Freight Tec Blog

The Federal Motor Carrier Safety Administration (FMCSA) has issued a final rule that will eliminate Cargo Insurance requirements for freight forwarders and most motor carriers.  Only household goods carriers will be required by law to maintain Cargo Insurance.  All other motor carriers and freight forwarders will no longer be required to maintain Cargo Insurance as of March 11, 2011.

What is the logic of this?  The FMCSA originally proposed eliminating Cargo Insurance in a proposed rule dated May 2005 along with the then new unified registration system.  The FMCSA has noted that motor carriers typically carry Cargo Insurance in excess of the regulatory requirements ($50,000 Minimum).  Most Shippers require the carrier to have cargo insurance as a condition for doing business.  Shippers also have the option of buying their own cargo insurance policy.  As a result, the FMCSA felt that since Shippers and motor carriers negotiate their own contracts, the FMCSA did not need to regulate Cargo Insurance.

Big and Medium Shippers understand this and have mechanisms for verifying that the motor carriers that they use do have Cargo Insurance.  But smaller, infrequent Shippers typically assume that the government regulates motor carriers and that a motor carrier automatically carries all the liability insurance necessary to protect the public—including Cargo Insurance.  As of March 11, 2011, this will definitely not be the case.  Any Shipper who ignores verifying the kinds of insurance that it feels is necessary to protect them and their freight from liability issues with a motor carrier will do so at its peril.

One Solution to this problem for Shippers is to use a freight broker such as Freight Tec to move their freight.  Freight Tec qualifies every single carrier and verifies that each carrier has Active operating authority, Cargo Insurance, Automotive Liability Insurance, and appears to be reasonably safe according to the information available from the federal government.  This is a great service for Shippers who do not have the budget or do not want to do a carrier qualification process by themselves.  In addition, Freight Tec carries its own Professional Errors and Omissions Liability Insurance Policy (same as Doctors, CPA’s, and attorney’s carry) to protect its Shippers from loss in the event Freight Tec makes a mistake and fails to properly qualify the carrier.  Less than 100 freight brokers out of 15,000 nationwide carry this insurance. This provides added Peace of Mind to Freight Tec’s Shippers.

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The National Association of Small Trucking Companies (NASTC) – http://www.nastc.com – recently named Freight Tec in their “Best Broker Directory” for 2010-2011.

NASTC screens every one of these brokers by carrier payment policy, history, and recommendations they receive from other NASTC members.

“We feel this group of brokers represents the top of the brokerage community and they move more than 150,000 loads per month.”

- From the NASTC Best Broker Directory 2010 – 2011

Freight Tec is proud to be listed amount this group of Best Brokers, and especially proud to be only one of three brokers in Utah that are listed.  That is quite a compliment.

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Freight Tec carries a significantly higher bond than is currently required by the F.M.C.S.A., and has for quite some time now.  Interesting to note that legislature is currently trying to raise the bond limit to $100k instead of just $10k, under the “Motor Carrier Protection Act of 2010″ (S 3483).

In the May/June 2010 issue of IT (Internet Truckstop) Magazine, Freight Tec is recognized as a “Diamond Broker” with a $100k Bond.  We are one of only 21 brokers listed that carry this $100k bond.

What does this mean?

Carriers can be assured that Freight Tec’s credit-worthiness is at the top.  Shippers can be assured that Freight Tec is a prominent broker in the industry, and a broker they can trust.  We are ranked as one of the Top 100 Brokers in the Nation.

If you are a Shipper needing a load moved, or a Carrier looking for loads, Contact Us Today.

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What happens when a Shipper gives one load to multiple freight brokers in order to find a truck? Market Distortion, and it’s Expensive for Shippers.

An interesting Market Distortion occurs when Shippers call multiple Brokers to move their load(s).  When a Broker receives a call from the Shipper to move a load on a particular lane, he will post the load on the various load boards unless he already has a truck available.  If a Shipper thinks that they are going to have better coverage for their load at the lowest price, they are mistaken.  Brokers pretty much use the same load boards.   Here is what happens when the Trucker sees 15 load postings for the same   lane.  Truckers subscribe to the same load boards as the Brokers and they will notice that there are 15 loads for one lane and that he is the only truck in town to move 15 loads.  Immediately, the Trucker thinks in terms of “supply and demand” economics.  If there are 15 loads to move he can easily raise his price as he is the only game in town.  The Trucker will call several Brokers.  The Trucker raises his price to move that load to a higher level—sometimes a much higher level.  The Broker receiving the call from the Trucker can’t move the load for the price the Trucker is demanding so he calls the Shipper to advise that he has found a truck but that they will need more money to move the load.  The Broker isn’t going to move the load for free so either the Shipper pays more money or the Broker backs off the load.   Then, the process repeats itself until the Shipper pays more to move the load.  That is a Market Distortion!  Yet it repeats itself many thousands of times each day.

