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Trading Assistance: Truck Brokers & Cargo Claims

Within North America, most fresh produce is hauled by small fleets and owner-operators that produce vendors do not know and do not vet for integrity, performance, or financial wherewithal.

Instead, fresh produce vendors rely on industry truck brokers to vet underlying carriers, arrange for and monitor shipments, and ultimately to take responsibility for cargo claims that may arise.

Of course, truck brokers may limit their services however they like. For example, a truck broker may wish to operate as a “true broker” responsible only for bringing the hiring party and underlying carrier together as principals, without responsibility for honoring cargo claims.

In this case, to avoid otherwise inevitable misunderstandings with produce vendors, we recommend truck brokers inform customers of this limitation to their service prior to booking the shipment.

We don’t typically see the well-known industry truck brokers claiming they are not responsible for cargo claims. It is usually the smaller truck brokers or those that don’t do much work in the fresh produce industry that take this position after a cargo claim is made against them.

In one such instance I asked a broker, “Why not just inform your customers that you will not be responsible for claims—you could do it on the rate confirmation—and then avoid this otherwise predictable misunderstanding entirely?”

“Then I won’t be able to get any business!” he responded in a huff before hanging up the phone.

Given the abrupt end to the call I was unable to confirm my suspicion that this truck broker wanted it both ways. He wanted to say or imply he would take care of his customers as well as rival truck brokers (while charging a similar price) but didn’t want to take responsibility for cargo claims.

Disclose the limits to service
We believe it is clear, however, that if a truck broker is offering a service more limited than its established competition in the fresh produce industry (the transportation of which is exempt from federal economic, as opposed to safety, regulations), then it should disclose the limits of its service upfront, and not wait until after a claim arises to deliver the bad news.

Our Transportation Guidelines reflect this belief. Blue Book Services has published trading and transportation guidelines for ethical practices throughout the company’s history and we use these guidelines as we evaluate claims filed with us.

You have probably seen instances where we have flagged claims as “meritorious” in Blue Book’s Credit Sheet or in our Claims Activity Tables online. When a claim is flagged as meritorious, it means that according to our assessment the claim has merit.

In other words, when a claim is flagged as meritorious it means that, in our view, the respondent has not handled the claim in question in a manner consistent with Blue Book guidelines.

The relevant sections of our Transportation Guidelines read as follows—
(3.0) Transportation Intermediaries, often called “truck brokers,” do not haul produce themselves, but are intimately involved in arranging and contracting for the transportation of fresh produce. They are responsible for ensuring that both the Underlying Carrier and the produce vendor understand and agree to the essential requirements of the shipment.

(3.1) Per these Guidelines (and consistent with industry expectations), Transportation Intermediaries impliedly take responsibility for (1) paying freight to the Underlying Carrier even if the Transportation Intermediary does not get paid by its customer; and (2) paying properly supported carrier claims (whether as a principal or indemnitor) to the Hiring Party, regardless of whether the Transportation Intermediary is able to recover from the Underlying Carrier or its insurer.

(3.2) If a Transportation Intermediary wishes to operate as a “true broker” responsible only for negotiating a contract between the Hiring Party and the Underlying Carrier (and perhaps “collecting and remitting” on behalf of the principal parties), then, to overcome industry expectations and prevent misunderstandings, it will need to communicate this, in writing, either in advance (e.g., with a master transportation agreement), or as soon as possible after the shipment is booked (e.g., on a rate confirmation) and always before the conveyance arrives at shipping point.

This communication should, at a minimum, identify the principals to the contract of carriage and make it clear to the Hiring Party that the Transportation Intermediary will not be responsible for paying properly supported carrier claims even in the event the Underlying Carrier and/or its insurer fails to pay; this communication should also make it clear to the Underlying Carrier that it will not be responsible for payment of its freight in the event the Hiring Party fails to pay.

(3.3) Under these Guidelines, a provision requiring that claims be filed with the Underlying Carrier is not, in and of itself, sufficient to establish that a Transportation Intermediary is acting as a “true broker” without responsibility as an indemnitor should the Underlying Carrier and/or its insurer fail to pay a properly supported claim.

Our Trading & Transportation Guidelines are periodically reviewed by attorneys and we believe they are consistent with prevailing law. [See, for example, TRYG Ins. v. C.H. Robinson Worldwide, Inc., 767 f. 284 (3d Cir. 2019). “If an entity accepts responsibility for ensuring the delivery of goods, then that entity qualifies as a carrier regardless of whether it conducted the physical transportation. Conversely, if an entity merely agrees to locate and hire a third party to transport the goods, then it is acting as a broker.”]

Not legally binding

That said, our guidelines were never intended to be legally binding or fully representative of the different state and federal laws that could potentially apply to domestic and/or international dealings in the fresh produce industry.

Ultimately, these guidelines represent our best efforts to document and codify the ethical principles and best practices expected from the top companies in the produce industry.

But really, in this case, Book Book’s guidelines aren’t needed to tell us what we all already know. Namely, that when selling a product or service, the features and benefits should be conveyed alongside any limitations. The produce industry is about repeat business—in the long run, the people and companies that hold themselves to high standards do best.

Doug Nelson is Vice President of Trading Assistance for Blue Book Services Inc.