Write Your Own Rules of Business
By Henry E. Seaton

August 1999
Reprinted from etrucker.com

Deregulation ended the filed rate doctrine and, with it, industry reliance on many traditional rules of commerce. The term “tariff” has become a dirty word to the shipping industry because of undercharge litigation, which resulted in shippers paying for hidden freight charges they would have never intentionally agreed to pay.
Yet even in an era of contracting and marketplace pricing, it’s essential that each carrier write its own SOP, or standard operating procedure, for conducting business. Most spot market agreements leave out essential and basic contractual issues. At least three or four dozen issues can arise in a truckload context that are seldom addressed in the typical shipper/ carrier or broker/carrier contract.

Publishing rules circulars or procedure manuals and incorporating them by reference into the contract is an ideal way to address these issues before problems arise. Some of the items your operations circular should address are free time for loading and unloading, detention with and without power, payment terms, pallet exchange, stop-off charges, third-party billing procedures, maximum truckload weight, claims handling procedures, salvage, CODs, carrier lien rights, fuel surcharges and mileage guides. If you have been in business for a while, you probably have written off bad debt, suffered claims losses or been unreasonably detained without compensation because these issues were not addressed and incorporated into the contract by agreement.

To overcome shipper and broker distrust of carrier rules, carriers should publish provisions that are fair, even-handed, and consistent with accepted rules of commerce and ensure that their contracting shippers and brokers have actual notice of the rules and their applicability. Putting together a satisfactory and comprehensive rules publication isn’t difficult.

Under federal law, you can publish your operating procedures in a circular or tariff form and provide them to the shipper upon request. By paying nominal annual subscription fees, you can incorporate the National Motor Freight Classification rules, the uniform bill of lading and the mileage guide of your choice into your document by reference. Although regulations governing damage claims and overcharges will apply by default to contracts, as well as common carrier service, it’s important to note the applicability of the regulations and to include language ensuring technical compliance with release rates.

A typical truckload rules tariff or rules circular is 18 to 25 pages long. You can prepare one using fairly standard language as long as you’re careful to select the level of accessorial rates and charges applicable to your business. Also, consider carefully the unique aspects of your business that require special provisions, such as escorts, inside deliveries, storage in transit and so on.

Once you complete the rules circular, consider how you will incorporate these rules into your contracting procedures and give shippers and brokers adequate notice. By law, your rules circular will apply unless it’s trumped in writing by a contract, but you can expect shippers and brokers to resist binding themselves to a multi-page document they haven’t read.

You should prepare a one- or two-page abstract of your rules circular and include that summary with rate quotations and sales brochures you send to customers. This summary should include key elements of the rules circular, as well as insurance information and other qualifying data. Assign an identification code to the rules circular and incorporate the rules circular by reference into each written contract and load confirmation sheet you execute.

In an interesting development, many carriers have placed their rules circulars and operating procedures on their websites and incorporated their home pages by reference in communications with their customers. By giving your customers a summary of your rules and easy access to the entire text, you can establish standard, binding and complete rules of commerce and head off disputes before they arise.

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