27. Bills Of Lading and Your Hidden Landmines, John Farquhar, Summit Risk Solutions

Chris Harris, Safety Dawg (1s):

Welcome to the Dawg On-It Trucking Pawedcast. I've got the pleasure of Mr. John Farquhar today from the Summit Risk. What is the John Summit Ris Solutions, solutions, summit risks, solutions online. And this interview came about because John and I were having a private conversation and he started talking about bills of lading. And it's a subject that I know very little about. So I said, John, could you be my very first guest to do a second interview and discuss bills of lading.

Chris Harris, Safety Dawg (41s):

Welcome to the Dawg On-It Trucking Pawedcast. When it comes to trucking safety, the dawg is on it. What do we do on this show? I get to talk to some of the most influential trucking executives in our industry so that we can pick up new tips and tricks to use in our everyday businesses back. Let's get on with the show choir bills of lading. But before we get into that, John, what makes you knowledgeable on bills of lading?

John Farquhar, Summit Risk Solutions (1m 18s):

Bills of lading are a, a big interest to me. So when I had my trucks, my fleet back in the nineties, early two thousands, we had our own bill of lading and it was something that I got into with a customer. So I made a point of educating myself on what I need to know about that bill of lading. And, and then over the last 15 years of my risk management career with insurance companies, one of the things that we look at is documentation when it comes to cargo and how you're handling and managing the documentation.

John Farquhar, Summit Risk Solutions (1m 49s):

So I've made a point of educating myself, working with lawyers and industry, best practice leaders on what do you need to have in place to cover your butt or your customers, but for that matter, when it comes to documentation. So that's how we've kind of gotten into that. So are you a lawyer?

Chris Harris, Safety Dawg (2m 9s):

No. Okay. So I just wanted to put that out there that we're having this discussion and John is not a lawyer.

John Farquhar, Summit Risk Solutions (2m 17s):

This is, this information is more from a high level than it is down here. It's, it's, it's more to intrigue you to look at your bills of lading and ask yourself a lot of questions. And that's where you might want to seek legal advice, legal counsel, to kind of find out, have I got things covered off, but there's a number of things we'll talk about today that can help protect you as a carrier and also help protect your customer in the event of a claim.

Chris Harris, Safety Dawg (2m 45s):

So I think, I think that's really good. So the idea then today is to have listeners ask themselves questions. Yes. Because you're going to make them think. Yup. Yeah. And then Indian. And if they want to carry

John Farquhar, Summit Risk Solutions (3m 0s):

That, that conversation on further, I'm more than open to having some further conversations. We can help them out. We could come in and look at what they're doing, what their practices are,

Chris Harris, Safety Dawg (3m 9s):

What would that, because yeah,

John Farquhar, Summit Risk Solutions (3m 13s):

Not so much. Is it a big issue when you're just hauling some general freight that's worth $10,000, but Hey, if we're getting into some high value and you know, some highly attractive cargo for theft, this is where it can be a big concern. If we get into a claim situation, it can cause a great fight between the shipper, the receiver and the a and the carrier. So these are meant to alleviate those fights, but also to EDU,

Chris Harris, Safety Dawg (3m 38s):

Right? And your contact information will be in the show notes or is in the show notes below. So a listeners and viewers can reach out and talk to you about bills of lading to stimulate talking discussion. Yeah.

John Farquhar, Summit Risk Solutions (3m 51s):

There you go. There you go. All right. So what's the first thing

Chris Harris, Safety Dawg (3m 56s):

I should know about bills of lading that you would like me to know, because as I said, I know nothing. Yep. So, so

John Farquhar, Summit Risk Solutions (4m 3s):

Probably starting at the base. So a bill of lading is your contract of carriage. Okay. That's the agreement that you have from a shipper or, or whoever you're hauling the freight for. Cause sometimes it could be a freight broker. You could be picking it up on behalf of the receiver. So you've got to consign or consignee a shipper or receiver. You've got a middleman third party. So a lot of it depends on who you're picking it up for. And then even we're going to confuse it all up and we're going to throw the U S in there and a little bit.

John Farquhar, Summit Risk Solutions (4m 34s):

So, but the concept is the bill of lading is a document that is your contract of carriage. It's the agreement that says, Hey, this is what I'm calling a, this is where I'm picking it up. This is where I'm delivering it to here's the commodity. Here's how much of the commodity. And it becomes a contract because on a bill of leading, you should have three signatures shipper carrier and the receiver to make a balanced contract. You've got to have all three signatures in there.

John Farquhar, Summit Risk Solutions (5m 5s):

So, and this is going to be the document that most drivers will pick up when they show up at the shipper's location to pick up the cargo. So one of the, the interesting things that I find is there's a lot of carriers that don't quite understand the rules and regulations around that. Now it's become very convenient here in the last 20, 30 years to show up at a shipper. And they'll provide you with a bill of lading, pretty simple. Here's the bill of lading. If you go drivers on your way to where you go.

