Industrial Traffic League (CITL) has been expressing concerns over the past few months with the proposed Canadian Uniform Bill of Lading (CUBOL). Their concerns centered primarily on the reduction of the notice of claims period from 60 to 15 days for concealed damaged and immediately for apparent damage and also the revision of liability limits from $2.00 per pound based on the total weight of the shipment to $2.00 per pound based on the weight of the goods lost or damaged.
The CITL reports in their newsletter that in February a meeting was held to gain insight into the actual consequences of the new CUBOL. During this meeting members of the Transportation Lawyers Association reviewed the proposed CUBOL clause by clause. Their explanation of the portion of the proposed CUBOL regarding claims is that the new clauses reflect the belief that if a receiver accepts in good order obviously damaged goods, then that receiver will lose some leverage when making his claim. He does not lose his right to file written notification of claim. If the receiver/consignee discovers concealed damage, he has 15 days to revoke his signature for goods received in good order and indicate that the goods were damaged upon delivery. Other proposed revisions to the notice periods would remove the 60 day written notification period. The shipper would have six months to complete both the initial written notification and the final statement of the claim.
We will continue to provide information on CUBOL to our membership.
Carrier and shipper groups continue to plead their cases to the STB regarding the application of the 180 day rule for the contesting of freight charges. A decision issued by the STB last year held that the 180 day provision was a condition precedent to the filing of claims for overcharges and that carriers in their discretion may voluntarily settle claims made after the 180 day period.
In light of all the various comments which have been filed between June and November of last year, the STB instituted a formal proceeding seeking further comments from interested parties. Thirty-five shipper associations, traffic consultants and freight bill auditors filed comments supporting the position that the 180 day provision applies: (a) only to “billing disputes” and not to “billing errors” (b) only to rates regulated by the STB (c) only when a case is brought before the STB.
On the carrier side the NMFTA generally agreed with the STB’s original decision, except to the extent it condones the voluntary settlement of overcharge claims after the 180 day period has expired. The NMFTA contends that, since the abolition of the filed-rate doctrine, other state commercial laws may dictate that carriers do not unduly discriminate. The NMFTA argues that the statute requires carriers to correct only those billing errors contested by the shipper within the 180 day period and that the provision not only limits the time within which a shipper must petition the STB but also provides as a limitation against any overcharge recovery if the shipper does not contest the charge within the 180 day period.
“Over 32,000 changes across Canada”. This astonishing number is printed on the cover of the 1997 Canadian Postal Code Directory and represents just the latest round of changes to Canadian postal codes. For carriers with base rate structures dependent on these codes, many of these revisions result in meaningful changes in the rate levels to points throughout Canada.
We are presently reviewing these changes and will be integrating them into the FCA and NFB base rate tariffs, providing up to date groupings. The changes will be reflected in NFB Tariff 169 and the groupings in the individual FCA tariffs. The information will be available in a variety of formats; including printed publications, data files and PC based rating tools.
For companies interested in learning more about the changes or incorporating them into individual rate structures, contact Ken Leising at extension 203.
FCA/NFB Website (http://www.fca-nftb.org)
To promote our members in cyberspace, a full roster of the FCA and NFB membership is being added to our website. The listing will include the name and location of each member. To maximize the benefit to our members, we are offering two new programs, free of charge.
The first program, designed for members without a current website of their own, is the establishment of a business presence on the Internet through the construction of a standard Information Page. Your individual Page will be accessed by interested web “surfers” by selecting your company listing on our list of members. The content of the Page will be based on information provided by your company.
The second program is for members with a website. For these carriers, we will include a link from your company listing on our list of members directly to your website.
For additional information on either of these programs, contact Warren Gawley at extension 209 or complete the following forms and fax them back to us.
In addition, we are in the final stages of adding a new section on our site to provide links to Internet sites of interest to the motor carrier industry. If there are sites you feel should be included on this list, please let us know. If possible, we need their location (URL) and E-mail address.