Subhaulers are trucking businesses or owner-operators who provide freight transportation services as a subcontractor based on a fixed agreement or contract. Although they provide similar services as those offered by trucking companies, subhaulers work with other carriers who require additional capacity.
Carriers and subhaulers typically sign a subhauler agreement, which details the terms and conditions, capacity, length, and requirements of the arrangement. In this article, we will provide an in-depth guide on everything you need to know about subhauler agreements, as well as a case study.
What Is a Subhauler Agreement?
A subhauler agreement is a contract between a subhauler and a company (typically a carrier or freight broker) that requires transportation services or additional capacity. Subhaulers are usually trucking businesses or owner-operators who provide freight services under a contract (subhauler agreement).
In essence, a subhauler agreement is a contract that is used as written proof and a collection of mutually acceptable agreements and arrangements between both parties (the subhauler and the party requiring their services).
There are various reasons why carriers subcontract trucking companies for freight services. While the most common reason is for additional capacity, carriers may be required to engage subhaulers if they require specialized trucks, service unfamiliar routes, or haul specialized cargo.
Common Terms & Conditions in a Subhauler Agreement
A fair and unbiased subhauler agreement ensures that the contract is mutually beneficial for both parties. Stating all terms in a comprehensive yet concise manner can help ensure each party understands what is expected of them and performs their duties accordingly.
The subhauler agreement extensively covers the terms and conditions of the work and the relationship between the contractor and the subhauler. Below, you’ll find the most important terms and conditions that a subhauler agreement should cover:
1. Relationship of Parties
A subhauler agreement should clearly state the nature of the relationship between the two parties (the contractor, which is typically the carrier, and the subhauler, which is the trucking company or owner-operator).
It should also clarify that the company and subhauler are neither in a joint venture, have an employer-employee relationship, nor have formed a partnership. It stresses how the subhauler is an independent subcontractor expected to uphold only those conditions mentioned in the subhauler agreement.
2. Duration of Contract
Another vital aspect of subhauler agreements is the stated duration of the contract. Typically, a contract between a subhauler and a company is only valid for a fixed period when the subhauler provides hauling services to that company.
Since subhauler agreements are usually arranged for specific projects or to make up for lack of existing capacity, they are limited to a specific time frame.
3. Scope of Service
The scope of services that are to be performed by a subhauler should always be clearly defined in the agreement. Freight that is to be undertaken by subhaulers is not just limited to existing jobs but also to ones that are being tendered.
It should state what types of services are included and/or excluded from the subhauler agreement.
4. Conditions of Service
It’s important to accurately state the conditions under which the subhauler is required to operate, as many factors can affect the transportation process.
Subhauler agreements typically mention details regarding safety measures to be followed and restricted routes for subhauler to ensure the cargo remains safe and reaches its destination promptly.
It also helps a subhauler understand counterproductive or unsafe hauling methods and when they should halt service to protect the cargo. The latter is particularly important when transporting cargo with special handling requirements.
5. Legal Compliance
A subhauler agreement should state that both the subhauler and the contractor must adhere to all laws as per dictated by the respective state and federal government.
Both parties have the responsibility to uphold all licensing terms and laws to ensure the operations are legally compliant and that failure to do so breaches the contract.
6. Work Methodology
The work methodology section of the subhauler agreement focuses on the assignment and the processes that subhaulers must follow. It states how the details of a job assignment will be shared with the subhauler, whether verbally or in written form, and how the job completion status should be proven and communicated to the company.
7. Rates & Payment Terms
The subhauler agreement must also indicate the respective fees and also if they are fixed or negotiable. It also details the payment terms and how soon the subhauler can expect to be paid for a job.
8. Indemnity & Claims
Although subhaulers are experienced professionals, there may be accidents during transportation or when handling cargo. The subhauler agreement should cover details regarding the conditions of indemnity, claims, and compensation.
Incidental damage to the cargo or persons during transportation usually falls under the responsibility of the subhauler in many cases. Therefore, it’s important to clearly indicate all indemnity and claim policies that this agreement should be governed by.