John Farquhar, Summit Risk Solutions (5m 37s):

Interesting enough, under the course of the, of the regulation, it's the carrier that is supposed to raise the bill of lading, not the shepherd, but the shippers have made it very convenient because of the fact that, well, they've got to have this software to do the packing slip, a proforma invoices, commercial invoices for, for customs purposes. So the software automatically generates a bill of lading. So it's like, Hey, I've got it all for you here, driver, just sign this and away you go.

John Farquhar, Summit Risk Solutions (6m 7s):

The problem with that is not all but many shippers. There's no terms and conditions and they're not on the back of the bill of lading. It might be just like this blank, you know, and if there are terms and conditions, they're very much swayed towards the shipper's side of the agreement. And the whole concept is it's the carrier's responsibility to put in the terms and conditions of how you're going to transport that cargo. It shouldn't be left to the shipper or the receiver, unless of course you have a separate contractor agreement above and beyond the bill of lading.

John Farquhar, Summit Risk Solutions (6m 44s):

So, which is sometimes what you'll see with certain agreements.

Chris Harris, Safety Dawg (6m 49s):

Gotcha. I got a question though, is a carrier responsible when the carrier hasn't seen the bill of lading because the drivers signing, not in the carrier, the carrier can't be held liable just because the drivers signed canny. Yes,

John Farquhar, Summit Risk Solutions (7m 7s):

Because they are an extension of the carrier. The driver or operator of the vehicle is an extension of the carrier. So they're fully responsible for who they hire and who they put into that position on behalf of the carrier. So it will always come back to the carrier. So again, back to some training aspects, when you're hiring them, teaching your drivers, how to accept the cargo, what to look for on the bill of lading, looking for some key items to make sure that they're there. And if they're not, they should be contacting their dispatch before they leave to be able to go, Hey, there's not this, there's not that.

John Farquhar, Summit Risk Solutions (7m 40s):

Or there's this, or, Oh my gosh, there's a million dollar price tag on this bell lady. What do I do? So, you know, this is where you need to alert the operations team back at the office, to be able to say, here's, what's going on. I'm a chipper. This is what's happening.

Chris Harris, Safety Dawg (7m 55s):

So one of the, are you, sorry, are you going to walk us through what a driver should be looking for? Yes. Okay. Very much so. Yeah.

John Farquhar, Summit Risk Solutions (8m 6s):

So can I share the screen?

Chris Harris, Safety Dawg (8m 9s):

Sure. Ken, let me,

John Farquhar, Summit Risk Solutions (8m 11s):

Let's, let's bring up a sample bill of lading. So, so this is just a sample. This is, you know, one of your standard, there are multiples, you know, of different bills of ladings and whatnot. This is just a simplistic form,

Chris Harris, Safety Dawg (8m 26s):

But one of the things

John Farquhar, Summit Risk Solutions (8m 28s):

The drivers should be looking for obviously is completeness. You want to make sure that you've got the consign Orin here, point of origin, addresses, dates, any reference numbers, vehicle information, if that's what's required. And then the consignee where it's delivering to, you know, you've been dispatched to the location to say, Hey, you're picking up here in Mississauga and you're heading down to Canton, Ohio. Well, your bill elating should say he is going to Canton, Ohio. And she would have the same information that your district gave you.

John Farquhar, Summit Risk Solutions (8m 58s):

If not, that should be concerning right off the bat. Any questions needs to be raised same within the body of the goods as a, we need to have a piece count what the description of the gun, that's our weights stuff. Along that line, it may or may not have collect prepaid with the freight charges, or it could be a Cod shipment. These are some nice to have, but one thing I want to make sure preface here, we're not, I'm getting into dangerous goods, bill leadings in this conversation, that's a whole nother topic.

John Farquhar, Summit Risk Solutions (9m 29s):

So we're just going to stick to general freight commodities. So anyway, this bill of lading just happens to have some, some niceties here for loading time, unloading time. But probably one of the biggest is that needs to be addressed is right here where it says declared valuation. This is what we see a lot of times not being on the bill of lading is a declared value. And in absence of a declared value on a shipper issued bill of lading, we usually do not see this disclaimer that says maximum liability shall not exceed four 41, a kilogram or $2 per pound computed on the total weight of the shipment unless declared valuation States otherwise.

John Farquhar, Summit Risk Solutions (10m 13s):

So this is a big area that helps the driver to know what's the value of the goods. So we're going to do a little sidestep here. A lot of people between the driver and the carrier will use that concept. Oh, but I have a customs document. I have a proforma invoice, which has the value on it. I'm okay. No, no, no. You're not. Okay. Proforma and customs documents are just that customs documents.

John Farquhar, Summit Risk Solutions (10m 44s):

They are not part of the contract of carriage. They're not part of the bill of lading. And they're not part of the agreement with the shipment. That is the proforma and the customs documents are what the shipper and the receiver or the buyer and the seller have agreed upon on the price of that product. Now that product could be based on a hundred loads, but it's not the value of your load. Your load is not worth one, 100, that price that they did, your load is worth.

