As the global supply chain and local markets continue to recover from the COVID-19 pandemic, the need for clear and concise freight broker contract agreements is more vital than ever. Freight trucking services make up the backbone of the supply chain network and account for the bulk of regular and holiday goods transportation, especially now. As reported by PR Newswire, “The global local general freight trucking market is expected to grow from $111.84 billion in 2020 to $125.24 billion in 2021 at a compound annual growth rate (CAGR) of 12%. The market is expected to reach $170.8 billion in 2025 at a CAGR of 8.1%.” With this much potential growth and the added pressure that comes with it, freight broker carrier agreements can make or break trucking companies. This guide will explore the fundamentals of freight-carrier agreements and how freight brokers can make them successful within the ever-changing market.
What Are Broker-Carrier Agreements?
Broker-carrier agreements are essentially agreements between a freight broker and a trucking company that detail specific expectations and requirements for a particular partnership or arrangement. Without the right specifics in place, brokers get charged higher fees and don't get paid on time, while carriers can experience delays and delivery processes that have not been defined and outlined. During market volatility, especially ahead of the peak season push, a balanced freight broker carrier agreement can help keep the supply chain moving as smoothly as possible.
What Are the Top Sections Within Broker-Carrier Agreements?
An agreement of this type is a legal contract between two parties- the freight broker and the trucking company. As with all legal documents, several critical sections must get proper attention from all logistics and transportation parties. Here are the top portions of each agreement.
- Brokers, carriers, and other partners must be disclosed, including full name, company name, insurance information, and other vital information. This contact information must be shared and easily accessible by all involved parties.
- Any agreement must have clearly defined start and end dates for the contract and include any rules or processes needed for terminating the contract early. Such parameters will help avoid disputes and issues down the road if any problems or questions arise.
Scope of Services
- The agreement must include details about when and where shipments will be made, where the cargo can and cannot go, and other similar geo-specific data. This level of detail is essential because any movement outside of these terms could be considered a breach of contract.
- Sometimes extra tasks are included beyond simply driving cargo from point A to point B. The trucking company may handle loading or unloading, packing, cargo protection, or other tasks. If so, this is all defined and outlined in the freight broker carrier agreement.
- Some carriers will subcontract other trucking companies to handle part or all of a particular shipment. If the broker or customer does not want to allow this, it must fall within the contract terms that no second-hand contracting is allowed for that particular agreement.
Rates and Fees
- The contract terms agreed to by both parties must clearly outline specific rates and fees. These include basic shipping costs, fuel rates, handling fees, the share of customs and tax charges, and other expenses associated with that particular load or agreed shipment.
- Freight broker contract agreements must also touch on payments and the process for resolving issues related to invoices and payments. When surprise fees and expenses occur, the terms of the contract will help all parties come to a resolution as quickly as possible.
Liability and Insurance
- Liability terms help define who is responsible for expenses related to lost or damaged cargo. In most cases, the freight carrier must guarantee the security of the shipment while in their care. Any damages and related expenses become the carrier’s responsibility.
- The insurance section of the broker-carrier agreement states that carriers must show proof of insurance before they load any cargo. Other essential coverage considerations include motor truck cargo insurance, workers’ compensation coverage, and required bonding and licensing.
- A well-balanced contact between freight brokers and carriers will include language dealing with dispute resolution. No contract agreement is final without clearly defining the process for resolving issues if either party believes something has gone wrong or a suspected breach of contract.
- Dispute resolution offers legal remedies for grievances between all parties involved in that particular contractual agreement. The term should be all-encompassing and touch on everything from third-party mediation to federal or state court processes assistance.
What’s the Benefit of Better, Easy-to-Use Agreements?
