Managing

Time and Space in the Modern

title: Warehouse : With Ready-to-use Forms,
Checklist & Documentation
author: Bolten, Ernst F.
publisher: AMACOM Books
isbn10 | asin: 0814479561
print isbn13: 9780814479568
ebook isbn13: 9780585040011
language: English
subject Warehouses--Management.
publication date: 1997
lcc: TS189.6.B65 1997eb
ddc: 658.7/85
subject: Warehouses--Management.
 Page iii

Managing Time and Space in the Modern

Warehouse
With Ready-to-Use Forms, Checklists & Documentation
Ernst F. Bolten

AMACOM
American Management Association
New York Atlanta Boston Chicago Kansas City San Francisco Washington,
D.C. Brussels Mexico City Tokyo Toronto

 Page iv
This book is available at a special discount when ordered in bulk
quantities. For information, contact Special Sales Department,
AMACOM, a division of American Management Association, 1601
Broadway, New York, NY 10019.
This publication is designed to provide accurate and authoritative
information in regard to the subject matter covered. It is sold with the
understanding that the publisher is not engaged in rendering legal,
accounting, or other professional service. If legal advice or other
expert assistance is require, the services of a competent professional
person should be sought.
Library of Congress Cataloging-in-Publication Data
Bolten, Ernst F.
Managing time and space in the modern warehouse: with ready-to-
use forms, checklist & documentation / Ernst E Bolten.
p. cm.
Includes bibliographical references and index.
ISBN 0-8144-7956-1
1. WarehousesManagement. I. Title.
TS189.6.B65 1997
658.7'85dc21 97-3843
CIP
© 1997 Ernst F. Bolten.
All rights reserved.
Printed in the United States of America.
This publication may not be reproduced, stored in a retrieval system,
or transmitted in whole or in part, in any form or by any means,
electronic, mechanical, photocopying, recording, or otherwise,
without the prior written permission of AMACOM, a division of
American Management Association, 1601 Broadway, New York, NY
10019.
Printing number
10 9 8 7 6 5 4 3 2 1

 Page v

Contents
List of Exhibits ix
Preface xi
Acknowledgments xiii
Abbreviations and Acronyms xv
1. Inventories: Their Importance to Business Today 1
Inventory Is Money and Costs Money 2
Inventory Is Everywhere 3
Stockrooms 5
Consumer-Direct Distribution 5
Transportation Costs 7
2. Warehouses, Leasing, and Storage Costs 8
Private Warehousing 9
Public Warehousing 11
Contract Warehousing 11
Leased Warehousing 12
Warehousing Costs 14
3. Logistics Services and Outsourcing Potentials 17
Expanded Services and New Providers 17
Outsourcing Options 20
 Third-Party Services: Analysis and Decision 21

 Page vi
4. Selecting a Third-Party Service Provider 26
5. Warehouse Operations: Delivery and Storage 41
The Cycle of Activities 42
Depositor Responsibilities 43
Transport Carrier Responsibilities 45
Warehouse Responsibilities 46
6. Other Warehouse Operations 58
Cross-Docking 58
Order Picking 61
Packaging 66
Loading and Shipping 75
Inventory Control 79
7. The Compliance Manual 84
Daily Activity Report 85
Receipts: Inbound 85
Carrier Deliveries and Inspection of Goods 87
Returns From Customers 87
Discrepancies 88
Handling and Disposition of Damaged Goods 89
Withdrawals From Storage 89
Shipping Orders 89
 Stock Transfers 90
Labeling and Marking 90
Shipping Documents 91
Export Shipments 97
Shipping Control Record 101
Routing Instructions 101
Unsuitable Transportation Equipment 103
Demurrage and Detention Control 104
Spills, Leaks, Breakage 104
Invoicing 104
Annual Physical Inventory 107
8. Performance Standards and Audits 110
Performance Standards 110
Performance Measurement 112

 Page vii
9. Pricing of Warehouse Services, (Quotations, and 122
Contracts
Pricing Factors 122
Activity-Based Costing 123
Industry-Wide Cost Standards 125
Customer Activity Profile 125
Warehouse Quotation and Contract 125
10. Bar Coding and Electronic Data Interchange 132
The Universal Product Code 132
Electronic Data Interchange 134
11. Packaging: Containers and Methods 139
Specification Packaging 140
Performance-Oriented Packaging 140
Package Testing 145
12. Liability, Claims, and Insurance 152
Warehouse Liability 152
Liability of Carriers 155
Appendixes: Warehousing Documents 165
A Uniform Commercial Code (UCC), Article 7, Parts 167
1-6
B Cargo Security Advisory Standards 189
C Standard Terms and Conditions for Public and 207
 Contract Warehouse Operators
D Contract Warehouse Agreement 216
E Lease Agreement 231
F Bill of Lading (Domestic): Terms and Conditions 240
G Hazardous Materials Communications Standards 247
Suggested Readings and Sources 273
Chapter References 275
Trade Organizations and Seminars 281
Index 283

 Page ix

List of Exhibits
Exhibit 1-1. Inventory value and carrying cost. 3
Exhibit 2-1. Negotiation schedule and checklist. 15
Exhibit 2-2. Comparison of warehousing modes (capital 16
costs, expenses, risks).
Exhibit 3-1. From warehouse to third-party provider. 19
Exhibit 3-2. Worksheet for collecting outsourcing data. 25
Exhibit 4-1. Selection process checklist. 27
Exhibit 4-2. Request for proposal checklist. 28
Exhibit 4-3. Public and contract warehouse profile (partial 30
list general outline).
Exhibit 4-4. Customer logistics business profile. 32
Exhibit 4-5. Customer data sheet. 39
Exhibit 5-1. Incoming tally sheet. 52
Exhibit 5-2. Warehouse receipt. 53
Exhibit 5-3. Over, short, and damage report. 55
Exhibit 5-4. Receiving checklist. 56
Exhibit 6-1. Cross-docking checklist. 60
Exhibit 6-2. Customer order pick list. 63
Exhibit 6-3. Instructions for marking and tagging freight. 68
Exhibit 6-4. Pictorial precautionary markings. 70
Exhibit 6-5. Shipping checklist. 78
Exhibit 6-6. Inventory report. 81
Exhibit 6-7. Cycle count worksheet. 82
Exhibit 7-1. Daily activity report. 86
Exhibit 7-2. Straight bill of lading. 93
Exhibit 7-3. Materials safety data sheet. 98
Exhibit 7-4. Carrier points list. 102
Exhibit 7-5. Warehouse invoice (billing rates and amounts 105
not shown).

 Page x
Exhibit 8-1. Audit form and rating system. 114
Exhibit 9-1. Customer activity profile. 126
Exhibit 9-2. Warehouse quotation. 129
Exhibit 10-1. Electronic data interchange explanation. 135
Exhibit 11-1. Specifications for fiberboard boxes. 141
Exhibit 11-2. Performance testing of shipping containers. 146
Exhibit 12-1. Freight (cargo) claims form. 160

 Page xi

Preface
Are you using warehouses now? What kind? How much does it cost?
What functions do the warehouses perform? Are you using private,
public, or contract warehousing? Maybe you shouldn't be using a
warehouse at all. Perhaps it's time to let someone elsea third partydo
some or all of that work. If outsourcing appears to be an option, do
you know how to select a good warehousea logistics provider?
Technology is revolutionizing the generation, transmission, and use of
order fulfillment and shipping information. Integrated warehouse
management systems support logistics decisions throughout the
supply chain, thereby improving customer service, reducing response
time, and lowering inventory levels and costs. Emerging distribution
concepts are beginning to affect storage, materials handling, and
shipping methods. Experts are predicting a "paperless" and near
"peopleless" warehouse in the not-too-distant future even the very
need for warehousing is on the table.
While the basic concepts, principles, and objectives of adding value,
increasing customer service performance, raising quality, and
heightening cost-effectiveness will remain essentially the same, the
new tools of the trade technology and information managementwill
offer greater opportunities to improve business efficiency. The
logistics industry is predicted to be a $200 billion business by the year
2000. Warehousing may represent between one third and one half of
this amount.
There are many good texts on warehousing that deal with layout,
construction, types, advantages and disadvantages, use, and operation
of fixtures and materials-handling equipment; automation, inventory
management, information systems, methods and procedures,
personnel issues, labor, cost, and productivity measure-

 Page xii
ment. Most are cited in the Suggested Readings and Sources section
of this book as worthy of further study. Instead, this text attempts to
ask some basic questions about warehousing and shipping and present
a framework for decision making. It discusses practical operating
requirements as well as provides tips, do's and don'ts, background
information, and examples. You are encouraged to stay up to date on
industry developments through your own research, trade literature,
attendance at seminars, and exchange and networking with your
colleagues. It is hoped that the ideas and information presented in this
text will help both companies that are looking for enhanced
warehouse services and warehouse operators hoping to expand their
services.

 Page xiii

Acknowledgments
I wish to express my sincere appreciation and extend my deepest
thanks to friends and colleagues who gave me valuable assistance in
my research and preparation of this text: A. J. Langer of Langer
Transport and Warehousing Corporation and Anthony R. Becker,
president of Port Jersey Distribution Services, Inc., both of Jersey
City, New Jersey, and Robert T. Walther, chief operating officer of
Brook Warehousing Systems, Inc., Bridgewater, New Jersey. Each
contributed valuable insights, advice, and direction. I would also like
to recognize their cooperation in permitting me to reproduce
documents used in their companies.
Special thanks go to Michael Jenkins, president of the American
Warehouse Association, for permission to reproduce the documents
without which warehousing could not function and without which this
text would not be complete: the Contract Warehouse and Lease
Agreements, as well as the Standard Terms and Conditions for Public
and Contract Warehouse Operators.
Charles E. Jackson of the National Motor Freight Traffic Association
permitted me to use and reprint selected items and rules from the
National Motor Freight Classification. These rules impact carriers as
well as warehouse operators; besides, most warehouses operate truck
fleets. Robert A. Davison, vice president of ABF Freight Systems,
Inc., kindly supplied the carrier points list. Many, many thanks.
First and last, I would like to thank my wife, Patricia, who, for the
better part of a year wondered if I'd ever get "this thing" done! Thank
you, Pat, for your understanding, patience, and support.

 Page xv

Abbreviations and Acronyms

Activity-Based Costing
ABC
ADC Automated Data Collection
AGVS Automated Guided Vehicle System
AIS Automatic Identification Systems
ASN Advanced Shipping Notice
AS/RS Automated Storage and Retrieval System
AUTO.IDAutomated Identification
B/L Bill of Lading
C/A Certificate of Analysis
CFR Code of Federal Regulations
COPL Customer Order Pick List
CRP Continuous Replenishment Planning
DAR Daily Activity Report
DOT Department of Transportation
DRP Distribution Requirements Planning
DSD Direct Store Delivery
ECI Efficient Channel Integration
ECR Efficient Consumer Response
EDI Electronic Data Interchange
FIFO First-In, First-Out Inventory Valuation
FTZ Free Trade Zone
HFS Hands-Free Scanners
ICCTA Interstate Commerce Commission Termination
Act of 1995
ILM Integrated Logistics Management
ISO International Standards Organization
ISTA International Safe Transit Association
JIT Just In Time
LIFO Last-In, First-Out Inventory Valuation

 Page xvi
Less Than Truckload
LTL
MES Manufacturing Execution Systems
MRP Materials Requirement Planning
MSDS Material Safety Data Sheet
NMFC National Motor Freight Classification
NMFTANational Motor Freight Traffic Association
POS Point of Sale
QR Quick Response
RFID Radio Frequency Identification and Transmittal
ROA Return on Asset
ROC Return on Capital
ROI Return on Investment
SKU Stock Keeping Unit
TIRRA Trucking Industry Regulatory Reform Act of
1994
TMU Time Measurement Unit
TQM Total Quality Management
UCC Uniform Commercial Code
UPC Uniform Product Code
WINS Warehouse Information Network Standards
WMS Warehouse Management System

 Page 1

1
Inventories: Their Importance to Business Today
The purpose of business is to produce goods and provide services.
Every business uses a variety of hard resourcescommonly defined as
land, labor, and capitalcombined with soft resourcesthat is,
knowledge. In the process, business incurs costs and generates
revenue. In short, the objective of business is to optimize available
resources, minimize costs, and maximize profit.
Manufacturing and trading enterprisesunlike service businesses
convert resources into physical goods. They must have sufficient
quantities of goods available and ready for use, consumption, and
sale. Therefore, they must maintain physical inventory.
As they are produced or acquired in exchange for money, these goods
have absorbed costs. Therefore, it can be said that inventory is
physical resources converted into money. And until inventory is
turned into sales, it is money at rest. Money at rest costs money.
To mobilize this tied-up money, business strives to carry as little
inventory as necessary to serve customers effectively, keep inventory
as close as possible to where it is needed, and move inventory as fast
as possible.
Achieving these objectives is the mission of managers applying such
concepts as quick response (QR), efficient consumer response (ECR),
and continuous replenishment planning (CRP).
IS THIS YOUR MISSION?

 Page 2

Inventory Is Money and Costs Money

There are three ways that inventory represents money being spent:
1. Inventory is money tied up in assets. Producers employ a variety of
resourcescapital, materials, labor, knowledgeand convert them into an
asset called stock, or inventory.
2. Inventory costs money to carry until it is used or sold. This cost is
defined as carrying cost, which is the sum of all associated costs until
goods are sold. A significant part of this is interest, the time value of
money. Interest cost is based on inventory valuationfor example, first-
in, first-out (FIFO), last-in, first-out (LIFO)and is calculated for the
time period the inventory remains unsold.
3. Inventory generates expenses. These involve the costs of handling
inventory into and out of storage and the cost of storage, which
includes the costs for facilities and buildingsrent, depreciation,
utilities, insurance, security, and related cost elements.
Tip: Carefully assess the inventory cost item of
shrinkage, loss and damage, mysterious disappearance,
theft, pilferage, and obsolescence.

An integrated warehouse management system (WMS) will help

businesses achieve optimal use of space, time-efficient storage and
retrieval, near-perfect inventory accuracy, improved response time,
and a significant reduction in carrying cost. For instance, if you
reduce the storage time of a $1 million inventory by just one day, you
can reduce the carrying cost for interest aloneat a rate of 12% per
yearby $329.
Exhibit 1-1 gives another example of carrying costs that include
storage cost, obsolescence, and shrinkage. This example can be
expanded by adding the transit time to destination for individual
shipments that, especially in the case of long-distance transportation,
will result in additional time cost.
DO YOU KNOW WHAT THE INVENTORY CARRYING COST IS FOR YOUR BUSINESS?

 Page 3
Exhibit 1-1. Inventory value and carrying cost.
Inventory value at the end of o period is the sum (S) of
product value (P) plus the interest (I) for the storage
period (t) plus the storage cost (W), adjusted for loss
and damage, shrinkage, and obsolescence (D).

Inventory Is Everywhere
Sand and road salt in silos; building materials in lumber yards;
petroleum, oil, and gas in tanks at refineries, bulk terminals, and gas
stations; grain in elevators; cars in new and used car lotsall are
inventory. Also considered inventory are goods of all descriptions in
public and private warehouses and distribution centers; those in
supermarkets and department stores; and goods in-transit in trucks,
railcars, containers, barges, and ocean vessels.
You keep inventory as fuel in the gas tank of your car, office

 Page 4
supplies in the supply cabinet, food in the refrigerator, tools in your
workshop, and money in your wallet. Wherever your inventory may
be, you try to keep not too much, not too littlejust the fight amount for
what you need at any given timeand you rely on the prompt
availability of more when you need it.
Companies keep inventories to provide a continuous supply of raw
materials and semifinished goods, equipment, parts, tools, and
supplies to allow the uninterrupted manufacturing activities that yield
benefits from long production runs. These companies work to ensure
prompt availability of goods for sale to customers from plants,
distribution centers, regional or local branch offices, customer service
and store locations, as well as to respond to projected needs and
emergencies.
Types of Inventory
Raw materials must be readily available when manufacturing has
been scheduled; they are most likely to be stored at or near
manufacturing and producing locations in private warehouses.
Supplies aid and assist in production. They are used inand/or used
upduring production processes, after which some supplies are
recovered or recycled; others are discarded. Like raw materials, most
supplies are kept very near the point of usefor example, in company
stockrooms.
In-process and semifinished goods are materials subject to further
processing, conversion, and finishing; they are not yet ready to be
sold. They are generally kept in private warehouses, but can also be
stored in off-site locations, especially when they are to be transferred
from one company plant or location to another.
Packaging materials are materials and supplies necessary to make
goods ready for handling, temporary storage, transportation, and sale.
Typically, they are held in manufacturing, as well as on-site
warehouse locations.
Finished goods are ready-to-sell packaged merchandise, goods,
and materials. They are prime candidates for off-site storage at
company or public warehouses.
Replacement and spare parts are needed to maintain and repair a
company's own machinery and equipment, and provide repair service
and replacement parts for goods sold to customers.

 Page 5
The level and variety of parts inventories are very hard to forecast.
While unforeseen events such as breakdowns and accidents introduce
a degree of uncertainty, companies know when equipment wears out,
and operate preventive maintenance programs. For instance, auto and
appliance manufacturers have studied which parts need periodic
replacement or are damaged most frequently, developing sophisticated
replenishment formulas.
Stockrooms
Traditionally, a distinction has been made between a stockroom and a
pure warehouse. Stockrooms are located near production or sales
facilities to keep small amounts of goods and supplies handy. They
are just large enough to keep a very limited amount of goods to refill
for instance, supermarket and department store shelves; industrial
supply and consumer hardware stores; parts cages in machine, auto,
truck, and other repair shops; tool cages in production and assembly
plants; medical and surgical supplies in hospitals; paper and ink in
printing shops, and so on.
When a stock reaches a certain depletion levelout-of-stock, stock-out,
minimum reorder pointmore goods are ordered to restock, usually
from a supplier's warehouse.
Note: Stockrooms are typical examples of replacement
and spare parts inventories, and one of the targets of
consumer-direct distribution.
WHAT TYPES OF INVENTORIES DOES YOUR COMPANY KEEP?

Consumer-Direct Distribution
In the mid-1980s, a paradigm shift* took place: The application of
knowledgethat is, increasingly better informationto marketing and
distribution techniques changed the logistics of inventory
fundamentally.
* A "paradigm shift" can be defined as a fundamental change in the way
things are done.

 Page 6
Quality techniques began to take hold. Products became better,
consequently consumer quality expectations rose substantially.
Consumer buying attitudes became more demanding.
Diminishing profit margins began to drive down inventories at
manufacturers, wholesalers, distributors, and retailers.
Transportation deregulation spawned new logistics ventures.
Information technology advanced by leaps and bounds.
Information management was substituted for physical inventory.
Response times were reduced because consumers wanted their
goods immediately.
Responding to this paradigm shift and attempting to meet these more
demanding buyer attitudes, producers and providers of goods began to
take money out of the supply chain. Their goal was to drastically
reduce and ultimately eliminate even very small inventories by getting
the goods directly to the consumer. One result was that the role of the
wholesaler/distributor began to change dramatically. This new
strategy was called consumer-direct distribution.
Early attempts at consumer-direct marketing and distribution were the
Fuller Brush salesman, Tupperware parties, Sears, Roebuck &
Company's wishbook, and a large variety of early mail-order houses.
More recent examples include Amway, which sells a near-inclusive
product line through its unique marketing technique in countries all
over the world; Wal-Mart's revolution in food distribution and
merchandising; and The Home Depot, Staples, computer warehouses,
and a growing number of wholesale buying clubs. We have all
become acquainted with home shopping networks. In the near future,
we will be able to buy just about anything through interactive TV and
computer video services.
The benefits of consumer-direct distribution are as follows:
Availability of a broad range of goods in one place
Wide brand selection
Fewer supplier inventory locations
Reduced overall inventory levels and associated cost
Better customer service through self-service stores
Increased revenue to the supplier and lower cost to the consumer

 Page 7

Transportation Costs
The impact that customer-direct distribution has had on transportation
costs is not clear-cut. On the one hand, more frequent and smaller
shipments to more customer-direct destinations increases the
transportation cost on a per-unit-shipped basis. On the other hand,
load planning and consolidation techniques, as well as advances in
information technology, tend to reduce transportation costs.
Inventory management policies have always recognized the monetary
value of inventories and available trade-offs. For instance, you can
achieve lower per-unit prices when buying greater quantities, lower
per-unit manufacturing costs through longer production runs, and
lower per-unit shipping costs by shipping in larger quantities. In each
case, these lower costs generate and may offset some or all of the
higher cost of storing more inventory.
Today's managers use the extensive amount of immediately available
and detailed information to calculate best-cost solutions. Evolving
trends appear to show that even though transportation costs increase,
less inventoryat lower carrying costheld in fewer locations and
handled by fewer intermediaries such as brokers, wholesalers, and
distributors (often called the ''middle channel participants") can reduce
the total cost of the supply chain.
Time will tell how robust this new system is under adverse conditions,
and how the fundamental operational changes will hold up when raw
material, labor, and facility shortages occur, and suddenly scarce
resources must be allocated.

 Page 8

2
Warehouses, Leasing, and Storage Costs
As discussed in Chapter 1, every member of the supply chain seeks to
minimize its inventory by bringing the producer closer to the
consumer. While this is readily achieved for general merchandise,
food, and groceries, there remain circumstances in which a specialized
facility is needed, and a special service is required, which may not be
available in a desired location. Depositors, therefore, must make a
series of decisions as to which warehouse and which mode of
operation best meets a company's marketing objectives, operating and
administrative competencies, and its understanding of, and
willingness to accept, defined levels of risks and costs. Types of
warehouses include the following:
General merchandise warehouses are used to hold just about any
type of goods.
Food warehouses are built and maintained to stringent cleanliness
specifications.
Bonded warehouses are for handling valuable and taxable goods.
Customs warehouses, often located in foreign trade zones, (FTZs)
are for dutiable goods.
Temperature-controlled warehouses handle perishable and
temperature-sensitive goods.
Hazardous-materials warehouses are for storing regulated
products or commodities.
Liquid and dry-bulk storage terminals and transfer facilities
include tanks, silos, and elevators, as well as rail tank or hopper car-
to-tank or hopper truck transfer; intermodal container

 Page 9
storage and transfer, loading and unloading, break-bulk and
consolidation facilities.
Each type of warehouse or storage facility can be operated as a
private, public, contract, or leased facility.
Private Warehousing
A large portion of inventory is held in private warehouses. These
warehouses represent a substantial corporate fixed investment in land,
building, and equipment. Their operation generates labor, operating
and administrative expenses, and obligations and liabilities.
Private warehouses can be on-site, either at a central location or
dispersed throughout the manufacturing facilities. They store
purchased raw materials, work in process, semifinished as well as
resale goods, and materials and supplies to package finished goods for
sale and shipment to customers. Off-site warehouses are satellite
facilities located close to marketing areas to store excess on-site
inventory and to serve as distribution centers for finished goods.
Sometimes these locations are also used to further process, assemble,
kit, package, and consolidate goods for shipment. Off-site locations
are commonly used to hold replacement and spare parts and provide
repair service.
The seven main considerations in owning and/or operating a private
warehouse are:
1. Responsiveness. Many companies believe that private facilities
offer more operating freedom in responding to customer demands and
can meet internal storage requirements for raw materials, supplies,
and work in process. Few companies, however, use on-site
warehousing space efficiently. You've probably heard this: "It's there;
you've got to pay for it; and it can't be used for anything else
anyway." Because of business fluctuations, shortages or excess space
are common results.
2. Availability and cost of capital. This raises the question: Should we
invest limited capital resources in warehousing (nonpro-

 Page 10
ductive) or in manufacturing (productive) facilities? Most
companies prioritize capital investment requests based on return on
asset (ROA), return on investment (ROI), and/or return on capital
(ROC). Warehouses must, but rarely do, meet these stringent capital
investment criteria and thus end up last on the priority list. Some
managers, for example, will not approve requests for storage facilities
at all, only for manufacturing facilities and equipment!
3. Management. Private warehouses should be managed with the
same know-how as are public facilities. However, they are often
controlled and run by sales, marketing, or manufacturing managers to
achieve narrow, self-serving objectivesfor example, field or branch
warehouses to service just their customers.
4. Warehouse labor competence and experience. Warehouse work
requires a labor force trained in loading and unloading trucks, railcars,
and containers; the safe and space-efficient operation of materials-
handling equipment; and put-away, picking, packing, staging, and
related jobs.
When and where union rules allow, warehousing activities are often
assigned to production personnel: Joe will put this away when he is
finished working on the machine and has nothing else to do. Be sure
to ascertain the union status of your prospective third-party
warehousing and/or logistics provider.
5. Control and visibility. Inventory control, optimum space utilization,
maintenance of facilities and equipment, internal materials flow,
handling routines, supervision, and associated cost control are tasks
that more often than not are left too casually to production or
marketing personnel. Successful integration of these functions into the
organization is a full-time effort that must be carried out by materials-
handling specialists.
6. Flexibility. Private on-site, as well as off-site, warehouses offer
little, if any, inventory location flexibility.
7. Risks and liability. It is important to understand that in a private
warehouse, all risks for damage and loss to facilities and inventory, as
well as personal harm and injury, are borne by the company.
HOW WELL DO YOU CONTROL YOUR PRIVATE WAREHOUSING?

 Page 11

Public Warehousing
Public warehousing offers users* these following five advantages:
1. Maximum inventory location flexibility. Depositors are not tied to a
private facility in a fixed location for long periods of time; they can
move in and out as needs indicate.
2. Short-term commitment. The commitment, or contract, covers
receiving, storage, handling, shipping, and related services for a given
time, usually on a monthly basis.
3. Professional operation. A trained and experienced staff relieves
users of the burdensome operating, labor, safety, insurance,
environmental, legal, and related responsibilities.
4. Predictable rates. These are charged on a per-unit occupancy and/or
handling basis, as quoted or negotiated. Examples are dollars per
square foot, per pallet, case, drum, or other stock keeping unit (SKU),
only for the space and period of time used.
5. Fewer risks and liabilities. Public warehouse operators accept
liability and risks in accordance with the Uniform Commercial Code
(UC; see Appendix A) and the Standard Terms and Conditions for
Public and Contract Warehouse Operators.
Contract Warehousing
Contract warehousing is a variation on public warehousing, whereby
users can do the following:
Enter long-term contracts for space and/or services.
Trade off inventory location flexibility for guaranteed space over
the contract period and a known price that is usually lower than public
warehousing rates.
 Contract for either an entire building or for a defined, fixed portion
of square-foot or cubic-foot space, sometimes with flexible options
for additional, as well as allowances for unused, space.
Assume negotiated levels and types of risks.
* In public warehousing, users are called depositors.

 Page 12

Leased Warehousing
Leasing all or part of warehouse structures and facilities affords users*
the benefits of private warehousing while using someone else's (the
lessor's) property. This alternative is chosen especially to
accommodate fairly stable inventory levels. However, leasing is not
feasible to accommodate inventories that are subject to wide swings as
a result of seasonal demand, special sales promotions, opportunity
purchases, or safety stock buildups in anticipation of shortages.
Lease commitments are typically long termat least a yearbut mostly
for periods of five, ten, or more years. The lessor retains ownership of
the real estate, with all its obligations and benefits. The lessee
assumes part of, or all of, the responsibilities and pays for the
corresponding expenses and costs that result from using the property,
as defined in the lease. The major expense categories are:
Land/grounds
Depreciation when the facility is owned by the lessor or operator
Mortgage interest when the facility is financed by the operator
Rent or sublease when the owner rents or leases the facility
Roads, truck or trailer drop, holding and parking areas
Docks for rail and truck traffic
Taxes and permits
Insurance for building
Equipment, stationary pallet racks, stacking frames, shelves, belt
and roller conveyors
Automated guided vehicle (AGV) systems, overhead cranes, bins
 Automatic identification systems (AIS)
Communication, automated storage and retrieval systems (AS/RS)
Heating, cooling, air-conditioning, ventilating machinery
Handling equipment: lift trucks, tractors, carriers Tools, supplies
Maintenance of roads, grounds, facility, building, offices
Utilities: electricity, water, gas, fuel
* In a leasing contract the user (depositor) is called a lessee.