John Farquhar, Summit Risk Solutions (11m 19s):

What is the value of it today? Because the agreement that they, the shipper and the receiver or the buyer and the seller put together could have been five years ago and it's taken five years to make the product. So they're going to be based on the value that they made the agreement, not today. Exchange rate has a lot to flow into it, demand, supply, and demand. So, so that can have a bearing on it. So I always encourage clients do not, and I'll repeat it, do not utilize and rely on the customs document or the proforma invoice you need to get from the customer that you're hauling the load for what the true value of that product is.

John Farquhar, Summit Risk Solutions (12m 1s):

So just to spin it up just a little bit more, every bill of lading should have, as I mentioned earlier, three locations to sign, this is what makes a fact full and complete a contract you're consigned or your carrier and your consignee. And every bill of lading should have terms and conditions. This is what you will not find on a regular bill of lading issued by a shipper. So when I had my trucks, one of the things that I did is I worked with my customers and I actually provided them a copy of my bill of lading.

John Farquhar, Summit Risk Solutions (12m 35s):

I had them printed up in a book form and I would send them out to them and say, here, use my bill leadings when you're transporting your product on my and here's. And we went through this, we talked about what these conditions mean. This is what's going to help protect the carrier as well as protect the customer. And it provides stipulations as to what needs to be done and how it needs to be done in the event of a claim or any kind of issues or anything that's, that's being brought forth. So how,

Chris Harris, Safety Dawg (13m 6s):

If I'm asking, I mean, the reason I want to use my bill of bleeding, if I'm a trucking company is because I now know what my drivers are signing. Every time a driver goes out to a shipper and uses a shipper's bill of lading, I as the carrier and the driver is my legal representative committing me to a contract. I don't know what the heck they're signing Colonel. Correct. It works in reverse. So how can I get the shipper to use my bill of lading?

Chris Harris, Safety Dawg (13m 38s):

Because essentially that dock worker who's their representative. They don't know what the heck that dock worker is signing. Correct? Correct.

John Farquhar, Summit Risk Solutions (13m 47s):

So that becomes the, the fight that we see on a regular basis. And particularly if you're dealing with a, a large organization, manufacturing facility, distributor, whatever B they've already got their protocols set. So, and, and especially if you're dealing with a freight broker freight forwarder or something along that line, you're into a situation where you're trying to put their customer on the hot seat of using my bill of lading. So, so that's where we come into a contract, a written agreement that says, hang on, before we haul this shipment, regardless of the bill of lading, let's put a contract in place and we can stipulate the contract of carriage within the contract.

John Farquhar, Summit Risk Solutions (14m 31s):

We can stipulate what the value of that product is going to be, what the service agreements are going to be, what the terms and conditions are going to be of me hauling this freight. And then therefore your bill elating, when the driver signs, it is a step down from the contract that you have in place. The contract will always supersede bill of lading. So, so that will, that will help you to be able to set up that process. Now, a lot of times that becomes another challenge because depending on who you're working with goes no, not at contract and whatnot, but it's all about how do I get the customer to understand this is here to protect you.

John Farquhar, Summit Risk Solutions (15m 12s):

So let's do another sidestep. So every carrier has to have insurance to operate up and down the road. Every carrier also has to have cargo insurance to haul the product up and down the road. The problem lies in the fact that people carriers will get cargo coverages usually for more than what they need, okay. To make sure that they cover themselves. So let's just use an example of a Harris transportation here needs cargo coverage. One of their customers that was to say, Hey, you know what?

John Farquhar, Summit Risk Solutions (15m 43s):

We're going to have some product once in a while, it's going to be worth $300,000. So can you get a policy that has $350,000 where the coverage and we'll be good? Sure, no problem. So I call my broker, I get my insurance involved and you know what? We now have a policy with $350,000 worth of coverage. I'll probably hardly ever use it because everything else I haul is maybe $40,000. Okay. So defaulting back to $2 per pound.

John Farquhar, Summit Risk Solutions (16m 14s):

If the cargo weighs 20,000 pounds, I'm covered for $40,000. If I haul a shipment that is worth 300,000 from ABC widgets here, but they never put the price on the bill of lading. And they never tell me when that price is in place for a shipment. They'll never be covered. They think they are because I have a certificate of insurance that says I got $350,000 with our cargo coverage. Whew, no, no, no insurance.

John Farquhar, Summit Risk Solutions (16m 45s):

Company's not going to pay out that way, because if we don't have any agreement in place that says, you're going to, we're going to pay 300,000 for that cargo. But if we never know when it is, how are we going to pay for it? So, so how it lies in the fact is by having an agreement in place with your customer. So whether it be on the bill of lading and they write 300,000 on that load, the insurance company will cover it because it's been declared on the bill of lading, or maybe we have a, a fax or an email confirmation from the shipper saying, Hey, Bob, we're going to do that $300 thousand dollars shipment this week.