As trucks become tight, this Market Distortion due to multiple postings of the same loads by multiple Brokers will cause the prices required to move the loads to rise at a faster than normal rate.  The best solution for the Shipper is to only use one or two brokers and reduce the redundant postings to counter this Market Distortion.  Using multiple brokers will only create higher prices for the Shipper as the false signals for supply and demand are broadcast through the load boards.

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In January of this year, the Commodity Futures Trading Commission proposed a new rule that would set limits on who can trade futures in the oil market.  The CFTC has rightly determined that the sudden increase of oil contract futures in Mid-2008 was caused by speculators who did not have a “legitimate commercial interest” in buying oil contract futures other than to enrich themselves by playing a market.  As a result, oil contract futures shot rapidly upward to $150/barrel.

Under the CFTC rules a Speculator is defined as an individual or group who is trading in a commodity that has no legitimate commercial interest in that commodity who is purchasing that oil contract future as an investment with no real intention of taking possession of the oil.  As an example, those who do have a legitimate commercial interest would be trucking companies, airlines, ship owners, taxicab companies, etc.  A trucking company may choose to buy oil contract futures at a given price to hedge against a future rise in prices.

What happened in the Summer of 2008 was rampant excessive speculation set the price in the oil contract futures market causing irreparable damage to thousands of trucking companies who were forced into insolvency since they could not afford to fill their tanks with fuel as the price rose faster than they could collect on their accounts receivable.  This affected the balance of loads vs. capacity and shipping rates rose dramatically.  Airlines that were on the verge of profitability (for once) suddenly were hit with quickly rising fuel prices that they could not pass back to their passengers who had already prepaid for their tickets.  Everyone suffered—except the Speculators! So the proposed new rule by the CFTC would put position limits on the amount of trading that speculators are allowed to make for a given commodity such as oil.

This is not a new law but only a proposed rule.  Some people are saying that it is about time.  Others are concerned because the comment period for everyone to submit their comments to the CFTC ends on April 26^th and the proposed new rule has limits that would only affect the top ten traders and leave a host of smaller traders untouched as long as they did not speculate beyond certain limits.  When asked by critics why the limits were so high, a spokesman for the CFTC said that the reasoning behind keeping the limits high was the concern that by setting the limits low, most traders would go to the unregulated markets.  This, of course, poses the question:  What will keep the top 10 speculators who the proposed new rule is supposed to keep from over-speculating from doing the same thing in the unregulated markets?

The system is still broke! Oil contract futures are also bought and sold in the international market place.  Although the proposed new rule might help if the top 10 speculators agree not to go to the unregulated markets (ie, the unregulated world markets not controlled by the CFTC), we are still at risk to the same thing happening again and oil suddenly rising to $150 barrel in the future.

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Each of us are reminded daily that Customers Talk.  If you do a great job, or a poor job, your customers will tell you – but probably won’t tell you to your face.  They’ll tell you, by telling others.

Here is an excellent quote from Jeffrey Gitomer:

Customers talk…to their associates, friends, and neighbors. Here is the number of people they will talk to based upon how well you handle their complaint.

3 if you do a good job
10 if you do a great job
25 if you do a bad job
50 if you get into an argument

[...]

How are your customers talking about you?

– Jeffrey Gitomer, Customer Satisfaction is Worthless Customer Loyalty is Priceless

Freight Tec strives for excellent service, 100% of the time.  That is what keeps our customers coming back, and provides new business opportunities from referrals.

Make sure you’re Always Doing a Great Job, and you’ll build your business.

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Should Agents be 100% liable for their customer’s Bad Debts?

Imagine one of your largest customers going belly up… and they owe you and your Broker company $50,000.00…

You soon learn there is no hope of collecting any of the money owed…

Who should pay for that bad debt?

It should be split the same way your commission was paid out between you and your Broker. If you are on a 50% / 50% split with your Broker, then you should both pay $25,000.00 of the bad debt.  If you are on a 60%/40% split, you would pay $30,000, and the Broker would pay $20,000.

