Real-world shipping mistakes that could have been avoided with freight auditing
Shipping mistakes can be avoided through the simple act of freight auditing. These mistakes can have significant financial and operational consequences for businesses. Here are some real-world examples where such mistakes have cost money and created problems:
Overbilling by Carriers
Freight carriers may sometimes overcharge for services, such as incorrect weight calculations or incorrect rate application. These errors can lead to higher transportation costs.
Justice.gov, March 2022- “YRC Freight Inc. (YRC), Roadway Express Inc. and Yellow Transportation Inc. (collectively the YRC defendants), have agreed to pay approximately $6.85 million to resolve allegations under the False Claims Act that they knowingly presented false claims to the U.S. Department of Defense (DOD) by systematically overcharging for freight carrier services and making false statements to hide their misconduct.”
Duplicate invoices can result in a company paying for the same shipment or service multiple times, leading to unnecessary expenses.
Journal of Commerce JOC.com August 2022 – “Scoular, the second-largest US animal feed and grain exporter, found nearly $2 million in duplicate freight invoices for one segment of its business, according to a case study released Tuesday documenting its freight audit automation process.”
Inaccurate Tariff or Contract Application
Failure to apply negotiated rates, discounts, or contract terms correctly can result in overpayments. For example, a company might be entitled to a volume discount but is charged the standard rate.
The Loadstar the loadstar.com August 2023 – “MSC may face charges relating to alleged violations of the US Shipping Act following an Federal Maritime Commission (FMC) probe into claims it billed more than $2m of extra demurrage and detention (D&D) charges.
The investigation follows an FMC audit of MSC’s D&D charges in 2021, with claims the carrier
Failing to monitor storage charges for delayed shipments can lead to accumulating storage fees, which can be significant over time.
Journal of Commerce JOC.com May 2023 – “Shippers are urging Congress to close the regulatory loop for rail container storage fees by expanding the Federal Maritime Commission’s (FMC’s) power so cargo owners can challenge demurrage that’s billed by railroads directly to cargo owners and consignees, but it’s a tall order.
Cargo owners and consignees billed by Class I railroads for storage charges can’t challenge those fees with federal rail regulators due to an intermodal exemption to the US Surface Transportation Board’s (STB’s) purview. The agency, and the Interstate Commerce Commission before it, gave the rail industry broad exemptions for trailer and container services.”
Detention and Demurrage Charges
If containers are not picked up or returned in a timely manner, shippers may incur detention and demurrage charges, which can be costly.
The Loadstar theloadstar.com April 2022 – “German carrier Hapag-Lloyd has been ordered to pay $822,220 in civil penalties for 14 violations – $58,730 for each offence – of the US Shipping Act.
An FMC investigation found it incorrectly applied detention and demurrage (D&D) charges to 11 containers handled by California drayage firm Golden State Logistics (GSL).
The D&D charges levied to GSL amounted to $10,135, but the FMC’s Bureau of Enforcement (BOE), which Hapag-Lloyd had unsuccessfully claimed had no jurisdiction over the case, said the penalties were punitive in nature as the carrier had “knowingly and wilfully” applied the D&D charges despite GSL being unable to return the containers.”
Inaccurate Fuel Surcharges
Carriers often apply fuel surcharges based on fuel price fluctuations. Errors in calculating these surcharges can lead to incorrect billing.
Phys.Org June 2018 – “Air New Zealand was Wednesday fined Aus$15 million (US$11 million) by an Australian court for its part in a global air cargo cartel involving major international airlines.
The carrier was taken to court by the Australian Competition and Consumer Commission (ACCC) over allegations it had agreements with other airlines to fix the price of fuel and insurance surcharges on freight services to and from international airports from 2002 to 2007.
“These illegal price-fixing agreements unfairly reduced competition for the transport cost for goods flown into Australia,” ACCC commissioner Sarah Court said in a statement.”
To mitigate these risks and potential financial losses invest in freight audit and payment systems and regularly review their supply chain processes to identify and rectify any inefficiencies or errors.
Freight invoice auditing is critical to efficient logistics management and cost control. By following a systematic auditing process, leveraging technology, and adhering to best practices, businesses can optimize their transportation expenses, enhance accuracy in billing, and gain valuable insights into their supply chain operations. Ultimately, mastering the art of freight invoice auditing can lead to improved profitability and competitiveness in today’s dynamic business landscape.
If your organization needs or is looking for an outsourced auditors alternative, iTech has a sizable staff ready to go. These auditors can be available for a 30-day, no-obligation proof of concept.
iTech provides highly trained Rate Audit employees. We use comprehensive and specialized approaches to verify and audit freight invoices and rates. Our experience will ensure discrepancies and errors are identified and will ensure that all potential cost savings in your freight billing process are captured.