John Farquhar, Summit Risk Solutions (17m 22s):

It's going out on Thursday. I'm letting you know. Now that's the load that we need that coverage on. No problem. That email now will help protect you to give you that coverage in place, because that's a declaration of $300,000. It's going to be attached with the contract of carriage. So I, like I say, the customs document may never say 300,000 because well, that wasn't the agreement they made with the buyer back five, 10 years ago. So, so that's where it needs to be into play now, now, so, so let's, we're gonna have some fun here, Chris, we're going to go in another direction.

John Farquhar, Summit Risk Solutions (17m 56s):

So under most understanding within Canada, we have a default of $2 per pound unless a declared value is provided, okay, that's Canada now. But the problem is that is not in all jurisdictions, Beasties to Scatcher one and PEI have a different set of rules. So if you're picking up in that province, you don't have to apply by their rules.

John Farquhar, Summit Risk Solutions (18m 28s):

Right? So, so we can all change up the game. So you need to know where you're picking up and what the rules are in that area, in that location, just cause you're from Ontario. But you're picking up in PEI does not mean I can use the rules of Ontario because no, no, the cargoes original eating in PEI. So, so it's, it's advantageous for a carrier to understand the jurisdictions that they're operating in and where they're picking up cargo coverage or cargo. I mean, so that they've got the right coverage in place.

Chris Harris, Safety Dawg (18m 57s):

It's so John it's confusing. Yeah,

John Farquhar, Summit Risk Solutions (19m 1s):

Very much so. Very, very much so it's not cut and dried and, and, and that is a big channel. So it's, it's trying to, how do I protect myself at all time? And the best thing that I tell customers and clients is have a conversation with your customer. Talk to them about what's the value of the goods, don't assume, Oh, what loaded lettuce is only worth $40,000. Do not assume it's for 30, $40,000.

John Farquhar, Summit Risk Solutions (19m 32s):

It in a, in a time of supply and demand, it may be worth 80,000 or 110,000 because nobody else has got lettuce, but this one farmer in California, guess what you want it you're going to pay. So they're going to want full protection on it. So you can't just assume that you know, what the value of the goods are. It's have a conversation with your customer and understand what it is that you're carrying and how much it's worth.

Chris Harris, Safety Dawg (19m 58s):

Well, the biggest thing I've picked up so far from what you're telling me is I really need to have a contract with my customers.

John Farquhar, Summit Risk Solutions (20m 6s):

It's very helpful. Not all customers are going to want to do contracts. Now, on the other hand, there are a lot of customers, your big distribution. I was going to say, just, just as an example, your Loblaws and your Sobeys, they're the ones that are going to issue you the contract. And they're going to set the terms and conditions. Now, the thing is, people need to realize that may be the contract, but that doesn't mean you have to sign it and agree to a hundred percent of it. You're meant to look at that contract or read that contract. If there's some things in there that don't work for you, you need to go back to the customer and say, Hey, this line here, that, that doesn't work for us and have a conversation because a contract is negotiable.

John Farquhar, Summit Risk Solutions (20m 47s):

So any lawyer I'll tell ya, yeah. You know what, the contract, as it's written as how it's enforced, but if you change the wording of the contract and particularly in a particular clause, and you both agree on that wording, then that's what it'll stand by.

Chris Harris, Safety Dawg (21m 1s):

How likely is it that if I went to a major shipper and said, Hey, this line here doesn't work for me. How likely is it that they are going to change the contract? Especially when you know, I'm probably one of a hundred carriers that they might be using. So, so that's where that's going to come in,

John Farquhar, Summit Risk Solutions (21m 24s):

Play. How desperate are they for your services? If you're one of 100, they're going to go, you know what, take it the way it is. We got 99 other guys over here we can use. So you won't work from us. You will work under our terms and conditions, right? So that's, and that's one of the dilemmas that you run into. Now, if you are one of two carriers for a small operation and they're quite busy and they need help, that's where you can kind of put a little bit of pressure on and go guys, I, you know what, that's right.

John Farquhar, Summit Risk Solutions (21m 54s):

We've got to do this properly. We've got to protect both sides. So not only they carrier, but the customer. So let's agree on something. We can both agree on.

Chris Harris, Safety Dawg (22m 4s):

Let me ask you a question. And again, this is, it may be common knowledge out there for some people, but I'm basically, most of my trucking experience was as a safety guy. How does all of this, the bill of lading and the contract of carriage and all this stuff. How does this work with load brokers?

John Farquhar, Summit Risk Solutions (22m 28s):

Okay. I didn't mean to be funny. So, so the, the free broker, the load broker is really not in the relationship at this time when it comes to a bill later, because he's the middleman, but he's not carrying the cargo. He is not responsible for that cargo whatsoever. He's responsible for putting the relationship together between the shipper or the customer and the carrier, right? So the bill of lading contract of carriage is between those two entities.

