Charge-Back Practices by Motor Carriers
December 30, 2015
Author: Katie Merriam, Account Administrator
Federal Motor Carrier Safety Administration Regulation governs charge backs for written lease agreements. Section 376.12 (h) Charge-back items states: “The lease shall clearly specify all items that may be initially paid for by the authorized carrier, but ultimately deducted from the lessor’s compensation at the time of payment or settlement, together with a recitation as to how the amount of each item is to be computed. The lessor shall be afforded copies of those documents which are necessary to determine the validity of the charge.”
There are several key items to note. The lease must clearly specify the items that will be deducted and the lessor shall be afforded copies of the documents to determine the validity of the charge.
Motor Carriers charge-back their owner operators for different types of insurance, fees, and operational costs. Insurance may include cargo, auto liability, general liability and motor carrier owned trailer damage. Motor Carriers can ensure payments are received from owner operators with escrow, which is subject to law or deductible buyback insurance. Deductible buyback insurance allows the owner operator to pay a monthly premium to cover all or a portion of the charge-back.
Other requirements for insurance from the Federal Motor Carrier Safety Administration include providing the owner operator with a copy of each policy upon the request when the owner operator purchases insurance from the motor carrier and provide the owner operator with a certificate of insurance for each policy. The lease shall clearly specify the conditions under which deductions for cargo or property damage may be made. The motor carrier also must provide the owner operator with a written explanation and itemization of any damage owed by the owner operator and must be delivered before any deductions are made.
Remembering to include all items to be deducted from the owner operator in the lease agreement and providing the appropriate documentation to the owner operator is important when using owner operators.
- “Federal Motor Carrier Safety Administration.” Federal Motor Carrier Safety Administration. N.p., n.d. Web. 30 Dec. 2015.