 Page 13
Security, safety, and housekeeping
Personal property, liability, workers' compensation insurance
Wages, salaries, and benefits (including labor and supervision,
administration and management)
Important! Before you commit to any lease, investigate
the status of zoning, permits, facility access and egress,
and, where it appears to pose potential problems,
pertinent variances. You may even go as far as
requesting disclosure of any pending legal action against
your prospective lessor. These precautions may save you
big legal bucks later on!

Types of Leases
Leases must be carefully negotiated and structured to reflect who is
responsible for what, and to what extent. Generally, "gross" and "net"
lease indicates which of the expense categories are the responsibility
of landlord or tenant; the terms "flat rental'' or "adjustable" lease
indicate the periodic, fixed, or variable amount to be paid by the
tenant. For example:
Gross lease generally means that the tenant pays the fixed and
variable cost of the facility, maintenance, building insurance, real
estate taxes, utilities, security, and so on.
Net, net-net, and net-net-net lease means that the tenant is
responsible for fewer and fewer fixed and variable expense categories.
For example, in a net lease, the tenant is responsible for facility,
building maintenance, building insurance, and real estate costs,
whereas in a net-net-net lease the tenant only pays for facility and
building maintenance costs.
Flat rental lease usually requires the payment of monthly rent,
which remains unchanged for the duration of the rental period. The
rental fee can include or exclude specified services, such as utilities,
security, and maintenance.
Adjustable (graduated or graded) lease generally means that the
tenant pays an agreed rental fee that, after an initial period at a fixed
rental, can be escalated or de-escalated for successive lease periods,

 Page 14
based on specific economic indicators such as the consumer price
index (CPI).
Percentage lease generally means that the tenant pays an agreed
minimum rental fee plus a percentage of the tenant's volume turnover,
sales, or other specified activity.
Since lease descriptions and terms vary, the responsibilities of the
parties must be carefully defined and clearly expressed in lease
agreements or contracts. Whichever type of lease agreement you
enter, the best advice is:
Always picture yourself in court!
Contracts are agreements between parties enforceable in
courtexpressing in legal terms the objectives that the contracting
parties intend to achieve. They should be designed, negotiated, and
written with utmost care. Unfortunately, any shortcomings in the
contractmisunderstood or poorly defined intent, omissions, oversights,
imprecise languagebecome evident just when a solid document is
needed most, namely during disputes. The form, format, and language
of any contract must, therefore, always be developed and/or reviewed
by legal experts.
Tip: Negotiating the lease agreement should follow a
prescribed time and action schedule as shown in Exhibit
2-1.

Warehousing Costs
The differences among private, public, and contract warehousing
become readily apparent when comparing the depositor's warehousing
cost structurethat is, the type of expenses that may be incurred and
assumed by each party, as shown in Exhibit 2-2.
Companies should review the design of their supply chain and related
inventory policies and practices, then methodically match their
requirements with available private, "pure" public, or contract
warehousing alternatives. Corresponding cost structures must be

Exhibit 2-1. Negotiation schedule and checklist.
Type of Vendor Warehouse _ Transfer Facility
Carrier _ Third-Party Provider
Name/Address of Vendor:
_____________________________________________________________
__________________________________________________________________
Name of Vendor
Contact:___________________________________________________________
Purpose of
Negotiations:_______________________________________________________
__________________________________________________________________
Date:______________Prepared
by:______________________________________________________
__________________________________________________________________
Status
StartedCompleted New
Date
1 .Compile information and data Name/s of
[ ] [ ] [ ]
person/s consulted:
2 .Advance notice to vendor
[ ] [ ] [ ]
3. Prepare request for proposal
[ ] [ ] [ ]
4. Receive reply from vendor
[ ] [ ] [ ]
5 Identify/select preferred vendor
[ ] [ ] [ ]
6. Review vendor presentation/bid
[ ] [ ] [ ]
7. Audit selected vendor
[ ] [ ] [ ]
8. User to review contract/agreement
[ ] [ ] [ ]
9. Legal review contract/agreement
[ ] [ ] [ ]
9. Legal review contract/agreement
[ ] [ ] [ ]
10 Meeting with selected vendor to review final
[ ] [ ] [ ]
contract draft

 Page 16
Exhibit 2-2. Comparison of warehousing modes (capital costs,
expenses, risks).
Public Warehouse
Private (Company) "Pure" Public Warehouse Contract
Warehouse Warehouse
Capital Cost Capital Cost Lease
(Capitalized)
Building cost (Not applicable) Based on
(depreciation) contracted
responsibilities
for land,
buildings, and
facilities
Facilities and
equipment
Materials-handling
equipment
(Un)loading
docks/rail sidings
Expenses Expenses Expenses
Safety equipment Per-unit cost including cost As contracted
associated with care,
custody, and control"
Insurance, taxes,
permits
Maintenance/repair
Utilities
Site security
Salaries/wages
Employee benefits
Rates/Fees Rates/Fees Rates/Fees
Not applicable Time-based: Time- or
Storage charges transaction-
based, as
contracted
Transaction-based:
Handling changes; in/out
special handling fees,
documentation, special
services, reporting, and
other costs/fees
Risks Risks Risks
All risks are Risks are defined and Risks are
assumed by the assumed in accordance with assigned and
company. the standard terms and assumed as
conditions of the (amended specified in the
as needed) worehouse lease and/or
agreement. contract.

analyzed, and the type and degree of responsibilities negotiated to be

reflected in a mutually acceptable, short- or long-term agreement. The
increasing use of third parties to carry out the rapidly expanding
functions of warehousing are the subject of Chapter 3.

 Page 17

3
Logistics Services and Outsourcing Potentials
"If you always do what you always did, you will always get what you always
got."
Mark Twain

Users and providers of logistics services are meeting in a new

environment, a business world where new concepts and practices of
customer service and inventory management are supported by rapidly
developing technology to reduce operating cost, inventory volume,
and corresponding expenses. This chapter discusses some of these
new concepts.
Expanded Services and New Providers
In an attempt to reduce costs, users of logistics services are radically
changing the way they manage their supply chain. They have long
known, for instance, that capital tied up in private warehousing could
be more profitably applied to manufacturing and production.
Moreover, after downsizing, many companies now recognize that they
no longer possess the special expertise, resources, and administrative
skills to operate logistics functions efficiently. Therefore, by
transferring their essential logistics functions to specialists, companies
can concentrate on their core business. Their costs are reduced
because the companies often can employ logistics services on a
variable-cost basisthat is, they can occupy warehousing space and/or
hire transport carriers only as they are needed.
Concurrently, providers of those logistics serviceswarehouse

 Page 18
operators, freight forwarders, common and contract carriers*mare
competing to meet current and future needs. They have learned to act
as extensions of their clients by offering professional logistics
expertise, state-of-the-art services and technology, and a trained,
specialized labor force.
Transportation deregulation has probably been the single most
important factor in this unfolding development, the main force in the
emergence of third-party logistics providers. These new services come
in a variety of forms:
Warehouse operators are expanding their traditional warehousing
functions of receiving, storing, order processing, and shipping by
offering a growing list of value-added distribution services, including
inventory management and control, order fulfillment, and pick and
pack activities (see Exhibit 3-1).
Transportation carriers, especially trucking companies, which in
many cases already provided some storage and warehousing services,
are expanding this function.
Freight forwarders are capitalizing on their expertise in domestic
and international business to combine with water, surface, and air
carriers on the one hand, and storage and distribution facilities on the
other, to offer a total logistics package.
Logistics companies are sprouting up left and right.
Caution! Providing third-party logistics is a new
industry. To date, there have been as many successes as
there have been failures. Poor definition of objectives
and need, hasty selection of partners, and insufficient
internal and external communications have been the
overriding causes of failure.
Exhibit 3-1 illustrates how traditional single-service providers have, in
stages and over a period of time, grown into true third-party providers.
* The Interstate Commerce Commission Termination Act of 1995 has
eliminated the traditionaland familiarlegal distinction between common
and contract carriers.
For more information, see "Third Parties: Aiming at Profits," Distribution,
April 1996, pp. 22-40.

 Page 19
Exhibit 3-1. From warehouse to third-party provider.
Stage A Stage B Stage C
1960s-1970s 1980s-early 1990s Mid-1990s
Traditional Expanded Logistics Services Provider/
Warehousing Warehousing Third-Party Services
Services Services
Materials management
Distribution services
(national/global)
Impart clearance
Bonding Bonding Bonding
Inbound transportation
Receiving Receiving Receiving
Bar coding
Cross-docking Cross-docking
Storage Storage Storage
Inventory management and
control
Shipment scheduling
Order processing Order processing Orders processing
Reporting EDI reporting EDI reporting
Picking Picking Picking
(Product) subassembly
Order assembly Order assembly Order assembly
(Re) packaging (Re)packaging (Re) packaging
Stretch- shrink- Stretch- shrink-wrapping
wrapping
Palletizing/unitizingPalletizing/unitizingPalletizing/unitizing
Label/mark/stencil Label/mark/stencil Labeling/marking/stenciling
Shipping Shipping Shipping
Documentation Documentation Documentation
Outbound Outboard transportation
transportation
Export documentation
FTZ operations
JIT/ECR/QR services
Freight rote negotiation
Carriers/route selection
Freight claims handling
Freight audit/payment
Safety audits/reviews
Regulatory compliance
review
Performance measurement
Returns from customers
Customer invoicing

 Page 20
HAVE YOUR WAREHOUSING NEEDS CHANGEDHOW? ARE YOU CURRENTLY OUTSOURCING?

Outsourcing Options
A number of corporate activities have long been outsourced to third
parties: accounting to CPAs; annual financial reporting to public
auditing firms; labor negotiations to negotiators and arbitrators; legal
services to law firms; safety, OSHA, and environmental matters to
consulting firms; plant and equipment maintenance to maintenance
contractors; freight-bill audit and payment to outside auditors and
banks; export forwarding and import clearance to brokers and freight
forwarders; consolidation and distribution to consolidators and
warehouses; transportation and associated services to contract
carriersin fact, traditional warehousing and transportation in
themselves are outsourced functions!
Outsourcing is a paradigm shiftit changes the way we work. Not every
business can, should, or want to outsource logistics functions that are
currently performed within the organization. To successfully
outsource any corporate function means asking some fundamental
questions:
1. What is the outsourcing objectivereduction of cost or reduction of
personnel?
2. Are company personnel currently performing the function
satisfactorily?
3. Does the organization at this time lack requisite expertise?
4. Which functions could or should be outsourced?
5. What will be the benefits of outsourcing?
6. What will the new cost levels be? Can real cost reductions be
calculated?
7. How will outsourcing affect the way the organization operates?
8. Will you lose control? Would this be critical?
9. Will things be better?
10. How will quality be affected?
Outsourcing is a process of reengineering. Authors Michael Hammer
and James Champy in their book Reengineering the Corpora-

 Page 21
tion, ask the question, Why do we do what we do at all? They explain
that "reengineering is about inventing new approaches to process
structure that bear little or no resemblance to those of previous eras.*
The process of deciding whether or not to outsource and, if the answer
is yes, how to select the outsourcing partner is outlined in the
following pages and developed further in Chapter 4.
Third-Party Services: Analysis and Decision
Review the Present Arrangement
Look at the investment in your logistics or distribution network: your
warehouses and distribution centers, the modes and types of
transportation, and the carriers you use.
Is your investment in logistics facilities and equipment as
productive as your manufacturing investment?
Could you invest in state-of-the-art logistics hardware, software,
and equipment? Would you want to do this?
What are your investment criteria? How do you prioritize?
What are the strengths and weaknesses in your current system?
What is the value-added?
What is your current structure of inventory and related taxes? Will
this change?
What is your current liability exposure?
How will your insurance requirements be affected?
Develop Your Marketing (Qualitative) Information
Collect solid, reliable marketing-logistics information about your
products, customers, suppliers, manufacturing process, inventory, and
network from your existing data bases. If necessary, simulate your
network with the aid of modeling techniques.
* Michael Hammer and James Champy, Reengineering the Corporation: A
Manifesto for Business Revolution (New York: HarperCollins, 1993), p.
49.

 Page 22
Products
What is their value?
What are their handling, storage, and transportation
characteristicsshelf life, hazard?
Are your products seasonal?
Do they need special packaging?
Do they need temperature protection?
What is your loss and damage experience?
What is your obsolescence factor?
How much space do you need?
Which warehouse services do you need?
Customers
What are your domestic or global marketing areas and regions?
What are your channels of distribution?
Who are your customers?
Where are they locatedare they concentrated or dispersed?
What are your customers' delivery requirements?
What are your customers' value-added service requirements?
What are your modes and methods of outbound transportation?
Are they effective and cost-efficient?
What are your freight terms?
 How many customers have you lost as a result of shipping errors?
Are your products readily available from the competition?
Suppliers
What determines your need for raw materials or supplies
inventory?
Are raw materials and supplies readily available or do they have to
be made to order?
What are your ordering patterns?
What are your freight terms?
Where are your suppliers located?
What are your receiving requirements?
Are they being met consistently?

 Page 23
What are your methods and modes of inbound transportation? Are
they cost-efficient?
Are delivery transit times reliable?
Manufacturing Process
Do your manufacturing processes and/or methods dictate your
inventory levels?
Do you manufacture ''to order" or "to inventory"? Is there always
something left over?
Could you match customer orders to production runs?
How good and reliable is your production and order scheduling?
Inventory
What determines your need for finished goods inventorycustomer
ordering patterns and practices, market presence and share, or
competition?
Have quality demands (JIT, ECR, QR, ISO 9000; see
Abbreviations and Acronyms) increased or decreased inventory
locations and volumes?
Have you calculated your response time?
What have you done to shorten your response time?
What determines your need for raw materials inventory?
Are your sources of supply reliable?
How responsive are your vendors?
Do you have or can you develop alternative sources?
 Could you reduce raw materials and supplies inventories and
related warehousing cost by changing your purchasing practices and
method of production and scheduling?
Distribution Network
Why and how were inventory locations selected?
Are transportation transit times realistic?
How are inventory availability and required inventory levels
determined?
Does each location provide enough or too much space?
What is the performance of each?
Could you reduce the number of warehouse locations and

 Page 24
still maintain the service levels demanded by your customers?
In particular, a network review will help you determine how you
could or should restructure your distribution and logistics network. It
will help you answer the basic questions: (1) are the warehouses in the
right location? Is the inventory in the right warehouse? and (2) Do you
need warehouses at all? The next step is to collect quantitative
information on your operations.
Develop Your Quantitative Information
Use the form in Exhibit 3-2 to assemble the relevant quantitative data.
Make the Decision
Should you outsource any logistics functions? If the answer is yes,
you may decide to implement transfer of responsibilities in phases.
Perhaps start with carrier selection, followed by order processing,
order fulfillment, pick and pack, warehouse management, andmost
likely as a last functioninventory management. Regardless of the
scope of your outsourcing, the process and time schedule must be
communicated to all involved well ahead of the target starting date.
Prepare for a rough time during the transition!

 Page 25
Exhibit 3-2. Worksheet for collecting outsourcing data.
Shipments
Number Volume Size Cost
Inbound (I/B), from
suppliers
Domestic ___________________________________________
Import ___________________________________________
Outbound (O/B), to
customers
Domestic ___________________________________________
Export ___________________________________________
Intrasystem
From plant to ___________________________________________
warehouse
Between ___________________________________________
warehouses
Transportation Modes
Railroad ___________________________________________
Highway: ___________________________________________
Truckload (TL) ___________________________________________
Less-than truckload ___________________________________________
(LTL)
Container ___________________________________________
Parcel; express ___________________________________________
shipments
Customer pickup ___________________________________________
Freight Terms
Who pays the freight?
Inbound Outbound
_ Vendor (prepaid) _Shipper (prepaid)
_ Receiver (collect) _ Customer (collect)
Warehouses/Distribution Centers
Warehouses/Distribution Centers
Total inventory volume (average) ___________ __________ __________
Square/cubic feet used
Throughput/Activity:
Number of receipts
Number of orders
Number of shipments
Special services (describe)
Cost:
Fixed and variable
Storage (time-based)
Handling (transaction-based)
Administrative overhead
Allocations
Private Public Contract
___________ __________ __________
___________ __________ __________
___________ __________ __________
___________ __________ __________
___________ __________ __________
___________ __________ __________
___________ __________ __________
___________ __________ __________
___________ __________ __________
___________ __________ __________
___________ __________ __________
 Page 26

4
Selecting a Third-Party Service Provider
"After all the concepts have been developed, the meetings are over and an
action plan has been developed, everything boils down to hard, dirty work!"
Peter Drucker, at a New York University seminar

Once you have developed your marketing, logistics, and quantitative

information, and have decided to outsource, you are ready to select a
suitable third-party provider to become your long-term business
partner.
The first comprehensive listing of more than 400 third-party logistics
providers and outsourcing organizations has been produced by
Transportation and Distribution magazine. This T&D Contract
Logistics Data Base will be updated annually. See the References for
Chapter 4 for information on ordering.
Important! Keep in mind that your customers will come
into contact with your third-party provider more
frequently than with your own representatives!

The following pages contain a checklist for the outsourcing selection

process (Exhibit 4-1), plus other exhibits to help in evaluating third-
party logistics providers. Exhibit 4-2, a request for proposal checklist,
will help you identify the value-added services to be outsourced and
compare your service needs with your prospective service provider's
operating capabilities. Exhibit 4-3, a public and contract warehouse
profile, is a means for describing your prospec-

 Page 27
Exhibit 4-1. Selection process checklist.
1. Verify each prospective partner's credentials. Check:
_ Financial status, annual reports, bank connections, Dun &
Bradstreet, and similar financial checks, reviews, evaluations
_ ISO 9000 certification, quality awards
_ Client references (network with your colleagues; don't just take
the prospects' word)
_ Service capabilities
_ Labor union status
2. Visit and inspect each others' facilities.
_ Assign/accept only qualified personnel to conduct inspections!
3. Prepare a general bidding format.
4. Solicit a request for proposal (RFP). The RFP should address:
_ Which functions and activities you want to contract/outsource
_ Location and geographic coverage
_ Projected volumes to be received, handled, and shipped
_ Customer service needs and requirements
_ Performance expectations, time/service standards, order cycle
time
_ Mutually acceptable measurements and control parameters
_ Audit, review, and improvement process
_ Communications methods and procedures
 _ Data links and interfaces
5. Assign an authorized liaison parson.
_ Assign only qualified personnel knowledgeable in all aspects of
the services to be outsourced. This person becomes the link
between your company and the third-party provider during the
evaluation and implementation period.
6. Prospects' bids must contain:
_ Proposed contract format, terms, and conditions
_ Itemized contract cost
_ Incentives and penalties
7. Review and approve contract proposal with assistance of legal
experts.
8. Select partner and negotiate the contract.

 Page 28
Exhibit 4-2. Request for proposal checklist.
Name/Address of Service
Provider:_____________________________________
Services Provided by Service Services Needed by
Provider Client
_ Order fulfillment, back orders
_
_ Transportation modes
_
_ Counting, weighing
_
_ Cross-docking
_
_ Breakbulk
_
_ Segregation/sorting
_
_ Bonding
_
_ Storage
_
_ In-transit mixing/assembly
_
_ Repackaging
_
_ Kitting/subassembly
_
_ Picking, packing
_
_ Shrink- stretch-wrapping
_
_ Marking, labeling, stenciling
_
_ Crating
_
_ Blocking, bracing
_
_ Seal application and accounting
_
_ Sampling _
_ Product classification
_
_ Freight rating
_
_ Documentation
_
_ Consolidation, pooling
_
_ Outbound transportation
_
_ Distribution
_
_ Freight bill payment
_
_ Loss prevention
_
_ Claims handling
_
_ Inventory control
_
_ Other services (specify)
_
Total Cost of RFP $_____________________

 Page 29
tive service provider's facilities and outlining general information
you'll need to compare providers.
To use these forms, prepare one checklist for each prospective vendor,
attach it to your request for a proposal, enter the results on a
spreadsheet, then compare facilities and services needed to services
provided, weighing the total cost quoted in each proposal.
For additional help, Exhibits 4-4 and 4-5 are examples of a customer
profile and a data sheet. They include such information as regulatory
requirements for new customers and a product inventory summary.
Our examples are documents from an actual warehousing provider,
Brook Warehousing Systems.
Have you chosen your new provider? What is your
implementation schedule?

 Page 30
Exhibit 4-3. Public and contract warehouse profile (partial listgeneral
outline).
Name/Address of Service Provider:
_______________________________
GENERAL INFORMATION
Type of storage facility
General merchandise (loose/packaged); special facility
Bulk liquid and dry tank/silo terminal
Name and address of warehouse operator
City, county, state; "mail-to"; street and P.O. box; "ship-to"; zip
code, FIPS code
Hours of operation
Customer service/office
Warehouse receiving and shipping
Communication access numbers24 hours
Emergency response (accident, hazardous materials, fire)
Office phones; cellular phones
Fax; EDI access codes; e-mail
Contact personnel names, phones, beepers for: customer service,
operations, safety, shipping, transportation
Warehouse management system capabilities
Order fulfillment methods and procedures
 Technology and equipment used
Insurance limits
Facility/buildings: public liability/fire disaster
Workers' compensation
Warehouseman's liability product/contents
Cargo (when transportation is provided)
Taxes
Local, county, state
Personal property (inventory)
(Exhibit continued on next page)

 Page 31
(Exhibit continued from previous page)
Sales and use (turnover/transaction)
Corporate income
Foreign trade zone, duty-delayed
FACILITY DESCRIPTIONOUTLINE
Premises
Security: controlled access, guard service, fences, surveillance,
closed-circuit TV, alarm systems
Floor load capacity (restrictions)
Ceiling height (restrictions)
Dock facilities and equipment
Weather protection
Lighting; sprinklers
Temperature control
Personnel
Management/supervision
Labor: numbers of personnel/union status
Compensation: salaried/hourly
Incentives/workforce stability/personnel turnover
Training
Space
In square feet/cubic feet for:
Office; workers and drivers lounge
Cross-docking
Dock/unloading/receiving
Storage/aisles
Handling/packing area
Buffer/staging area
Loading/shipping area
Empty pallet storage; trash disposal area
Temperature/humidity control: ambient/heated/air
conditioning/cooling/freezer
Product segregation: Commodities, food-grade, chemicals,
pharmaceuticals
Hazardous materials areas

Exhibit 4-4. Customer logistics business profile.
BROOK WAREHOUSING SYSTEMS
Company:
____________________________________________________________
Address: __________________________________________________________
__________________________________________________________________
__________________________________________________________________
Phone: ________________________
Facsimile: ______________________
Prepared by: ____________________
Title: __________________________
Date: __________________________
-1-
Reproduced with permission of Brook Warehousing Systems, P.O. Box 6068,
Bridgewater, N.J. 08807.

