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Freight Payment Liability: What You Need to Know

Making sure your shipments get to where they need to be in one piece is one of the most important aspects of your business, and one that often feels chaotic: Do you know when shipments leave and when they’ve actually arrived? Who is at fault if the carrier misses a shipping deadline? Were you double-billed? There is a lot on the line when it comes to freight and logistics.

Most business owners are very good at what they do, but are probably not knowledgeable about freight payment liability, freight auditing, and the ins and outs of freight invoices. And they shouldn’t have to be— freight auditing all by itself is a full-time job.

What is Freight Payment Liability?

Freight payment liability is the responsibility to compensate the carrier for a shipment regardless of the received condition, barring an act of negligence. This responsibility may not always be straightforward, especially if the shipper uses a shipping forwarder who works directly with carriers.

When something goes wrong, carriers can cover the cost with insurance, leaving everyone whole—unsuccessful shipments still cost money in fuel, driver salary, and other expenses that can’t be reversed.

Unfortunately, not everything that can go wrong is covered by the carrier’s insurance. That’s because the law (specifically, The Carmack Amendment) applies more liability to shippers and carriers than most insurance companies do.

That means insurance claims can be denied, leaving payment liability hanging over everyone’s heads. As a shipper or forwarder, you may be on the hook and must establish three things to shift liability to the carrier:

  1. That the item was in good condition when it left your place of business.
  2. That it was not received in good condition or on schedule.
  3. The amount of the damages.

The carrier must then prove that their negligence was not the cause of the issue. That means considerations such as Acts of God, the public enemy, or the public authority relieve the burden from the carrier. If a shipment didn’t make it on time due to a blizzard, it’s not the carrier’s fault.

To an extent, the shipper or shipping forwarder’s liability can depend on the details of the shipping contract. A no-contract job (which we all know we should never do under any circumstances, but which also sometimes happens) leaves you at the mercy of laws that weren’t necessarily created with your supply chain situation in mind.

Regardless, it’s important to be able to show that your shipments left their origin point in the condition they were expected to be in when they reached the destination. This can be difficult to prove, but pre-shipment freight audits can help.

The Freight Drain

And freight liability is just one thing to worry about. When things go smoothly, everything is taken care of and paid on time by the shipper. With the complexity of freight, it’s not uncommon that a shipper is invoiced twice for the same shipment—and when that happens, it’s not uncommon for those shipment invoices to be paid twice. The shipper may not even notice.

audit freight payment

Freight billing can also be inaccurate, and often not in favor of the shipper. This isn’t something the shippers accountant will necessarily catch, unless it’s a dramatic deviation from the norm.

This is why there are freight auditing systems, which simplify and automate freight auditing. Freight auditing catches inaccuracies, prevents double payments, and helps lower overall freight costs. A freight audit and payment software system can also help you assess risk, so that you’re not so blinded by a profitable job that you put yourself in a position where there is a high probability that you will take a loss.

Auditing helps manage freight payment liability by keeping track of every shipment, every invoice, and every client. And it gives you more of that most valuable commodity: time.

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