An Overview of the Types of Shipping Carrier Contracts

Carrier contracts are more than a single document, as there are many different aspects to consider and cover when negotiating.

Key takeaways

• There are many different types of carrier contracts.

• Carrier agreements, rate confirmations, load tenders, accessorial contracts, and bills of lading all serve different purposes.

• Keeping it all organized is challenging without a document system.

• Resource Logistics Group can provide technology and other assistance to keep your carrier contracts organized and up to date.

Freight contracts define the prices and terms you’ll abide by when shipping goods with a carrier over the period the contract defines. They significantly influence a company's bottom line because they determine how your products will reach their destinations and what it will cost to get them there. 

Your business probably has many contracts in place at any given time, including multiple contract types with the same carrier. Numerous deals are necessary because there are so many aspects to consider when reaching an agreement. 

When handling your logistics operations in-house, it’s important to negotiate these contracts and oversee their implementation efficiently. You should also collect information on the carriers' performances to inform your approach, and perhaps offer leverage, during future negotiations.

Here's a look at what you should know about the various contract types in the shipping industry.

1. Carrier agreement

The carrier agreement provides an overview and a framework for how the partnership will work moving forward. It provides clear expectations that both parties will strive to meet while working together. This agreement includes details like the contract date, timeline for invoice payments, invoicing procedures, and liability information. 

When using a broker, your organization would have a broker-carrier agreement. In situations where you negotiate the contract directly, you'll have a carrier agreement. 

2. Rate confirmations

In addition to the agreement outlining when and how the shipper makes payments, a rate confirmation agreement shows how much your company pays to have items shipped. This document is legally binding and ensures that the shipping carrier can't overcharge you while outlining how much you're obligated to pay for the service. 

Rate confirmations are often ongoing, so you don't have to renegotiate for each shipment.

Your rate confirmation contract provides a bit of cost-certainty, ensuring that you have a good idea of how much it will cost to send a shipment from point A to point B with a particular carrier.

3. Load tenders

A load tender, or load confirmation, contains all of the necessary details of each shipment. Both parties will add information to the load tender document before the truck leaves.

For the shipper, this information can include the address and hours of operation at its destination and further details on the consignee who will receive the load. There is also often a detailed description of the freight. The carrier needs to know where the load is going, who will receive it, and that the consignee will be available before departure.

The carrier needs to provide other information on the load tender, including the type of trailer, its dimensions, and its weight. From there, the shipper can provide this information to the consignee to ensure the truck can access the destination.

4. Accessorial contracts

Most agreements will include a list of accessorial charges that the carrier can implement in addition to the rate confirmation. These charges won't appear on every invoice but can come into play when the shipper is at fault for delays and other unexpected costs. 

There are sometimes situations where the shipper doesn't meet its obligations. The carrier could be entitled to any defined accessorial charges when this occurs.

Examples of accessorial charges could include compensation for detention or wait times, tarping fees, additional fuel, storage, or shipment refusals. 

Make sure you understand these accessorial charges when negotiating your contracts. That way, you can do everything in your power to avoid them or, possibly, negotiate exclusions into your next deal.

5. Bill of lading

A bill of lading (BoL) is a legal document that a carrier provides to a shipper.

This document fills three roles:

• Provide evidence of a contract of carriage

• Offer assurance that the shipment is on the truck

• Show the title of goods

The evidence of contract carriage is crucial because it offers information on the freight, including its type, amount, destination, and condition.

The receipt assurance proves that the shipped goods have made it onto the truck or other transportation vessel in good shape.

The title of goods includes information that the carrier will provide to the receiving party.

The bill of lading is a vital piece of documentation because it protects all parties by outlining the entire procedure. It also includes information like the carrier name, the date the goods were loaded, the port of loading, the port of destination, a description of the goods, the receiving party's name, and any special instructions.

Negotiating your contracts

As you negotiate with carriers, you'll have to deal with all types of contracts. Some of this information will be unique for each shipment, while others will apply for the duration of your agreement with that carrier. There's a lot to take in when negotiating carrier agreements, which is why it's a good idea to seek an advisor's services. 

Assistance is particularly valuable if you decide to negotiate and maintain these contracts yourself.

Resource Logistics Group offers consultant services to companies that want to handle their day-to-day logistics operations without overburdening their back-office staff. Our team of professionals can provide the advice you need to develop and implement carrier contracts that best meet your needs. 

Contact us for more information or to receive your free carrier contract benchmarking.