Rebates, freight allowances and off bill discounts, huh, yeah, what are they good for? Absolutely nothing, say it again! Rebates, freight allowances and off bill discounts, huh, yeah, what are they good for – okay, okay, okay, I’ll stop. I am not going to bore you to death by singing a whole song about freight rebates. My freight articles probably put you to sleep enough. But perhaps this one will be an eye opener for you, especially if you are currently getting a freight rebate, allowance or off bill discount.
There is something that I love about getting a rebate. I don’t know what it is. It probably has to do with the idea of getting a check in the mail. But for businesses, I feel different about the notion of receiving freight rebates.
To me, I feel a rebate or an allowance is a creative way for carriers to hold on to money that rightly belongs to the shipper. In business, where cash is king, having a vendor hold on to money for an extra month or even a year just does not seem efficient.
Even so, that is not as big of a deal to me as one of the main reasons why I see shippers opting for rebates, allowances and off bill discounts. Shippers want a kick-back from their carrier partners in most cases because they are providing their customers with a copy of the freight bill. In their minds, they feel the rebate keeps their customer from knowing they are making money on freight.
Highlighted is exactly how the "rebate" is usually printed on carrier invoices.
However, there is one little problem with that idea. Motor carriers, by law, have to show on their invoice what, if any, rebate they are providing back to the shipper. US Code, Title 49 – 13708 states that a “motor carrier shall indicate in any document presented for payment to the person responsible directly to the motor carrier that a reduction, allowance, or other adjustment may apply.” Sorry for the buzz kill!
Here is exactly how 49 USC – US Code 13708 – Title 49: Transportation reads:
(a) Disclosure. – A motor carrier subject to jurisdiction under subchapter I of chapter 135 shall disclose, when a document is presented or electronically transmitted for payment to the person responsible directly to the motor carrier for payment or agent of such responsible person, the actual rates, charges, or allowances for any transportation service and shall also disclose, at such time, whether and to whom any allowance or reduction in charges is made. (b) False or Misleading Information. – No person may cause a motor carrier to present false or misleading information on a document about the actual rate, charge, or allowance to any party to the transaction. (c) Allowances for Services. – When the actual rate, charge, or allowance is dependent upon the performance of a service by a party to the transportation arrangement, such as tendering a volume of freight over a stated period of time, the motor carrier shall indicate in any document presented for payment to the person responsible directly to the motor carrier that a reduction, allowance, or other adjustment may apply.
An effective way to be up front with customers and speed up cash flow is to simply add a line item on an invoice indicating “shipping & handling”. As long as the customer feels they are getting a reasonable rate, they are not likely to question the charge.
Adding a line item for "shipping & handling" is a much quicker way to get paid by customers for freight over getting a delayed rebate from the carrier.
*The key here is to be sure to add “shipping & handling” or some other verbiage that states the shipper is billing for more than shipping. Just typing “shipping” implies the shipper is charging exactly what they are paying. If “it got to court, a jury would likely side with the customer” according to Brian Kenney a New Jersey based attorney.
If a carrier does not state the rebate on their invoice, and they are providing an additional discount or allowance in the form of a check, then they are breaking the law. I have seen carriers not disclose this and they could face prosecution from the federal government. I would suggest not dealing with such carriers. If they are lying to the government, they will likely lie to their customers as well.
So in summary, getting rebates is fun! But if a shipper is pretending to be up front with their customers, they will likely be perceived as less than honest by their customers due to 49 US CODE 13708. Plus, a rebate is just another way hold up cash flow and as GE’s Jack Welsh says, “cash flow is the pulse—the key vital sign of a company.”
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{ 1 comment… read it below or add one }
woah.I never thought getting a rebate from freight carriers also has a bad side XD thanks for the enlightenment George!