Why you need to watch out for waivers in carrier contracts

carrier waivers bad

Major carriers like United States Postal Service, FedEx, UPS and DHL offer a money-back guarantee on shipping costs if a package is lost, damaged or delivered late. Naturally, on-time delivery of undamaged shipments is what’s expected. We never hear shippers saying, “I hope UPS delivers my packages late this time.” If a shipment arrives late or damaged it’s only fair for the shipper to receive a refund. Right? But now carriers are conveniently sneaking waivers into contract agreements to save themselves money.

The waiver trend

Waivers are now more than ever being included in carrier agreements by default. If you check, you might see waivers slipped into your contract inadvertently. You waive the right to file claims and get refunds on late deliveries leaving you with lost dollars. Carriers are off the hook for returning refunds to you. Some carriers will point to better pricing when you ask if the waiver agreement is in your contract, but better pricing isn’t always true. It sounds like a good deal on the surface when you hear, “Don’t file claims on late shipments and get an additional 2% discount off the shipping costs.” The loss in not filing claims against late deliveries is higher than the full amount of the additional discount. In other words, the 2% discount is more like .2% and the loss in not filing claims is more like 6%. This doesn’t sound like a good deal.

How waivers actually lose you money

Package minimums

In writing you might have a 2% discount, but if it’s applied 0% of the time that leaves you with a 0% discount. For some customers, the package minimum affects upwards of 20% of all shipments. That means any base level or earned discounts are never even applied to packages, so understanding what impact a 2% discount has on your agreement starts with understanding how discounts are actually applied.

Discount expiration

Most of the best discounts happen upfront at the beginning of carrier agreements. The same is true with discounts related to waivers. An additional 2% discount might be applied, but only for a limited time offer of one year. After that year, the benefit of additional discount is gone and yet the waiver against filing disputes on late packages still stands. Who’s the one really winning when you only get half of the benefit?

Applied discounts

This is extremely important. The agreed upon 2% discount could be applied to the earned discount type at the highest tiers, but the revenue bands don’t reflect accuracy in shipping volume meaning the discount is never even obtained. Or, in plain language, the 2% is 0% if the discount isn’t applied based on normal shipping volumes.

What you can do to get maximum dollars returned

Talk to your rep

A red flag should be raised if your carrier asks you to waive your right to audit your invoices for late deliveries. If you are deciding to renew your carrier agreement or negotiate a new one, you don’t have to accept a waiver. Ask your rep to help you here. You would be shocked to find you can still save 2% without forfeiting the right to refunds owed to you as a result of late deliveries.

Check your data

Sometimes the data provided by carrier account reps on late package frequency is wrong. For example, 1% late on ground shipments is more like 3%. If you are building projections against waivers, be sure to start with real numbers. Specifically, which packages were delivered late? Which are eligible for a refund and what are the costs associated with those shipments? Collect your own data. Without it the financials are likely wrong and the decision being made about a waiver isn’t based on reliable numbers.

Get expert support

Need help building models to understand waivers? If you would like to see benchmark data on what waivers are reasonable to expect in your agreements, given your shipment volumes, then contact our team at Share A Refund for a free consultation.

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