John Farquhar, Summit Risk Solutions (23m 3s):

Okay. Now, with that said, there are many times a freight broker we'll have a, an agreement with their customer. Okay? And you have to be very, very careful because if you're holding freight for the freight broker and the freight broker has an agreement with the customer, you are subject to that agreement between the freight broker and the customer. So you have to be very careful there. You need to understand what's going on. So one of the challenges of that is knowing if there's an agreement in place, and if there's not, you need to put a secondary agreement in place.

John Farquhar, Summit Risk Solutions (23m 42s):

Now, whether that agreement will be with you and the freight broker, as to what your terms are for hauling this load, or you raise your own bill of lading from the shipper to the, to the consignee on your own, and you cut out the shipper issued bill elating. So, and that's where you run into that because the other problem is too. You need to make sure that the freight broker's name is not on the bill of lading, because they're not the ones holding the cargo.

John Farquhar, Summit Risk Solutions (24m 12s):

You are. I have actually seen guys charged with theft because their name was not on the bill of lading. It was a freight broker freight broker doesn't even have trucks, but the problem was, it was listed as a freight broker having it. So that caused a bit of a dilemma.

Chris Harris, Safety Dawg (24m 27s):

Well, and there's a whole issue. I'm just changing subjects a little bit. The reside theft over in, I believe it was Montreal where trucking companies were picking up freight from a load broker through a load broker. And then they were being told, Oh, don't deliver it to the address on the bill of lading. We we've have to change it. And they all delivered. It was several loads to an empty warehouse where it was offloaded quite quickly.

Chris Harris, Safety Dawg (24m 57s):

And it turned out that the warehouse was up for lease. So this was on Friday and Saturday. And by the time the loads that were supposed to be delivered on Monday were discovered missing where the police went to the warehouse. And there's a, the sign had been knocked down that said for lease and all the trucking truck drivers said it was a great place to go. They offloaded me in like 20 minutes.

John Farquhar, Summit Risk Solutions (25m 22s):

Oh, lots of room. They served me coffee. It was great. I want to go back.

Chris Harris, Safety Dawg (25m 29s):

But anyway, bills of lading as what we're talking about, not Cargill, but that's where it's very difficult when somebody says, Hey, don't deliver it to the bill of lading, deliver it to this address instead. Right? So

John Farquhar, Summit Risk Solutions (25m 44s):

There's another issue because that becomes a, what they call a blind shipment. Right? So what problem is, you need to raise a bill of lading. So you have to have a nother bill of lading that says, I picked it up here and I'm delivering it here, which is different than the other bill. Lady would go deliver it over there. But now you're going to be reverted over here. So you have to raise another bill of lading. And sometimes that's because I'm not a freight broker, but it could be a distributor who's bought the product and sold the product to somebody else. He doesn't want you wanting to, he doesn't want the end buyer knowing where it actually came from.

John Farquhar, Summit Risk Solutions (26m 17s):

He wants it to look like it came from him. So, so when you get into those, you need to make sure you have your agreement tightened up knowing exactly what all the particulars are. And knowing that everybody's protected.

Chris Harris, Safety Dawg (26m 29s):

Holy smokes, these truck drivers today need to be, need to take a course on the law and bills of lading. So, well, again, it comes back to the responsibility of

John Farquhar, Summit Risk Solutions (26m 44s):

The carrier, right? The carrier supposed to know these regulations know what's required. Highway traffic, X, and every province across the country, all have these belittle eating regulations and whatnot. So if you're going to operate on a highway, you need to know, and then you need to educate the drivers and, and teach and coach them as to what they need to understand when it comes to I link cargo and cargo documentation.

Chris Harris, Safety Dawg (27m 8s):

So Bill's of leading should be part of a new hire orientation. Oh, very much. So. Very much though.

John Farquhar, Summit Risk Solutions (27m 15s):

So now do you want to confuse the subject again?

Chris Harris, Safety Dawg (27m 17s):

Okay. Let's, let's make it even more confusing. Go ahead.

John Farquhar, Summit Risk Solutions (27m 21s):

So, so we talked about declared values or limitations of liability, the $2 per pound quote. Okay. That works great. In Canada, throughout Canada, back and forth across Canada, in and out of Canada, going to the U S that works great, but now we have to be in the U S and now we're picking up a load in the U S that's coming back to Canada. Well, now we have, what's called the Carmack amendment, which is a us regulation.

John Farquhar, Summit Risk Solutions (27m 52s):

And the Carmack amendment says you can't limit your liability. So you can't put on the bill of lading $2 per pound. We're good. We're covered no problem at all. You can, you can't do it. It's illegal. What you have to do is have an agreement with the customer that you are going to holler or holler. You're going to haul the freight of X value, and I'm going to haul it for X dollars worth of free rate. So you have to stipulate that. So obviously this is where it helps that if the value of the cargo is 300,000, well, then I should get more freight rate because I'm taking on more risk.

