A shipping agreement is the contract that decides who pays when freight is lost, damaged, delayed, or billed in a way nobody expected. It sets the rate, assigns liability, defines insurance responsibility, lists the fees a carrier can add, and spells out how disputes get resolved. Federal law fills gaps in favor of the carrier far more often than the shipper, so what you negotiate into the document before anything moves is usually what determines your exposure.
Parties, Cargo, and Pricing
Start with the legal names and addresses of the shipper, carrier, and receiver. Errors here cause misrouted freight and arguments over who actually contracted for the shipment. The cargo description needs to be precise: weight, dimensions, and any hazardous material classification. Federal civil penalties for hazmat violations run up to $102,348 per violation, and if the violation causes death or serious injury the ceiling climbs to $238,809.1eCFR. 49 CFR Part 107 Subpart D – Appendix A
Financial terms cover the freight rate, fuel surcharges, and payment deadlines. Fuel surcharges deserve attention because they float on diesel and jet fuel index prices and change weekly.2UPS. Fuel Surcharges A locked base rate means nothing if the surcharge formula is open-ended.
Accessorial Charges
Beyond rate and fuel, carriers add fees for anything outside a standard dock-to-dock delivery. These catch shippers off guard more than anything else on a freight invoice. Common ones:
- Liftgate service when there is no loading dock, typically $50 to $150.
- Detention when a truck waits past its free time, roughly $50 to $100 per hour after the first hour or two.
- Redelivery when a delivery attempt fails, $100 to $300.
- Residential delivery, limited-access locations like construction sites, and hazardous materials handling, each at its own rate.
A well-drafted agreement lists which accessorials the carrier can charge, at what rates, and when.
Freight Classification
For less-than-truckload freight, your price depends heavily on freight class. The National Motor Freight Classification system assigns every commodity a class between 50 and 500 based on density, handling, stowability, and liability. Lower class, lower rate. Misclassified freight gets reclassified by the carrier after pickup and the invoice adjusted upward, so pinning the correct class in the agreement prevents billing surprises.
The Bill of Lading
The bill of lading is the operating document the shipping agreement sits on top of. It plays three roles at once: a receipt showing the carrier took possession, a contract setting the terms of carriage, and sometimes a document of title that controls who owns the cargo. Article 7 of the Uniform Commercial Code governs bills of lading across U.S. commercial transactions.3Cornell Law Institute. UCC – Article 7 – Documents of Title
There are two main forms. A negotiable (or “order”) bill is transferable: the consignee can endorse it over to someone else, effectively selling the cargo in transit. International commodity trading relies on this. A non-negotiable (or “straight”) bill names a specific consignee and cannot transfer ownership through endorsement. Common carriers issuing a non-negotiable bill must print “nonnegotiable” or “not negotiable” on its face.4Office of the Law Revision Counsel. 49 USC 14706 – Liability of Carriers Under Receipts and Bills of Lading Most domestic ground freight moves on straight bills. International or financing-dependent deals often need negotiable bills.
Carrier Liability and the Claim Window
For domestic interstate motor freight, the Carmack Amendment is the governing law. It makes the carrier strictly liable for actual loss or injury to property from pickup to delivery, without the shipper having to prove negligence.4Office of the Law Revision Counsel. 49 USC 14706 – Liability of Carriers Under Receipts and Bills of Lading That protection comes with sharp limits in practice.
Released Value Caps
Carriers routinely limit exposure through released value rates, which cap liability at a set amount per pound rather than paying full cargo value. This is legal when the shipper agrees. General freight carriers use per-pound formulas or flat per-shipment caps negotiated in the contract. If your agreement is silent on the carrier’s liability limit, check the bill of lading and the carrier’s tariff. The gap between cargo value and what the carrier will pay is often enormous, and shippers who assume strict liability means full-value recovery find out otherwise after a loss.
Nine Months to File, Two Years to Sue
Under the Carmack Amendment, a carrier can set a minimum claim-filing window of nine months from delivery and a minimum lawsuit deadline of two years from the date the carrier denies the claim.4Office of the Law Revision Counsel. 49 USC 14706 – Liability of Carriers Under Receipts and Bills of Lading Many carriers set both at the minimum. Miss the window and you lose your rights entirely. A valid claim must be in writing, identify the shipment, assert the carrier’s liability, and demand a specific dollar amount.5eCFR. 49 CFR 370.3 – Filing of Claims A damage note on a delivery receipt is not a filed claim.
International Shipments
International ocean freight between U.S. and foreign ports falls under the Carriage of Goods by Sea Act. COGSA caps carrier liability at $500 per package or per customary freight unit unless the shipper declares a higher value on the bill of lading before loading.6Office of the Law Revision Counsel. 46 USC 30701 – Definition That limit has not been adjusted since 1936, which makes it functionally worthless for most modern cargo. Ship high-value goods by sea without declaring value in writing and you are capped at a Depression-era figure regardless of what the cargo is worth.
International air cargo falls under the Montreal Convention, which sets carrier liability at 26 Special Drawing Rights per kilogram of damaged or lost goods.7Canadian Transportation Agency. Limits of Liability for Passengers and Goods The SDR is an International Monetary Fund unit that fluctuates against the dollar, typically converting to roughly $35 per kilogram. You can declare a higher value when shipping, but you pay more for the coverage.