1. PRODUCT AND INVENTORY INFORMATION
A. Provide a list of products to be stored at Brook with corresponding U.S. D.O.T
classification. See attached suggested format.
Percentage of hazards ________ to non-hazards ________
Is your material described as hazardous under:
40CFR/EPA ____ 49CFR/DOT ____ 29CFR/OSHA ____ IMO/IMDG ____
ICAO/IATA____
Are you able to provide Proper Shipping Descriptions for Haz and Non-Haz mate
under:
DOT ____ IATA/Air Transport ____ IMO/Marine Transport
Do your product labels list the CAS#? ________
B. Freight class for each product:
___________________________________________________
C. Type of package for each product:
_______________________________________________
D. Pallet size(s): Length ____________ Width ____________
E. Average cases per pellet (if applicable):
____________________________________________
F. Average weight per case (if applicable):
____________________________________________
G. Total SKUs in inventory:
_______________________________________________________
H. Estimated storage configuration: Rack (%)________ Floor (%)________
I. Bulk/floor stacking limits: ________________________ pallets high
J. Temperature control requirements:
Ambient ________% Protect from freezing ________%
K. Rotation requirements: FIFO ________ LIFO ________ Lot/batch control Y/N
L. Annualized inventory tumover: ______________________________________
times
M. Inventory levels:
Minimum KLB ________ Average KLB ________ Maximum KLB ________
N. Physical inventory frequency:
N. Physical inventory frequency:
__________________________________________________________________
2. INBOUND MERCHANDISE/RECEIVING INFORMATION
If available, please enclose any relevant actual/historical volume information.
A. Inbound merchandise received by:
Truck/LTL ________% Truck/Truckload ________%
Ocean container ________% Other ________%
(describe) _________________________________________________________
B. Received on: Pallets ________% Floor ________%
Stretch-wrapped Y/N
-2-

Exhibit 4-4. (continued)
2. INBOUND MERCHANDISE/RECEIVING INFORMATION
(continued)
C. Average size of receipt:
Pieces Number of
_________________pallets___________________________
Number of line Weight___________________________________
items
_____________
D. Inbound frequency:
Number per Month___________________________________
week________________
E. Inbound(s) received from (locations):
_____________________________________________
__________________________________________________________________
F. Full pallet quantities received: Y/N
G. What is your policy with regard to damages?
__________________________________________________________________
H. Recoupeage policy:
__________________________________________________________
3. OUYBOUND/SHIPMENT INFORMATION
If available, please enclose any relevant actual/historical volume information.
A. Outbound merchandise shipped by:
Truck/LTL Truck/Truckload __________%
______________%
Ocean container Rail ____________________%
__________%
UPS Other ___________________%
___________________% (describe)
B. Shipped on:
Pallets ____________% Slipsheets ____________% Floor
Pallets ____________% Slipsheets ____________% Floor
____________%
C. Average size of shipment: Number of pieces: ____
No. pallets: No. line items:
________________________ __________________________
Weight Min. order size:
____________________________________________________
D. Shipment frequency:
Number per week Month
___________________ ________________________________
E. Order selection:
Full cases/bags/drums/etc. ____________________%
Full-pallet quantities ____________________________________%
Less-than-case quantities (pick-n-pack) ________________%
4. CUSTOMER SERVICE/ADMINISTRATION
A. Order transmission: Fax ________ E.D.I. ________ Mail
________
B. Do you reconcile your inventory on a monthly basis? Y/N
- 3 -

5. TRANSPORTATION
If available, please enclose any actual/historical tonnage-to-point(s)
information for both in-bound and outbound freight.
A. Who routes and pays for inbound transportation? ____
B. Who mutes and pays for outbound transportation? ____
C. Customer pickup/will call ____% versus prepaid ____%
What carriers are you presently using?
Short haul Long haul
________________________________________________________
Pier work (if any) Trailer
________________ load_________________________________
D. Special services: Reefer ________%
Temperature required ________°F Dry van ________%
Other
__________________________________________________________________
E. Would you like pricing from Con-Brook Transportation? Y/N
Brook's customers receive a special discount program. Con-Brook provides truckl
LTL, container drayage, and specialized service to many of Brook's customers.
6. VALUE-ADDED SERYICES
Brook Warehousing Systems can provide consulting services in these areas:
Regulatory interpretation and monitoring
Y/N
DOT OSHA, EPA, ICAO/IATA, IMO training and compliance
Y/N
programs
Environmental/safety audits
Y/N
Logistics management consulting services
Y/N
Label design assistance
Y/N
Carrier qualification and review
Y/N
MSDS preparation and publication
Y/N
Representation at industry or regulatory meetings
Representation at industry or regulatory meetings
Y/N
Site selection
Y/N
Facility design/layout
Y/N
- 4 -
(continues)

Exhibit 4-4. (continued)
Brook Warehousing Systems
Regulatory Requirements for New Customers
The following information is needed for Brook Warehousing to prepare for
storing customers' products that ore regulated by the federal, state, and local
govemments. All information should be sent to Brook prior to arrival of
material to their facility.
Material Safety Data Sheets (MSDSs)
An MSDS for each product anticipated to be stored should be supplied to
Brook prior to acceptance of materials.
The Environmental Affairs Manager shall approve new products entering the
warehouse.
Spill/Damage Procedure
A documented spill procedure including emergency response procedure (e.g.,
Do you use your own group or do you enlist the services of an off-site
contractor?)
·The name of a specific person in your organization to contact concerning a
spill.
Spill Compensation and Control Act
Which of your products are covered under the Spill Compensation and
Control Act?
Is there a contact within your organization who is interested in receiving a
copy of our public warehouse informational tax return?
Specific Labeling Requirements
OSHA
USDOT
N.J. Right-to-Know Canadian WHMIS
We need the name of a contact who can supply us with labels should any be
missing on the products coming into Brook.
All products must have a caution OSHA label.
If regulated by USDOT, then they must also have a USDOT label.
If regulated by USDOT, then they must also have a USDOT label.
Products said within or used within New Jersey must have a N.J. Right-to-
Know label.
Any Canadian shipments of hazardous materials must have WHMIS labels.
- 5 -

 Page 37
Brook Warehousing System
Regulatory Requirements for New Customers
SARA Title III Reporting
·SARA Title III information concerning each of your products to be
stored at Brook. Daily averages and maximums at the end of the
calendar year for each of the products.
Hazardous Waste Requirements
Brook does not handle hazardous waste. You will be responsible for
the disposition of any hazardous waste originating from your products
regardless of how it is generated.
Emergency Response Information
The method you plan to use to comply with U.S.D.O.T. requirements
for providing emergency response information to carriers. Include
your 24-hour emergency contact.
Environmental Contract
The names, addresses, and telephone numbers of those individuals
who perform your environmental affairs/safety requirements.
- 6 -
(continues)

 Page 38
Exhibit 4-4. (continued)
CUSTOMER LOGISTICS BUSINESS PROFILE
PRODUCT INVENTORY SUMMARY
DOT Annual
Product Hazard Freight Package Average Shipments
Name Class Class Type Inventory KLB KLB

Exhibit 4-5. Customer data sheet.
BROOK WAREHOUSING SYSTEMS
Account name
______________________________________________________
Contact name/title
___________________________________________________
Address __________________________________________________________
_________________________________________________________________
Phone ____________________________________ Fax ____________________
PRODUCT DATA
Description: (name, commodity, proper USDOT shipping name and UN/NA #, if
applicable)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Hazardous? Yes ______No ______ Hazard class __________ Total SKUs
______
Package: Type _________________________ Size ________________________
Weight ____ Palletized? Yes ____ No
Pallet size: L ________ W ________ H ________ # of Units/Pallet
_____________
VOLUME (in tonnage)
Flow through: ________ Storage: ________ # of inventory rums: ________
INCOMING FREIGHT
Size of shipment: ____________ No. of SKUs/ship. ____________
Mode of transportation:
________________________________________________
Suppliers locations:
___________________________________________________
__________________________________________________________________
Handling equipment:
Handling equipment:
__________________________________________________
Damage handling instructions:
___________________________________________
Reject to carrier? ________ Yes ________ No
STORAGE REQUIREMENT
Bulk stacking? Yes ______ No______ How high? ________ No. of pallets
_______
Rack needed? Yes ________ No ________
Type/rack_______________________
Fragile? Yes ________ No ________ Pilferable? Yes ________ No ________
Temperature: Summer ________ F Winter ________ F
Special storage requirements?
___________________________________________
__________________________________________________________________
__________________________________________________________________
Reproduced with permission of Brook Warehousing Systems, P.O. Box 6068,
Bridgewater, N.J. 08807.

Exhibit 4-5. (continued)
OUTBOUND SHIPMENT
Avg. order size (in pieces and weight): Amount per week ___________________
Min. weight: ________ Avg. wt.: ________ # of pieces ________
Full pallet? Yes ________ No ________
Pick & pack: Inner carton? Yes ________ No ________
Loose goods? Yes ________ No ________
How packed? ___________________________________________
Handling equipment:
___________________________________________________________
Palletized? Yes ________ No ________ Customer's ________ Brook's ________
Pallet exchange? Yes ________ No ________
Shrink-wrapping? Yes ________ No ________
Transportation:
Freight class: ________________ NMFC no.: ____________________
LTL ________ TL ________ Prepaid ________ Collect ________
How routed: _______________________________________________________
__________________________________________________________________
Special instructions: _________________________________________________
__________________________________________________________________
__________________________________________________________________
Hazardous placards/labels required: ____________________________________
RETURNS
Authorization program? Yes ________ No ________
Original package? Yes ________ No ________
OFFICE SUPPORT
Order transmission: Fax __________ Mail __________ Computer __________ Ph
_________
Orders released by:
_____________________________________________________________
Lot/batch control: ________________________________ Other
________________________
________________________
Broken case shipping & repacking?
________________________________________________
Any other special services you require?
_____________________________________________
__________________________________________________________________
Reports required?
______________________________________________________________
Brook prepares: (written confirmation required)
Bills of lading: Yes ________ No ________
Packing list: Yes ________ No ________
Labels: Yes ________ No ________
UPS manifest: Yes ________ No ________
Invoice to consignee: Yes ________ No ________
QUOTATION DETAILS
How should the rates be quoted? ____ per unit ____ per CWT ____ per sq.
ft. ____ other
Decision date: ________________________________
Start-up date: ________________________________
Decision maker: _______________________________
How did you find Brook?
________________________________________________________

 Page 41

5
Warehouse Operations: Delivery and Storage
''The truck's at the gate, so what do we do next?"
Exasperated warehouse manager

Warehouse operationsthe things you doare the same whether you do

them in a private, public, or contract facility. When you look around a
warehouse it appears that nothing much is going on: only a few
forklift trucks running between stacks of boxes and drums, placing
pallets into racks; some cartons rolling down a maze of conveyors;
someone picking parts out of one bin and placing them into another;
trailer interiors yawning at the docks waiting to be loaded; two or
three workers hanging around the water cooler. There don't seem to be
all that many people working here!
But when you look more closely, there is work going on: Someone at
Dock 15 is zapping bar code labels on the boxes being unloaded;
somebody else is getting a pick list from a computer terminal; others
are checking unloading tally sheets, loading drums on trucks, pushing
cartons from slip sheets on to pallets, signing shipping documents. All
these and more warehouse activities go on at the same time. Yet there
is order in what at first sight appears to be random work! Let's identify
who generates all this activity, who performs it, and for whom it is
done.
We can identify four different, but interdependent parties:
1. The depositorscustomers of the warehouse who engage and rely on
the services of a warehouse. They transfer their goods from
manufacturing plants, ocean piers, and other shipping origins to the
warehouse for future shipments to their customers.

 Page 42
2. The common, contract, and private carriersoperators who, at the
direction of the depositors, haul the goods to and from the warehouse.
Many warehouses either run their own truck fleets or are closely
affiliated with local or regional trucking companies.
3. The warehouse and its personnelemployees who receive, cross-
dock, store, handle, pick, pack, and ship the goods and merchandise
upon their depositors' instructions. In a growing number of cases, the
depositors' customers can also place their orders directly with the
warehouse.
4. The customersthe people or businesses that use the goods. Every
task and function in the cycle of warehouse activities is aimed at the
depositors' customers! Service-oriented warehouse operators are well
aware that they are the immediate, direct contact with their depositors'
customers; they represent their depositors and are the final link in the
supply chain. A good warehouse operator performs as if its depositors'
customers are its own!
The Cycle of Activities
The cycle of activities in a warehouse begins with the depositor's
notification that goods will be shipped to the warehouse and ends with
the delivery of goods to, and receipt at, the customer's destination.
To ensure that goods, products, and merchandise are received,
handled, and shipped according to its wishes and requirements, the
depositor should provide the warehouse with specific operating
instructions and guidelines, contained in a formal compliance manual
that becomes an integral part of the warehousing agreement or
contract (more about compliance manuals in Chapter 7).
Have you, the depositor, provided the warehouse with a
compliance manual?
Thus, depositors manage the warehousing function and leave the
running of the facilities to warehouse operators. Those depositors rely
on their operators' experience in performing the many warehousing
tasks competently. These tasks include:

 Page 43
Receipt and unloading of goods
Assignment of adequate space suitable for the goods to be stored:
on the floor (bulk storage); in pallet, antilever, flow-through, drive-
through, or sliding racks; on shelves or in drawers, bins, carousels of
adequate size, operated manually or automatically
Space- and time-efficient location of goods for easy accessibility
Placement of goods by skilled personnel, using a wide variety of
material-handling equipment, among them lift trucks for pallets and
slip sheets, reach trucks, side loaders, turrets, robotic trucks,
automated put-away machinery
Selection and application of appropriate order-picking methods
and equipment
Adequate product maintenance and protection
Packing of orders, shrink- and stretch-wrapping, banding, marking,
and labeling, loading with proper equipment, supplying and installing
blocking and bracing as necessary
Documentation and reports
Loss prevention and control, security
Inventory control
Personnel and facility management
Warehousing activities must follow detailed, written procedures
carried out by trained warehouse personnel. This chapter and the next
present procedural highlights of interest to the depositor. For
additional information on warehousing operations, see the specialized
texts mentioned in the Suggested Readings and Sources at the back of
this guide.
Depositor Responsibilities
Depositors should notify the warehouse by phone, electronic data
interchange (EDI), or fax at least 24 hours in advance (48 hours is
better!) that goods will be shipped to the warehouse on a certain day,
with certain receiving hours. Reliable activity forecasts for deliveries
and shipments will translate into lower costs for the warehouse
operator. Conversely, short-notice, same-day, and off-hours deliveries
and shipments generate higher costs; they throw off the

 Page 44
warehouse work schedule, may require expensive overtime, and can
generate truck detention charges.
Tip: The advance notice should be given by EDI or fax
hard copy to confirm verbal communications; this
establishes an audit trail that will minimize later
disputes.

Order and schedule the outbound transportation equipment from your

selected carrier roster or private truck fleet. You should also inspect
the interior of the transport vehicle prior to loading to make sure that
it is clean, contains no rubbish or waste, and the floors and walls are
in safe condition and show no indication of roof or floor leakage. If
the vehicle is unsatisfactory, return it to the carrier. This is especially
important for trucks, trailers, intermodal containers, and railcars that
will be "dropped," that is, placed for loading at the site for your
convenience.
Tip: Rake the vehicle floor with a nail rake to detect any
loose screws or nails on the floorboards.

Load the goods for shipment. Loading begins the transportation phase
during which you, as shipper, are not in total control of the shipment.
The carrier has physical, not legal, possession of the goods and
assumes full liability in accordance with the terms and conditions of
either the bill of lading or the shipper/carrier contract under which the
shipment is made. Be sure to supply the driver at the shipping origin
with placards, should the shipment include hazardous materials.
Common and contract carriers are not required to provide such
hazardous materials placards. Obviously, when loads are transferred
between carriers you cannot supply those intermediate carriers with
placards, but this is the intermediate, or delivering, carrier's
responsibility.
Prepare your shipping documents. These include the bill of lading,
shipping order, packing list, material safety data sheet, delivery
receipt, and certificate of analysis. From the outset, establish which
documents are needed. On shipments of nonhazardous materials, a
shipping order and packing list may be sufficient; for hazardous
materials, a "Haz Mat" manifest, material safety data sheet, and
emergency response information must be added. The shipping doc-

 Page 45
uments should include the product number and description,
classification, hazard class, volume, weight, number of shipping
items, type of packaging, special shipping and handling instructions,
shippers' routing, and delivering carrier.
Retain the original bill of lading, copies of the delivery receipt,
packing lists, and other shipping documents in hard copy or electronic
format. You may need these and other documents later to substantiate
and trace errors, investigate complaints, and file and settle freight
bills, overcharges, and loss and damage claims.
Transport Carrier Responsibilities
The principles of transportation apply to inbound receipts from
depositors, as well as outbound shipments to depositors' customers,
irrespective of the mode of transport.
Many depositors use their private trucks to make deliveries to and
shipments from warehouses. Since the trucking industry was
deregulated by the Motor Carrier Act of 1980, the Trucking Industry
Regulatory Reform Act of 1994 (TIRRA), and the Interstate
Commerce Commission Termination Act of 1995 (ICCTA),
companies that operate private trucks can also operate as for-hire
common or contract carriers.
Therefore, it can happen that the goods of Depositor A are delivered
to and/or picked up from a warehouse in trucks owned and/or
operated by Depositor B. This situation can become even more
complicated when Depositor A, operating as private carrier for
Depositor B, leases its trucking equipment; in this case, names such as
Hertz or Rollins may appear on the vehicles.
While deliveries to a warehouse may not need verification of truck
ownership, pickups by private trucks from a warehouse do require
warehousing personnel to verify that the carrier was indeed sent by
the depositor. When in doubt, warehouse shipping personnel must
verify carrier status with the depositor before any goods are loaded.
Common and contract carriers must sign for any goods received and,
as indicated by the depositor's routing instructions, transport those
shipments to the consignee. In accordance with the routing, the origin
carrier also transfers and interchanges shipments

 Page 46
to intermediate or delivering carriers that, in turn, make the final
delivery.
Warehouse Responsibilities
Truck Deliveries
When the depositor uses a common or contract carrier, the truck
driver or his dispatcher makes the delivery appointment. The
receiving warehouse will not pay any detention charges if the carrier
fails to make a delivery appointment and, upon arrival, has to wait in
line to have the truck unloaded. If a private carrier is used, the
depositor makes the truck delivery appointment.
Rail Deliveries
Railroad agents should give advance notice to the warehouse that
railcars have arrived at the nearest railyard and are available for
placement at the warehouse rail siding. This first advice, called
constructive structive placement, is made by phone, fax, or EDI. It
starts the clock for calculation of demurrage charges.
The physical delivery of railcars or containers is called actual
placement. The receiver gives the railroad agent, or railroad switching
crew, instructions for the actual placement of cars so that they can be
spotted in accordance with a switch list prepared by the warehouse
and transmitted to the railroad agent ahead of time.
A constructive placement notice may also be given upon arrival of
overseas shipping containers. Consignees should arrange for prompt
pickup to avoid detention charges.
Tip: In today's lean-and-mean environment, the receiver
will most often be in direct contact with the railroad
switching crew. (In cases where a small railroad makes
 the delivery, even its president could double as
locomotive engineer and agent!)

Railroad switching crews pick up empty and spot loaded rail-cars in

accordance with the switch list prepared by the warehouse.

 Page 47
At most warehouses, security guards must open a gate to allow trains
to enter the property; at other warehouseswhere the rail gate is located
farther from the guard housethe railroad crew can either be given a
key to your gate or the key can be kept in a locked box at the gate.
Most railroad switching personnel use mobile phones to communicate
with the guardhouse. If at all possible, the receiving personnel should
be present when railcars are spotted to check and verify car numbers
and seal integrity. They should inform railroad personnel, preferably
the agent, immediately of any irregularities.
Gatehouse Security Guards
Gatehouse guards check and verify the date and time of all carrier
appointments. Indeed, efficient and safe receiving- and shipping-dock
management begins at the gatehouse. An experienced gate-house
guard works closely with the receiving foreman to avoid yard and
dock congestion, detention, and delay, as well as provides a secure
perimeter.
In particular, when deliveries are made by private truck, the security
guard should verify truck ownership. Some security guards, in
addition to checking the driver's paperwork (especially when
hazardous or dangerous cargo is involved), verify that the truck and/or
trailer complies with Department of Transportation regulations, for
example, placards, equipment condition and cleanliness, visible
violations, and driver appearance.
The gatehouse guard then directs the truck to a receiving dock, bay, or
door number. When trailers or containers are to be dropped, they are
directed to a drop area. Warehouse drivers, using yard horses
(Ottawas), then shuttle the equipment to the designated docks for later
unloading.
 Tip: It will be impossible to manage the docks unless all
inbound receipts are scheduled. Failure to do so will
inevitably lead to unused docks while other trucks are
waiting to be unloaded. Insist that truck drivers or their
dispatchers call ahead to make delivery appointments;
they'll get the point if you let them wait.

 Page 48
Where space allows, reserve some receiving docks for small-parcel
carriers, such as UPS, FedEx, and the Postal Service, as well as
private trucks.
ReceivingDock Management
To begin, insist that the dock personnel receive shipments in the order
they are delivered. Don't allow them to handle the easy ones first and
leave problem shipments for last. If possible, there should be a
separate receiving dock and unloading area for problem shipments.
Also, provide adequate lighting and a small standup desk where dock
workers can put their working papers, bar code scanners, labels, and a
few other supplies. But don't let these locations get messy!
The receiving personnel identify vehicle numbers (truck, trailer,
railcar, or intermodal container numbers), comparing and verifying
them against numbers shown on advance notices and accompanying
shipping documents. They accept delivery when these numbers agree,
and reject the shipment when the numbers don't agree. However,
before any truck is refused and sent back, the receiving personnel
should call the shipper to find out what's wrongthe cause for rejection
could be a minor paperwork error.
Dock personnel then direct the truck drivers to do the following:
Carefully open their trailer doors. Loads, especially in ocean
containers, may have shifted in transit. The blocking and bracing may
have been broken, and items may fall out of the vehicle and cause
damage and personal injury.
Back the trailer against the dock. They should make sure the truck
doors have been opened and secured so they don't flap around and hit
someone or something. The drivers should be cautioned against
hitting the dock bumper too hard. In addition to causing building and
equipment damage, this may cause the load to shift and even fall out
of the now open doors.
The receiving personnel then proceed with the receipt of the shipment.
First, they chock the wheels. Always chock the wheels to prevent
movementcreepingof the trailers. Dock personnel must

 Page 49
observe OSHA, DOT, and other applicable regulations. They also
attach grounding cables before any bulk loads are discharged.
(Likewise, dock personnel should not forget to remove the wheel
chocks before the truck leaves. Some jockeys pull their trailers over
the chocks, with a resulting severe jolting of the load or worse.)
Warning! If a trailer drops on its nose because the
stanchions (landing gear) have not been lowered, or a
forklift falls off the trailer or dock, there can be severe
injury, even death. These are the result of serious safety
violations.

The next step is to carefully position the dock plate or adjust the dock
leveler. Important: Loading and unloading docks are the most active
areas of any warehouse. Receiving personnel walk and drive manual
and powered lift trucks across dock plates or levelers thousands of
times a year. For example, unloading and reloading one 53-foot trailer
holding 25 pallets requires 50 entries and 50 exits, or a total of 100
dock crossings. Handling just two such trailers a day means 50,000
dock crossings a year. So these levelers must be positioned correctly
to avoid accidents.
Although presumably standardized, truck heights can vary six inches
or more, as well as vary from loaded to unloaded condition. To
overcome height differentials, dock levelers are used to facilitate
trailer entry. Power-assisted or automated, 6 to 8 feet long, these dock
levelers are permanently installed at most receiving docks. Some
docks feature truck restraints (a dock-installed hookup device) that
prevent movement of trailers and their accidental or unscheduled
removal from the dock.
Portable dock plates are generally used to load or unload rail-cars that
vary in length, and are often "spotted," that is, located, at random
along the rail siding. Portable steel dock boards are heavy and are
placed in position by lift truck, an operation which requires skill;
improper dock plate movement can cause severe injury.
Warehouse and dock construction dictates the method of unloading.
Some warehouses are built at, or slightly raised from, ground level.
Here, loading and unloading can be achieved by portable lift dock.
When such a portable lift dock is used, it is raised to the level of the
truck, the load is moved on to the lifting dock, and it is then lowered
to the receiving dock height.

 Page 50
Less frequently used are truck levelers that raise the rear wheels of the
truck or trailer to meet dock height; or an inclined, depressed pit
reaching into the warehouse. Either method places the vehicle at an
incline (either the nose or the back of the vehicle) and presents
loading and unloading difficulties. In addition, both methods are
maintenance-intensive because of weather exposure and drainage.
During the warehouse selection process, depositors should ascertain
the design, maximum allowable grade, and load-bearing capacity of
dock levelers. These factors will affect the safe and efficient loading
and unloading of goods.
At this point, receiving personnel extend the weather seals (or
shrouds) to keep out the elements and maintain the goods in dry,
temperature-controlled condition. They also open any seals. When
delivery is made by sealed truck or container, the number on the seal
must be compared to the seal number shown on the shipping
document before the vehicle doors can be opened. Receiving
personnel can break the seals only when the numbers agree, and this
must be done in the presence of the carrier's driver. If drivers refuse to
wait, call their dispatchers immediately.
The seals on railcars, spotted trailers, or containers must also be
checked and verified as intact immediately after arrival and before the
driver or railroad crew departs. If the receiving crew detect a broken
seal after the delivering carrier has left, there are apt to be claim
problems if any loss or damage is found. So dock personnel should
carefully inspect the seals to verify they have not been tampered with.
If seal numbers do not agree, or if seals have been broken, the vehicle
must be rejected because the integrity of the load may have been
compromised.
Tip: When seals have been broken in transit by U.S.
 customs agents, representatives of other government
agencies, or police inspectors, new seals will have been
applied and appropriate notation with new seal numbers
will have been made on the shipping papers by those
authorized officials.

A seal accountability procedure recommended by the U.S.

Department of Transportation has been published in the code of
federal regulations CFR 49, included in Appendix B.

 Page 51
The receiving personnel should take pictures of the vehicle interior
before they begin to unload. At first sight, a Polaroid camera and film
appears to be an expensive proposition, but in the long run it's a cheap
way to cover your bases! A picture is worth a thousand words. You
can clip it to the receiving tally to verify the condition of the load
inside the shipping vehicle, and add it to your permanent record, or
submit it to the carrier in support of a claim. New technologyin 1996,
still much more expensive than an inexpensive Polaroidwill let you
record pictures on CD-ROM discs and, eventually, on microchips.
This is the point at which your personnel now unload the railcar,
trailer, or container using hand trucks, dollies, powered lift trucks, and
portable conveyors to shuttle the loose items, floor loads, unitized
loads on pallets, slip sheets, and BOP sheets. Of course, you should
make sure that the trailer or container floor can hold the weight of a
forklift truck. Compact as they appear, they weigh 7,000 pounds and
moreunloaded!
Tip: For safety, use bright spotlights mounted at the
dock door on the lift truck. Working in poorly lighted or
dark trailers invites damage to goods, or the forklift may
be driven through the walls of the trailer. There's always
the danger of protruding nails, splintered lumber, and
broken dunnage, as well as shifted items that may fall
down as workers begin to unload.

The receiving personnel should follow these steps:

1. Check and verify the shipment count and weight. Check the number
of items, palletized units, boxes, crates, and drums. The number of
items being unloaded must agree with the number in the carrier's bill
of lading, delivery receipt, packing list, and/or other shipping
documents. Obtain scale weights of bulk deliveries.
Increasingly, this function is performed using bar code scanners,
which also can generate labels that, immediately upon unloading, are
applied to packages or unitized loads (see Exhibits 5-1 and 5-2).
2. Check the condition of the shipment. Any discrepancies in
nomenclature, description, weight, count or volume, overages,
(text continues on page 54)

 Page 52
Exhibit 5-1. Incoming tally sheet.

Reprinted with permission of Brook Warehousing Systems, P.O. Box 6068,

Bridgewoter, N.J. 0887

 Page 53
Exhibit 5-2. Warehouse receipt.

Reprinted with permission of Book Warehousing Systems, P.O. Box

Bridgewater, N.J. 0887.

 Page 54
shortages, or significant product codes or numbers must be established
at the time of receipt. Detailed information must be noted immediately
on the shipping document in the form of an exception notation.
3. Inspect for visible damage. Unloading personnel must make an
exception notation on the receiving report (or bill of lading copy) by
fully describing any loss and damage to goods. This must be signed
by the delivering truck driver. Therefore, warehouse receiving
personnel should be trained to make proper exception notations, fully
describing the condition of packages and observed damage.
4. Remove damaged goods. Take the damaged goods, together with
all packaging materials, to a holding area out of the way of the
receiving area for inspection by the shipper, carrier's representative, or
independent inspector. Leave these goodsand their packaging
materialsuntouched. Obtain clear instructions from the shipper for
disposition, for example, the warehouse may be asked to hold for
inspection, return to origin, repackage (recooper), salvage, or dispose
of the goods.
5. Notify the depositor immediately of discrepancies. In case of
damage to hazardous materials, it is mandatory that all personnel
comply with OSHA, EPA, DOT, and other regulations and procedures
pertaining to documentation, labeling, temporary storage, transport,
and disposal.
6. Prepare the receiving report. This document is the warehouse
operator's equivalent of the carrier's bill of lading. It acknowledges
receipt of goods by the warehouse. It is also the basis for all
subsequent accounting, reconciliation, and potential transportation
claims (see Exhibits 5-3 and 5-4).
7. Remove all waste from the vehicle. Hold the vehicle in a designated
area for disposal. This includes removing dunnage, broken pallets,
blocking and bracing materials, disposable load restraints, and spilled
and loose material from broken bags, cartons, and drums. Personnel
should be aware of their handling, storage, and disposal
responsibilities with regard to hazardous materials and substances.
When the goods have been unloaded and receipt acknowledged, it is
time to release the truck carrier. The warehouse advises

Exhibit 5-3. Over, short, and damage report.
BROOK WAREHOUSING SYSTEMS
P.O. BOX 6068
BRIDGEWATER, NJ 08807
908-725-4343
OVER-SHORT-DAMAGE REPORT
CONSIGNEE:
DATE: ____________
__________________________________
__________________________________
__________________________________WAREHOUSE
RECEIPT # __________
BUILDING #
_____________________
ARRIVAL INFORMATION
SHIPPERCARRIERFWAYBILL#POOL DATE
TRUCK# REC'D
THE FOLLOWING MERCHANDISE WAS RECEIVED
OVER: ___________________________________________________________
__________________________________________________________________
SHORT: __________________________________________________________
__________________________________________________________________
__________________________________________________________________
DAMAGED: ______________________________________________________
__________________________________________________________________
__________________________________________________________________
COMMENTS: _____________________________________________________
__________________________________________________________________
BROOK WAREHOUSING SYSTEMS
BY _____________________________
M.I.S. Department
Reprinted with permission of Brook Warehousing Systems,
Reprinted with permission of Brook Warehousing Systems,
P.O. Box 6068, Bridgewater,N.J. 08807.