John Farquhar, Summit Risk Solutions (28m 30s):

Right? So if, if I'm not, if the shipper let's, let's use an example. Okay. So Cincinnati, Ohio got a load coming back, and it's a load of widgets, and they're paying a thousand dollars to bring it back to Toronto, but, but it's worth half a million dollars, right? So the gold plated widgets. So anyway, so all of a sudden you're going, geez, half a million dollars thousand bucks is not enough money. No, exactly. It's not. So you might go, well, hang on mr. Customer, based on Mack, I need to limit the liability, but I can't limit it by just saying $2 per pound.

John Farquhar, Summit Risk Solutions (29m 7s):

We have to come to an agreement. So if you want me to hold up for a thousand dollars, I'm going to give you $150,000 worth of coverage. That's it. And if they go, no, no, no, no. We gotta have at least $250,000 worth of garbage. Okay. Well, $250,000 worth of coverage. We are now looking at $2,000 to haul the load. And you have to put this in. Writing could be an email, a fax confirmation or whatever, but it's basically stating how much you're going to hold a load for and how much the load is going to be covered for. And then on top of that, you need to make sure that you have the coverage to back it.

John Farquhar, Summit Risk Solutions (29m 39s):

So again, if you've got the coverage of 350 from your insurer, then you're good to go. So, but too many people don't know this. So when you pick up a load, that's worth 250,000 and you're doing it for a buck and a half a mile, and you're thinking, God, this is really don't pay much. Well, you're on the hook for 250,000. You roll it over. You're now in trouble. Now it changes and gets really confusing a little bit. When we start talking about, well, who are you doing the load for? If you're doing it for a Canadian entity, you can limit to $2 per pound.

John Farquhar, Summit Risk Solutions (30m 15s):

So I'm picking up in Ohio, I'm bringing it back to Ontario. I'm doing it for the customer in Canada, which is, which is very common with, with North South operations. So now you can limit to $2 per pound because the agreement started in Ontario, right between me and the customer in Ontario. There's where the agreement said, because we're picking it up in the U S we don't have to comply with, with CarMax. But if I happen to have the U S entity as the customer, and they're calling me up and going, Hey, we have this load every week, I fall under karma.

John Farquhar, Summit Risk Solutions (30m 53s):

So therefore I can't limit it to two dog, $2 per pound. And you definitely can't rely on the proforma or commercial invoice for customs. Because again, that's not the true value of the product. So you need to have the conversation with the customer or a written agreement in place that says, anytime I haul for you, we're going to haul it for a thousand bucks. It's going to be worth no more than a hundred thousand dollars. And as long as everybody agrees in the event, something happens. We share that with the insurance provider and the claim will be covered up to a hundred thousand dollars.

Chris Harris, Safety Dawg (31m 25s):

You see, I'm confused.

John Farquhar, Summit Risk Solutions (31m 28s):

Oh, I don't blame you. I'm confused too. At times,

Chris Harris, Safety Dawg (31m 33s):

You know, it, it just, it highlights for me how confusing this all is, because really I've had no exposure to it before I've never owned a trucking company. I've never had to worry about it. When I was in operations, it was for one customer and one customer only. And somebody else within my organization had approved how we work for that customer. You know? So I'm really hearing a lot of this for the very first time my insurance background says, I, I know it's been a problem.

Chris Harris, Safety Dawg (32m 7s):

And it ends up in court a lot over the confusion because the carrier saying, that's not what I agreed to. And the shipper says, here it is in writing. It is what you agreed to. Yes, exactly. Exactly. So I know from that perspective, but I really, other than like, really what you're saying to me today is probably the second time I've really discussed bills of lading. The first time was a lawyer that I heard from the States talking about bills of lading, Hank Seaton was his name and heard him actually, he's got a book out.

Chris Harris, Safety Dawg (32m 44s):

It was probably still relevant today. I know I've got a copy of it somewhere on my bookshelf. And I tried to read it, you know, but the subject matter was a little dry and Hey, great job.

John Farquhar, Summit Risk Solutions (33m 0s):

Yeah. There's a lot of legal ease in there. Yes. Yeah. Well, and, and, and, and, and the trick is if you're going to consult with legal counsel, you need to seek specialized legal counsel. Don't just not every lawyer is going to know this. You want to talk to a transportation lawyer or law firm that knows contracts of carriage regulations with transportation. And there are a couple of great ones out there.

John Farquhar, Summit Risk Solutions (33m 30s):

Fernandez and Hearne is one there's, there's one in BC. Oh my gosh, I'm sorry. The name eludes me right now, but, but there are a couple of really, really good transportation lawyers out there that understand this. And, and that's been one of migraine things is I've gone to some symposiums where these people have spoken at some conferences, and this is where you can really get educated and then carry on that conversation. Even further with these folks to be able to say, I need to know more, you know, so, so in the, in the, in the meantime to help protect most carriers.

