The Complications, and Costs, of Guaranteed Service Refund Waivers (and the Remedy)

What happens when a big player in the shipping world is his own sheriff and judge?

That is what is happening, with increasing frequency, with Guaranteed Service Refund (GSR) waivers. To begin, large carriers like UPS and FedEx have added ‘Generally On Time’ type clauses to some of their contracts, stating, in effect, that if their deliveries are on time the majority of the time, be it 9o% or 99% of the time, one cannot file for a late delivery refund. But who gets to adjudicate what is unacceptably late or the degree of late deliveries? As it now stands, the carriers are the ones monitoring their own performance.

On the one hand, the two major carriers, and others, continue to increase many of their rates and accessorial charges every year. On the other hand, they attempt to have business customers waive their rights to hold them to their own service standard of on-time delivery – which is, of course, what we are all paying for.

It is the job of independent parcel contract negotiators and those who work to optimize clients’ agreements with UPS and FedEx – firms like us, LJM Group – to be a watchdog of the parcel carriers, and an advocate for the companies who ship their products and supplies with them. We help our clients review their current contracts, create, dissect and analyze new shipping proposals, and, subsequently negotiate with the Carriers for the best rates possible, as often as possible.

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There is always a starting point. And we at LJM start with providing valuable information.

Many companies simply do not have the time to dig into the fine details of new contract terms, or fully understand nuances, and nuisances, like the GSR waiver. However, once we point out to our clients that they have every right to expect consistent standards in the Carrier contracts they sign, and that every late delivery not refunded is a potential loss of revenue, then they start to pay attention. It is not only enlightened self-interest, it is fair business.

For example, FedEx recently introduced an updated format of their standard agreement. It is separated by sections for Express (Air) and Ground deliveries. They may also have separate agreements for international Exports and Imports. So it follows that the more frequent and diversified a company’s shipment profile is, the more detailed the agreement is, including caveats, waivers, and other miscellaneous clauses. Clarifying with our clients what is in their newer agreements is step one. The next step is the essential reason companies like LJM are hired: an in-depth analysis of all pricing, followed by a comprehensive contract review, underscored by a relentless effort to uncover every discount and cost-saving measure due them, and finally securing a renegotiated optimized parcel carrier contract.

So it is with GSR waivers. At LJM, we recommend that no shipper waives their right to late-delivery refunds. When one thinks about it, by doing so, a business like yours is asked to forgive their carrier’s delinquency, while sacrificing their own reputation by not getting a product, part, proposal, or finished goods to their customer on the date promised. The collateral damage, is that you, the shipper, now have to deal with unhappy customers. Are they going to be as forgiving as you were?

Late deliveries can also increase customer service efforts and decrease revenues that arise from shipping. Accordingly, if your carrier ever asks you to waive your right for a refund or waive a discount for deliveries that fail the ‘On Time’ promise, one should pause, and ask why?

With the right information, proper detailed auditing, and strategic negotiations completed by knowledgeable professionals, surcharges and billing errors can be avoided, fair refunds can be satisfied, and contracts will be adhered to.