The agreement will touch on delivery terms, timelines, freight shipping modes, transport rates and fees, insurance and claim regulations, customs and border procedures, accident liabilities, shipping damage and loss, and more. Detailed freight broker contract agreements protect all involved parties and offer many benefits to all involved parties:
- speed of onboarding and training is improved and streamlined
- a clearly defined contact quickly leads to access to more carriers
- diversity with load and transportation modes is greatly improved
- all-around increase in access to better and more profitable capacity
- less confusion about responsibilities between parties
- better customer satisfaction with quality service and reliable deliveries
- faster and more accurate resolution to conflicts, disruptions, and concerns
- more power to secure the advantage against the competition
- improved relationships between carriers, shippers, and trucking brokers
- ability to move more diverse freight by accessing a variety of carrier services
- capacity to handle custom orders and specialty freight safely
- easier time overall with keeping rates in check and maintaining profit margins
- less time to acceptance of loads and faster payments
- improved ability for carriers to handle short lead times with less trouble
- access to omnimodal capabilities and multiple transportation modes
- less risk to carriers that have a broker that reliably pays on time and in full
Establishing and maintaining a freight broker carrier agreement significantly impacts every aspect of the modern supply chain.
What Other Documents Are Vital to Broker-Carrier Interactions?
A well-rounded broker-carrier agreement will also touch on other contracts and arrangements that can help with the relationship between brokers and carriers, which includes:
Load Specification and Tender
Also known as load confirmation, this part of the agreement aims to list all the load details for carriers. The load confirmation will list specifics, any safety or hazard concerns, special equipment required, specific services, customized or unique protocols, and anything carriers need to know to manage the shipment successfully.
Rate and Fee Considerations
The freight rate terms help keep shippers, carriers, and brokers on the same page about who is responsible for what expenses. It is an important part of contractual agreements which lists expected fee ranges while also detailing steps to take when addressing unexpected fees, surcharges, or damage claims.
Bill of Lading
The bill of lading (BOL) acts much like a receipt for freight delivery within freight broker contracts. It is generally issued by the carrier and given to drivers who handle the transportation details. The BOL is a legally binding agreement that offers drivers and carriers the details required for accurate and lawful transportation of any goods across any mode.
Brokers, shippers, or carriers who have of-choice status might be subject to additional terms, requirements, payments, and considerations. A contract may necessitate committing to a specific load size and frequency. An of-choice agreement might also give some carriers preferential treatment or personalized options that other drivers are not granted.
How to Assure Brokers You’re a Safe Carrier
Recent evidence shows that attorneys will now go after brokers for negligent hiring of an independent contractor if there was any indication that the carrier was potentially unsafe. Even with all the advances in supply chain and logistics technologies, things still can go wrong, And the results can be devastating for brokers.
As highlighted by TruckingInfo.com, “In 2012, an Oregon jury returned a verdict of nearly $5.2 million, including punitive damages, to the family of a man killed by a commercial truck, in a case that may have involved the first punitive damages verdict against a transportation broker in a case involving a negligent hiring claim.” Brokers are subject to huge liability risk, and more and more liability lawsuits have been popping up as more carriers and brokers enter the marketplace. The more trucks on the road and the more carriers enter the picture, the bigger the liability risk surrounding freight broker carrier agreements.
Presenting a safe driving record, including certification for driving education and safety classes, can help carriers establish a long-standing claims-free reputation. Given a choice between nearly identical trucking companies, the preferred option will always be whoever is known for safe driving protocols. Carriers who demonstrate this safety-first mindset instantly gain a competitive advantage.
Take Care in Creating and Executing Broker-Carrier Agreements While Streamlining Freight Payment With the Right Partner
Even with the best of intentions and extensive preparations, accidents occur, loads are damaged, injuries happen, trucks wreck, and things go wrong. This ongoing risk is a significant concern for brokers as they, of course, want to make sure they are dealing with carriers who have a reputation for overall safety and who have a good driving record. When you need help establishing and managing broker-carrier agreements, it is vital to have a partner with proven experience and success with freight broker carrier agreement management. Create and execute the best freight broker contracts today with ComFreight. Request a demo of HaulPay today to learn more about how to maximize your working capital and interact more efficiently with freight brokers now with reliable agreements and contracts.