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Who’s Liable for What in a 3PL Relationship? – Part 2: Transport Liability

June 3, 2020 Published by

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In 3PL Liability Explained – Part 1: Warehouse Liability, we looked at the warehouse liability of a 3PL and its client, defining clear responsibilities and risks for both parties. After goods leave the warehouse, it’s also important to consider the transport liability of a 3PL and suppliers.

Responsibility for Damaged Cargo

Handled by various pickers, packers, and loaders before ultimately arriving to customers – cargo goes through a lot during transit. Even with sophisticated equipment, packaging, and handling protocols damage still occurs. This is why it’s important to recognize the different areas of responsibility for suppliers and 3PLs.

Damaged cargo liability is usually split between suppliers and 3PLs as follows.

  • Supplier Duties: Suppliers are responsible for proper packaging, appropriate labeling, and accurate documentation.
  • 3PL Duties: The 3PL company must maintain the integrity of each package and its contents from the supplier to their destination.

It’s important to properly inspect and document products throughout the process to determine liability in the event of damaged cargo.

Claims for Damaged Cargo

During delivery, when a customer or any other end-user location reports damage, the supplier and/or seller is notified of the product’s condition. The supplier could be required to issue credit for the damage and return the goods. In all cases, the supplier is liable for any losses in value because they “own” the goods until they are accepted.

However, 3PLs are hired for transporting goods and delivering them to their end-user location without damage. Prior agreements between the supplier and the 3PL define responsibilities. This means if the supplier believes their products departed the site in excellent condition and arrived damaged at their destination, then the 3PL could be held liable.

This is why documentation is a crucial element of the claims process. For suppliers to have a legitimate claim, they need to show their product left their facility in good shape and arrived damaged. 3PLs on the other hand must carefully inspect and document the condition of all cases and crates before taking them on.

A good tip for documenting is to take photos in addition to logging conditions of goods before taking possession. It’s also important to remember that without a solid contract, claims you want covered might not be.

Negotiating a 3PL Contract

If you want to avoid any surprises when you need to file a claim, you should always remember two things when creating a contract:

  1. Contracts should cover liability for every conceivable occurrence:

Murphy’s Law states that “Whatever can go wrong, will go wrong.” It’s important to include anything that could go wrong within your contract. For example, if a fire started by vandals damages goods stored in your 3PL’s warehouse, who is responsible?

  1. Everything is negotiable:

If you are ever in doubt about questions of liability, speak up at the beginning. While standards do exist for 3PL contracts, adjustments are always possible through negotiation.

In Summary

The fulfillment process can be stressful even when your operation runs without a hitch, and being uncertain about liability when signing a contract with a 3PL can only add to your anxiety. Be sure to understand your duties within any contract you sign, and remember to negotiate for coverage of any variables you think are missing.