9. Equipment & Labor
This section of the subhauler agreement focuses on how the subhauler is required to use and provide the necessary equipment for transport. It is the responsibility of the subhauler to check all equipment to ensure they are in good working condition.
However, it’s typical for the contract to mention that the subhauler has complete discretion over the labor they hire and the equipment they use for the service. Here are some equipment details that are typically found on the agreement:
- Commercial Driver’s Licence (CDL) Number
- Commercial Driver’s Licence (CDL) Expiration Date
- Motor Carrier Permit (MCP) Number
- Vehicle Registration Date
- Vehicle Make
- Vehicle Model
- Vehicle Plate Number
10. Termination of Agreement
The subhauler agreement also discusses terms of agreement termination and under what scenarios the contract may be terminated. This section also states any conditions or terms that might apply to either party after the contract’s termination.
11. Resolution of Disputes
The agreement also covers how disputes must be resolved and a set timeframe for it. The timeframe and resolution methods usually depend on the nature of the dispute.
12. Prior Agreements
The subhauler agreement is structured to include all details of the agreement and to be the official document of the relationship between the two respective parties. It should also state that the subhauler agreement supersedes any prior agreements, whether verbal or written, that might have taken place between the company and the subhauler.
The subhauler agreement is signed by the authorized representatives of the two parties to show that both agree to the stated terms and conditions. Signatories generally share the following information:
- First Name
- Last Name
- Company Name
Considerations That Are Not Included in a Subhauler Agreement
Some factors that are not included or commonly omitted from a subhauler agreement hold the same importance as included factors. They should be considered before signing and entering into a subhauler agreement.
- Capacity of Subhauler – The company requesting a subhauler’s services must be aware of the capacity of freight they can haul for them. It can help the company decide if the capacity is able to meet the output expectations or if they would be required to contract multiple subhaulers for their needs.
- Workload of Service – A subhauler must also consider the company’s expectations of the workload allocations and determine if they can fulfill their needs. Managing workload expectations beforehand can help a subhauler allocate resources accordingly and determine if they have sufficient drivers and equipment to do the job.
- Reputation – Both the company and the subhauler need to do their due diligence to ensure ethical business conduct and integrity. By surveying each other’s reputation, both parties may be able to straighten out any concerns or potential risks. If both parties hold a good reputation, it becomes a solid foundation to establish a good business relationship and boost the other’s standing in the industry.
- Operating Hours – The operating hours of the company and the subhauler company must be set to prevent delays in delivering freight and avoid disputes. It can also help both parties manage time and resources better on their end and streamline processes.
- Profitability – Before entering into a contract, the carrier or freight broker and the subhauler should conduct a complete cost study. The company should understand the fee range that they can offer a subhauler considering any possible shared liabilities to maintain good profitability. Similarly, a subhauler should consider all costs they may incur for the contract’s term and set a profit margin buffer when negotiating their fees.
Case Study: Subhauler Agreements
To help you better understand how subhauler agreements work, we would like to share the following case study. In this scenario, a national carrier in Chicago, Illinois engages an owner-operator to provide transportation for specialized cargo.
The national carrier, based in Chicago was contracted by a large multinational manufacturing company to move a large piece of machinery to Columbus, Ohio. They have an existing business relationship and the shipper wishes to continue working with a single trucking company.
As transporting this machinery requires specialized equipment and handling, the carrier has subcontracted an owner-operator who specializes in moving sensitive machinery. They subsequently get in touch with the owner-operator to negotiate rates, as well as the terms and conditions.
The discussion with the owner-operator is conducted verbally at first, but after the owner-operator agrees, the trucking company drafts a subhauler agreement in writing.
The written document details the terms and conditions for the owner-operator to become a subhauler for the company for moving the piece of machinery from Chicago, Illinois to Columbus, Ohio.
After authorized representatives from both parties sign and agree to the written terms and conditions of the subhauler agreement, the owner-operator readies the equipment and resources for transportation.