 Page 56
Exhibit 5-4. Receiving checklist.
Receiving Checklist
(Must be completed before signing Carrier Delivery
Receipt)
Item Action Status Initials
Advance notice Received Yes _ No _
[ ]
Delivery Driver On time _ ________minutes late
[ ]
Consignee Verified as correct
[ ]
Delivery receipt Verified against P.O./advance
[ ]
notice
Vehicle number Verified against delivery receipt
[ ]
Labsis/placards Were applied to vehicle and
[ ]
goods
Seal numbers Verified against delivery receipt
[ ]
Seals Intact Yes _ No
_
Removed by: [ ]
C.O.D. cheek Given to and signed for by
[ ]
driver
MSDS Accompanied by Yes _ No
[ ]
_
C. of A. Shipping papers Yes _ No
[ ]
_
Samples Received from driver Yes _ No
[ ]
_
Vehicle opened Photographs taken by
[ ]
Condition of load Acceptable Yes _No [ ]
_
Unloading Driver assisted Yes_ No
[ ]
_
Cought/weight Agrees with del'y Yes _ No
[ ]
receipt _
OS&D Noted on shipping papers by
[ ]
Describe damage:
Inspection Requested by
[ ]
L&D claim Initiated by
[ ]
Returns Approved by
[ ]
Delivery receipt signed Date:
by:

 Page 57
the railroad agent or shipping container provider that railcars and
containers have been unloaded and can be picked up. This avoids
demurrage and detention charges. Any transportation claims must be
initiated as agreed between the depositor and warehouse, and be
handled in accordance with established procedures and within
prescribed deadlines (discussed further in Chapter 12). At this point,
the receiving process is completed and the warehouse removes the
goods from the receiving dock into storage. Many warehouses mark
the boundary between their staging and their storage areas with a
yellow line. Inbound goods should never cross this line until the
paperwork (electronic input by bar code scanner, portable data
terminal, or keyboard entry) is completed.
Tip: Never say "Just unload the trailer now and put the
stuff somewhere. We'll complete the paperwork later,
when we have more time."

 Page 58

6
Other Warehouse Operations
As mentioned in Chapter 5, warehouse services entail more than
receipt and storage of goods. Particularly at a time when companies
are looking to outsource some operations, warehouses can be cost-
effective third-party providers.
Cross-Docking
Cross-docking is the ''direct flow of goods from the receiving process
to the shipping process with the least handling and storage between. It
is as much information handling as it is material handling."* Cross-
docking compresses the receive-to-ship time period, as well as
reduces handling between receipt and shipment of goods and
merchandise.
Cost Reductions
Cross-docking is used especially for quick response (QR) and
efficient consumer response (ECR) shipments to retailers. It shortens
the replenishment cycle, increases the speed of inventory turns, and
can drastically reduce storage, handling, and inventory carrying costs.
Much like back-hauling freightwhich matches inbound with outbound
loads to effect round-trips, thereby reducing transportation costscross-
docking matches inbound with outbound ship-
* From "Considerations for Cross Docking," by Gene E Schwindt,
Material Handling Engineering, November 1995, p. 47.

 Page 59
ments. Both procedures rely heavily on the timely receipt of accurate
shipping information.
Efficient Use of Space
The turnover rate of goods determines their location inside the
warehouse: slow-moving items are stored farther away, while fast-
moving items are kept closer to the shipping dock. Items intended for
cross-docking are usually moved only a very short distance from the
inbound dock, at or near the staging area, in order to hold in-bound
shipments just long enough for reshipment; break inbound shipments,
then sort, package, and label as may be needed; and reassemble and
unitize them into new shipments. (Reverse-order picking is a variant
of cross-docking. Here, the warehouse holds a portion of one inbound
order for combination with goods from other inbound shipments or
from storage.)
Warehouse management must determine how much short-term space
must be assigned in the staging area for cross-docking operations, and
how this area will be managed. The staging area is already heavily
usedin fact, it is the area of highest activity in any warehouseso the
potential for confusion, mixups, accidents, and damage from
crowding is great.
Cross-docking is becoming so popular that warehouse operators are
beginning to change the basic configurations and layouts of their
warehouses. In existing buildings, certain areas could be assigned to
cross-docking. Future warehouses will be designed with separate
cross-docking and handling space, with different areas for rail and
truck receiving and shipping access. The layout of these new sections
will be similar to a less-than-truckload carrier break-bulk terminal.
A Cross-Docking Checklist
Successful cross-docking depends on safe and smart dock
management and control. It requires timely receipt of reliable
information and careful scheduling of shipments. If you are
contemplating cross-docking operations, answer the questions on the
checklist in Exhibit 6-1.

 Page 60
Exhibit 6-1. Cross-docking checklist.
What type of goods will be handled?
What type of packagecrates, unit loads, boxes, basketswill be
handled?
What are the projected sizes of inbound and outbound shipments?
Where will we perform the activity? How much space do we need?
Will this require a specially designated area?
Are the docks in good repair? How about the door seals, the dock
levelers, lighting, heatingremember, this is the area most exposed to
the weather.
How will we handle potential waste material?
What handling activities are required (break, sort, assemble,
repack, label, mark, unitize)?
What type of materials-handling equipment is needed?
Will goods be stored on pallets or slip-sheets on the floor, or will
they be stored on wheelson handcarts (do we have enough carts)?
How much labor is requiredhow many people do we need?
How good is the match between inbound and outbound shipments?
How many outbounds for each inbound, and vice versa?
How long will the inbound material remain on the dockwhat is the
"dwell"?
What do we do with leftovers from inbound break-bulk loads?
What type of information do we need from shippers (depositors)
and/or customers; what format will it take, hard copy, EDI?
Can we handle the information transmission and flow? Do we
have the necessary data generating and processing equipment?
Can we develop a computer modelsimulate the projected
operation?

 Page 61

Order Picking
Order picking, order filling, or simply picking can be described as the
sequence of locating, extracting, and bringing forward customer
orders for shipment. Selecting the most efficient order-picking
procedure depends on the following:
Type of product
Turnover rate
Method of storage loose in bins or on shelves, packaged in cases or
boxes, in full loads, break-bulk quantities, or unitized on pallets
Method of pickingavailability and use of automated storage and
retrieval systems
Type and size of orders to be picked
Seasonality and related characteristics
Among the traditional picking routines are:
Discrete picking. Also called pick-by-order, this is the most
common picking method; it is used when only single orders are
picked.
Batch picking. Also called pick-by-article, this is used when more
than one order is picked on the same picking run, taken to the staging
area, sorted, and combined with other items for the same order; a
variant is zone picking.
Wave picking. This is used when orders are picked in accordance
with routing or shipping criteriafor example, pick all less-than-
truckload orders or pick all orders for Yellow Freight.
Reverse-order picking. This is used when part of an order is held
for combination with another order (see also cross-docking).
Shipping orders are received either from the depositor or from the
customer, by phone, mail, fax, remote printer, or electronic data
interchange. As an example, the following activity sequence describes
the typical picking process. These activities are performed by
warehouse customer service personnel, the warehouse supervisor, and
pickers.

 Page 62
Customer Service Personnel Duties
1. Identify the type of order as either a full-pallet truckload order,
which requires locating and picking full-pallet unitized loads, or less-
than-truckload and small-package orders, which may have to be
picked from several locations, consolidated in an assembly area, and
packaged.
2. Assign a customer order number.
3. Edit the customer profile information; that is, verify the product
description and codes, quantities and sizes, type of packaging
(including method of unitizing), ship-to and bill-to addresses,
prescribed markings and labeling requirements, special instructions,
delivering carrier, and delivery date.
4. Determine availability of inventory in the ordered quantities and
sizes. If inventory is not available, the depositor must be advised, and
a replenishment order must be generated and transmitted immediately.
5. Enter the order into the open (unshipped) customer order data base.
In most electronic data-processing systems, orders are automatically
sequenced and prioritized by delivery date and will appear in that
order on the warehouse office computer terminal or be printed out in
hard copy on a remote printer terminal.
6. Produce a customer order pick list in accordance with the picking
method. It should display the following elements: number, size, and
dimensions of items ordered; weight of items where this is important;
lot numbers; product codes; product descriptions; storage location
from which items are to be picked; and number and size of items
picked.
This pick list is also sequenced by storage locations, positions, or slots
(area, rack, block, tier, shelf, bin numbers/codes). It also lists
alternative or secondary picking locations in the event the primary
picking location does not contain sufficient inventory, so as to
optimize travel distance and picking time. (Later, the picker must
indicate on the pick list the actual location from which those goods
were picked so that inventory records can be corrected and updated.)
See Exhibit 6-2, Customer Order Pick List, for an example of pick
list.
7. Transmit electronically or manually the pick list to the ware-house
supervisor or shipping to office. Depending on the sophistication of
the warehouse warehouse management system, the pick list is

 Page 63
Exhibit 6-2. Customer order pick list.

Reprinted with permission of Port Jersey Services, 2 Colony, Road, Jersey City
N.J. 07305.

 Page 64
accompanied by a work standardpick rates measured in the time
measurement units (TMU) for each work component that, together
with equipment-utilization factors, are used to calculate picking and
other order-fulfillment costs.
Warehouse Supervisor Duties
1. Schedule and assign the pick list to a warehouse worker (by name),
together with appropriate material-handling equipmenthandcarts,
dollies, forklifts, bins, crates. The picking equipment should match
the order; that is, the correct equipment must be selected so that it will
handle the weight and dimensions of all items to be picked. For
example, if inventory records show that order items are positioned
exclusively at floor level, the order can be handled by a hand truck; if
items are located in the second or third tier of a storage rack, a power-
lift truck must be assigned; where the pick list requires picking of
loose items, bins or crates must be provided.
2. Provide the selected picker with the pick list and any special
instructions. Paperless pick lists are displayed on either portable
terminals, which may be hand held, or fixed terminals that are
attached to stationary or mobile picking equipment.
Picker Duties
1. Visit the locations on the pick list in the most efficient
sequencewith no backtrackingto minimize travel time.
2. Pick (extract) the items from their storage position and place them
on the lift truck or cart, or into the bins or crates.
3. Mark the picked item on the pick list, noting any irregularities,
discrepancies, or variations. (Note: Order pickers should be trained to
note and report any actual or impending stockouts.)
4. Proceed to the next picking location until the order is completed.
Single-pallet loads are picked and transported to a predetermined
staging area. Many orders, especially truckload orders, require the
picking of 24 or more pallet loads. To avoid transporting each pallet
individually on repeated trips up and down the length

 Page 65
and width of the warehouse, you can hook several warehouse trailers
together to form trains, pulled around by a power-lift truck.
In many modern warehouses, picking orders are preroutedthe decision
as to picking method and sequence is predetermined by the warehouse
management system. Pickers do not have to decide which method to
use.
Where paperless order picking is an integral part of a warehouse
management system, the picking activity is automatically transmitted
and entered into system data bases by radio frequency.
The picked orders are assembled or accumulated in the staging areas.
Batch-picked or zone-picked orders, which must be sorted and/or
assembled, are transported to the assembly area for consolidation and
packaging. Discrete-picked orders are transported directly to the dock
staging area assigned for pickup.
Tip: Orders placed too early at or near the dock, and late
carrier arrivals, are the most common sources of
misshipments. Make sure that orders to be loaded on the
same truck are kept separate and are not mixed with
other orders staged in the same area.

The order is then checked for completeness. In warehouses where

picking operations are supported by bar code scanning and radio
frequency identification and transmittal (RFID) technology, all
manual recording is substituted for electronic location identification,
data recognition, recording, and entry.
Following the check, the order is unitized, wrapped, containerized,
and packed. Shrink- and stretch-wrapping of cartons, bags, and other
shapes are preferred methods of unitizing, although disposing of these
wrapping materials may become a waste disposal problem at the
receiving location. Banding with plastic or steel bands is common, but
if not properly applied or removed, these loose bands lying around can
pose a significant hazard. Some shippers spot-glue bags and other
packages, however, when disassembled, these loads may rip or tear.
Smaller items should be overpacked in cartons.
For a complete description of picking methods, procedures, systems,
and documentation, consult the texts in the References at the end of
this book.

 Page 66

Packaging
Cartons, boxes, crates, drums, and pails are subject to multiple
handling in the warehouse and during transportation. (More on this in
Chapter 11.) For example:
From the truck to the staging area
From the staging area to the storage location
From the storage position back to the staging area
From the staging area into the truck
From the truck to the carrier's break-bulk dock
From the carrier's dock into another truck
From the truck to another carrier's break-bulk dock
From the carrier's dock into yet another truck
From the truck to the receiver's dock
From the receiver's dock to the storage area
From the storage area to the sales shelf
Therefore, all nonbulk goods must be packaged so they can be
handled in automated (robotic) packaging systems, can be handled
repeatedly, and can withstand the rigors of transportation (abrupt
movement, acceleration and deceleration of vehicle, friction, grinding,
chafing, rocking, swaying, shocks, and vibration). They also need to
be protected from loss and damage or influences of the environment
(extreme heat and cold, water, condensation, rust). They must not
damage other goods while in storage or in transit, and must remain in
salable or usable condition.
Packaging Hazardous Materials
Hazardous materials must be packaged in specified containers and
packages. Detailed specifications are published by the U.S.
Department of Transportation, CFR 49, parts 173-178. Under the
definitions of the CFR, warehouses are considered shippers of
hazardous materials, and thus must comply with all handling,
packaging, labeling, marking, placarding, certification, and other
regulations. All warehouse personnel must be thoroughly familiar and
comply with these regulations, as well as EPA, FDA, and OSHA
laws, regulations,

 Page 67
and Responsible Care* initiatives. Warning! Noncompliance with
hazardous-materials handling and packaging regulations may re-suit
in substantial personal and corporate fines. (See Chapter 11,
"Packaging: Containers and Methods.")
Marking, Tagging, and Labeling
To identify goods, labels, tags, and markingsin hand-written, printed,
stenciled, or bar code formatsmust be exhibited on all goods. The
shape, size, format, and content of these tags and labels are prescribed
by shippers and depositors, as well as regulations governing freight
classifications, hazardous materials, and other matters. The labels and
tags must be of durable quality and/or a material to withstand the
rigors of handling. They must remain legible and identifiable
throughout the logistics cycle, and be permanently affixed or adhered
to the goods in a manner resistant to wear and tear or accidental
removal. The labels should be easily visible and in a recognizable
place; palletized or unitized loads can be marked as a single unit.
The labels must show the following:
1. The name and address of the receiver (consignee)
2. The name and address of the shipper (consignor)
3. Any hazardous-materials warnings
4. The product identification, description, and codes
5. Any protective service symbols, such as high or low temperature
limits
6. Any special handling symbols, such as forbidden handling methods
and equipment (see Exhibit 6-3)
Pictorial precautionary markings, as shown in Exhibit 6-4, can be
adhered as labels, exhibited within a border and with an opposing
color or background color.
* Responsible Care® is an initiative adopted by the members of the
Chemical Manufacturers Association, 2501 M Street, Washington, D.C.
20037. It addresses environmental, safety, and health issues associated
with chemicals in the workplace and in transportation.

(text continues on page 75)

 Page 68
Exhibit 6-3. Instructions for marking and tagging freight.
RULES
ITEM 580
MARKING OR TAGGING FREIGHT
Sec. 1. Freight must be stenciled or marked in accordance with
the following, except as provided in Sec. 3 of this rule or
otherwise provided in this Classification, or in the Code of
Federal Regulations (CFR), Title 49 for the shipment of
hazardous material. If these requirements are not complied
with, freight will not be accepted for transportation.
Sec. 2. Except as otherwise provided in Sec. 3, each package,
bundle or loose piece of freight in a shipment must be stenciled
or otherwise marked (see Notes 1 and 2) by the shipper,
showing name and address of shipper and only one consignee,
at one address at one town or city in one slate to which
destined. Packages or pieces securely fastened to pallets,
platforms or skids for lift trucks need not each be marked,
provided each palletized or skidded unit is marked, and
number of packages or pieces loaded on pallets, platforms or
skids is shown on bill of lading.
When consigned to a point of which there are two or more of
the same name in the same state, name of county must also be
shown.
When consigned 'To Order' or 'COD,' shipping units must be
so marked, and further marked with an identifying symbol or
number, which must be shown on shipping order and bill of
lading.
When consigned for 'Export' the name and address of shipper
and port of export, or the name end address of broker or agent
at port of export must also be shown.
Packages catalog fragile articles or articles in glass or
earthenware must be marked 'FRAGILEHANDLE WITH
CARE,' or with similar precautionary marks.
Markings must be clear and legible, using inks or paints which
are both waterproof and capable withstanding normal
transportation abrasion Marking ink or paint color used must
provide a defines contrast to the color of the surface being
marked.
Consignee markings may be typed, printed, stenciled or hand
lettered. When typed or printed, letters must not be less in
height than capital letters of nine point type. When hand
lettered, characters and figures must be not less than 3/2 inch
in height. Where space does not permit, characters and figures
may be proportionately smaller in size.
Boxes printed with advertising or other matter must provide a
clear area of not less than 10 square inches for direct marking.
Area mull be defined and capable of accepting all marking
which must be located therein. Shippers address may be shown
within border defining clear area. In lieu of a clear area on box,
an indirect label property adhered of not less than 10 square
inches of such color to contrast with box printing and
background may be used.
Note 1Labels must be securely attached with glue or equally
good adhesive or metal staples.
Note 2Tags mull be made of cloth, leather, metal or tagboard.
Tagboard tags must consist of 100 percent chemical wood
pulp, thickness .0145 inches weighing not less than 142.5
pounds per ream 22½ × 28½ inches, 500 sheets, and tags must
have patch reinforcement.
Tags attached to bags, bales, bundles or pieces must be
securely fastened with strong cord, wire or blunt or dull
pointed wire tag fasteners.
Tags used to mark wood or wooden containers must be
fastened at all corners and center with large-headed tack, tag
fasteners or metal staples; or must be tied to wooden pieces
when the freight would be injured by use of tacks, fasteners or
staples.
Sec. 3. A shipment that fully occupies the visible capacity of a
vehicle or that weighs 6,000 pounds or more, or if weighing
less than 6,000 pounds, is declared by shipper as weighing
6,000 pounds and so charged for by carrier, when shipped
from one place in or on one vehicle. in one day, by one shipper
for delivery to one consignee at one destination, need not be
marked if every piece is of easy identification as belonging to
such shipment without the possibility of being confused with
other freight.
Sec. 4. Marks must compare with shipping order or bill of
lading, and corrections, if necessary, made before receipt is
signed.
Sec. 5. Old consignment marks must be removed or effaced.
Sec. 6. When Height is billed to a point for consolidation with
other freight, the destination of the shipment to the
consolidating point must be shown and the final destination
beyond the consolidating point may be shown, provided the
two destinations are shown on the package in the following
form and wording:
FROM
(Name of Shipper)
(Point of Origin)
TO
(Name of consignee at consolidation point)
(Street address)
(Destination)
FOR
(Name of consignee beyond consolation point)
(Street address)
(Destination beyond consolidation point)
Reproduced with permission of the National Motor Freight
Traffic Association, Inc., Agent, 2200 Mill Road, Alexandria,
Va. 22314.

 Page 69
RULES
ITEM 580Concluded
Sec. 7. Unless specifically provided for elsewhere in the
Classification address must be located approximately as shown
below; location(s) shown indicate the top, a side or an end as
the case may be. Where more than one location is shown
placement is optional.

 Page 70
Exhibit 6-4. Pictorial precautionary markings.
RULES
ITEM 682-A
PICTORIAL PRECAUTIONARY MARKINGS
In addition to shipping container markings required by the Code of
Federal Regulations (CRF). Title 49 for the shipment of hazardous
materials, the following pictorial symbols or precautionary wording
must be conspicuously shown only when conditions are applicable,
indicating special handling or storage requirements. Palletized or
unitized loads may be marked as a single unit. Markings must be
shown on two adjacent panels as a minimum, with the exception of
markings shown in Secs. 7(a), 8(a), 11 and 13. Symbols may be
printed or adhered as a label. For prominence, such symbols may be
within a border or have an opposing background color.

Sec. 1. FRAGILE HANDLE WITH CARE:

In addition to being shown in the upper left corner of side panels, the
glass symbol may also be positioned in any area of any panel to
indicate the location of glass within the container.
Reproduced with permission of the Notional Motor Feight
Association, Inc., Agent, 2200 Mill Rood, Alexandria, Va. 22314.

 Page 71
RULES
ITEM 682-AContinued
Sec. 2. UP ARROWS:
(a)

For reasons of prefereable or multiple safe orientations, the above

symbol may be shown in duplicate authorizing multiple direction
upright positions as an option.
(b)

All articles of furniture must show the above symbol and

precautionary markings. Multiple direction arrows are authorized. In
lieu of the above symbol, articles of furniture may show the
precautionary markings of Sec. 1 and Sec. 2(a) (see Note, Item 79022)
In combination only.
Sec. 3. TOP HEAVY:

For application, see Item 680, Sec. 12.

Sec. 4. KEEP DRY:
 (Continued on following page)

(continues)

 Page 72
Exhibit 6-4. (continued)
RULES
ITEM 682-AContinued
Sec. 5. PROTECT FROM HEAT:

Sec. 6. PROTECT FROM FREEZING:

Sec. 7. HAND TRUCK:

Accordingly:

Must ge shown on side of contianer where handling device should be

used.
(Continued on following page)

 Page 73
RULES
ITEM 682-AContinued
Sec. 8. FORK LIFT:
Accordingly:

Must be shown on side of container where handling device should be

used.
Sec. 9. STACK HEIGHT:

Note The number '4' is shown for example only.

Sec. 10. DO NOT STACK:

(Continued on following page)

(continues)

 Page 74
Exhibit 6-4. (continued)
RULES
ITEM 682-AContinued
Sec. 11. NO STEP:

Sec. 12. TEMPERATURE LIMITS:

NOTEThe numbers shown relating to specific temperatures are for

example only.
Sec. 13. CENTER OF BALANCE:

Must be shown on two opposite sides of container to indicate balance

point for handling purposes.
Sec. 14. MAGNETICALLY SENSITIVE:

 Page 75

Loading and Shipping

Goods that have been received and stored, as well as others that have
been picked and assembled to fulfill orders, will eventually be loaded
onto trucks or railcars and shipped out. The warehouse frequently
performs these operations. This chapter touches upon some of these
operations. Detailed instructions for routing and the preparation of
shipping documents are described in Chapter 7.
Loading Responsibilities
The National Motor Freight Classification 100* states, in Rule 568
regarding the loading or unloading of heavy or bulky packaged
freight:
Unless otherwise provided in carriers' individual tariffs, when freight (per
package or piece) in a single container, or secured to pallets, platforms or
lift truck skids, or in any other authorized form of shipment: (a) weighs
110 pounds or less, the carrier will perform the loading and unloading; (b)
weighs more than 110 but less than 500 pounds: (1) the carrier will
perform the loading and unloading where the consignor consignee
provides a dock, platform or ramp directly accessible to the carrier's
vehicle . . . (c) weighs 500 pounds or more . . . [and] . . . (d) exceeds 8 feet
in its greatest dimension or exceeds 4 feet in each of its greatest and
intermediate dimensions, the consignor will perform the loading and the
consignee will perform the unloading. . . .

Many shippers and receivers perform loading and unloading

operations with their own personnel and equipment, without driver
assistance. Insurance limitations, safety rules, and other operating
considerations frequently prohibit nonemployees from working on
company premises.
Shippers should understand, however, that, where the labor cost for
loading and unloading is part of the freight rate, they
 * National Motor Freight Classification 100, National Motor Freight
Traffic Association, Inc., Agent, American Trucking Associations, Inc.,
Alexandria, VA, June 25, 1995.

 Page 76
should try to get a loading and/or unloading allowance from the
carrier.
Bulk freight is generally loaded onto trucks by the shipper. Note that
the loading and unloading of hazardous materials can be performed
only by personnel trained in accordance with regulations. Railcars and
intermodal containers are loaded by the consignor while unloading is
the consignee's responsibility.
Should it happen that the loader cannot find all the units shown on the
shipping papers, remember that the depositor's customer service group
has already faxed the bill of lading to the warehouse. The depositor
must transmit a corrected document to the warehouse to avoid
inventory reconciliation problems. Make sure all copies of shipping
documents are signed legibly by the accepting carrierusually the
driver.
Dunnage
Dunnage is any type of material that does not constitute a shipping
carrier, container, or package, and is used to separate and fill empty
spaces to protect cargo from movement inside the transport vehicle
while in transit, and protect the vehicle from damage by the cargo.
Carriers that use this definition do not include the weight of dunnage
in the gross weight used to calculate freight rates. Item 995 of the
National Motor Freight Classification states that
Any temporary blocking, flooring or lining, racks, standards, strips, stakes
or similar bracing, dunnage or supports not constituting a shipping carrier,
container or package, or a part of the vehicle, shall be excluded from the
gross weight.

Commonly used as dunnage are floor linings, pallets, boards,

inflatable paper or plastic bags, plastic foam sheets, and blankets.
Many dunnage materials are returnable and reusable.
Blocking and Bracing
Blocking and bracing is required, especially when shipping hazardous
materials. The equipment and devices used include bulkheads in
railroad cars, damage-free bars in cars and truck trailers, strap-

 Page 77
ping and banding, and friction tape. Also, 2''×4" studs and 4'×8'
plywood sheets can be nailed to the floors and side walls of vehicles.
Carriers' safety and loss-prevention departments will assist shippers in
selecting and using load-restraining devices. The recommendations
for dunnage materials and blocking and bracing methods can be
obtained from your rail, highway, and ocean carriers, the Association
of American Railroads, and the American Trucking Association. For a
complete description of blocking and bracing devices, see Smith et al.,
Freight Claim Prevention in Plain English. (See Suggested Readings
at the end of this book.)
Routing
Routing is the selection of a carrier (or combination of carriers) to
transport goods between origin and destination. Shippers select
common, contract, and private carriers based on rates and services,
including carrier capabilities, reputation, financial stability, equipment
type and availability, responsiveness, and performance. Service
agreements, including transportation and warehousing contracts,
should contain explicit routing instructions.
Although single-sourcing of carriers and other service providers has
its adherents, the vagaries of business suggest that you or your third-
party service provider seek protection from service failures of primary
carriers by selecting and ranking alternate carriers. For instance, you
could assign shipment volume on a rotating business: Carrier A gets
75% of the business for three months, Carrier B gets 25%; for the next
three months, you reverse the order.
Shipping Responsibilities
At the end of the line, there must be one person responsible for the
accuracy of the shipment and all associated information, whether it is
in hard copy or electronic format.
The shipping checklist (Exhibit 6-5) will help you perform this task
before the doors of the loaded vehicle are closed.
Some warehouses employ the following security procedure: Loaded
truck trailers and containers keep their loading doors open while
proceeding to the gatehouse. The security guard checks the load
against the shipping papers and applies seals, as necessary.

