"Per Piece" or "Per Shipment": What's the Difference?

The following Parcel Counsel column, written by Brent Wm. Primus, first appeared in the August 17, 2018 issue of Parcel magazine. Brent will again be the presenter for this year’s TIA Minnesota seminar. It is reprinted by permission of Parcel whose website is www.parcelindustry.com

It is especially timely, as loss and damage will be one of the topics covered in this year’s seminar. https://www.tianet.org/transportation-logistics-and-the-law-for-3pls-identifying-and-minimizing-legal-risks-in-the-supply-chain/

In this installment of Parcel Counsel we will explore the effect of a limit of liability expressed as “$ _____ per pound, per piece” as opposed to one expressed as “$ _____ per pound, per shipment”.  In this installment of Parcel Counsel we will explore the effect of a limit of liability expressed as “$ _____ per pound, per piece” as opposed to one expressed as “$ _____ per pound, per shipment”.  

When there is a total loss of a shipment containing multiple pieces, that is, the cartons or packages on a pallet or a fully loaded trailer, the dollar amount of the recovery by the shipper is not affected by how the carrier’s limit of liability is expressed. However, when there is a partial loss, the manner in which the limit of liability is stated can mean the difference between a shipper making a full monetary recovery or only a partial recovery.

The concept of limiting liability based on the weight of the individual package originated in the international treaties governing international air carriers. Under the current treaty, the Montreal Convention, the liability of the air carrier is approximately $12 per pound, per piece. Prior to the deregulation of domestic airline carriers in 1977, the airlines paid the full value of losses up to $0.50 per pound times the total weight of the shipment.  After deregulation, a majority of the air carriers adopted a limit of liability of $0.50 per pound and added “per piece”.

With respect to motor carriers, when Congress passed the Carmack Amendment to the original Interstate Commerce Commission Act, the intent was to make carriers fully liable for cargo loss and damage with certain limited exceptions.  

However, beginning with the passage of the Motor Carrier Act of 1980 and continuing through today, motor carriers have published ever lower limits of liability in their tariffs…starting with $50 per pound in 1980 and continuing through the present time down to as low as $1 per pound. Additionally, the motor carriers have added language borrowed from the airlines and began stating the limit as a certain amount per pound, per piece.

To illustrate how this would come into play, please consider the following:

Assume a shipment of:

• 10 packages weighing 50 pounds each
• Total shipment weight of 500 pounds
• The value of the products is $60 per pound for a total shipment value of $30,000
• The value of one package is $3,000

Example One:  If a $25 limit of liability per pound, per shipment applies:

• If a total loss, then the carrier’s liability is $12,500 (500lbs x $25)
• If just one parcel is lost, then the carrier’s liability is $3,000 (50lbs x $60) resulting in a full recovery for shipper…because less than total possible based on weight of entire shipment

Example Two:  If a $25 per pound, per piece limit of liability applies:

• If a total loss, then the carrier’s liability is $12,500 (500lbs x $25)
• If just one parcel is lost, then the carrier’s liability is $1,250 (50lbs x $25) resulting in a partial recovery for shipper.

It should be noted that the limits under discussion here need to be distinguished from those expressed as, for example, “$100 per package”. When this limit is in effect, neither the weight of the lost or damaged package nor the number of other packages in the same shipment is a factor.

To conclude, and without all the math, shippers should try to negotiate a “per shipment” limit; while carriers will push for a “per piece” (per package) limit.

All for now!