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June 10 2019

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68 The Journal of Commerce | June 10 2019 By Colin Barrett Q&A Q A Be careful what you sign I lead business development efforts at a new broker. You may have heard of us recently as we have raised quite a bit of venture capital and have grown rapidly. We would be classified as a digital freight broker like Uber Freight. My internal legal team is hung up on a contract with a Fortune 50 firm that uses a standard terms-and-conditions document that it will not modify but requires all suppliers to sign. The document refers to "carriers" throughout and not "brokers." Hundreds, if not thousands, have signed this document and do business with this firm. In your opinion, why does the term carrier or broker mat- ter in this case? IT MATTERS VERY much these days, I'm afraid. And your legal team is correct in urging you not to sign the doc- ument, no matter how many others may have done so, and even if it costs you the opportunity to do business with this shortsighted company. There's a Federal Motor Carrier Safety Administra- tion (FMCSA) regulation that specifically deals with this question: 49 CFR Section 371.7. As the FMCSA itself spells it out in a document entitled Small Entity Compli- ance Guide for Broker Operations, "You must be careful not to represent the operation of your business as that of a motor carrier. You must be clear that you provide services as a broker, not as a motor carrier." OK, sure, if the matter ever came up, you could argue that it wasn't your intention to misrepresent yourself as a carrier instead of a broker, and that it wasn't even your idea to call yourself a carrier. You could, in short, try to blame the whole thing on the shipper's intransigence about its standard-form documentation. I'm sure that's been the thought process of the other brokers you say have signed this paper. But do you really want to rely on what I'm sure the agency's bureaucrats will see as a flimsy excuse? Even if the shipper would support you — something I'd hate to count on, given most people's reluctance to stick their necks out for somebody else — the fact would remain that it would be your signature on a piece of paper in the body of which you call yourself a carrier and not a broker, when you're actually the latter. And what happens if there's a problem during the transportation process, as sooner or later is foreseeable? Say there's in-transit loss or damage, for which you, as a broker, wouldn't ordinarily be liable to the shipper, and the shipper, as is not uncommonly the case, doesn't want to hear your excuses for not paying its claim and instead passing the buck to the underlying carrier. In such a case, isn't the shipper likely to hark back to that terms-and-conditions document to demand that you pay, conveniently forgetting that it was at its (the shipper's) insistence that you executed the document with the misrepresentation of your status? I could go on from there with reasons why it's ahorri- ble idea to put your name to any paperwork that refers to you as a carrier rather than a broker. It's a fine way to get a portion of your anatomy above the waist that you may not even possess caught in a wringer, and has no upside that I can think of. In fact, the shipper's unwillingness to entertain any modification of its required documentation suggests to me that its overall intent is to do business only with principals (carriers) and not with third parties (brokers). It's prepared, apparently, to make exceptions to this basic policy, but only if, and to the extent that, a third party agrees to assume the same obligations and com- mitments as would a principal. And if you go back over some of the details in that document this shipper is pressuring you to sign, I sus- pect you'll find other things that reflect this mindset you didn't fully appreciate before. Check out the provisions discussing claims, late delivery, and other penalties for unsatisfactory performance and so on. Now, the shipper is also being pretty foolish about failing to recognize that just calling you a carrier doesn't make you one and (for example) protect it against freight payment demands from underlying carriers if you fail to pay them. But it didn't ask for my opinion; you did, and I'm limiting the scope of my response to why it's a bad idea for you to sign the document, not why it's equally dumb for the shipper to demand that you do so. JOC Consultant, author ,and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843 559 1277; email, Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010. Do you really want to rely on what I'm quite sure the agency's bureaucrats will see as a flimsy excuse?

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