 Page 78
Exhibit 6-5. Shipping checklist.
Shipping Checklist
(Must be completed before vehicle doors are closed and
sealed, and bill of lading is signed)
Item Action Status Initials
Address Delivery street address complete
Yes _ No _
Directions Given to the driver
[ ]
Routing Carrier loaded is carrier on B/L
[ ]
Shipment/load Counted and verified correct
[ ]
Short-shipped Yes _ How much
[ ]
__
Labels/tags Applied to packages
[ ]
Packing list Attached to packages
[ ]
HazMat labels Applied to packages
[ ]
Placards Given to driver
[ ]
MSDS Given to driver
[ ]
C. of A. Given to driver
[ ]
Samples Given to driver
[ ]
Dunnage Applied
[ ]
Blocking/bracing Applied
[ ]
Seals Applied and noted on B/L
[ ]
Exceptions Noted on B/L
[ ]
Special Noted on B/L, given to driver [ ]
instructions
Bill of lading Signed by driver
[ ]
Driver on time Yes _ How many minutes late___
Describe any problems:
Date Time
________________________________________________________

 Page 79
This exit control is intended to prevent any collusion between dock
personnel and the truck driver.
Inventory Control
When depositors are preparing their corporate financial statements,
they take a physical inventory to determine their total assets in
inventory, in accordance with standard accounting and valuation
methods. Inventories of all their materials are counted: raw materials,
supplies, semiprocessed and semifinished goods, and finished goods.
These annual physical inventory counts may be conducted even in
companies that keep manual or computerized cycle counts or
perpetual inventory records. Errors in record keeping occur whether a
company uses an electronic or a manual data-entry system.
Nevertheless, the physical inventory is the best time to identify slow-
moving, overage, obsolete, lost, damaged, and broken items. It's also
an opportunity to clean up the inventory and initiate the disposition of
unsalable or unusable goods. In figuring costs as well as assets,
depositors should understand that a warehouse charges the same
rates for the storage and handling of damaged, obsolete, and
otherwise unsalable inventory as it does for salable inventory.
Reporting the inventory status periodically is part of inventory
control, and is the responsibility of warehouse operating personnel.
Inventory control should not be confused with inventory management,
which is the manner in which optimum inventory levels are deployed
for maximum availability to users and customers. (Inventory
management techniques are beyond the scope of this text; see the
Suggested Readings at the end of this book.)
Inventory reports reflect the current level of inventory, by line item,
product, or stock keeping unit. They are a way to monitor, measure,
and control inventory accuracy and operating performance, and to
catch errors in item posting, order picking, recording and reporting,
overages, and shortages.
Methods of Counting Inventory
Inventory control is performed in three ways:
1. Perpetual inventory. Daily activities are reported in compliance
with the depositor's instructions and the warehouse proce-

 Page 80
dures, and inventory is brought up to date daily. Perpetual inventories
must be reconciled at least once a year, during the annual physical
inventory.
2. Annual physical inventory. Actual and book inventory records are
reconciled once a year during the annual physical inventory.
Inventory reports are prepared for each product or product group or
class and should follow the general, simplified format shown in
Exhibit 6-6.
3. Cycle counting. To achieve maximum accuracy by detecting
discrepancies in a timely fashion, and to reduce the labor-intensive
annual or semiannual inventory counting and reconciliation effort,
companies are increasingly using cycle counting. In this system,
inventory activity and balances are reported daily, weekly, monthly,
bimonthly, or quarterly for a group of items, product lines, or stock
locations (zones) only. Cycle counting is applied specifically to items
that are sensitive, perishable, expensive, and/or particularly subject to
theft and pilferage. This cycle count must agree with the sum of daily
activity reports for the counting period, and in case of discrepancies,
is reconciled, item by item, with the warehouse book inventory. See
Exhibit 6-7.
ReconciliationOverages and Shortages
In the normal course of manufacturing and production, large volumes
of goods are handled. In spite of sophisticated counting methods, and
adherence to quality operating and handling procedures, certain
discrepancies between inputs and outputs will be encountered. They
may be the result of process-yield variances, loss and damage,
defective materials and products, packaging, and shrinkage. Since in
virtually all cases* the manufacturer or producer owns (has title to)
the goods and materials, some of these differences are recognized and
absorbed by company management as part of the process, while others
may be written off.
The wide variety and large number of warehousing transactions
similarly result in overages and shortages. Generally, ware-
* Exceptions are, for instance, tolling operations where a manufacturerthe
toileraccepts the product of another company for further processing and
returns the processed product to the original manufacturer. In such cases,
the original manufacturer retains title.

Exhibit 6-6. Inventory report.
Product:
______________________________________________________________
__________________________________________________________________
For the period from: ______________________________ to:
____________________
Location: Building, Aisle, Tier, Rack Nos.
$ Quantity
Beginning book inventory
____________ ____________
( + ) Plus: Receipts (inbound
shipments)
including
Stock ________________________
replenishments
Retums from
________________________
customers
Purchased items
________________________
Stock transfers
from
other locations ________________________
(-) Less: Customer
________________________
shipments
(outbound)
Returns to
________________________
depositor
Stock transfers to
customer accounts________________________
Stock transfers to
 Stock transfers to
other
depositor ________________________
locations
( +/-) Loss and damage
________________________
Adjustments:
Mysterious
________________________
disappearance
Known theft and
________________________
pilferage
Errors, overages,
________________________
and shortages
Reconciliation
________________________
write-offs
(=) Ending
________________________
inventory

 Page 82
Exhibit 6-7. Cycle count worksheet.
WHS C_CC2 CYCLE COUNT WORKSHEET 12/19/95 07:01
BINITEM RVLOT ON COUNTDIFFLOCATIONISPCOMMENTS
# # HAND +/-
QTY
07 109959 BS1155-1.00 1 ____ STOCK 3 ___________
032
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-033 1.00 0 -1 STOCK 3 destroyed
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-034 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-035 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-036 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-037 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-038 1.00 1 ____ STOCK ___________
3
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-039 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-040 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-041 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-042 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-043 1.00 1 ____ STOCK ___________
3
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-044 1.00 1 ____ STOCK 3 ___________
43307 109959 BS1155-044 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-045 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-046 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-047 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-048 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-049 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-050 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-051 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-052 1.00 2 +1 STOCK 3 Scanning error
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-053 1.00 1 ____ STOCK ___________
3
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-054 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-055 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-056 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
43307 109959 BS1155-057 1.00 1 ____ STOCK 3 ___________
Description: NTA,@A0,000,DI,350#DRUM
Reprinted with permission of Brook Warehousing Systems, P.O. Box
6068, Bridgewater, N.J. 08807.

 Page 83
house operators do not own, i.e., do not have title to, the goods while
in their care and custody; therefore, they are not presumed to own any
overages and will report these to their depositors. For shortages,
warehouse operators are responsible only as a reasonably careful man
would be under like circumstances. (See Chapter 12, "Liability,
Claims, and Insurance," and Appendix A, the Uniform Commercial
Code.)
Inventory reconciliation to the last penny may cost more in time and
effort than the discrepancy is worth. To reconcile small differences,
depositors and warehouse operators may agree on a specified
shrinkage allowance, such as an amount of loss both parties accept for
which the warehouse operator shall not be responsible. An alternative
is to average the overs and shortsthat is, to offset the shortages with
overages, which can be the result of oversights, recording, or counting
errors.
Responsibility for loss and damage in excess of agreed allowances or
averages, obviously, influences the rates that warehouse operators
charge their depositors. The depositors, therefore, have the option of
absorbing such losses (self-insurance), buying excess insurance, or
accepting higher warehousing rates in exchange for full-loss coverage
by the warehouse. For a detailed discussion of such alternatives, see
several of the documents in the Appendixes.
Tip: When negotiating and/or accepting agreements or
contracts, depositors must carefully review their
potential exposure to loss and damage, responsibility
limitations of the parties, insurance requirements, and
resulting warehousing rates and charges.
WHAT ARE YOUR INVENTORY PRACTICES AND ROUTINES?

 Page 84

7
The Compliance Manual
The compliance manual is a document prepared by the depositor. It
contains detailed instructions to the warehouse operator for the
execution of all depositor-related activities. The warehouse's own
procedures, combined with depositors' compliance manuals, form the
basis for effective operations, performance measurements, and
compliance audits. Depositors should provide a compliance manual to
each of their warehouses.
This chapter presents the basic elements of and guidelines for
developing such a depositor's compliance manual. There are
suggestions for typical methods, sample procedures, and appropriate
forms, as well as examples of useful phrases. Individual users should
develop their own format in conformance with their corporate
practices, ISO 9000, and similar quality guidelines.
Essential to many of these operations is the collection of operating,
personnel, and administrative data by the warehouse. This information
can be collected, either manually, using paper documents, forms, time
cards, tags, and reports, or with an automated warehouse management
system, using bar code scanning, radio frequency identification and
transmittal (RFID), and related electronic means.
The information can then be conveyed to the depositor via phone,
mail, remote printer, fax, e-mail, or batch or real-time electronic data
interchange (EDI). Individual companies often devise their own
forms, systems, routines, and methods for the warehouse operations
they have contracted for. The following are examples of some
warehouse activities that will need to be managed, controlled, and
reported using the depositor's desired method of documentation.

 Page 85

Daily Activity Report

A daily activity report (DAR) (see Exhibit 7-1) is generated by the
warehouse to supply the depositor with specific information about all
daily activities carried out on its behalf. This is the warehouse's most
important report because it becomes the basis for all subsequent
reporting and billing.
The depositor will specify the time of day the DAR must be received.
The company may also stipulate that daily activity reports be
transmitted at the specified time even when no activity has occurred.
A daily activity report includes the following for all inbound receipts
and outbound shipments, and transfers to other warehouses,
distribution centers, and other destinations:
Date and time of report and transmittal
Receiptsinbound to warehouse
Orders shippedoutbound from warehouse
Number of units, pallets, boxes, or drums
Overages and shortages
Returns to manufacturing plants or vendors
Returns from customers
Orders not shipped as requested
Transportation damages
Spills, damage, and/or accidents in the warehouse generated by or
affecting the depositor's goods
Emergency responses
 Other significant events
Name and signature of preparer
Time and date of preparation
Receipts: Inbound
The warehouse receipt is the document that transfers possession (not
title!) of the goods described. (See Appendix C: Standard Terms and
Conditions for Public and Contract Warehouse Operators.)
A warehouse receipt must be issued for each shipment. This is the
source document proving possession of the goods. It is used to

Exhibit 7-1. Daily activity report.
Daily Activity Report for (Name of Depositor)
Warehouse Location
Activity Period Covered: From ____ To ____

Code Product Sellers DateDocument- Transactions Units

DescriptionNumber Reterence OpeningAdjustmantsReceived
No Balance
TOTALS

 Page 87
establish acceptance of goods and becomes the basis for inventory
status and reconciliation. Receiving personnel must note overages and
shortages on the receipt, and demand signature by the delivering
carrier's driver or agent.
In particular, the warehouse receipt should show:
Date and time of receipt (time stamp, if possible)
Origin name and location
Delivering carrier, routing
Bill of lading numbers with corresponding warehouse receiving
report numbers
Description of goods: name, product code, lot number
Count, weight, or number of units per shipment; for purchased
goods, vendor name, purchase order number; for returns, customer
name and condition of goods
Discrepancies and exceptions, overages and shortages
Damage noted upon receipt and not noted on shipping papers at
origin (loss and damage during transportation)
Condition of shipment
Carrier Deliveries and Inspection of Goods
Carriers must be instructed to make delivery appointments. A
shipping order with detailed information on the goods should
accompany each shipment from the depositor; a bill of lading
accompanies each shipment from other origins (such as vendors) for
the depositor.
Damage, broken seals, and other discrepancies between the shipping
order and the load, discovered when the goods are received, must be
noted. The warehouse then informs the depositor immediately of the
situation.
Returns From Customers
All returns from customers to the warehouse must have prior approval
from a depositor's representative. The customer returning

 Page 88
the goods has been instructed to affix return tags to the goods. Un-
tagged shipments must be set aside for disposition by the depositor.
Record the following information on the paperwork detailing the
returned goods:
The name of the customer returning the goods
Verification of bill lading data with returned goods received
Description of product
Volume, quantity, and weight of containers returned
Condition of the goods; description of any damage or broken seals
Signed bill of lading; also the delivering carrier's signature noting
any exception
The warehouse must advise the depositor's representative immediately
of the return. The goods are set aside and held for the depositor's
disposition. When the goods have been approved by the depositor as
acceptable, it is time to remove the return tags, place the goods into
storage, and adjust the inventory records.
Discrepancies
Documentation supporting discrepancies in volume or quantity,
number of pieces, condition of shipment, or damage to goods must be
submitted to the depositor for claim preparation.
The documentation must include:
Signed bill of lading (carrier's delivery receipt) with exception
notation by warehouse receiving personnel
Receiving report with description of damage or loss
 Packing list
Photographs
When the shipper requests a carrier inspection at the warehouse, the
inspection report must be submitted to the shipper. Transportation loss
and damage claims are prepared, filed, and settled by the depositor;
see Chapter 12.

 Page 89

Handling and Disposition of Damaged Goods

Damaged goods must be stored as received. They can be repackaged
or secured only if in their present condition they may deteriorate
further or pose a hazard to the facility or persons. Immediately upon
notification from the warehouse, the depositor determines the methods
of handling and disposition. All applicable safety regulations must be
observed.
Withdrawals From Storage
Orders for shipments to customers are transmitted to the warehouse by
the depositor's customer service representatives via an approved
communication mediumremote printer, fax, EDI, mail, or messenger.
The depositor provides the warehouse with a list of personnel
authorized to initiate warehouse withdrawals.
Tip: When orders are transmitted by phone, they must be
confirmed in writing, with the warning ''do not duplicate
the shipment."

Shipping Orders
All significant information on the shipping order must be reviewed
and verified. Any changes made by the warehousesubstitutions of lot
numbers, short shipmentsmust be noted in the following detail:
Customer order or purchase order number
Bill of lading number
Outbound carrier, routing
Description of goods: name, product code, lot number
Classification of goods
 Count and/or weight per piece or per shipment
Unit of measure
Total weight shipped
Scheduled shipping date or pickup date for customer pickup

 Page 90
Freight terms: prepaid, collect, COD (collect on delivery)
Special instructions
Name of person preparing the shipment
When the warehouse is unable to meet the scheduled shipping date, it
must contact the depositor's representative immediately to explain the
reason and agree on a revised shipping date.
Stock Transfers
There are two types of stock transfers. In the first, the ownership of
goods is transferred from the account of the depositor to the account
of a customer, but the goods remain in the same warehouse facility.
The depositor issues a bill of lading. In the carrier instructions section,
the words "stock transfer" are inserted. The depositor also advises the
warehouse to establish a separate account on behalf of the new
customer, noting that the depositor will consign the goods to the new
customer c/o the warehouse facility. To maintain proper inventory
records, the warehouse moves all the goods to a separate warehouse
location and labels the goods with the new customer's name and
address. From this point on, the warehouse will treat these goods as
the new customer's goods; any instructions for disposition of this
inventory must be given by the new owner.
There should be no charges for this transfer, since the depositor's
warehousing cost usually includes the cost of one move in and one
move out. Any charges after this transfer is completed are made to the
new customer's account.
In the second type of stock transfer, ownership of the goods is
retained by the depositor, but the goods are either physically
transferred to another warehouse location of the same warehouse
operator or are transferred to another warehousing company.
In each case, the depositor issues the appropriate shipping instructions
and provides the necessary documents.
Labeling and Marking
The warehouse must label and mark goods and articles for shipment
in strict adherence to the depositor's instructions. The depositor willor,
when agreed, will notsupply the necessary labels.

 Page 91

Shipping Documents
The preparation and issuance of shipping documents depends on the
type and extent of services for which the depositor and the warehouse
have contracted. Services may include the preparation, distribution,
filing, and control of domestic as well as export documentation.
Preprinted bills of lading and other required forms may be provided
by the depositor. Warehouse personnel should be familiar with the
types and purposes of these documents, as well as the importance of
their proper preparation.
Bill of Lading
The bill of lading (B/L) is a "document of title" controlling the
acceptance, transportation, and delivery of goods in accordance with
the terms and conditions stated either on the back of the document or
in classification and/or rules tariffs to which carriers are a party.*
Important! Regarding the use of the "standard" bill of
lading form: Motor carriers that are participants in the
NMFC and shippersmay use the Standard B/L forms,
terms, and conditions published in NMFC 100-V.
Shippers must confirm carriers' participation in this
tariff!

The bill of lading serves as a receipt for goods, issued and signed by
the carrier. It has long been customary for shippers to prepare the B/L
in order to save time in preparing the document, ensure the accuracy
of information, and comply with the increasing complexity of product
descriptions and regulatory requirements imposed by federal, state,
and local governments.
Also, the bill of lading is a contract of carriage between shipper and
carrier. It is a contract separate from any other contract. If you use the
B/L form, or if it is referenced in a transportation contract or
agreement, such contract must clearly state whether its terms and
* The Trucking Industry Regulatory Reform Act of 1994 (TIRRA)
provides that: "a motor carrier of property, the application of whose rates
is determined or governed by a tariff on file with the [Interstate
Commerce]Commission cannot collect its rates unless the carrier is a
participant in those tariffs." (Section 206(b)(3), amending par. 10761 (a) of
USC 49.)

 Page 92
conditions, or those specified in the contract, apply. When shipping
hazardous materials, waste products, and other regulated goods, the
shipper must certify that descriptions and classifications on the B/L
are correct.
Lastly, the bill of lading is evidence of title. "Ownership" of the goods
is established in accordance with the freight terms negotiated between
the shipper and receiver. Carriers do not own the goods entrusted to
their care and custody, unless they are abandoned to them by parties
to the document.
A standard bill of lading is shown in Exhibit 7-2. It may be prepared
by either the depositor or the warehouse. For additional information
on preparing bills of lading, see Appendix E which has the terms and
conditions used by National Motor Freight Commission participants.
Bill of Lading Prepared by Depositor
When bills of lading are prepared by the depositor, they are
transmitted to the warehouse by remote printer, EDI, or other means.
Since most information has been shown on the depositor's bill of
lading, the warehouse supplies only the following information:
Corrected carrier's name and four-digit Standard Carrier Alpha
Code (SCAC) or routing if different from the name shown on the bill
of lading
Date shipped (some depositors and warehouses include the clock
time of shipment)
Weight of shipment: gross weight of packaged goods in the
required unit of measure, net weight for bulk shipments
Gross, tare, and net weights when transportation containers (bulk
truckloads, intermodal containers, and railcars) are scale-weighed
 Seal number, as applicable
Legibly signed name and date of shipping personnel and carrier's
driver or agent
Bill of Lading Prepared by Warehouse
When bills of lading are prepared by the warehouse, the following
information must be provided in accordance with the depositor's
instructions:

 Page 93
Exhibit 7-2. Straight bill of lading.

Reproduced with permission of the National Mator Freight Traffic Commission,

Inc., Agent, 2200 Mill Rood, Alexandrio, Va. 22314.

 Page 94
City and state of origin
Carrier's name and four-digit carrier code
Depositor's order number and customer order number
Date shipped
name and address of destination
Route descriptionhighway carrier's name, railroad route, or
sequence of participating carriers for international shipments
Special carrier instructionsany in-transit temperature control,
delivery, stopoff, or consolidation information
On shipments that have been preloaded by the depositor, the
warehouse adds the shipper's load and count (SL&C) notation. Do not
accept any SL&C notation made by the carrier. Remember: the
carrier's driver must verify the count of goods when signing for their
receipt. Also, insert the number and abbreviation of the type of
package (for bulk shipments, show 1 T/T (tank truck), 1 T/C (tank
car), 1 CTR (container), etc.). The number of pieces loaded and
signed for by the driver or agent must agree with the number shown
on the bill of lading. On unitized (for example, shrink-wrapped
pallets) loads you can show, for example, "1 pallet containing 20
cartons." Insert the product description as provided in the freight
classifications, followed, if desired, by the classification item number
and product or trade name. Mark with an X each line describing a
hazardous material. The method and sequence of product and hazard
description is mandated by HazMat regulations and must be observed.
Shipping weight: gross weight of shipment, weight of pallets
shown separately; on bulk shipments, show net weight of load.
 If charges are to be prepaid: In accordance with the shipping order,
enter as prepaid if shipping charges are to be prepaid.
Subject to section 7: This will be completed by the warehouse
upon the instructions of the depositor.
Collect on delivery: Insert the dollar amount of the value of the
shipment plus the transportation charges (provided by the depositor);
a check will be collected by the carrier prior to unloading. Mark the
appropriate box and type, stamp, or

 Page 95
write "COD" in letters not less than 1 inch in height in the body of
the form. Some bill of lading forms have COD printed prominently on
the document.
Car or vehicle number: Insert the vehicle identification number.
Customer pickup disclaimer: When shipments are picked up by
customers in customer-owned trucks, a disclaimer should be placed in
the body of the document, for example:
"This is a receipt only for material delivered in good order and loaded onto
customer-owned vehicle for movement by customer truck. This is not a
bill of lading subject to the terms and conditions stated thereon or [name
the applicable classification]. All loss and/or damages incurred after
delivery to customer-owned vehicle are the responsibility of the
customer."

The warehouse must not release goods to a customer pickup carrier

unless the carrier has been authorized by the depositor or the
warehouse has confirmed with the depositor the authenticity of an
unknown pickup carrier. The depositor will hold the warehouse
responsible for failure to verify unknown carriers, should loss of or
damage to the shipment occur.
At times, several individual orders for the same customer, each with a
separate bill of lading or other shipping document, are combined into
one shipment. In such a case, the warehouse can issue a master bill
that lists the individual bill of lading numbers constituting the
shipment.
Note: Many companies pay their freight bills using a third-party
service or a bank payment plan. The Depositor will advise the
warehouse when the following notation must be made on the
document: "Transmit [by EDI or mail] a copy of the bill of lading
together with carrier's freight to [name of bank/payment plan
address]."
Distribution of Bill of Lading Forms
Document retention is determined by the depositor's legal accounting
department. To establish a reliable audit trail, depositors and
warehouses agree on a bill of lading distribution. For example, the
original is retained by the warehouse and periodically submit-

 Page 96
ted to the depositor; the second copy is retained by the carrier for
freight billing; the memo copy is retained by the shipper for future use
in claims filing; the warehouse copy is retained by the warehouse; and
the customer's shipping notice is sometimes given to the driver and
sometimes attached to the load. It can serve as delivery receipt and
proof of delivery.
Packing List
A packing list must accompany every inbound and outbound
shipment; sometimes a copy of the bill of lading serves as the packing
list. The list usually describes the contents of the package in greater
detail than the bill of lading. It must be placed in a prominent place on
the shipping unit, preferably on the side of a unitized pallet or on the
side of the last pallet facing the truck or container door. Upon opening
the vehicle, receiving personnel remove the packing list and compare
it to the goods as they are being unloaded.
The packing list specifies:
The number of shipping units in the shipment
The number of cartons, boxes, or packages per pallet
A detailed description of the contents of packages on the pallets
The total number of packages shipped
Production and shipping lot numbers to ensure proper storage,
order picking, and shipping sequence
Additional numbers and codes
Certificate of Analysis
A certificate of analysis (C/A) will accompany shipments of bulk
itemsfor instance, chemicals and chemical compounds, agricultural
goods, food, and a number of bulk products sold based on a named
specification. The C/A must be securely attached to the shipping
papers.
Material Safety Data Sheets
The Occupational Safety and Health Administration (OSHA) of the
Department of Labor requires that "chemical manufacturers and

 Page 97
importers shall obtain or develop a material safety data sheet for each
hazardous chemical they produce or import,"* and, furthermore, that
"employers shall provide employees with effective information and
training on hazardous chemicals in their work area," and "[c]hemical-
specific information must always be available through labels and
material safety data sheets."
Warehouses are "workplaces," and therefore, warehouse operators
are held responsible to comply with all regulations through a written
program of information and training of all personnel. The Hazard
Communication Manual, the compliance guide to the OSHA Hazard
Communication Standards enables warehouse operators to establish
and implement hazard communication programs for their employees
in compliance with OSHA regulations.
The applicable portions of the Code of Federal Regulations are
reprinted in Appendix B. An outline of Materials Safety Data Sheet
Information Requirements is shown in Exhibit 7-3. OSHA has
developed a nonmandatory format, OSHA Form 174, which may be
ordered from your OSHA regional office listed in your local phone
directory or from the OSHA Office of Information and Consumer
Affairs at (202) 219-8151.
: Readers must familiarize themselves with these rules and
IMPORTANT

regulations. Noncompliance entails substantial fines.

Manifests and Other Shipping Documents
These must accompany the bill of lading, and copies must be retained
and, where required and as agreed, periodically submitted to the
depositor.
Export Shipments
Export shipments must be handled in strict accordance with the
depositor's instructions. The documentation requirements depend on
the country of destination and may include, in addition to the ocean
* Code of Federal Regulations, CFR 29, (7/1/95 Edition), Ch. XVII,
Paragraph 1910.1200(g).
Ibid., Paragraph 1910.1200(h).
Published by the Small Business Legislative Council; available through the
American Management Association, Park Ridge, Ill.
(text continues on page 101)

 Page 98
Exhibit 7-3. Materials safety data sheet.
Information Requirements
Manufacturer/Importer/Shipper (Name and Address
Part 1. Product Identification and Emergency Information
Product Number/Code
Product (Trade) Name
Description
Chemical Name (if Single Substance)
Common or Chemical Name of Components
Formula
Chemical Family
Product Appearance
Emergency Telephone Numbers:
CHEMTREC 1-800-424-9300
Manufacturer/importer/Shipper
Part 2. Hazardous Components of Mixtures and Ingredients
Components/Ingredients (%)
CAS No.
ACGIH Threshold Limit Value (TLV)
Part 3. Health Information
First Aid and Nature of Hazard
Carcinogen (NTP, IARC, or OSHA Reports)
Effects of Overexposure
Mitigating Procedures in Case of
Eye contact
Inhalation
Skin Contact
Ingestion
Occupational Exposure Limit
Toxicological Test Data
Personal Protection
Personal Protection
Respiratory protection
Eye protection
Protective clothing and gear
Ventilation

(Exhibit continued on next page)

 Page 99
(Exhibit continued from previous page)
Part 4. Physical and Chemical Properties
General Physical Characteristics
Boiling Point
Melting Point
Pour Point
Vapor Pressure
Specific Gravity or Bulk Density
Solubility in Water
Odor
Part 5. Fire and Explosion Hazard Data
Flash Point
Flammability Limits in Air
Autoignition Temperature
Extinguishing Medium
Firefighting Procedures
Hazardous Fire and Explosion Hazards
Hazardous Combustion Products
Part 6. Reactivity Data
Stability
Conditions to Avoid Instability
Chemical Incompatibility
Hazardous Polymerization
Hazardous Decomposition Products
Corrosivity to Metal
Part 7. Environmental and Spill Control Information
Reportable Quantity (RQ)
Environmental Toxicity
Hazardous Waste (40 CFR 261) Yes No
Hazardous Waste Number
Hazardous Substance Superfund Yes No
Hazardous Substance Superfund Yes No
Land Spill/Leak Control and Mitigation Procedure
Water Spill/Leak Control and Mitigation Procedure
Waste Disposal Method for Product
Container/Packaging Material Disposal

(continued)

 Page 100
Exhibit 7-3. (Continued)
Part 8. Storage and Transport Conditions
OSHA Storage Equipment and Facility Requirements
Electrostatic Accumulation Hazard
Storage/Transport Temperature
Storage/Transport Pressure
Loading and Unloading Procedures
Viscosity: Temperature Required at Loading/Unloading
Part 9. Shipping Data (49 CFR 172)
DOT/UN Proper Shipping Name
DOT/UN Hazard Classification (Primary-Secondary)
Poison Constituent
DOT/UN Labels/Placards Required
Bill of Lading (Shipping Paper) Description
DOT/UN Containers/Packaging Specifications
DOT/UN Transportation Equipment Specifications
Hazardous Substance (49 CFR CERCLA Substance List)
Reportable Quantity (RQ)
Part 10. Label With Product Information
SAMPLE OF PRODUCT LABEL
which must be affixed to Product Containers,
with
DESCRIPTION OF HAZARDS;
FIRST AID, STORAGE AND HANDLING PROCEDURES;
EMERGENCY RESPONSE TO FIRE, SPILL LEAK;
WASTE AND CONTAINER DISPOSAL.
TECHNICAL BULLETIN
Prepared by _________________________________________ Title
Prepared by _________________________________________ Title
____________________________
Date prepared __________________________________ Supersedes (Date)
_____________________

 Page 101
bill of lading, dock receipts, shipping instructions, delivery
instructions, certificates of origin, packing lists, insurance certificates,
and pro-forma, commercial, and consular invoices. The export
documents must be completed accurately; the information must be
identical in all respects. Any discrepancies in documents will mean
the shipment could be delayed.
Shipping Control Record
The warehouse must maintain a consecutive record of shipments for
control, billing, and reconciliation purposes. This record verifies the
sequence in which orders were received and shipped. The shipping
control record must show the shipping order, or purchase order or
''pro" (progressive) number, and the carrier name and/or routing.
Routing Instructions
Depositor-preferred carriers are listed in a master carrier roster. This
list is then split into specific routing guides for each of the depositor's
shipping origins, plants, warehouses, and distribution centers.
Depending on the negotiated freight terms, deliveries to the
warehouse can also be routed by the receiver and, correspondingly,
the warehouse is supplied with routing instructions.
For highway shipments, the truck carrier's points list shows the
destinations to which it makes either direct or interline deliveries (see
Exhibit 7-4). In most cases, the carrier at the origin is also the carrier
at the destination.
For railroad shipments, the routing has been negotiated between
carrier and shipper. It must be shown on the shipping documents.
The warehouse must use depositor-selected preferred carriers. Upon
receipt of a shipping order, and depending on inventory availability,
the warehouse's customer service desk assigns a "ship-from" and a
"ship-to" location. The carrier is assigned from the carrier roster as the
preselected, primary, and/or alternate choice. When orders are
transmitted by EDI, the system will have automatically assigned the
preselected carrier from the carrier roster.

