What is freight? Freight is defined as goods or cargo carried by ship, train, truck, or airplane. Our global economy is impacted by the freight that is moved from one end of the U.S. to the other. At the risk of offering what is already known, this column will shed light on what is less known or familiar as it relates to the Carmack Amendment. The U.S. spends over $3 billion annually on claims for goods lost or damaged. This figure is affected by a myriad of factors such as load characteristics, weight and volume constraints, market demand fluctuations, scheduling, and operational inefficiencies. These rejections pose significant challenges, such as increased costs, delays, and logistical complications. Understanding freight rejections is crucial for maintaining efficiency in the supply chain.
The Carmack Amendment was named after Sen. Edward W. Carmack, who was killed in a gunfight in Nashville, Tennessee in 1908 and was the primary advocate and sponsor of this legislation. “Carmack” 49 U.S.C. Section 14706, familiar to most who handle freight claims, establishes the legal framework for carrier liability. It ensures that carriers are responsible for any loss or damage to goods during transit, providing a standardized approach to handling freight claims and disputes. Carmack preempts common or state law remedies. Further importance would be on the fact that Carmack includes injury to tangible property rights and economic losses not directly related to physical damage.
When considering the applicability of Carmack, the issuance of a Bill of Lading when procuring interstate transportation creates the contractual agreement between shipper and carrier for the transport of goods. Carmack does not always apply—attention should be given to whether the transportation was intended for interstate or intrastate. Not all carrier shipments are subject to Carmack—a farmer’s agricultural or horticultural products, transportation of motor vehicles operated by an agricultural cooperative, and transportation of livestock are exempt. Certain commodities such as fish, shellfish, and livestock feed not intended for human consumption are also exempt.
Claim Trends
Current trends in freight claims highlight several challenges in the modern logistics landscape, driving viable discussions as to the efficacy and relevance of Carmack. The rise in e-commerce growth has increased the volume and complexity of shipments and the Carmack framework may not adequately address the nuances of modern freight claims. Claims professionals should consider the elements of the claim through a different lens, taking into account facts that could be less obvious but have the greatest impact, such as rejecting refrigerated cargo on the basis of ‘pulp thermometer’ readings and nothing more, or a load shift where heavy packages were placed on top of light packages causing collapse of the packaging.
Additional trends include:
- Technological advancements in tracking, monitoring, and data analytics have improved the visibility into shipment conditions and routes. Real-time data can pinpoint where damage occurs and could challenge the traditional burden-of-proof requirements under Carmack.
- Customers have increased the pressure for carriers with the expectations of rapid and reliable delivery, leading to disputes that may be resolved through alternative resolutions utilizing arbitration or mediation.
- Risk managers are moving more toward practices that employ sophisticated tools to mitigate losses more effectively and engaging resource partners for collaboration to reduce liability.
- A collaborative logistic model is becoming more popular, such as sharing shipping and on-demand delivery services, which complicates the assignment of liability. This can cause a less adaptive perspective when applying Carmack to a more fluid transportation arrangement.
Re-thinking Freight
Considering the evolution of freight, the impact of e-commerce, and current demands, it is necessary to think about innovation and implementation of new strategies. Investing in technology to provide real-time tracking and inventory management to monitor shipments and address issues promptly can lessen the severity of the claim or eliminate it altogether.
The agreements established can be deliberate and clear to set conditions for which goods can be rejected; and include acceptable quality levels, temperature ranges as opposed to a specific temperature for refrigerated products upon delivery, and standards for inspections that determine acceptance or rejection. The broker/carrier agreement between the freight broker and the carrier would be a potential instrument for such clarity.
Inefficient routes can influence the effective transportation of goods by creating increased transit times, higher fuel costs, missed deliveries, and higher carbon emissions. This may seem like a simple fix, but many transportation companies overlook the value of efficient routing. Operational awareness is key to the carrier and can make the difference between whether freight/cargo is loaded and unloaded, prevent communication breakdown, and maintain good customer relationships. Failure of carriers to leverage technology such as route optimization software and real-time tracking can hinder efficiencies that would generate future improvement in received freight.
Freight and logistics are changing as global demands evolve. Freight claims practices will need to evolve as well to address new elements of loss and damage while adapting to new technologies. Investigating freight claims involves meticulous investigation. Responding rapidly increases the chances of accurately assessing liability. Environmental factors may impact a claim and affect whether comparative fault may be applicable.
Carmack asserts five defenses for the carrier in determining liability, one of which is error or omission of the shipper. Evidence of direct physical damage to the cargo must be established and, absent the documentation to support the claim, may require additional investigation or that the claim is unreasonable.
Evolving Considerations
Freight rejections are occurring more frequently and with less justification. It is incumbent on the claims professional to either determine the carrier failed to exercise reasonable care in handling the freight, directly causing the damage; or, equally important, eliminate other causes that may be contributing factors that can absolve the carrier of any liability.
Considering load patterns, distribution of weight, the modality of the product, packaging, and load securement (49 CFR 392.9), are all elements that merit attention when investigating freight claims. Title 49 Chapter III Part 370 provides principles and practices for investigating loss and damage claims, and processing salvage.
Carmack provides a standardized legal framework for many freight claims, but it does not apply universally to all freight claims. The claims professional should consider the context of each shipment, type of carrier, nature of the goods, geographic scope, chain of custody, carrier performance, timely filing, and comparative analysis for fair and efficient resolutions.