Have you ever been in a situation when your or your customer’s freight has been held hostage? If so, then you’re not alone. In an ideal world, every carrier completes shipments, and brokers pay them the total amount when they say they will. However, nothing is perfect, and payment problems occur between brokers and carriers. With nothing perfect, brokers have reasons not to pay the total amount. Some examples include damaged freight or, to the extreme, a broker who went out of business and can’t pay any of the money back.
A hostage freight scenario is stressful and unpleasant for all the parties involved. As a result, the resolution might be very time- and energy-consuming. Being prepared and aware of the potential risks is the best way to try and avoid these situations as much as possible. This blog dives into what freight hostage is and what you can do to prevent it from happening in the future.
What does hostage freight mean?
Holding freight hostage can mean two different things for businesses. The most common occurrence is when a carrier doesn’t deliver a shipper’s items in their possession during delivery until the shipper can pay the transportation debt to the carrier. Another scenario that isn’t as common is when a third-party logistics (3PL) company requests that the carrier holds the items hostage because a 3PL hasn’t received the payment from the shipper. In both cases, the reason why freight becomes held hostage is because of delayed payments.
Why do carriers hold freight hostage?
Hostage freight situations occur when the carrier has either not received payment for a previous load or faced significant deductions. In the first case, shipping services demand proper compensation before delivering the cargo in question. In the second case, carriers request payment before returning the load. There are several factors leading to hostage cargo events.
The original destination changed after the carrier picked the load up. Thus, the carrier is looking for a rate increase for the extra miles or having to cancel their planned reload.
Significant changes in load details
The carrier is looking for higher compensation than initially agreed upon for hauling a different load than originally discussed. Changes may be weight increase, dimension change, temperature, and more. Knowing your freight characteristics before arranging a shipment is vital to avoid unwanted charges and eliminate hostage cargo risks.
Detention occurs when the carrier is held at the shipper for an extended period and refuses to deliver a load until a guarantee of payment is received or receives compensation with a detention charge.
The carrier is aware of a potential claim or back-charges on the load they are hauling and refuses to deliver a load until they are sure they will get paid in full.
In a double-brokerage scenario, the actual carrier might have a problem with the ‘originally contracted’ carrier and hold the load hostage until the latter meets their demands. In this case, taking care of the issue might get even messier.
What can you do to prevent this?
- Communicate and notify carriers of possible changes as soon as possible.
- Ensure you’re on the same page as your broker throughout the process.
- Know your lanes, facilities, and common issues and plan them.
- Use Rate Confirmations/Carrier Agreements to outline the requirements.
- Use carrier vetting by implementing the use of public records as well as internal databases and historical data.
- Know double-brokerage red flags and stay away from them.
- Focus on creating long-term partnerships with carriers and using dedicated carriers for your dedicated lanes.
Both the carrier and the shipper/broker have reasons to stand their ground. For example, the carrier is afraid they will not receive any payment for hauling the load if they trust their opponent and deliver it. Their counterpart worries about paying upfront and never having the shipment returned. Arriving at a consensus might be challenging, and there are constant disputes about the best strategies you can use. Sometimes the easiest way to resolve it is to provide a legal guarantee of the payment once the load is successfully delivered.
Overcoming hostage freight with PLS
At PLS Logistics Services, we want to ensure that you don’t have to deal with the hassle of hostage freight. We strive to make the broker and shipper relationship an easy one for you. Contact us today if you want more information about our company and how we can help you deal with hostage freight and legal issues. Get a quote with us to discover how we can assist you in the future!