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It's no secret that logistics providers are being tasked with operating in an increasingly complex, high-stakes logistics environment. Volatile fuel prices, skyrocketing OS&D costs, and ongoing labor issues force logistics providers to do more with less. According to the National Cargo Security Council, these issues result in an annual $50 billion in cargo losses.
For shippers, these supply chain woes can quickly result in blown budgets and unsustainable operational spend. Luckily, regulatory bodies have taken steps to ensure that carriers, not customers, pay the price for overburdened operations. The Carmack Amendment 49 U.S.C. 14706 to the Interstate Commerce Act limits shippers' liability and allows logistics providers to operate with the knowledge that federal law holds responsible parties accountable for freight loss.
But for shippers without law degrees or familiarity with century-old shipping regulations, the Carmack Amendment can present an intimidating chasm of jargon and legalisms, leaving worried shippers asking, 'what is the Carmack Amendment?' We've assembled the must-know highlights of the Carmack Amendment to ease your mind.
After implementing the Interstate Commerce Act of 1877 as a means of busting railroad monopolies, Congress saw that the complicated, state-by-state laws regulating freight liability resulited in inscrutable lawsuits and complex chains of responsibility. In hopes of simplifying these labyrinthine laws into a cohesive, national liability framework, Congress adopted the Carmack Amendment 49 U.S.C. 14706 to the Interstate Commerce Act in 1906.
Since then, the Carmack Amendment has allowed shippers to rest-easy knowing that federal regulation limits their liability.
In short, the Carmack Amendment is a regulatory measure designed to protect shippers from excessive costs due to carrier missteps. By law, the Carmack Amendment places liability for freight loss on the carrier unless the carrier can prove themselves not responsible through one of five exclusions.
According to reporting from FreightWaves, 73% of warehouses are struggling to find the labor they need, leaving shippers vulnerable to supply-side mistakes. Loads can be left unsecured, shipments can be mispackaged, and fragile or hazard labels can be forgotten. In these cases, the Carmack Amendment 49 U.S.C. 14706 holds shippers, rather than carriers, responsible for cargo loss.
Increasingly, major industries are relying on specialized logistics. The global refrigerated logistics market is worth an estimated $113 billion, and is set to reach $160 billion by 2027, according to ResearchandMarkets. With the refrigerated logistics market booming, labor-strapped shippers are struggling to maintain their loads properly. In cases where perishable products, fragile products, or other specialized shipments are left unprotected by the shipper, the Carmack Amendment protects carriers from otherwise automatic liability.
Though rarely cited in court, the "Public Enemy" or "Act of War" clause protects carriers from automatic liability when an enemy of the United States damages freight. Fortunately, this exception has rarely been used in court, leaving logistics professionals largely uncertain about its specific parameters. However, with increasing military tensions stretching into busy global logistics markets, the "Public Enemy" or "Act of War" exception could soon be applied.
Much of what affects supply chains is unpredictable. Billion dollar natural disasters are on the rise. The number and cost of weather and climate disasters are rising "due to a combination of population growth and development along with the influence of human-caused climate change on some type of extreme events that lead to billion-dollar disasters," according to Climate.gov.
In the case of freight damage caused by increasingly common natural disasters, theCarmack Amendment 49 U.S.C. 14706 limits carrier liability. However, the Carmack Amendment also stipulates that carriers remain liable if the event was predictable and could have been accounted for.
Anyone who drives knows the unpleasant surprise of unexpected road closures, and logistics professionals are all-too-familiar with the stress and expense of trade embargoes. In these events or other government-controlled inconveniences, the Carmack Amendment stipulates that carriers and carrier networks maintain only limited liability. And with the number of government-mandated recalls increasing by a whopping 63.8% in the first quarter of 2022, according to Quality Assurance Magazine, shippers should be aware that recalls, and other actions affecting the product itself, are covered under the Public Authority clause of the Carmack Amendment.
Generally, plaintiffs in a negligence lawsuit must prove the defendant responsible. Once the plaintiff proves negligence, the defendant then attempts to prove negligence on the plaintiff's part. The Carmack Amendment, however, turns these assumptions on their head.
Under the Carmack Amendment 49 U.S.C. 14706, the burden of proof falls squarely on the shoulders of the carrier. According to Texas-based law firm Mehaffey Weber, "The fact that the goods were damaged or destroyed during transit is sufficient evidence to meet the shipper's burden of proof when they are seeking damages. If the shipper suffers a loss, the burden of proof shifts to the transportation company to show it was not negligent." If a carrier fails to prove that the damage falls under one of the five exceptions defined by the Carmack Amendment, they face strict guidelines under the Carmack Amendment 49 U.S.C. 14706.
Under the Carmack Amendment, shippers can recover a broad spectrum of damages, including the actual cost of the lost freight asset, the cost of repairing damaged assets, the expenses caused by undue delays, the initial cost of transporting the item, and the shipper's legal fees.
Like any regulation, the Carmack Amendment 49 U.S.C. 14706 requires paperwork, paperwork, and more paperwork. Not only do shippers need to have complete documentation of the carrier in question taking responsibility for the damaged freight, including a Bill of Lading and signed receipts, but they're also required to file all cargo claims within nine months. These stipulations often leave shippers, already stressed by the sometimes-staggering costs of freight loss, struggling to gather the documentation they need within the strict timeline set forth by the Carmack Amendment.
Luckily, tech-forward logistics experts have created freight claims management solutions to help shippers approach freight claims without fear. Unlike other solutions, these innovative, cloud-based freight management solutions allow shippers to store all their vital freight claims documents and data in a single location, accessible simultaneously to all logistics professionals throughout a shipper's supply chain. Using these innovative solutions, shippers can throw out the filing cabinet and rely on 21st-century solutions to resolve any Carmack Amendment 49 U.S.C.14706 disputes.
According to reporting from FreightWaves, the value of the global logistics industry could exceed a staggering $15 trillion by next year. With so much at stake, shippers are under more pressure to deliver on-time, every time. Faced with a competitive, booming logistics industry, today's shippers don't have time to pull hairs over freight claims.
That's where Intelligent Audit comes in.Using the latest innovations in freight claims management technology, Intelligent Audit enables shippers to access all vital freight claims documentation, data, and deadlines through a single, easily accessible, cloud-based platform. Start a conversation with Intelligent Audit today, and see what worry-free freight claims can do for your business.
Set up a call with one of our experts to discuss how Intelligent Audit can help your business uncover opportunities for cost reduction and supply chain improvements through automated freight audit and recovery, business intelligence and analytics, contract optimization, and more.
