Freight Brokers, Freight Forwarders, NVOCCs and Indirect Air Carriers: Negotiating with Transportation Intermediaries in the U.S. and Canada by Land, Sea or Air

Description

The global supply chain and worldwide movement of goods has created a growing number of actors in the international transportation field. In addition to shippers and carriers, additional stakeholders have arisen as necessary middlemen to get products to market. The names of these entities vary by country and by mode of transportation, as do the regulations and default liability rules. Counsel advising clients with respect to contracts with transportation intermediaries must understand the distinctions and legal implications under a wide array of federal, provincial, state, and international transportation laws and negotiate the specific contracts that comply with these myriad rules while effectively allocating risk and reducing liability exposure.

“Principal” transportation intermediaries (those that take responsibility for the transportation even if they do not perform the services themselves) may both negotiate the delivery of goods between shippers and recipients and take possession of those products, sometimes solely in transport and, at other times, to store until another segment of travel can be arranged. In arranging transportation with a “principal” transportation intermediary, it is important to clarify what liabilities and functions are or are not assumed and what is necessary for adequate insurance coverage. Such intermediaries have the added potential responsibility of negotiating customs clearance of the goods in their possession and must be aware of the risks associated with those duties.

Counsel for “Agent” transportation intermediaries (those that merely arrange transportation with third party providers) must ensure that their clients are acting solely as third-party negotiators and not inadvertently creating liability for the goods in question. Sometimes such intermediaries elect to take on such liability, but this should be a point of negotiation not carelessness. These contracts should stress the importance of indemnity/hold harmless provisions, as well as the need for potentially more than the minimum insurance requirement provisions to cover reasonably foreseeable losses. Risk of non-payment to a carrier (or the prospect of double payment by the shipper) is typically greater, and vetting of parties to the transaction is important.

Understanding the allocation of liability between the different parties in a transportation agreement, the nature of the intermediary's role, and the necessary insurance is part of the foundation of creating enforceable contracts. Counsel should also consider other essential provisions, including service rates, payment terms, damages, best efforts, force majeure, confidentiality, and more.

Listen as our authoritative panel of transportation attorneys explains best practices for drafting freight forwarder and freight broker contracts and when each should be used. The panel will provide strategies for counsel to avoid common contracting pitfalls when negotiating terms to minimize the risk of loss, damage, or non-delivery of commercial goods.