 Page 102
Exhibit 7-4. Carrier points list.

Reprinted with permission of ABF Freight System, P.O. Box 10048, Fort Smith,
Ark. 72917-0048.

 Page 103
Tip: When the warehouse routes the shipment, it must
ensure that the interline and delivering carriers protect
any rate discounts the depositor may have negotiated
with the originating carrier.

The routing guide shows the following:

"Ship-from" originname and address of warehouse
Name of the selected primary carrier
Names of alternate carriers
Contact information: carrier EDI code, phone and fax numbers,
dispatcher name
Territories, states, or regions served by the primary and alternate
carriers
Volume (number of shipments) assigned for a period
Deviation from the depositor's preferred carrier list is considered
noncompliance. If a preferred carrier cannot be used for any reason,
warehouse personnel must notify the depositor. Upon receiving the
depositor's approval, warehouse personnel must correct or change the
routing description on the shipping papers and show the carrier
actually used. Failure to change the name of the carrier or the routing
can result in excess freight charges, for which the depositor can hold
the warehouse responsible.
Unsuitable Transportation Equipment
Any transportation equipment delivered to the warehouse must be
inspected by warehouse shipping personnel prior to loading to ensure
its suitability. Equipment exhibiting signs of damage, leaks,
protruding nails and splinters, waste, dirt, contamination, or odors
must be rejected, and the rejection must be noted on the daily activity
report.
Tip: Reeferi.e., temperature-controlled trailers, rail-cars,
or containers are often used for food and meat
shipments. Warehouse personnel must ensure that such
equipment has been steam-cleaned to avoid contamina-

 Page 104
tion and remove odors. A notice that the trailer must be
steamed is usually affixed to the inside of the trailer or
car.

Also, transportation equipment used for carrying hazardous materials

must be properly certified. In case of doubt, consult the depositor to
ensure the equipment's suitability.
Demurrage and Detention Control
Advance pickup scheduling and delivery notices, plus proper yard and
dock management, should keep railroad demurrage and truck and
container detention to an absolute minimum. Any receiving and
shipping delays resulting from improper practices will not be paid for
by the depositor.
Spills, Leaks, Breakage
In the event of an involuntary release of hazardous or nonhazardous
materials, the warehouse must contact and notify the depositor
immediately, before attempting to mitigate the spill or clean up and
dispose of the materials.
When the depositor and warehouse have agreed to use third-party
emergency-response contractors, these should be called in to control
the event.
Invoicing
The warehouse must submit an original and the stipulated number of
invoice copies for any services rendered during the service period.
Invoices must be supported by substantiating
documentationwarehouse receipts, daily activity reports, and shipping
reports. For a sample invoice, see Exhibit 7-5.
A separate invoice must be submitted for storage charges, supported
by the inventory report. For example, a full month's storage charge is
assessed for goods received between the first and the 14th day of the
month, and one-half month's storage is charged for goods

 Page 105
Exhibit 7-5 Warehouse invoice (billing rates and amounts not shown).

Reprinted with permission Brook Warehousing Systems, P.O. Box 6068

8ridgewater, N J 08807.
(continues)

 Page 106
Exhibit 7-5 (continued)

 Page 107
received on the 15th day of the month and thereafter. A separate
invoice is also used to bill services other than storage, including
stenciling, labeling, picking and packaging, repackaging, and
unitizing.
The invoice is submitted in EDI, fax, or hard copy format. When
billing once a month, send the invoice no later than two days after the
end of the month. When billing twice a month, send it no later than
two days after the first of the month, and two days after the 15th of the
month.
Note: When more than one product management group or corporate
division is storing goods in the warehouse, the invoices may have to
be submitted to more than one person or department. The depositor
must provide all necessary addresses.
All invoices are reviewed and approved by the authorized depositor
personnel before payment. The billing cycle and payment terms are a
negotiated part of the warehouse agreement.
Annual Physical Inventory
Depositor Responsibilities
During the physical inventory period, all receiving and shipping
operations should be suspended. The depositor advises the warehouse
of the activity cutoff date. When using its own personnel to conduct
the physical inventory, the depositor:
Develops a detailed physical inventory plan and procedure in
cooperation with warehouse personnel. This plan includes a schedule
of working hours, lunch, and rest periods. A copy of the plan is sent to
the warehouse.
Notifies the warehouse, in writing, ahead of time (30 to 60 days)
of the inventory cutoff date so that both parties can begin
preparations.
Prepares and prints the inventory reports and stock cards for each
stock item as near as possible to the physical inventory date. These
inventory reports should show the book inventory amount, item code,
type and size of packaging, and warehouse stock location.

 Page 108
Obtains labels and tags for identification of and placement on
goods.
Selects and trains company personnel to perform the physical tasks
of counting, including what to count, how to count, how to complete
the inventory reports, and how to affix labels and tags. Ideally, the
depositor's office or customer service personnel work as the counters,
checkers, and controllers because they are most familiar with the
product names and numbers and can spot inconsistencies and
discrepancies:
Gets name tags for counting personnel.
Familiarizes the counting personnel with the warehouse layout,
including locations of first-aid kits, fire extinguishers, sprinklers,
emergency showers, water fountains, restrooms, canteens, and
vending machines; perhaps a simple map of the warehouse facilities is
handed out.
Instructs counting personnel to follow all safety rules of the
warehouse, such as wearing suitable work clothing, hard hats, safety
glasses, and steel-tipped shoes. Safety instructions should include
cautions against riding power equipment or climbing onto second or
third tiers to read labels.
Instructs counting personnel to stay with the job and stay in the
assigned area.
Ensures that all warehouse safety, work, and union rules are
observed.
Warehouse Responsibilities
As at the depositor's facility, the warehouse should cease all shipping
and receiving operations for the duration of the physical inventory
activity, if possible. Delivering carriers should have been advised not
to pick up or deliver during this time. Obviously, emergency
shipments must be handled; special instructions should cover such an
event. In addition, the warehouse:
Prepares inventory, including all activity records, for
reconciliation.
Provides counting and tally sheets, electronic scanning equipment,
tags, labels, markers, and other necessary supplies.

 Page 109
Provides and assigns the necessary experienced warehouse
personnel and materials handling equipment, including hand carts, lift
trucks, and dollies.
Accompanies the depositor's counting personnel to move pallets,
carboys, gaylords, bundles, or rolls from their location inside the
racks, storage slots, and shelves so they can be readily viewed,
inspected, verified, counted, recorded, and tagged or labeled.
Remember, the depositor's personnel are not allowed to operate
materials-handling equipment for reasons of safety as well as the
depositor's and warehouse's liability exposure.
Makes sure all counted items are replaced in storage locations
when released by depositor personnel.
Secures sufficient space in the aisles and staging areas to inspect,
verify, count, label, and tag.
Instructs its own personnel to work with extra care because the
depositor's personnel are in unfamiliar territory and not fully aware of
day-to-day operating hazards.
Encourages a spirit of cooperation during this disruptive, once-a-
year event.
A carefully planned physical inventory can be fun for the participants;
they get away from their daily work routine, meet people they
normally talk to only on the phone and, when the work is done, often
cap the event with an inventory party.

 Page 110

8
Performance Standards and Audits
"Quality is conformance to requirements."
Philip B. Crosby in Quality is Free

Chapter 7 outlines the depositor's performance expectations of the

warehouse. This chapter measures to what degree the warehouse has
met those expectations. The performance audit also bears out whether
or not the depositor's selection of a warehouse was a good one.
Performance Standards
Standards can be summed up in the familiar phrase: Deliver the right
goods in the fight quantity, in the right package, at the fight time, at
the right cost, in good condition to the customer. But that's not
enough. You have to qualify: What is right? Will the customer accept
a little more or a little less? How much more or less is acceptable?
What is the right time8 A.M. on the button, or is the delivery window
"all morning"? If the delivery is only Tuesday through Thursday, and
you delivered on Monday, you have not met the standard, even though
you were one day early. In addition, you may have incurred extra cost
to prepare the order overtime for Saturday work and a weekend
layover for the truck driverand yet you have made a nonstandard
deliveryyou have not met the requirement!
If your policy is to always answer the phone no later than the second
ring, to process orders within one hour of receipt, to ship

 Page 111
each order the same day, you have to ensure that this can be done. Do
you have enough phones and enough people? Can the warehouse
really ship this order the same day? The order may have to be
assembled, repackaged, unitized, restenciledand the lead time you got
from your customer (and, unfortunately, you accepted) was
unrealistic.
Today, compliance manuals and performance audits apply the
processes developed by the International Standards Organization
(ISO) 9000-9004 series of standards. As of this writing, these
standards have been adopted by more than 50 countries. They are
known in the United States as the ANSI/ASQC Q90-94 series and
describe, in generic terms, the elements of the ISO system needed to
ensure that products and services meet or exceed customer
expectations. The warehouse must, therefore, confer with its
customers and its transport providers on the level of expected service
before it implements any quality program.
Performance standards must be:
Clearly identified. The standards for performance must be
described and explained by the depositor. Each customer has different
requirements; to fulfill them, a warehouse must develop a customer
profile that reflects customer-specific service requirements and
mutual commitments.
Achievable. Standards must be reasonable. The warehouse cannot,
for instance, receive an order at 3 P.M., process it, package it, and
have the trucker deliver it at 8 A.M. the next morning, 1,000 miles
away.
Measurable. Keep the performance measurements simple measure
only what is essential to the operation, and use only measurements
that can be expressed in numbers. Measure daily activity, overs,
shorts, damages, inventory discrepancies, shipping errors, and the
like. Understand that quality improvements may result in a reduction
in productivity as well as an increase in costs.
Consistent. Change causes confusion and errors. For example, new
customer delivery times require worker and equipment reassignments,
rescheduling of carriers, perhaps even relocation of and adjustments
in inventory. Change the performance standards only when absolutely
necessaryand only after you have reached

 Page 112
agreement with service providers that the new standards can be
successfully implemented.
Performance Measurement
Activities that produce meaningful periodic measurements against
established productivity benchmarks include:
Space utilization: Space reserved, rented, or contracted versus
space used
Order fulfillment: Total number of orders, month-to-monthbudget
versus actual, variances, processed on-time and complete versus
incomplete and partial
Order picking and assembly: Standard versus actual time,
variances, and errors
Cross-docking, consolidation: Orders completed on time versus
delays and extra handling
Inventory accuracy: Book inventory versus overages and
shortages; out-of-stock; back orders
Total throughput: Stock keeping units (SKUs), pallets, cases,
pounds handled
Transportation: Number of shipments by mode, cost per shipment,
cost per unit shipped, picked up on time versus late
Loss and damage: Warehouse storage and handling, transportation
damages
To ensure compliance with depositor standards, warehouse operators
must provide depositors with periodic performance reports. In
addition, a complete annual warehouse performance audit is
recommended.
The performance audit should be scheduled ahead of time and
conducted during a period of normal warehouse activity. Warehouse
managers should specify the functions, procedures, processes, or
criteria to be reviewed, and these should cover a distinct activity
periodmonth, quarter, or year. The audit should be objectivesthat is,
conducted by knowledgeable personnel. Send an auditing team made
up of accountants to check inventory levels and billing records;
regulatory personnel to check safety and environ-

 Page 113
mental conditions; manufacturing personnel to check packaging,
product integrity, age, condition, and obsolescence; transportation
personnel to check transit damage; and warehousing personnel to
check procedures. Exhibit 8-1 illustrates an audit form and rating
system. The rating points shown in Exhibit 8-1 serve merely as an
example; you will use your own point system based on the importance
you attach to each audit item.
The audit should be concluded with a postinspection conference to
discuss areas that require immediate improvement or change. There
should also be a reasonable time period for the warehouse operator to
correct shortcomings, and a date should be set for a follow-up audit.

 Page 114
Exhibit 8-1. Audit form and rating system.
Items to Be Rating Rating This Rating Last
Covered Maximum Audit Audit
SUMMARY
Conditions of 50 ________________________
buildings/grounds
Facility safety and 150 ________________________
security
Sanitation and 100 ________________________
housekeeping
Customer service 175 ________________________
Warehouse personnel50 ________________________
Handling of goods 100 ________________________
Loss and damage 75 ________________________
Inventory 100 ________________________
Annual physical 100 ________________________
inventory
Documentation 100 ________________________
accuracy
1,000 ________________________
Total
(max.)
Performance Rating
OutstandingSuperior in all categories 950-
1,000
Excellent Minor deficiencies 850-
949
Acceptable Deficiencies not critical to operation 800-
849
Fair Complaints, failing performance 750-
799
Poor Customer svce., housekeeping, 700-
inventory problems 749
Critical Use of warehouse under serious review <700

(Exhibit continued on next page)

 Page 115
(Exhibit continued from previous page)
Condition of Buildings/Grounds
Warehouse signs in ________________________
place and clean
Outside appearance ________________________
of structures
Parking area, ________________________
driveways
Railroad rails ________________________
Fences ________________________
Docks and doors ________________________
Grass and weeds ________________________
controlled
Drainage adequate ________________________
Trash cleaned up ________________________
and contained
Lighting adequate ________________________
________________________
Total 50
(max.)
Facility Safety and Security
Hydrant pressure ________________________
O.K.
Sprinkler system ________________________
working
Smoke detectors ________________________
working
Fire extinguishers
Unobstructed/visible ________________________
Strategically located ________________________
In working ________________________
condition
Latest test date ___________
Safety showers
Strategically located ________________________
Unobstructed/visible ________________________
In working ________________________
condition
Safety signs visible ________________________
Security/fire alarm ________________________
functioning
Security system ________________________
connected to
police/fire
departments
Date of last ___________
regulatory
inspection
OSHA, EPA, FDA,
Fire Department
inspections
satisfactory ________________________
________________________
Total 15
(max.)

(continued)

 Page 116
Exhibit 8-1 (continued)
Sanitation and Housekeeping
Interior appearance ________________________
Roof in good repair ________________________
Lighting adequate ________________________
Ventilation adequate ________________________
Heating adequate ________________________
''No smoking" signs ________________________
visible
Rules strictly enforced ________________________
Insect, rodent, bird ________________________
control
Last exterminator service ____________
date
Aisle clear ________________________
Waste and trash ________________________
containers present
Waste/trash cleaned up ________________________
Spills cleaned up ________________________
Floor sweepingregular ________________________
Empty pallets stacked in ________________________
accordance with fire
regulations
"White Lines" (FDA food
& grocery regs)
In evidence ________________________
Unobstructed ________________________
Storage areas ________________________
identified/marked
Safety striping visible ________________________
Rest rooms clean ________________________
Lunch room clean, ________________________
Lunch room clean, ________________________
equipment safe
Truck driver waiting area ________________________
clean
Public phone ________________________
Receiving/shipping/cross- ________________________
dock area
unobstructed/organized
Check-out desk ________________________
organized
Labels, stencils, and ________________________
supplies organized
Idle mobile equipment ________________________
parked safely
Workers' safety ________________________
equipment available
Control procedure in ________________________
place
________________________
Total 100 (max.)

(Exhibit continued on next page)

 Page 117
(Exhibit continued from previous page)
Customer Service
Office space adequate ________________________
Rules and policies posted ________________________
Rest/lunch room access ________________________
Clean/organized ________________________
Personnel appearance ________________________
Communication skills
Depositor complaints ________________________
Customer complaints ________________________
Size of office staff ________________________
New employees since last ________________________
audit
Orderstotal ________________________
Missed ________________________
Late ________________________
Incomplete ________________________
Back ordered ________________________
Shipmentstotal ________________________
Misrouted ________________________
Incomplete ________________________
Late ________________________
Returns total ________________________
Invoices
Depositor billing ________________________
# incorrect ________________________
Customers billing ________________________
# incorrect ________________________
Freight bills ________________________
# incorrect ________________________
Debit/Credit MemosTotal ________________________
________________________
Total 175 (max.)

(continued)

 Page 118
Exhibit 8-1. (continued)
Warehouse Personnel
Is management on-site? Yes_
No _
Union Yes_
No _
General appearance ________________________
Loitering ________________________
Smoking evidence ________________________
Safety equipment used
Hard hats, steel-tipped
shoes
Eye glasses or shields, ________________________
gloves
Workerstotal ________________________
New employees since ________________________
last audit
Supervisors/foremantotal ________________________
New employees since ________________________
last audit
Paperwork completed ________________________
accurately
Auto ID equipment used ________________________
well
Training frequency ________________________
Last safety training; date ________________________
__________
Last HazMat training; date ________________________
___________
Last lifttruck training; date ________________________
__________
 Total 50 (max.)________________________
Receiving/Shipping (totals)
Inbound receipts ________________________
Broken seals on transport ________________________
equipment
Receipt rejected
(cause: excessive transport ________________________
damage)
Outbound shipments ________________________
Equipment inspected before ________________________
loading
Carrier equipment rejected ________________________
Routing guide observed ________________________
________________________
Total 100 (max.)

(Exhibit continued on next page)

 Page 119
(Exhibit continued from previous page)
Loss and Damage
Transportation
Receipts
# Claims ________________________
$ Value ________________________
Type of damage
____________
Shipments, outbound
# Claims ________________________
$ Value ________________________
Type of damage
____________
Warehouse
Type of damage
____________
# Items ________________________
$ Value ________________________
# items recoupered ________________________
Cost ________________________
# items disposed ________________________
Cost ________________________
Mysterious disappearance (theft, pilferage)
# items ____________ ____________
Cost ____________ ____________
Concealed damage
# occurrences ____________ ____________
Cost ____________ ____________
____________ ____________
Total 75 (max.)
(continued)

 Page 120
Exhibit 8-1. (continued)
Inventory
Goods are located in assigned ________________________
(reserved space)
Space adequate (overflow ________________________
observed?)
More space needed? ________________________
Less space needed? ________________________
Access and working space ________________________
adequate
Aisle clearance ________________________
Aisles are clean ________________________
Locator system adequate ________________________
Goods can be found easily ________________________
Lot ID and rotation observed ________________________
Appearance of goods ________________________
Packaging intact ________________________
Overwrap intact ________________________
Packaging adequate ________________________
Changes indicated? ________________________
Stack height as specified ________________________
Pallet overhang observed ________________________
Shelves, bins orderly ________________________
Small items controlled ________________________
Sample desk organized ________________________
Orders are checked after ________________________
assembly
Shipments are verified in ________________________
staging area
Cross-docking space ________________________
adequate
 Total 100 (max.)________________________

(Exhibit continued on next page)

 Page 121
(Exhibit continued from previous page)
Annual Physical Inventory
Other warehouse activity ________________________
observed
Any interference with our ________________________
API ?
Goods accessible for count ________________________
Goods arranged for count ________________________
All goods found easily ________________________
Labels, tags prepared ahead ________________________
of time
Documentation prepared ________________________
Sufficient warehouse labor ________________________
available
Sufficient equipment ________________________
available
Any damage caused by ________________________
moving inventory around
API completed on time ________________________
________________________
Total 100 (max.)
Documentation Accuracy
Receiving reports ____________ ____________
Proof of delivery? ____________ ____________
Receiving tallies ____________ ____________
OS&D reports ____________ ____________
Error reports ____________ ____________
Loss & damage reports ____________ ____________
Daily activity reports ____________ ____________
Inventory reports ____________ ____________
Shipping reports ____________ ____________
Billing ____________ ____________
____________ ____________
Total 100 (max.)

 Page 122

9
Pricing of Warehouse Services, Quotations, and
Contracts
Warehousing costs are developed by the warehouse operator. This
chapter should help depositors understand the costing process and
mechanism used. It will also assist depositors in developing the
information needed by the warehouse operator to come up with a
mutually acceptable price.
Pricing Factors
Warehouse costs are the product of four factors. First, they involve
features unique to a specific warehouse. These include the geographic
location, with consequent climate and environmental circumstances;
the age of the facilities and their structural integrity, level of
maintenance, and repair; the type of ownership and method of
financing and amortization; any real estate taxes or local business
incentives; utility and other ongoing costs; labor availability and
union status; and management commitment.
Second, there are the depositor requirements, including the type of
services needed and the volume and quantity of goods offered for
storage.
The third factor is the goods tendered for storage. Rates and charges
are dependent on the value of the goods. Thus, the depositor must
disclose value as well as any unique and critical properties of the
goods so that the operator can prepare a representative quotation.
The fourth factor is whether the warehouse operator chooses an
aggressive or a defensive pricing approach. This decision de-

 Page 123
pends on the state of the economy and market conditionswhether it's a
buyer's or seller's market. It also depends on the nature of the
competition, the present and projected level of warehouse occupancy
(fill rate), and the depositor's statuswhether it is a new or a current
user.
To make educated decisions, depositors should understand the cost
structure of the warehouse and the pricing approach taken by its
operator. For instance, when comparing warehouses, some depositors
believe that a great-looking new warehouse in itself is better than an
old one. However, ownership costs for an older facility may be lower;
furthermore, its management may provide the same or even superior
quality of service. When geographic location, safety, product
stewardship, customer service performance, and management are
comparable, looks should be secondary, and cost must be the selection
criterion.
Activity-Based Costing
Cost accounting has been used in manufacturing to associate costs
with the product as it progresses through the production process.
Fixed, semivariable, and variable costs are recorded in cost centers,
and are charged to the product either in full or allocated based on
mathematical formulas or empirical estimates. In the dynamic
logistics environment and, specifically, warehousing, it becomes
essential to associate costs with activities.
The activity-based costing (ABC) concept recognizes the following:
Each process consists of a sequence of activities.
Each activity absorbs distinct and measurable amounts of
resources.
 Each customer order calls for the application of a sequence of
activities.
The sum of activities defines the total resources employed and/or
consumed by the process.
The total resources employed and/or consumed are the economic
basis for service pricing.

 Page 124
Thus, ABC enables warehouse operators to prepare representative
cost and price estimates to meet their cost recovery and profit
objectives. To apply the ABC concept effectively, depositors and
warehouse operators must take the following steps:
Understand the process and its components.
Identify the activities that make up the process. Each service
performed and each customer order employs distinct procedures that,
strung together, make up the process.
Ascertain the cost elements of each activity.
Find out where these costs elements are recorded. Traditional
accounting systems are rarely set up to reflect activity cost. Individual
cost components are spread all over the chart of accounts; for ABC,
they must be extracted and recombined.
Set up an activity-based (functional) cost statement and collect all
costs relevant to the process: labor costs from time, payroll, and
benefits records; equipment costs from depreciation, repair, and
maintenance records; building, utility, and related costs from
operating statements; supplies costs from purchasing records, and so
on.
Analyze and describe each activity in detail. For instance, to
unload a trailer means: walk to forklift, mount forklift, drive to trailer,
enter trailer, pick up pallet, exit trailer, travel 50 feet, lift into the
second tier of a storage rack, place pallet into position, extract fork-
lift, lower forks, return to dock. For a packaging operation, it's: walk
to forklift, mount forklift, travel to predetermined rack position, raise
fork to third tier, enter and extract pallet, lower pallet to floor level,
verify package identification, note on pad (scan by hand-held wand),
travel to stretch-wrapping machine, position pallet, remove fork . . .
and so on, for every discrete step in the activity.
Measure the time it takes to carry out each activity. This is done
either by actual time measurementsecondsor by a predetermined time
measurement unit (TMU) in a time and motion study and work factor
analysis.
Develop the time cost for each activity phase based on the number
of seconds or TMUs used.
Calculate the time cost for the complete activity (loading,
unloading, picking, packing).
Add the costs of all the activities.