Why?

Its fair. Its ethical. And both parties always have great interest in doing business with customers who will pay you.

I’ve heard of Brokers paying 100% of any bad debts from their Agents… They are CRAZY !

Lets me share a story with you…

I know of a company who practiced the policy of paying 100% of any bad debts from their agents. They did it because they thought it would lure agents into their company, and you what? They were right! They did lure a lot of agents into their company!

A few years down the road, they were hit for a $400,000.00 bad debt from one customer, then another one for 109,000.00, then another one for $55,000.00. The agent (who’s customers they were) didn’t care… he didn’t have to pay any of that $500,000.00+ back. No worries for him…

But there was great pain and anguish for all the other agents, and the broker. The broker was not in position to handle these rapidly mounting bad debts (there were more that rolled in). The broker tried to work things out… but the hole they were in got deeper and deeper too fast.

The broker quit paying the carriers.

The carriers sued all of the customers (and I mean EVERY single customer).

The customers had to pay all the freight bills again. (after already paying the broker months ago).

The customers were very angry.

The customers no longer trusted the agents they had worked with for years.

Good agents and several other good people lost their customer base – and their jobs. They could no longer provide for their families.

Agents now had to start over – their previous customer relationships were ruined because their broker ended up going belly up and not paying the carriers.

The criminal thing behind it all was this: There was a rotten apple agent who PURPOSELY did business with companies he knew were at risk of not paying their freight bills for one reason or another. Because he was paid his commission each week – he knew he would be paid before the bad debts hit the broker.  One bad apple spoiled the bunch… Actually, he put them out of business.

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Stay current with valuable updates – simply by checking your email.

A great way to stay up-to-date on the transportation industry is by subscribing to Freight Tec’s Email Updates.  You’ll automatically get valuable updates from our blog delivered right to your Inbox.

Technology can be a great asset to your business.  Take advantage of this technology today and sit back and let the updates come to you.  You don’t have time to browse the web, you’re running a business – so let the web come to you.

So, how do you sign up?  I’m glad you asked.

In the upper-right corner of this blog, you’ll see an area that looks like this:

Simply follow these instructions:

1. Enter your email in the top box, or click on Get Email Updates.
2. Next, you’ll be asked to confirm your email by typing in a code.
3. Then, check your email.  You should receive an email from us with a final link for you to activate your updates.
4. That’s it! Enjoy!!

You’ll now receive updates whenever we post valuable information on our blog.

If you have any troubles at all, please Contact Freight Tec and we will be happy to help.

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Capacity is rapidly tightening up on ocean containers from China. How will this affect the U.S. domestic market in 2010? How will these containers be utilized in the supply chain?

Fast-paced change buoyed by surge in demand, shortage of containers.

Ocean container spot freight rates on the key export trades out of China to Europe and the U.S. east and west coasts soared by an average of 24 percent in the past three months.

The rate of recovery is much faster than expected, buoyed by a surge in demand this month, according to Alphaliner, the Paris-based container shipping consultant.

Continued high vessel utilization rates on certain trades, especially on services to Europe since Christmas, have also created shortages of empty containers in a number of locations, which in turn, has underpinned the higher freight rates.

The Far East-Europe trade posted the strongest performance with spot freight rates surging by 50 percent since October from $2,500 per 40-foot container to $3,700 based on rates filed with the Shanghai Shipping Exchange.

The steep rise in rates resulted from successive rounds of rate increases imposed by ocean carriers since October and the extension of the peak season surcharge until February.

“It remains to be seen if the rates are sustainable as the Lunar New Year holidays in China in mid-February could lead to some weakening in freight rates,” Alphaliner said.

Spot rates from Shanghai to the U.S. West Coast have risen by 26 percent in the past three months and are 17 percent higher on shipments to the U.S. East Coast.

Asia-Australia and Asia-Africa spot rates also have risen over the past three months, but rates to the Middle East, especially to the Gulf region, remain under pressure.

The high spot market rates on the major trades from China to Europe and the United States have come at a key period as contract rates for 2010 have also strengthened, Alphaliner said.

Twelve-month contract rates for the Far East-Europe trades starting in January or February 2010 are reported to be about 200 percent higher than last year, reflecting renewed optimism about trade prospects.

by Bruce Barnard

The Journal of Commerce Online

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Freight Tec would like to wish you a very Merry Christmas and a Happy New Year!

- Best Wishes to you and your family, from Freight Tec’s corporate office.

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