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Risk Management Basics

Exposures of Today’s Supply Chain Partners Presented by Greg J. Kritz,CIC CCBFA September 27, 2007. Risk Management Basics. 1. Identify the Risks to Your Business 2. Eliminate What You Can 3. Mitigate the Rest 4. Finance Future Losses *Self Insure and/or Higher Deductibles

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Risk Management Basics

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  1. Exposures of Today’s Supply Chain PartnersPresented by Greg J. Kritz,CIC CCBFASeptember 27, 2007

  2. Risk Management Basics 1. Identify the Risks to Your Business 2. Eliminate What You Can 3. Mitigate the Rest 4. Finance Future Losses *Self Insure and/or Higher Deductibles *Transfer Risk to Insurers

  3. Do You Need a License & How Is Your Business At Risk? Are You a Motor carrier? - Own Truck (s) and Operate Interstate or through a state - If Intrastate, You Comply With State Filing Regulations

  4. Do You Need a License & Is Your Business At Risk? Are You A Surface Forwarder by Law? • Arrange for transportation of freight? • Play some role in assembly, consolidation and distribution of the freight? • Issue a Freight Bill or Accept Straight BL’s? • Issue an Air waybill but knowingly send freight by truck? Insurance: MUST Have Cargo Liability with Filings

  5. Surface Freight Forwarder Liability Subject to “Carmack Amendment” • Strict Liability –Guilty until proven Innocent • Time Provisions Are Different than for Air Freight – Surface Much Longer • May Limit Liability (Release Rate) in Accordance with “Release Rate Doctrine”

  6. The Release Rate Doctrine • Carrier must give shipper notice of their legal liability terms (E.g.: .50 cents per pound) • Shipper must have notice in advance of shipping • Shipper must have option of increasing carrier’s limit of liability for additional charge.

  7. Other Issues When Handling Motor Freight If Legally a Surface Forwarder & Receive Shipper’s Straight Bill, You May Be Liable for 100% of Invoice • Send Shipper Your Terms & Conditions prior to shipping and ask them to sign-off (don’t laugh) If Your Terms Reference a Tariff & You Don’t Have a Tariff You May Be Liable for 100% of Invoice

  8. Danger of Acting as Air Forwarder But Really a Surface Forwarder • May Be Held Liable for Full Invoice Value plus Attorney FeesClaim: Courts have Ignored Release Rate When Airway Bill issued for Surface Freight. • May Not Have Coverage Under the Air Legal Liability Insurance Policy due to restriction to airfreight only

  9. Are You A Property Broker? Don’t Own Trucks Arrange Transportation for Motor Carriage (Interstate) for Compensation Don’t Issue a Bill of Lading Licensing www.safersys.org Bond: $10,000 Property Broker Bond

  10. Property Brokerage cont’d Contingent Cargo Liability Insurance • To Avoid Coverage Gaps try to Get a Policy that Doesn’t Follow Terms of Carrier’s Primary Policy Liability: None unless found negligent E.g.: Negligent selection of carrier (bankruptcy, unlicensed, not properly insured etc…)

  11. Do You Cross-Dock and/or Warehouse Freight? Cross Dock Freight, Absent of You Limiting Your Liability by Receipt, House Bill, or Contract, May Make you 100% Liable for Loss or Damage to Freight. Recommend Shipper Contracts for 3PL Operations

  12. International Legal LiabilityExposures NVOCC Update Your House Bills of Lading Must be legible Provided in advance Option to declare value Jurisdiction IIAC If electronic, require a YES to “agreement with terms”

  13. Simple Low Cost Solutions 1. Determine What You Are Property Broker? Surface Forwarder? Indirect Air Carrier? Warehouseman? 2. Get Licensed, if necessary www.safersys.org

  14. Simple Low Cost Solutions 3. Secure Legal Counsel with Trade Specialty to Review Receipts, Bills of Lading & Terms & Conditions of Service • Verify That They are Lawful and Consistent with Insurance Coverage

  15. Simple Low Cost Solutions 4. Implement a Quality Selection Practice for Supply Chain Partners • Certificates of Insurance Evidencing Cargo Liability • Copies of Polices Revealing Exclusions, Deductibles and Warranties • Questions Regarding Hiring Practices • Confirmation of Current Licensing (easy on-line)

  16. Simple Low Cost Solutions • Incorporate all Terms & Conditions Into POA • Make Available All T&C’s on Your Web-Site (NCBFAA Industry Standard) • Create Hyper-link to T&C On All e-mail Signatures

  17. Thank You for Inviting Us This Evening!

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