 Page 125
Develop the total cost of the work sequences applicable to
individual customer orders.
Industry-Wide Cost Standards
Elaborate time and motion studies have been conducted to develop
standard time values (STVs), as well as TMUs for each warehouse
activity and process. These values have been published by the U.S.
Department of Agriculture, U.S. Navy, American Warehouse
Association, the Warehouse Education and Research Council, the
Distribution Center Management, several logistics consulting firms,
and individual companies in the United States and overseas. For more
on this, see the Suggested Readings and Sources at the end of this
book.
Warehouse operators no longer individually calculate work processes
and other costs. Today, computer software programs provide
predetermined time units, cost distributions, and allocation algorithms.
Warehouse management systems permit the precise calculation of
time values and all other costs associated with warehouse operations.
Customer Activity Profile
Chapters 5 and 6 described the sequence of all warehousing functions.
Warehouse operators analyze a depositor's projected warehousing
activities to come up with a price proposal. But to do this, depositors
must provide a detailed description of all planned warehousing
services. The basic document is a customer activity profile, an
example of which is shown in Exhibit 9-1.
Warehouse Quotation and Contract
Many warehouse transactions between depositors and warehouse
operators are conducted based on the standard terms and conditions of
the Warehouse Quotation and Contract. It is understood that the
depositor accepts the standard terms and conditions, that the quotation
prepared by the warehouse states the rates and charges for the desired
warehousing services is usually good for thirty days, and
(text continues on page 128)

Exhibit 9-1. Customer activity profile.
Customer name and address:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
1. Communications
Remote printer _
EDI _ Fax _
2. Product Information
Description and trade name
Hazard classification
Freight classification
Temperature control ranges/limits
Value per unit
3. Packaging Characteristics
Type of packaging (box, drum, crate, bundle, bog)
Dimensions per unit
Weight per unit (U/M = unit of measure: pound, kilo)
4. Storage Space Needed
Total volume (U/M per day, week, month, year)
Number of SKUs Number of line items
Inventory level (average) Turnover (average/period)
Stacking limits (one, two, three, four high)
Storage configuration
5. Handling
Pallets
% slip sheets % floor loads %
Rotation
LIFO _ FIFO lot no _ serial no _ batch no
_ _
Received on
on slip sheets _ as floor loads _
pallets _
Special handling equipmenttype
Special handling equipmenttype
6. Inbound Receiving
Truckload
% LTL intermodal container railcar %
% %
Frequency
/day /week /month

(Exhibit continued on next page)

 Page 127
(Exhibit continued from previous page)
Quantity, pallets; pieces
number of
Pallet return: Yes _ Dunnage return Yes _ No _
No _
Waste Yes _ No
removal _
7. Outbound Shipments
Truckload
% LTL % intermodal container railcar %
%
Small
UPS % FedEx %
parcels:
Frequency /day /week /month
Average shipment (units; weight/TL-LTL-railcar-
size container)
Loaded
on pallets on slip sheets _ as floor load _
_
Carrier assists in Yes _ No
loading _
8. Transportation
Routing: consignorwarehouseconsignee customer pickup
_ _ _ _
Freight prepaid (consignee) warehousecollect(consignor)
payment: _ _ _
Preferred carriers:
Truckload
Less-than truckload
Temperature-controlled equipment
9. Inventory Reporting
Daily activity reports
Cycle counting
Annual physical inventory
10. Other Services
Bonding Freight claim handling Sorting
Subassembly Repackaging Bar coding
Labeling Marking Stenciling
Shrink-wrapping Stretch-wrapping
Hazardous materials control
MSDS preparation
Safety and environmental audits
Training and compliance programs

 Page 128
that the period of the standard agreement is for thirty days only
(Exhibit 9-2). Using this standard format, the only negotiable items
are usually rates and charges.
When the depositor desires to enter a long-term relationship with the
operator (one year or more) and desires to negotiate terms in addition
to rates and charges, the parties usually enter a contract or lease
agreement. For an example of a contract, see Appendix D; for an
example of a lease agreement, see Appendix E.
Guidelines for Contract Development
All such contracts and agreements should be formulated and reviewed
by your corporate legal counsel or legal department. The following
are some general guidelines for the development of such documents.
Purpose. Give a brief, general statement of intended facility use:
storage, subassembly, minor manufacturing, distribution; define the
limitations, exclusions, and prohibited use/s.
Parties. The parties to the agreement or contract give their full
names, addresses, states in which they are incorporated, and addresses
where necessary notification, notice, or demand must be given, and
where lease or rent payments must be made.
Status of Parties. Clarify whether the lessor owns the premises or
facilities or is subleasing to lessee, and whether the premises or
facilities are encumbered in any way. If so, determine what exposure
the lessee may have to such encumbranceyou may not want to enter
the lease.
Relationship of Parties. Legal counsel should address secondary
employer consequences.
Term. Commencement, duration, extensions, cancellation, and
renewal dates and provisions should be specified.
Tip: Beware of ''evergreen" clauses! Should you forget
the expiration date, you could commit yourselfby
oversightto a "like period" following the original period!

Permits and Restrictions. Where necessary, the lessor should

provide copies of applicable zoning, hazardous materials and waste

 Page 129
Exhibit 9-2. Warehouse quotation.

Reprinted with permission of Brook Warehousing Systems, P. O. Box 6068,

Bridgewater, NJ. 08807.

 Page 130
handling, storage and hauling, food hauling, and storage permits.
Consider also access and local traffic routing and noise restrictions;
many warehouses are in or near residential areas.
Description of the Property. Indicate the location (address) of the
premises, including buildings (height, total square footage of storage,
office, storage, HazMat, subassembly, packing, filling, staging areas);
perimeters and ancillary facilities (roads, trailer drop, and parking
lots); fences; rail sidings, barge or vessel docks. Attach a
representative drawing of the facilities.
Modifications to Premises. Installation of fixtures (racks, shelves,
interior walls, overhead cranes, automated guidance systems) should
be allowed only upon prior permission by the landlord. The
responsibility for maintenance of installations, terms of removal of
installations, and restoration of premises to prior condition at lease
termination should be noted. Structural changes are generally not
permitted. In the event the landlord determines that certain
improvements installed by the lessee should remain for lessor's
continued use, the parties would negotiate appropriate termination
settlement and compensation.
Maintenance. Define the responsibilities of each party for
structural components, exterior and interior walls, roofs, sprinkler,
heating and cooling, air-conditioning, safety, and other systems, as
well as repair and maintenance of improvements.
Signs. The agreement should establish conditions for erecting and
maintaining signs.
Insurance. Delineate clearly who buys insurance for fire, weather,
storm, earthquake, other casualty, or damage or loss to lessee's
property. Define and assign responsibility for maintaining the
premises in insurable condition. Mention the exclusion and/or
prohibition of storage of goods or activities that would affect the
insurance rate or insurability of premises.
Taxes. Identify responsibility for real estate and any other
premises-related local, county, state and federal taxes, and inventory
(personal property) taxes.
Liability. Next to cost, this is one of the most important areas to
consider when contemplating a lease contract. Duties and
responsibilities of the partiesin the event of loss of and damage to
existing facilities (as leased), lessee-installed improvements, injury
and loss of life arising out of the presence and activities of persons
on-

 Page 131
site, and accidents caused by third parties (truck and rail
operations)should be very carefully delineated.
Tip: Events causing or leading to loss and damage may
be detailed to include poor ground drainage, weather-
related structure and sprinkler leaks, overflow from
sewers, malfunctioning water, heating, cooling, gas and
electrical systems, etc.

Utilities and Other Services. Responsibility for electric power,

heat, gas, water, sewer, phone, security, snow removal, grounds-
keeping and repair, paving, parking, and truck trailer and container
drop space should be precisely defined. In cases where parts of
buildings and facilities are leased, allocation formulas for common
services should be agreed upon, or, where possible, separate utility
(electric, gas, water) meters installed to ensure precise cost
assessment.
Cost of Facilities. In "consideration" for use of a specified space
(defined either as building, or square feet of area to be used), lessor
agrees to pay a negotiated monthly fee, for a specified term, and
agrees to make each periodic payment on a specified date.
Access by Lessor. This is usually granted by lessee "upon prior
notice" and "during normal business hours."
Assignment. This almost always requires the concurrence of the
lessor; it should be spelled out.
Compliance with Laws and Regulations. It is implied that the
parties to a lease will comply with local, state, and federal laws, rules,
and regulations. Many legal experts feel that a clause reminding each
party of its compliance responsibilities, although perhaps redundant,
should be included in a contract.
 Signatures. Only personnel empowered to bind their company to
the significant responsibilities, major expenses, obligations, and
exposure should appear on these documents. Some managers are
impressed by their power to sign agreements. Remember that your
signature can entail corporate as well as personal liabilities.

 Page 132

10
Bar Coding and Electronic Data Interchange
Applications of bar coding and electronic data interchange (EDI) are
everywhere. In department and retail stores, on supermarket shelves,
in video rental shops, in auto parts and repair shops, every · item
displays the little rectangle with black linesthe universal product code,
or UPC. Checkout counters everywhere scan customers' purchases
(and discount coupons); UPS and FedEx package labels are read by
bar code scanners. Even some toll roads have installed automatic toll
booths that read a bar code on a car's windshield.
Meanwhile, behind the scenes, paperless transactions are taking place
between manufacturers and distributors, between buyers and sellers,
and in all manner of service businesses. The future is bright for even
more types of electronic data exchange.
The Universal Product Code
The UPC is an internationally recognized system of unique numbers
(to be read by people) and bar codes (to be read by machines).
Initiated by the grocery industry in the early 1970s, it is used by
virtually all manufacturing and service companies, especially logistics
industries, the U.S. government, and the military.
This automated UPC system generates a wealth of instant data
supporting marketing decisions. It improves the inventory
management process, and provides real-time information on inventory

 Page 133
status. In addition, it can initiate replenishment orders at the point of
sale or point of use. The UPC system speeds up the supply-chain
transaction cycle and decreases response time. It reduces recording
errors to 2 to 3 per million, and eliminates manual and keyboard data
entry. In short, it improves worker and facility productivity and
utilization. In the United States, "the uniform code council [UCC]
administers the assignment of all UPC manufacturer identification
numbers to preserve the uniqueness of each individual item. The full
UPC system is intended to provide readers of the codeboth people and
machineswith a reliable way to make business work more effectively
through accurate product identification."*
Bar codes have fundamentally changed the way producers,
distributors, retailers, and warehouses manage their businesses.
Planners and managers now rely on information generated at the point
of activity for the efficient scheduling, deployment, and control of
goods. In the warehouse, this includes:
Order transmittal and advance order notification
Receiving and label printing
Storage location assignment
Put-awaymanually, assisted by automatic identification equipment,
or totally automated
Inventory updates by downloading data from portable or fixed
devices to a mainframe computer
Order picking and handlingmanual or by automated equipment
Packing and order consolidation
Checking at the loading dock
 Shipping and documentation
Inventory management and control, especially cycle counting
Billing
Loss and damage
Performance reporting
*UPC Implementation Guide: How to Develop and Maintain a Top
Quality UPC, Uniform Code Council, Inc., p. i.

 Page 134
For a detailed description and applications of bar coding technology,
contact the Uniform Code Council, Inc., 8163 Old Yankee Road,
Suite J, Dayton, OH 45458; phone (513) 435-3870. Available
publications include the WINS standards manual Read Me First:
Getting Started With the Universal Product Code, an EDI Supplier
Directory, and a large selection of UPC manuals and videos.
Electronic Data Interchange
Paperless transactions are gaining acceptance through the medium of
computer-to-computer electronic data interchange (EDI). Modern
warehousing activity is supported by an integrated warehouse
management system that applies Warehouse Information Network
Standards (WINS) to the individual hardware and software
technologies of automatic identification (auto ID), including:
Bar coding based on bar code symbology specifications
Bar code application standards developed by the Uniform Code
Council (UCC)
Bar code scanners and other optical or magnetic recognition
devices, hand held or fixed, to read bar codes and other recognizable
symbols
Label printers, using laser-based ink, thermal, impact, and other
techniques, to mark and label goods
Radio frequency identification and transmittal (RFID)
Electronic data interchange between compatible computer systems
and software
For a brief description of the availability and application of this
technology, see Exhibit 10-1. This system has been implemented by a
major East Coast grocery warehouse and distribution center.

 Page 135
Exhibit 10-1. Electronic data interchange explanation.
EDI AT PORT JERSEY
By definition, Electronic Data Interchange (EDI) is the computer-to-
computer exchange of business documents between companies, using
a public standard format. Standards used by Port Jersey include ASC
X12 and WINS. Versions supported include 3030 and 3040.
WINSWarehouse Information Network Standard is the EDI "public
standard" used by warehouses and their depositor customers. Fifty
percent of our current warehouse customers utilizing EDI am using
the X12 standards.
Benefits of EDI As published by the Uniform Code Council, the
following benefits are being realized by users of EDI.
Reduced Lead Time/Quick Response:
EDI can provide a direct reduction in the Order/Shipping time cycle.
This benefits both customer and supplier.
Warehouse Efficiencies:
lmproved planning for Receiving/Shipping
More efficient deployment of personnel
More efficient use of dock space
Administrative and Clerical Costs
One major goal of EDI is to reduce the volume of business paperwork
and many of the clerical tasks involved in handling the processing of
paper documents. EDI users may reduce or eliminate the time
required for the following tasks:
Document editing and checking
 Document filing and retrieval
Document matching
Manual document preparation
Key entry for computer input
[1]

Reprinted with permission of Port Jersey Distribution Services, 2 Colony Road,

Jersey City, N.J. 07305.
(continues)

 Page 136
Exhibit 10-1.(continued)
We are currently utilizing the following EDI transaction sets with our
Warehouse customers:
940:Warehouse Shipping Order
Advise warehouse that a depositor shipment is to be made on
behalf of the shipping account/depositor.
PJDS: This creates an order on our system and replaces manual
Order Entry.
945: Warehouse Shipping Advice
Advise depositor that a shipment was made.
PJDS: When an order is released and a B/L is printed, all shipment
information is electronically written to an EDI file for transmission
to the Customer. Any changes to the Original Order are reflected in
this document (Carrier, Case Count, Etc. . . .)
943: Warehouse Stock Transfer Shipment Advice
Advise warehouse that a stock transfer shipment was made.
PJDS: This provides the warehouse with advance notice of
inbounds and is used with Warehouse Receipt entry.
944: Warehouse Stock Transfer Receipt Advice
Advise a depositor that a transfer shipment has been received.
PJDS: Following Entry and Printing of a Warehouse Receipt, the
receipt information is transferred to an EDI file for transmission to
the customer.
[2]
(Exhibit continued on next page)

 Page 137
(Exhibit continued from previous page)
947: Warehouse Inventory Adjustment Advice
Used to inform warehouse depositor of a quantity or status change
to inventory records.
888: Item Maintenance
Used to enable a manufacturer, supplier, broker, or agent to provide
detailed finished goods product information to a partner in a
consumer goods market. Can be used to provide info on new items
or change specs on existing products.
846: Inventory Inquiry/Advice
Used for one location to provide another with inventory
information.
The following Documents are also used by Port Jersey Distribution
and/or Continental Logistics:
204: Motor Carrier Shipment Information
Used to provide a motor carrier with detailed B/L, rating, and
scheduling information pertinent to a motor carrier shipment.
210: Motor Carrier Freight Details and Invoice
(we currently send a summary invoice only)
Used to provide information for charges for services rendered by a
Motor Carrier.
214: Motor Carrier: Shipment Status Message
Used by a Motor Carrier to provide shippers, consignees, and their
agents with the status of shipments in terms of dates, times,
 locations, route, and ID numbers.
We currently process EDI transmissions (send and receive) every 30
minutes, between 6:30 AM & Midnight, Monday through Friday.
Upon completion of an EDI transmission, summary reports are
generated in MIS and our Customer Service offices to inform
customer services reps of New, Changed, and Canceled orders and of
any other documents that may have been received.
[3]

(continues)

Exhibit 10-1. (continued)
EDI QUESTIONNAIRE
NAME:__________________________
TITLE:___________________________
COMPANY:______________________
PHONE #:________________________
#1: Are you currently utilizing EDI?
____ yes ____ no
#2. If so, what standards do you use?
_________________________________________________________
#3. If communicating through a 3rd Party Network, which one?
______________________________________
#4. Which of the following EDI Transaction Sets are you utilizing/planning on uti
Please list Standard and Version (e.g., WINS 3030 or X 12 3030)
204 Motor Carrier Shipment Information
____________________________________________________
210 Motor Carrier Freight Details and Invoice
________________________________________________
214 Motor Carrier Shipment Status/Message
_________________________________________________
846 Inventory Inquiry/Advice
_____________________________________________________________
888 Item Maintenance
__________________________________________________________________
940 Warehouse Shipping Order
___________________________________________________________
943 Warehouse Stock Transfer Shipment Advice
______________________________________________
944 Warehouse Stock Transfer Receipt Advice
_______________________________________________
945 Warehouse Shipping Advice
__________________________________________________________
947 Warehouse Inventory Adjustment Advice
________________________________________________
Others
__________________________________________________________________
#5. Are you interested in becoming an EDI Trading Partner with Port Jersey? ___
[4]

 Page 139

11
Packaging: Containers and Methods
Goods that are not shipped in bulk must be shipped in packages
designed in accordance with detailed specification or performance
criteria. Compliance with these criteria ensures that:
Goods do not present a hazard to other goods in storage and
transport.
Goods are protected to withstand the ''normal rigors" of storage
and transportation, and arrive undamaged and in usable condition at
their destination.
Shippers' loss and damage claims confirm the use of approved
containers.
"Normal rigors" include:
The forces of static load, compression, shock, drop, moisture and
corrosion, as well as vibration, rocking, pounding, and swaying of
vehicles in transit
Undesirable influences of the environment, such as moisture, dust
and dirt, contamination, and other causes of deterioration
Loss, theft, and other "mysterious disappearances"
Multiple handling of goods by all types of materials-handling
equipment, especially robotics, including automated trucks,
conveyors, and picking, sorting, and packing machinery used to
unload from transport vehicles, put into storage, move around the
warehouse, pick from storage, and load on to transport vehicles

 Page 140
Warehouse operators and shippers can select proper containers and
packaging methods using either "specification" or "performance-
oriented" packaging standards.
Specification Packaging
The National Motor Freight Classification (NMFC) 100* describes in
great detail about 1,000 different packaging specifications to be
applied to numbered items. Materials of construction and methods of
fabrication, wall thickness, dimensions, weight-carrying capacity, and
taping or gluing of packages are indicated. To ensure compliance with
these regulations, package manufacturers are required to display a
certification seal on each package or container; see Exhibit 11-1 for
examples of these seals.
The specifications for numbered packages are published in the
NMFC, which is applicable only to carriers that participate in it, in
accordance with the provisions of the Trucking Industry Regulatory
Reform Act of 1994. When using containers and packaging
complying with these standards, make sure that your preferred carriers
are shown on the "List of Participating Interstate and Intrastate
Carriers."
This traditional method of selecting and using specification packages
is onerous to shippers. It does not provide flexibility in packaging.
Furthermore, incorrect packages may or could be used; unfortunately,
these packaging specifications often are neglected or not observed.
The result is endless finger-pointing when failures Occur.
Performance-Oriented Packaging
Instead of prescribing detailed specifications for each item, in late
1990, the U.S. Department of Transportation adopted performance-
oriented packaging standards, published in the Code of Federal
Regulation 49, part 178, originally applicable to domestic and
international shipments of hazardous materials. Effective June 24,
1995,
* NMFC 100 specifications for numbered packages, beginning on page
613.

(text continues on page 145)

 Page 141
Exhibit 11-1. Specifications for fiberboard boxes.
ITEM 222-1-C
CERTIFICATE OF BOX MANUFACTURUER
(Applicable only in connection with Item 222)
(a) BOXES, COMPLYING WITH THIS ITEM:
(1) Size, Type and Wording: All fibre boxes that are made to
conform to specifications of this rule must bear a legible
certificate of a box manufacturer on an outside surface,
guaranteeing that boxes do so conform. Certificate must be of
following form, size (3-inch diameter, plus or minus ¼ inch),
type and wording, as illustrated in either paragraphs (2) or (3)
(see Notes 1, 2 and 3). City and state may be either that of the
manufacturing or corporate location.
(2) Certificates applicable to boxes made to comply with the
burst or puncture test and other requirements of Table A:
 [ 1 ]
Reproduced with permission of the National Motor Freight
Traffic Commission, Inc., Agent, 2200 Mill Road, Alexandria,
Va. 22314.

(continues)

 Page 142
Exhibit 11-1. (continued)
ITEM 222-1-CContinued
(3) Certificates applicable to boxes made to comply with the
edge crush test and other requirements of Table B:

Note 1Reduced Diameter for Small Boxes:

On boxes having a length of less than ten inches or a width of
less than nine inches, the above certificates may be reduced in
size so that outside diameter is not less than two inches.
Note 2Boxes or Numbered Packages Made in Foreign
Countries:
Fibreboard boxes complying with the provisions of this rule, or
numbered Packages of this Classification, and as amended,
which are made in foreign countries and used for freight
imported into the United States of America need not bear a
certificate, or certificate may be printed in the language of the
country in which the box or numbered package is made,
provided shipper certifies on bills of lading that the boxes
comply with Item 222 or the appropriate numbered Package.
[ 2 ]

(Exhibit continued on next page)

 Page 143
ITEM 222-A-CContinued
Note 3Actual Test Above Required Minimum:
The test stated in this certificate must be not less than the
minimum required for the gross weight and dimension limit,
except as provided in Note 4 of Item 222-1, and the combined
weight of facings for required bursting strength must be the
minimum prescribed by Item 222, Sec. 3. When the actual test
is in excess of the minimum test required, the actual test may
be stated below the certificate, but in such case all classes and
rules in this Classification as provided for a box having
minimum test will apply.
Note 4Nonconforming Boxes:
In the separate description of articles when boxes not having to
meet the requirements of Item 222 are authorized, such boxes
are not required to be guaranteed by certification. Boxes may
bear the circular certifcate only when the provisions of Item
222 have been met. Such boxes may bear a straight line stamp
indicating the box manufacturer and the test of the fibreboard
on a voluntary basis.
Note 5Boxes of Mixed Components:
For boxes having more than one fibreboard component part
making up the outside shipping container, the Box
Manufacturers' Certificate must reflect the lowest represented
bursting test or edge crush test of any given part.
Note 6Fibreboard Master Pack:
The rates or classes for freight in properly certified fibreboard
or special numbered packages will also apply on such freight
when the boses complying with Item 222 or containers
complying with special numbered Packages are enclosed in
outer fibreboard boxes, the fibreboard meeting the construction
requirements of Item 222. Inner boxes or special numbered
packages must reasonable occupy available capacity without
creating voids affecting the performance of the Master Pack.
Outer box must be securely closed or fastened. No certificate is
required on outer box.
Gross weight of Master Pack must not exceed 4 times the
allowable gross weight authorized for the lowest burst or edge
crush test of any component part of the master pack container.
Gross weights exceeding this maximum weight limit must be
tendered on pallets of sound construction.
(b) NUMBERED PACKAGES:
(1) Numbered Packages which contain provisions specifying
boxes, containers, trays and component parts thereof to be
made of fibreboard complying with the burst test, puncture test
or edge crush test and other requirements of Tables A and B of
Section 3 of this rule, must bear a legible certificate of box
manufacturer on an outside surface, in the form size (3½
inches × 2 inches, plus or minus ¼ inch), type and wording as
illustrated in either subparagraph (2) or (3). City and state may
be either that of the manufacturing or corporate location.
For triplewall box and doublewall box specifications which
refer to puncture test units, substitute the words 'Puncture Test
Units' for 'Bursting Test Lbs. per Sq. in.' in the certificate
below.
Where numbered Packages authorize different tests of
fibreboard for bodies and caps, test of the body only need be
shown within certificate.
When numbered Package has a length of less than ten inches
or a width of less than nine inches, certificate may be reduced
in size, but outside dimensions must be not less than 1¼ × 2¼
inches.
(2) Certificate applicable to numbered Packages containing
provisions requiring compliance with the burst or puncture test
and other requirements of Table A:

(3) Certificate applicable to numbered Packages containing

provisions requireing compliance with teh edge crush test and
other requirements of table B:

[ 3 ]

(continues)

 Page 144
Exhibit 11-1. (continued)
ITEM 222-1-CContinued

(c) CUBIC CAPACITY PRINTING REQUIREMENTS FOR ALL

FIBREBOARD SHIPPING BOXES OR CARTONS, etc., Cancel.
ITEM 256-A
SPECIFICATIONS FOR REMOVABLE HEAD
POLYETHYLENE DRUMS
Unless otherwise privded in separate descriptions of articles, or in
the Code of Federal Regulations (CFR), Title 49 for the shipment of
hazardous materials, when the following requirements adn
specifications are complied with, the rates or classes applicable to
commodities in polyethylene drums will be thoseprovided for such
commodities in barrels. Characteristics of commodity must be such
that shipping container and commodity are compatible in nature.
(a) Drum body and integral bottom must be of one-piece molded
construction, or body of extruded tubular construction securely
joined to a bottom head by means of a welded polyethylene chime
or metal chime band. Full removable top head must be made of
molded polyethylene or steel, 24 gauge minimum, secured to drum
body by means of a metal ring equipped with a locking mechanism;
OR closure may be of any method, material or design contingent
upon a successful diagonal drop series of 3 of 3 drums filled with
commodity or sand/sawdust mixture as a substitute, onto solid
concrete from a height of 30 inches onto the top chime at its
weakest part of closure without evidence of leakage or failure.
When top head is made of polyethylene, it shall have the following
properties as determined by the American Society for Testing
Materials (ASTM) per methods designated. Tests shall be
performed on plastic with additives included:
Property Specification (See Notes ASTM Method
A and D)
Melt Index 1.2 Maximum D1238
Density 0.941 - 0.965 D1505
Range 3.000 psi minimum D638
Tensile 75 percent minimum D638
Strength
Percent
Elongation
(b) Capacity and material construction must be as follows:
Maximum Capacity (Gallons) Minimum Material
Thickness (Inches)
15 .975
20 .090
30 .110 (see Note B)
55 .110 (See Notes B and C)
(c) The following test is required only for the shipment of liquids in
removable head containers when not contianed in liquid-tight bags.

[ 4 ]

 Page 145
the NMFTA adopted performance-based packaging standards,
published in NMFC 100-V Rules, item 180; see Exhibit 11-2.
The new standards mean that a package or shipping container of any
design may be used as long as it meets certain performance criteria,
including drop, crush, moisture, compression, and corrosion tests.
Eventually, the existing specification packaging standards will be
replaced by these performance-oriented packaging standards.
Warehouse operators who provide packaging services should be
familiar with these new rules.
Package Testing
The members of the International Safe Transit Association (ISTA)*
perform package testing. In addition, many carriers and logistics
service providers offer testing services, including FedEx and UPS.
Some charge a fee for testing; others offer it as part of their value-
added service.
Seek expert advice from such reliable testing services. Contact the
International Safe Transit Association and/or your carriers' safety and
loss and damage-prevention departments for information, advice, and
assistance. Especially for small shipments, testing the packages you
use will reduce disputes and help eliminate loss and damage claims.
* International Safe Transit Association, 1400 Abbott Road, Suite 310,
East Lansing, Mich. 48823-2900. Phone: (517) 333-3437.

 Page 146
Exhibit 11-2. Performance testing of shipping containers.
ITEM 180
This Rule provides an alternative to: the Test Shipment Permit
program (Item 689); other packaging Rules except those
relating to drums, pails and bags; and numbered Packages. It is
recommended for solving chronic damage problems and for
providing an acceptable assurance level of packaging for
articles of great value. In order to qualify as authorized
methods of packaging under this Rule, shipping containers,
including palletized laods, must be preshipment tested and
successfully pass the following prescribed performance teset
requirements and meet the acceptance criteria as indicated.
For lack of a simulation test method, but to accommodate the
use of this Rule for see-through, tightly-wo8und stretch or
full-shrink plastic film wrap-style shipping units, in addition to
meeting the following applicable performance requirements,
spans of open space (apertures) between clearance forms on
vertical sidewalls or vertical corners of packaged articles must
not exceed 18 inches (0.46 m) in width when inner clearance
between outer film wrap and surface of inner article is not less
than 1 inch (25 mm) and total thickness of film prior to
stretching is not less than 4 mils (0.01 mm). For clearances of
not less than ¾ inch (19 mm), span width must not exceed 12
inches (0.30 m).
Shippers will be required to perform the specified minimum
tests as often as necessary to maintian a satisfactory
performance level of the packaged article (see Certification
section). Multiple test specimens are recommended when
available and all specimens tested must pass.
PERFORMANCE TEST REQUIREMENTS: All applicable
shipping units must be tested as follows:
Section I. Compression/Vibration Test
Two alternate methods of testing are permissible, Methods (A)
or (B). Either may be utilized, depending on test capability or
product characteristics. Unless the shipping container has a
skid or pallet outside base, or is marked with upright arrow
symbols, the container must be tested in all three planes.
Method (A)
Shipping units must be vibration tested under a stacked
compressive load for one (1) hour using the procedures of
ASTM D4169 Element E, assurance level II, for random
vibration.
Use a concentrated dead load (see description of load
following formula) to simulate miscellaneous freight loaded
on top of a floor-stowed shipping unit in a trailer of 9 ft. (2.7
m) inside height, determining the amount of load from this
formula:

Where:
average density of LTL freight (pounds/cubic
10 pcf =
foot)
108 in =
Inside height of trailer (inches)
h=
height of shipping unit (inches)
l=
length of shipping unit (inches)
w=
width of shipping unit (inches)
In metric:
LOAD = (162 kg/m3) x (2.7 m - h) x (l x w)
Where:
= average density of LTL freight
162 kg/m3
= Inside height of trailer
 2.7 m= height of shipping unit (metres)
h= length of shipping unit (metres)
l= width of shipping unit (metres)
w
NOTE: The formula is reduced to 54 inches (1.4 m0 instead of
108 inches (2.7 m) for packages under 30 pounds (14 kg) or 2
cubic feet (0.056 m3) or less in size.
LOAD:
The concentrated dead load shall consist of the following:
RSC style corrugated container(s) of doublewall construction
having a corrugated medium maximum basis weight of 33 lb.
(15 kg); a plywood sheet with a minimum thickness of ½"
(13mm) resting inside the container on the complete area of
the bottom inner flaps of the container; and sand contained in
plastic bag(s) evenly distributed over the bottom surface of the
container to complete the required calculated load (sand
weighs approximately 110 lb/ft3; 50 kg/m3). The dead load
container(s) must be larger than the test specimen, but must
not overhang the specimen by more than 1½" (38mm). The
dead load container(s) must be fixtured so that it cannot move
inside the perimeter of the test specimen during testing. The
test specimen should not be fastened to the vibration table and
should be allowed some lateral movement, yet restricted so
that it does not move from under the perimeterer of the dead
load.