John Farquhar, Summit Risk Solutions (34m 5s):

So those that are listening on the carrier side and operations, the one thing I encourage every customer I meet to do is to that terms and conditions that I showed on the back of that bill of lading. If you have a set terms and conditions posted on your website, get it on your website, okay. And then put a link in your email, signatures, all your staff in the office, put an email link in there to that website page. And I encourage people to be able to click on that link and say, cargo valuation, or cargo terms and conditions, and then have them that way, whoever sees it can go to it goes right to that page.

John Farquhar, Summit Risk Solutions (34m 45s):

And also have with that page, something that says, unless the declared value is provided limited liability is $2 per pound or $4 and 41 cents per kilogram. And I, I get people to put this on their load confirmation. So a lot of times you're getting a load from a freight broker or a customer, and they're requesting that you sign it, send it back or email acknowledge, no problem acknowledged back and make sure the statement is on there. That in lieu of a declared value, we're two bucks per pound.

John Farquhar, Summit Risk Solutions (35m 17s):

Simple as that, it's not going to cause chaos. What it's going to do is if, if you haven't had a chance to talk to that customer yet, and they see that on that confirmation or that notification, they're going to pick up the phone and go, Chris, what the heck you talking about? What do you mean this $2 per hour? We've never had this conversation before. What are you talking about? My stuff's 40 grand. What are you doing? What are you doing? That's where you can sit there and talk and go, okay, Harry, no problem. Your product weighs 40,000 pounds. And what is the value? Oh, it's worth $40,000.

John Farquhar, Summit Risk Solutions (35m 48s):

Okay. You're under the $2 per pound. You're okay. We've got insurance coverage for you. And we, we now know truly what your product is worth, but when you get that load of golden widgets and it comes up at 500,000 and it's, it weighs in at 10,000 pounds, if there's no value, the insurance, company's going to give you two bucks per pound based on the jurisdiction. So anyway, but yeah, this is, this is the problem with this subject is so like a spider web.

John Farquhar, Summit Risk Solutions (36m 19s):

It just goes everywhere and it can be so confusing, but it doesn't have to be, if you look within your own organization and understand what are we doing? What are we hauling? And we had talks with our customers, do we have contracts in place? Do we have agreements with our shippers and receivers and, and making sure that you understand what they are and review those bills of ladings. So when a driver comes back and, and the Shipman's done, you've invoiced it and closed it up. Don't just attach the bill of leading to the invoice and file it away. No, let's have a look at that ventilating and makes sure there's nothing on it.

John Farquhar, Summit Risk Solutions (36m 53s):

That there's enough on it. There's good information. Make sure everything's covered off, you know, because if there's a claim they're coming back and the only recourse you got is that bill of lading.

Chris Harris, Safety Dawg (37m 4s):

Right. So I really liked your suggestion there about the website, putting your terms and conditions on the website, and then having everybody that is conversing with the customers have it as part of their email signature. So, yeah. And I've heard that before. I think Hank Seton actually suggested that many, many years ago. And when I was working for the insurance company, I suggested it to many carriers and I don't know of one that actually did it.

Chris Harris, Safety Dawg (37m 34s):

Yeah, yeah,

John Farquhar, Summit Risk Solutions (37m 35s):

Yeah. That's the challenging part. I'm, I'm seeing more and more now when I have conversations with client and particularly over the last five to 10 years with the insurance side here in having conversations, I've seen a lot of customers that we're working with have populated that on their website, Pat them on the back, they've done a great job, but you've gotta be aware of it. And so to add to that too, you also need to be aware of any contracts that you're signing. So to add, to insult to injury here, there should be one person in your organization that signs those contracts, nobody else, and that person should know every contract you have signed, seen it too many times, gone into the organization, done an evaluation and find out if you've signed any, Oh no, I haven't.

John Farquhar, Summit Risk Solutions (38m 25s):

I, you signed one in the last and then you have to talk to a dispatcher operations. Oh God, I got a drawer full of them. I signed them all the time. Nobody knew this, this dispatcher was signing, but, and then you start pulling them out and you're finding out that you're liable for the full value of the cargo plus taxes plus loss, this plus that it's like just trying to weigh the company here. So that's why it pays to have one person in the organization who understands contractual agreements to be reviewing that contract and signing.

John Farquhar, Summit Risk Solutions (38m 57s):

I'll give you a great example of a customer. I went to visit. They'd signed a contract, a logistics contract for some big machinery. And what was interesting was I asked if I could review the contract quickly. And he said, well, yeah, here you go. It's right here. I just finished sign and send it back to them. And what not. We've been hauling freight with these guys already for about a month. Perfect. In the contract, it stipulated that the carrier would be responsible for the value of the cargo up to $2 per pound. So I'm thinking, okay, cool.

