May 13, 2020 | Industry Insights | Jason Palumbo
Shipper & 3PL Contract Considerations | Roanoke Trade
Managing the Risk for Brokers and Shippers
The Transportation Intermediaries Association (TIA) recently released a comprehensive whitepaper titled, “Shipper 3PL Contracts Considerations” as a guide to navigating contracts for its members. Our own Glenn Patton, VP Business Development and a board member of TIA contributed to the piece, and we are happy to be able to offer access to the whitepaper to our clients and partners as well.
It’s not uncommon for brokers and logistics service providers to be presented with contracts by their shipper clients. While every situation is different and should be managed on an individual basis, there are some general issues LSPs should consider when presented with contracts from clients. In best-case scenarios, good contracts are designed to protect both the shipper and the logistics service provider; however, there are instances where contracts are worded in a way that puts a lot of the legal responsibility on the LSP. At Roanoke, it’s our goal to act as a resource for shippers and brokers to ensure they are making the right decisions for their business and employees.
Third-Party Logistics Contract Considerations for Brokers
As a general rule of thumb, we suggest that logistics service providers never contractually agree to perform tasks that only the actual carrier or driver can accomplish. This puts an unnecessary risk on the LSP and opens them up to potential legal issues that are ultimately outside of their control.
Just some examples of this include:
• Dictating a driver’s route
• Having a driver check-in throughout transit
• Verifying equipment maintenance
• Drug testing drivers
• Changing the contract language to “shipper-carrier”
• Auto liability requirements
It’s recommended that logistics service providers carefully review all language in a contract presented by a shipper. If there are requests or requirements in the language that are too demanding for motor carriers, there is a good chance as a third party broker it will be difficult to find a compliant carrier.
Another common issue that logistics service providers should watch out for is any language in a 3PL contract that can make them legally responsible for the actions of the client or shipper. This can include anything from placing unlimited liability on the LSP to indemnifying them for shipper negligence.
Ultimately, contracts are a way for shippers and logistics service providers to clarify their roles and protect themselves throughout the transaction. It is in the best interest of both parties to carefully review all contracts with their attorneys and insurers before ever signing. Many insurance policies don’t cover the liability assumed in a contract unless agreed in advance, so it is always best to review contracts on a case by case basis.
For much more detail on the intricacies of shipper LSP contracts, please download the TIA “Shipper 3PL Contract Considerations” whitepaper.
We’re Here to Help
At Roanoke Trade, we offer a program that includes contract review to our clients by partnering with legal experts who specialize in trade and transportation. Our goal is to help facilitate access to essential legal services to alleviate some of the stress surrounding contract considerations.
Trade Risk ReviewSM is a unique solution designed to implement or update proper business documentation. It can also help to address potential legal concerns including regulatory compliance and operational exposures. We offer this service through a select group of attorneys, and we recommend it for all 3PLs, freight forwarders, customs brokers, property brokers, and warehouse operators.
Just some of the features of this service for our customers include:
• Analysis and review of your business activities
• Document review including terms and conditions of service, bills of lading and warehouse receipts
• Ocean Transportation Intermediary license renewal
• Access to reference documents pertinent to your industry
• Preferred rates for future services
We encourage you to learn more about the features of our Trade Risk ReviewSM program.
Please contact us with any questions at firstname.lastname@example.org or 1.800.ROANOKE (800.762.6653).