Customs Documentation
International shipments require a commercial invoice stating transaction value and often a certificate of origin verifying where the goods were manufactured. Tariff rates and import eligibility depend on these documents. U.S. Customs requires importers to keep all entry-related records for five years from the date of entry.8eCFR. 19 CFR 163.4 – Record Retention Period Failing to produce them on request can result in penalties up to $100,000 per release for willful violations, or up to $10,000 per release for negligent recordkeeping failures.9Office of the Law Revision Counsel. 19 USC 1509 – Examination of Books and Witnesses
Documentation delays also trigger demurrage and detention. Demurrage applies while a container sits at the port terminal past its free time; detention applies after the container leaves the terminal but is not returned within the allowed window. Fees often start around $75 to $150 per day for a standard container and climb past $300 per day after the first week. Your agreement should assign these costs when the delay comes from documentation rather than logistics.
Incoterms and Who Carries the Risk
Incoterms are standardized trade terms published by the International Chamber of Commerce that define where the seller’s responsibility ends and the buyer’s begins. The current version is Incoterms 2020.10International Trade Administration. Know Your Incoterms Three common terms show the range:
- EXW (Ex Works): The seller only makes the goods available at its own facility. The buyer handles loading, transport, export clearance, and insurance from there. Maximum obligation for the buyer.
- FOB (Free on Board): The seller delivers onto the vessel at the named port of departure. Risk transfers to the buyer when the goods are loaded on board. The buyer covers ocean freight, insurance, and import costs.
- CIF (Cost, Insurance, and Freight): The seller pays freight and procures marine insurance to the destination port. Risk still transfers at the loading port, but the seller carries the transport and basic insurance cost.
The term you choose controls who files an insurance claim after damage in transit and who absorbs port surcharges or customs delays. Ambiguity here is one of the fastest routes to a dispute with no clean resolution.
Cargo Insurance
Carrier liability and cargo insurance are different things, and conflating them is where most shippers get hurt. Carrier liability is what the law requires the transportation company to pay, subject to all the per-pound and per-package limits above. Cargo insurance is a separate policy the shipper or buyer buys to cover actual value in transit. A container of electronics worth $200,000 lost at sea under COGSA’s $500-per-package limit leaves you absorbing nearly the entire loss. A cargo policy on that same shipment pays out on declared value.
Your agreement should name which party procures cargo insurance and at what coverage level. Under CIF, the seller buys insurance, but the Incoterms minimum is often below full cargo value. Under FOB or EXW, the buyer carries the risk and arranges coverage independently. Treating carrier liability as a substitute for proper insurance is the mistake.
Carrier Liens on Unpaid Freight
If you do not pay freight charges, the carrier does not just send the invoice to collections. Under the UCC, a carrier has a lien on the goods in its possession for unpaid transportation, storage, demurrage, and preservation expenses.3Cornell Law Institute. UCC – Article 7 – Documents of Title The carrier can hold the shipment until you pay. If you still do not pay, the carrier can sell the goods at a public or private sale after notice to everyone known to have an interest. The sale must be commercially reasonable, and the carrier can only sell enough to cover the debt.11Legal Information Institute. UCC 7-308 – Enforcement of Carriers Lien
Anyone with a claim to the goods can stop the sale by paying the balance plus reasonable expenses. The carrier must hold any surplus for the person entitled to the goods, and willful violations expose the carrier to liability for conversion. Some carrier contracts extend the lien beyond the unpaid shipment to cover all cargo belonging to the same customer in the carrier’s possession, so a billing dispute on one load can freeze a different one.
Force Majeure
A force majeure clause defines what happens when events outside anyone’s control stop delivery. These clauses typically cover natural disasters, wars, government actions, port closures, and pandemics, but only the specific events the contract names. If an event is not listed, it probably does not count. Vague language like “acts of God” invites litigation; a tight clause names triggering events.
The affected party usually must notify the other side promptly and take reasonable steps to minimize the disruption. Most agreements also cap how long the excuse lasts. If the event drags past that period, either party can terminate. Without a force majeure clause, you are left arguing common-law impossibility or impracticability, which is a much harder case.
Dispute Resolution and Governing Law
Freight disputes over lost cargo, billing errors, and delivery failures come up often enough that most shipping agreements build in a resolution process. Arbitration clauses push disputes to a private arbitrator rather than court, which is faster but limits appeal. Many agreements layer in a negotiation or mediation step first, requiring authorized executives from each side to meet within 30 days of a written dispute notice. Firm deadlines on pre-arbitration steps matter, or the process becomes a vehicle for delay.
Without an arbitration clause, disputes default to court litigation, which is slower and more expensive. Any agreement governing interstate freight should also name governing law and a venue for lawsuits. A forum selection clause can force you to litigate thousands of miles from your business if you miss it when signing.
Signing and Keeping Records
Shipping agreements can be signed electronically. The federal E-SIGN Act provides that a contract cannot be denied legal effect solely because an electronic signature was used in its formation.12Office of the Law Revision Counsel. 15 USC 7001 – General Rule of Validity Once signed, give identical copies to the shipper, carrier, and receiver so everyone is working from the same document.
Retention depends on the shipment type. For domestic motor carrier records, federal regulations require bills of lading, shipment records, and contracts to be kept for at least three years.13eCFR. 49 CFR Part 379 – Preservation of Records International shipments carry the five-year customs retention requirement.8eCFR. 19 CFR 163.4 – Record Retention Period Keeping records for the longer of the two is the safer practice, since cargo claims and billing disputes sometimes surface well after delivery.