John Farquhar, Summit Risk Solutions (39m 27s):

I read on another page or two. It now says that they're responsible for the full value of the cargo. Oh, that's interesting that just supersedes that. And then we read a little further and it says that they are enacting CarMax in the agreement. Well, the interesting thing is it was a Canadian logistics company contracting with a Canadian carrier. You cannot enact a U S regulation on Canadian soil.

John Farquhar, Summit Risk Solutions (39m 59s):

So here we had three different scenarios of cargo valuation. And I said, what's the true value of the cargo. He said, please, to crepes these things are worth like $3 million a piece. And I said, you might want to have a talk with somebody to find out. So he called them right there on the spot. And the guy says, Oh, don't worry about it. It's just two bucks per pound. Don't worry about it. I said, I wouldn't be asking for the new contract. And I said, that's where you should have been going through this contract and scratching out these lines because I said, they're, they're, convoluting the whole situation by having three different scenarios, it should be one, what is it?

John Farquhar, Summit Risk Solutions (40m 33s):

One or the other? So, but that's where it's very important to read the contracts. Know the customers you're dealing with understand the values of the product that you're transporting. Don't just assume, Oh, that's not worth much more than a bucket. Nah, you know,

Chris Harris, Safety Dawg (40m 50s):

It's crazy. And I think for more clarity, I would encourage customers to reach out to mr. Farr choir, to Johnny boy and get some more information because I'll tell you this one conversation has stimulated a lot of FOBT and I'm only a safety consultant about

John Farquhar, Summit Risk Solutions (41m 10s):

One of the things we can do with a customer or client. We can help them. We can come in, we can review what it is. They're hauling. Let's look at the cargo, let's understand what it is. Let's look at some of the sample bills of lading that they're dealing with and help them to realize some of these don't have any values. And they also don't have a limitation. So now you're defaulting to the provincial law that you're operating yet. But then, Oh my God, this has been coming out of the U S this is for a U S customer. You've got no you've been full risk here. So it's, it's nip it in the bud. Now get a handle on it because God forbid you have a huge claim that you're not responsible for it.

John Farquhar, Summit Risk Solutions (41m 43s):

It's going to be a hell of a fight

Chris Harris, Safety Dawg (41m 44s):

In court. Yeah. John, in respect of your time, how about we wrap it up? What sir, I was hurting parting words or anything that we didn't talk about yet that you really want to get out there today?

John Farquhar, Summit Risk Solutions (42m 1s):

I think the biggest thing is probably just pay attention, know what you need to know. And there's a lot of people that don't know what they don't know. Don't take it for granted that the shipper provided me a bill of lading. I'm okay. You're not, it's one sided agreement from the shepherding industry. So you need to be aware. So it's a matter of pay attention, get yourself educated and, and review the bills of ladings that you're working with. Know what you got, know what you're doing, because sometimes you just need to have a conversation with a customer because a customer doesn't know what either.

John Farquhar, Summit Risk Solutions (42m 37s):

You know, as I mentioned before, when you're looking at jurisdictional situations, let's just use Ontario as an example, it's $2 per pound. If there's no declared value on the bill of lading, there's no limitation of liability. The courts are going to default to $2 per pound. And if you're telling me the product's worth 350,000, and then only weighs 10,000 pounds, the insurance cap, he's only going to pay 20 grand. So somebody on the hook and who's that somebody probably,

Chris Harris, Safety Dawg (43m 2s):

You gotta be the carrier, so that's going to hurt it. So from this I I'm taking away several things. The, the website, the email address that you had suggested, and myself, I'd say call John for more clarification and just contact John's contact info is below in the show notes. Alright, Johnny, that was, I think that was a great interview. And I want to thank you so much for coming back on to talk about for having me.

Chris Harris, Safety Dawg (43m 36s):

I appreciate it. Bills of lading and for our audience, if you haven't figured it out, John worked God, what was it? 15 years John, for an insurance company as a safety guy,

John Farquhar, Summit Risk Solutions (43m 48s):

15, 15 years for two different things.

Chris Harris, Safety Dawg (43m 50s):

Yep. Yeah. Okay. So a great deal of experience there. And then before that you owned your own trucking company. Yup. Yup. And it wasn't even where was it located? Branford or just outside of Hamilton? Just outside of Branford Paris, Paris, Ontario. Okay. And we ran all over North America, open deck over dimensional freight and whatnot all over North America. Yeah. So you've got lots of trucking experience. You've got bill of leading experience. John is not a lawyer, but has a great deal, more knowledge than I do when it comes to trucking and bills of lading.

Chris Harris, Safety Dawg (44m 23s):

So awesome. Thanks John. For coming on the Dawg On-It Trucking Pawedcast.

John Farquhar, Summit Risk Solutions (44m 28s):

Appreciate it, Chris. It was a hoot. Okay.

Chris Harris, Safety Dawg (44m 33s):

I hope you love the show as much as I did. Please leave us a, like a thumbs up a review, a comment, a rating. If it is, thank you so much. And I do really appreciate your time and join us again next week for another exciting interview.

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