Contracts 101: The Critical Paperwork You'll Use as a Freight Broker
The following excerpt is from The Staff of Entrepreneur Media, Inc. and Jason R. Rich's book Start Your Own Freigth Brokerage Business, 5th Edition. Buy it now from Amazon | Barnes & Noble | IndieBound
As a freight broker, once you match a load to be shipped with a carrier, you must fill out a number of forms. First, you and the carrier need to enter into an agreement covering current and future dealings. The Transportation Intermediaries Association provides sample agreements in its New Broker Kit, but experienced freight brokers recommend you develop your own contracts, agreements and forms, customizing them to your particular operation.
Once you have a carrier agreement on file, you need to send the carrier a load confirmation and rate agreement form for each specific load. When the carrier picks up the load from the shipper, the shipper will give the carrier a bill of lading listing the goods being transported and any special arrangements the driver needs to make for the load. When the driver reaches the consignee (recipient of the shipment), he needs to have someone there sign for the load. If an independent contractor unloads the freight at the consignee’s location, the driver needs to obtain a contract labor receipt from this worker.
Depending on your arrangement with the carrier, the driver or trucking company will invoice you, the shipper or the consignee for transportation services.
The carrier/broker agreement outlines the terms under which you'll work with a given carrier. It’s designed to apply to all the dealings you have with that carrier and should also provide for any future changes.
When writing the carrier/broker agreement, make sure to do all the following:
- Note the carrier’s motor carrier (MC) or license number, full corporate name and address.
- If you'll be working with this carrier on a contract basis, state that the freight and rates will be negotiated for each shipment.
- State that the carrier is liable for any damage or loss to the freight that occurs while the carrier transports it.
- Note that the carrier is responsible for any personal injury or damage to vehicles or equipment that occurs while the freight is in the carrier’s possession.
- State when the carrier will receive payment and what the carrier must provide before you will pay (such as bills of lading).
Load Confirmation and Rate Agreement
Once a carrier agrees to move a given load, you should complete and send a load confirmation and rate agreement form. This should include the name and address of both the shipper and the consignee, a trip number (for tracking purposes), any information on extra pickups or stops, pickup and delivery dates, a brief description of the commodity to be shipped, and your commission or brokerage fee structure.
Bill of Lading
At the time of the pickup, the shipper will provide the driver with a bill of lading. This form will include information on the nature and size of the load, its destination and any required special handling. The driver signs the bill of lading as an acknowledgment of receiving the load described by the shipper.
The bill of lading is prepared and handled by the shipper and the carrier. As the broker, you won't be directly concerned with it, but you need to keep a signed copy in your files. The carrier usually sends this to you, along with its invoice for transportation services.
Contract Labor Receipt
Drivers may occasionally work with contract laborers who unload trucks once they reach the consignee. If they do, the laborer will give the driver a contract labor receipt, which the carrier sends to you. The driver or carrier pays the laborer and turns to you for reimbursement. If your shipper is willing to cover this cost, pay it. Even if your shipper doesn’t want to pay for contract labor, you may want to consider absorbing the expense so you can maintain good relations with the driver and carrier.
After making the delivery and obtaining proof of delivery, the carrier sends you an invoice, along with the bill of lading. With these documents, you can prepare your own invoice to send to the shipper. (Unless, of course, the carrier bills the shipper directly.)
Your invoice should include the billing date, the dates of pickup and delivery, the origin, and destination, what was shipped (commodity, pieces and total weight), and additional fees (such as fees for exceeding weight limits or charges for contract labor). Bill your shipper as soon as you receive the complete invoice and bill of lading from your carrier.
If the shipper is sending the delivery “collect,” then you bill the consignee rather than the shipper. The shipper should provide you with billing information on these shipments.
Contract of Carriage
A contract of carriage isn't a document itself, but it’s important that you understand the concept and what it includes. Many otherwise well-informed transportation professionals view the bill of lading as a contract of carriage—a common misconception. “A bill of lading is certainly a receipt used in a contract of carriage, but there are many elements required by that contract that are generally not stated on the bill of lading,” says freight broker Bill Tucker. “Some examples: the price agreed to in the contract, all the services to be provided, rules to be used to handle exceptions, and accessorial charges that may be applicable.”
What makes up a contract of carriage? “A contract of carriage between a common carrier and a shipper with or without a broker being involved usually consists of some form of bill of lading, plus all the tariff provisions, pricing, rules and service descriptions,” Tucker says. “Also, part of the total contract is the intent of the parties; the regulatory rules that must be followed, whether federal, state or local; and all the other usage of trade and precedent within which this transaction has occurred.”