[ 1 ]
Reproduced with permission of the National Motor Freight
Traffic Commission, Inc., Agent, 2200 Mill Road, Alexandria,
Va. 22314.
(Exhibit continued on next page)

 Page 147
ITEM 180Continued
NOTE: When test units have large top surfaces, i.e., any
dimension exceeding 18 inches (0.46 m), the dead load must
be subdivided into smaller portions. If only one dimension
exceeds 18 inches (0.46 m), the load must be divded into two
(2) equal portions along the longer dimension. If both
dimensions exceed 18 inches (0.46 m), the load must be
divided into four (4) equal portions (See Figure #1).

FIGURE #1 - EXAMPLE OF CONCENTRATED DEAD

LOAD ON TEST SPECIMEN FOR RANDOM VIBRATION
TEST
TEST SPECIMEN SHOWN IN EXAMPLE MEASURES 30"
X 20" X 20", LARGER THAN 18" IN BOTH LENGTH AND
WIDTH, REQUIRING THAT THE DEAD LOAD BE
DIVIDED INTO 4 EQUAL PARTS.
Method (B)
Shipping units must be subjected to compression and vibration
in separate tests. A compression test is conducted first and
then the same shipping unit is vibration tested.
(1) Conduct a machine compression test (per ASTM D642) on
the shipping unit, applying a force in the normal vertical
shipping axis as calculated from the following formula:

Where:
= pounds force
lbf
= average density of LTL freight (kb.ft3)
10 pcf
= inside height of trailer (inches)
108 in
= height of shipping unit (inches)
h
= length of shipping unit (inches)
l
= width of shipping unit (inches)
w
= Design Factor from following table
D.F.
In metric:
FORCE (N) = (162 kg/m3) x (2.7 m - h) x D.F. x 9.8 m/s2
Where:
N = Newtons
162 kg/m3 = average density of LTL freight
2.7 m = inside height of trailer
h = height of shipping unit (metres)
l = length of shipping unit (metres)
w = width of shipping unit (metres)
D.F. = Design Factor from following table
9.8 m/s2 = metric conversion factor
Remove the force immediately after reaching the calculated
value.

[ 2 ]

(continues)

 Page 148
Exhibit 11-2. (continued)
ITEM 180Continued
NOTE: The formula is reduced to 54 inches (1.4 m) instead of
108 inches (2.7 m) for packages under 30 pounds (14kg) or 2
cubic feet (0.956 m3) or less in size.
DESIGN FACTOR:
Shipping Unit Construction
Design
Factor
(a) A corrugated fibreboard or plastic container that
7.0
may or may not have stress-bearing interior packaging
using these materials, and where the product does not
support any of the load. An example is a plastic bottled
product in a corrugated box with a corrugated interior
packing.
(b) A corrugated fibreboard or plastic container that
4.5
has stress-bearing interior packaging with rigid inserts
such as wood. An example is an appliance packed in a
corrugated box with wood-reinforced corner posts.
(c) A container constructed of materials other than
3.0
fibreboard or plastic that are not temperature or
humidity sensitive or where the product supports the
load directly. An example is a wood crate or box.
(2) Using the same shipping unit, conduct a vibration test for
total of 60 minutes. Any of the three following vibration
methods may be used: random, ASTM D4169 Element G
Level II; repetitive shock, ASTM D4169 Element F (vertical-
linear motion); repetitive shock, ASTM D4169 Element F
(rotary motion).
NOTE: For high or unstable shipping units, random or
vertical-linear tests may be preferred.
 Section II. Impact/Handling Test
Following compression/vibration tests, the same shipping
units must be impact/handling tested using the following
procedures:
Procedure (A)
For packages having no external attached or integral pallet or
skid and not in a palletized load, perform an impact/handling
test as follows:
(1) Under 200 pounds (91 kg) gross weight - perform a free-
fall drop test in accordance with ASTM D5276, using the
following height and sequence:
For Shipping Weight, lb (kg) Drop
0 through 40 (0-18) Height,
41 through 80 (19-36) in (m)
81 through 100 (37-45) 24
101 through 199 (46-90) (0.61)
18
(0.46)
12
(0.30)
10
(0.25)
Drop in sequence on these package surfaces for a total of 6
drops: top; two adjacent bottom edges; and two diagonally
opposite bottom corners. The final drop must be on the bottom
from a drop height at 1.5 times the specified height, where the
bottom is defined as the surface upon which the package is
most likely to rest during shipment (upright arrows also define
the bottom for transport).
NOTE: The package should be designed to withstand drops
from the specified height from any drop orientation.
(2) For 200 pounds (91 kg) gross weight and over - perform an
incline impact or a pendulum impact test according to ASTM
D880, or a horizontal impact on a test machine with short
duration shock programmer (ASTM D4003), as follows:
Impact the top, two adjacent sides and bottom at a final dolly
minimum velocity of 5.75 feet per second (1.75 m/sec).
Alternately, the impact test may be provded by free-fall from a
drop height of 6.0 inches (0.15 m) on the top, two adjacent
sides and bottom.
Also conduct a rotational drop test (ASTM D1083) from a 6.0
inch (0.15m) height on a bottom corner and on a bottom edge
radiating from the diagonally opposite bottom corner.

[ 3 ]

(Exhibit continued on next page)

 Page 149
ITEM 180Continued
Procedure (B)
For individual packages with external attached or integral
pallets/skids, including crates, perform impact and handling
tests as follows:
(1) Based on the gross weight of the total load, perform a
Raised Edge Drop Test according to ASTM D1083 as follows:
Weight Drop Height
Up to 500 pounds (227 kg) 12 inches (0.30 m)
500 pounds (227 kg) and over 9 inches (0.23 m)
With one bottom handling edge of the shipping unit supported
by the floor, raise the other end to prescribed height and
release it to fall flat on the floor. Repeat the test by lifting and
dropping opposite bottom edge of shipping unit from same
height.
(2) Impact Test - Perform an incline impact test or a pendulum
impact test according to ASTM D880, or a horizontal impact
on a test machine with short duration shock programmer
(ASTM D4003), impacting each of the four (4) sides at the
final minimum velocity of 5.75 feet per second (1.75 m/sec).
Procedure (C)
For palletized loads made up of a multiple number of
containers or unitized loads of a bulk configuration, perform
both impact tests listed above in Procedure (B). In addition,
conduct a fork truck handling test according to ASTM D1083:
Pick up shipping unit with lift truck having 36-inch-long
(0.9m) forks (for longer forks, penetrate pallet only 36'' (0.9
m)); transport around test course, and set down. Repeat the
moves four (4) more times for a total of five (5) moves. The
test course should include at least one (1) right angle turn on a
rigid flat surface representative of carrier terminals and
warehouses. A nominal 2 x 4 board shall be placed on the
course in a position where both lift truck wheels on one side
must pass over it during each handling sequence, and a second
2 x 4 shall be placed on the course after the right angle turn in
such a position that both lift truck wheels on the opposite side
must pass over it duringh each handling sequence. The speed
of the truck passing over the 2 x 4's and rounding the right
angle turn shall be at least 2 mph (0.9 m/sec). Vertical
alignment of palletized containers must be reasonable
maintained throught the test.
Section III. Ambient Test Conditions
All specimens must be conditioned in an atmosphere of 73°F
(12°C) minimum and 50 percent RH minimum for a minimum
of 24 hours for paper-based packaging and 12 hours for all
others. Testing should be conducted in the same minimum
atmosphere and conditions must be recorded for each test
conducted. If testing cannot be conducted in the minimum
atmosphere, conduct the tests as soon after removal from the
minimum atmosphere as practicable.
Section IV. Documentation
Test methods, conditions, and results must be recorded on the
following form and permanently held on file for the duration
the article is subject to this Rule. The name shown above the
certificate (Section VI) shall be the contact for such
documentation. Changes in articles or packages require
subsequent testing and documentation. At a minimum, the
report should include the following: (1) description of article,
including model number, size, weight and other distinguishing
features; (2) description of shipping unit, including
specifications of container and interior packaging; (3) testing
performed; (4) conditioning and test conditions; (5)
acceptance criteria; (6) condition of specimens (article and
packaging) after testing; and (7) laboratory performing tests.

[ 4 ]

(continues)

 Page 150
Exhibit 11-2. (continued)

[ 5 ]

(Exhibit continued on next page)

 Page 151
ITEM 180Concluded
Section V. Acceptance Criteria
The shipping unit shall be deemed acceptable after
performance testing if the following criteria are met:
(a) The article is neither damaged nor nonfunctional.
(b) The shipping unit has maintained its integrity and still
affords reasonable protection against the normal hazards of
transportation.
The acceptance criteria of article damage and nonfunctionality
must be predetermined before testing and included in the
report.
Section VI. Certification
(a) Packages tested in accordance with this Rule must
conspicuously bear the following triangular symbol (3 inches
in width at top and 3¾ inches in height) showing that they
meet the minimum performance requirements specified. This
marking is the responsibility of the shipper, ISTA
(International Safe Transit Association), or any other third
party identified above the symbol by name, city, and state.
Testing may be conducted by the shipper or any other
competent test laboratory.
(b) In the event of a damage claim, carriers may request a
retest at a third party laboratory (see Note 1). Should the
shipping unit fail the retest, a second retest of two shipping
units may be conducted at the third party laboratory and both
shipping units must pass the retest.
(c) All shipping unit configurations and article sizes and
variations must be tested and new reports filed for the purpose
of certification by this Rule (see Note 2). Any time a
packaging or product change is made, the required
performance tests must be repeated.
When minor variations are made in articles, a single test
sequence may be performed for certification, provided the
variations have no effect on the degree of protective packaging
required. Examples of minor variations may be color
differences, electrical voltage/wiring, left hand/right hand.
NOTE 1: To qualify as a third party laboratory, such facilities
must register with the National Classification Committee
(NCC). A list of registered third party laboratories will be
made available upon request.
NOTE 2: When the shipping unit certified is a palletized load
or a unitized load, the packaged products in the load are not
certified as individual shipping units unless they are also
successfully tested as individual packages and are so certified.
Such palletized or unitized loads must show the triangular
certificaiton symbol on an upper position of not less than one
sidewall.
[ 6 ]

 Page 152

12
Liability, Claims, and Insurance
As earlier chapters of this book have stressed, damage to or loss of
goods is costly, whether it happens in the warehouse or in transit.
Such situations lead to confusion, claims, and losses. To avoid
problems, learn about your responsibilities and guard your liabilities.
Warehouse Liability
The famous "reasonable and prudent man" doctrine contained in Sir
William Blackstone's (1723-1780) Commentaries on the Laws of
England, says that "[a person] . . . if he undertakes specially to keep
the goods safely he is bound to take care of them, as a prudent man
would take care of his own." From this principle evolved the present
liability and responsibility standards for warehouse operators, as
codified in the Uniform Commercial Code (UCC), Article 7, Part 2,
Sections 7 to 204. They are restated in the Standard Terms and
Conditions:
(1) A warehouseman is liable for damages for loss of or injury to the goods
caused by his failure to exercise such care in regard to them as a
reasonably careful man would exercise under like circumstances but
unless otherwise agreed he is not liable for damages that could not have
been avoided by the exercise of such care.
(2) Damages may be limited by a term in the warehouse receipt or storage
agreement limiting the amount of liability in case of loss or damage, and
setting forth a specific liability per article or item, or value per unit of
weight, beyond which the warehouseman shall not be liable; pro-

 Page 153
vided, however, that such liability may on written request of the bailor at
the time of signing such storage agreement or within reasonable time after
the receipt of the warehouse receipt be increased on part or all of the goods
thereunder, in which event increased rates may be charged based on such
increased valuation, but no such increase shall be permitted contrary to a
lawful limitation of liability contained in the warehouseman's tariff, if any.
No such limitation is effective with respect to the warehouseman's liability
for conversion to his own use.
(3) Reasonable provision as to the time and manner of presenting claims
and instituting actions based on the bailment may be included in the
warehouse receipt or tariff.
(4) This section does not impair or repeal . . .
Note: Insert in subsection (4) a reference to any statute that imposes a
higher responsibility upon the warehouseman or invalidates contractual
limitations which would be permissible under this article.

Loss and damage to depositors' goods can range from the occasional
damage as result of improper handling or minor accident and
mysterious disappearance as result of theft or pilferage, to total loss as
result of fire, flood, roof collapse following an unusually heavy
snowfall, or other natural catastrophe. Depositors, therefore, should
evaluate the potential extent of such losses and their corresponding
exposure.
Some of the more common causes of losses occurring in the normal
course of warehousing operations are:
Overages and shortages. These are usually averaged on a dollar
basis and resolved between the parties periodically. For instance,
when the net balance reflects excess inventory (overage), the
inventory records are adjusted, adding the excess inventory. When the
net balance reflects an inventory shortage, the parties may agree to
limit the operator's liability, and a loss claim will only be for an
amount in excess of the set limit.
Inventory shrinkage. This is normallyand should beresolved by
determining a reasonable shrinkage allowance acceptable to the
depositor or owner of the goods.

 Page 154
Consequential damages. These are the result of untimely delivery,
shipment of incorrect or defective product, interruption of a
customer's business, or loss of depositor's business. Such damages,
when occuring in a warehouse or during transportation, are often
difficult to substantiate and prove; the parties may wish to mutually
limit or altogether waive liability.
Claims
The Uniform Commercial Code states that the depositor, when filing a
claim against a warehouse, is required to prove that the warehouse did
not perform in accordance with the standard agreement; in other
words, the depositor has to prove the warehouse operator's gross
neglect.
The bone of contention in many claims is the value of the goods in
question. The warehouse operator'sas well as the depositor'sinsurance
rates are based on the value of the goods. In addition, the rates
charged by the warehouse are dependent on the value of those goods.
Therefore, it is essential that the depositor disclose the value of the
goods to the warehouse operator in the customer activity profile (see
Exhibit 9-1), so that the operator knows what the depositor will store
and can prepare a complete and representative quotation.
Insurance
Depositors should be aware of the legal consequences of increasing
the warehouse operator's liability beyond that which is provided in the
UCC, Section 7-204. Insurance policies contain an exclusion against
losses where the warehouse operator has accepted a greater degree of
care than that stipulated by law. With the assistance of their
professional legal counsel and insurance carrier, the depositor must
conduct a risk-benefit analysis to determine the desired and needed
level of insurance.
Contracts and agreements between depositors and warehouse
operators for the storage and handling of goods, therefore, must
carefully address responsibility for loss and damage, overages,
shortages, shrinkage (and consequential damages, as feasible). They
must specify who insures the goods while in storage, and for how
much.

 Page 155
Warehouse operators typically carry the following types of insurance:
Workers' compensation, coverage A and B
General liability
Auto liability, including physical damage
Property coverage, including business interruption
Product and contents liability
Depositors must familiarize themselves with their warehouse
operators' general responsibilities, as well as insurance coverage,
limits, provisions, and exclusions. They should request a copy of the
current insurance certificates from the operator's insurance company
before goods are tendered for storage. Depositors should make sure
they fully inform the warehouse operator when offering goods of
extraordinary value or sensitive and hazardous materials for storage.
The insurance requirements are more stringent.
No warehouse contract subject to standard terms and conditions can
address all possible situations and events. Therefore, depositors often
add, modify, or change the standard terms of the agreement to fit their
intent, business practice, and objectives. Among the supplementary
terms to a warehouse agreement are those addressing insurance, truck
and container detention, rail demurrage, handling and disposition of
warehouse and transportation claims, averaging of overages and
shortages, shrinkage allowances, and disposition of damaged goods as
well as hazardous materials.
Liability of Carriers
In his widely used work Goods in Transit, Saul Sorkin devotes well
over 1,000 pages to the subject of claims, court interpretations, and
decisions. The following discussion, therefore, can present only a
brief summary of loss and damage claim principles, procedures,
recommendations, and forms. Organizations providing information on
the filing of freight claims are listed at the end of this book.
Warehouse Operator vs. Carrier Liability
The law imposes different care and custody liability standards for
warehouse operators and transportation carriers. There are situa-

 Page 156
tions when carriers must temporarily store goods in a warehouse, such
as when the carrier is unable to deliver goods or the shipper or
receiver has failed to pay for shipment.
The warehouse operator's liability has been outlined earlier in this
chapter. The transport carrier's liability is codified in the NMFTA's
Bill of Lading Terms and Conditions (see Appendix F). Section 2
specifies that when a carrier stores goods in its possession for any
reason, its strict liability for loss and damage as carrier changes to the
differentand less stringentterms and conditions as warehouse operator.
Carrier Responsibility
Carriers must deliver goods in the same condition as received. Like
warehouse operators, carriers have possession of but do not own the
goods they transport; they are virtual, not absolute, insurers of the
goods. Therefore, they are responsible only for what they should have
done but did not do.
Common carriers are held strictly liable to the person entitled to
recover under the receipt or bill of lading for any loss of or damage to
goods while they are in the carrier's care and custody. This is the
essence of the 1972 Carmack amendment to the Interstate Commerce
Act. Together with the landmark decision of the U.S. Supreme Court
defining "burden of proof" in Missouri Pacific Railroad v. Elm-ore
and Stahl, the Interstate Commerce Commission* formulated the
regulations, rules, practices, and procedures for the settlement of
claims.
The Trucking Industry Regulatory Reform Act of 1994 (TIRRA) and
the Interstate Commerce Commission Termination Act of 1995
(ICCTA) have left the Carmack amendment intact; however, in the
new, deregulated environment, carriers will attempt to reduce their
statutory liabilityand thereby their cargo insurance premiumsby
offering lower rates in exchange for reduced liability limits.
As a result of transportation deregulation, claims rules vary between
carrier modes, and within carrier modes, they may vary from
* As of January 1, 1996, the Interstate Commerce Commission was
abolished. Its remaining functions were transferred to the Surface
Transportation Board at the Department of Transportation.

 Page 157
one carrier to another. Claims rules vary especially between different
railroads, so you must contact the railroads you use to obtain their
specific rules. For instance, railroads do not pay claims on shipments
in privately owned or leased equipmentthat is, tank and hopper cars,
trailer, and container shipmentsunless this equipment has been in a
derailment, accident, or otherwise mishandled.
Tip: Because much truck traffic, and the vast majority of
railroad traffic, is handled under contract, it is extremely
important that cargo liability and loss and damage claim
provisions included in a transportation contract are
written so as to pertain to the particular transportation
mode.

Claim rules for other modes of transportair, water, UPS, FedEx, and
other small-parcel carriersmust be obtained from individual carriers.
Contract carriers are responsible for goods in transit to the extent of
the negotiated liability provisions set forth in lawful transportation
contracts between shippers and carriers.
Loss and Damage Claims
Strictly speaking, the party that owns (has title to) the goods in transit
must file any claims and provide sufficient documentary proof. That
proof includes the count and condition of the goods as tendered to and
as delivered by the carrier, and the measurethe valueof the claim. If
these conditions are met, the claimant has established a prima fade
case and a presumption of carrier liability, which the carrier must
overcome with factual evidence.
The value of the claim is based on two principles: (1) carriers must
make whole the owner of the goods; and (2) the owner must mitigate
the loss, that is, only claim the value that existed at the point of loss.
Oversimplified, this means that any anticipated profit cannot be
included in the claimed value.
Truck carriers then have a double burden of proof. First, they must
prove that the damage is the result of the five common-law bill of
lading exceptions: act of God, act or omission of the shipper, authority
of law, public enemy, or inherent vice. Second, they must

 Page 158
show freedom from negligence. There is no contributory negligence
("I am a little at fault and you are a little at fault") in claims law
pertaining to truck shipments. (An exception is with rail shipments.
Proof of in-transit damage in railroad-owned cars must be provided by
the owner of the goods.)
In many cases, small customers ask the shipper to file the claims
regardless of freight terms; either they don't know how or it's too
much trouble and they won't pay their invoice unless the shipper files
and settles the claim. Some customers even deduct the value of the
lost or damaged goods from their invoice, before the claim is filed.
Claims must be filed against the delivering carrier, regardless of how
many times the goods were transferred between carriers. Under the
law, the delivering carrier must process the claim and then collect
from the carriers participating in the routing.
Tip: Some delivering carriers insist the claim be filed
against the carrier that made an exception notation on
the shipping papers. Some truck carriers may suggest
that the claim be filed with the truck carrier's insurance
company. Don't do it, lest you lose the claim!

Warehouses do not file or pay freight claims because, as a rule, the

warehouse operator only has possession of, but does not own, the
goods (does not have title). However, where freight claims handling is
part of the service contract, the warehouse must handle the claims
function.
Most warehouses do their own trucking. Where this is the case, the
trucking operation is most likely conducted under a separate
corporation, so the loss and damage claim must be filed against this
trucking company.
To avoid improper claims against carriers for damage that occurred
during loading, unloading, or receiving at the warehouse, careful
documentation of shipping and receiving activities is crucial. Use
preshipment and receiving report checklists.
Claims Filing and Disposition
All claims must be in writing and transmitted by mail or
electronically. A standard claim form is recommended. If you do not
have

 Page 159
one, ask your carrier for an acceptable format or use the form included
here; see Exhibit 12-1. Exception notations on shipping papers,
inspection reports, railroad bad order reports, and the like are not
freight claims; they are considered supporting documents.
The following supporting documents must accompany the claim form:
Original bill of lading or bond of indemnity
Original freight bill or bond of indemnity
Certified copy of the original invoice, or a statement of destination
value where goods have not been invoiced
Copy of the carrier's delivery receipt showing the exception
notation
Original packing slips
Carrier's or independent inspector's report
Consignee's concealed loss and damage form
Photographs
Unless the transportation contract specifies otherwise, the following
time limitations must be observed in filing loss and damage claims
(see also ''Notice to Claimants" and Exhibit 12-1):
Each shipment is inspected upon receipt.
Upon receipt of damaged goods, an exception notation is made on
the carrier's delivery receipt or bill of lading copy.
Goods are inspected within 15 days to determine concealed
damage.
Claim is filed immediately, but not later than nine months from
delivery.
The carrier must acknowledge all claims within 30 days of receipt.
The carrier must either pay the claimant, decline, or explain the
delay within 120 days from receipt of claim.
Every 60 days thereafter, the carrier must inform the claimant of
the claim status.
Within two years after denial, and if not settled earlier, the shipper
can file a lawsuit, go to arbitration, or drop the claim.
Keep a good claim file, showing the claim number, date filed,
shipping document numbers, carrier name, date of acknowledg-
(text continues on page 164)

 Page 160
Exhibit 12-1. Freight (cargo) claims form.

Reproduced with permission of the National Motor Freight Traffic Commission,

Inc., Agent, 2200 Mill Road, Alexandria, Va. 22314.
(Exhibit continued on next page)

 Page 161
(Exhibit continued from previous page)
NOTICE TO CLAIMANTS
Claimants are requested to make use of this form for filing claims
with carriers. Claims may be filed with the carrier's agent either at the
point of origin or destination of shipments, or direct with the Claim
Department of the carrier, and will be considered properly presented
only when the information and documents called for on the other side
of this form have, as far as possible, been supplied.
Before presenting a claim on account of loss and damage, the
following important information respecting claims should be given
careful consideration:
1. The terms under which property is accepted and transported by a
carrier are stated on the bill of lading isued by the carrier; also in
tariffs and classification issued or subscribed to by the carrier. Persons
intending to file claims should, before doing so, examine the terms
and conditions under which the property was accepted and
transported.
2. Carriers and their agents are bound by the provisions of law, and
any deviation therefrom by the payment and claims before the facts
and measure of legal liability are established will render them as well
as the claimant, liable to fines and penalties by law.
3. In order that carrier may have an opportunity to inspect goods and
thereby properly verify claims, any loss or damage discovered after
delivery should be reported to the agent of the delivering line, as far as
possible, immediately upon delivery, or within 15 days after receipt of
goods by consignee. Concealed loss and damage claims should be
supported by an "Inspection Report Form" covering the joint
inspection of the loss or damage by consignee and carrier's
representative.
4. It is a common practice for manufacturers and others to ship large
quantities to key points for warehousing and later distribution to
surrounding areas. In many instances, the original container is not
opened and the contents examined before re-shipment to final
destination. When this practice is followed, it is impossible to
determine after delivery to final destination whether loss or damage of
a concealed nature occurred before or after re-shipping. Consignees
can usually expedite settlement by securing initial shipper's and
warehouse's cooperation in supplying necessary billing reference so
that shipment can be identified in handling with carriers rendering
transportation to the distribution point.
5. Under the provisions of Part II of Interstate Commerce Act, it is
unlawful for a carrier to charge or demand or collect or receive, any
greater or less or different compensation for the transportation of
property than the rates and charges named in tariffs lawfully on file.
To refund or remit in any manner or by any device, any portion of the
rates and charges so specified through the payment of fraudulent,
fictitious or excessive claims for loss or damage to merchandise
transported is as much a violation of law as is a direct concession or
departure from the published rates and charges.
In this connection, attention is also called to the following important
quotation from Section 11904 of the Interstate Commerce Act [49
USC §11904(b)]:
A person or an officer, employee or agent of that person, that (1)
knowingly offers, grants, gives, solicits, accepts, or receives a rebate,
concession, or discrimination in violation of a provision of this subtitle
related to motor carrier transportation subject to the jurisdiction of the
Commission under subchapter II of chapter 105 of this title, or (2) by any
means knowingly and willfully assists or permits another person to get
transportation that is subject to the jurisdiction of the Commission under
that subchapter at less than the rate in effect for that transportation under
 chapter 107 of this title, shall be fined at least $200 but not more than $500
for the first violation and at least $250 but not more than $2,000 for a
subsequent violation.

[ 2 ]

(continues)

 Page 162
Exhibit 12-1. (continued)
PRINCIPLES AND PRACTICES FOR THE INVESTIGATION
AND DISPOSITION OF FREIGHT CLAIMS
ITEM
(Provisions names herein are NOT applicable on interstate or
foreign commerce for account of carriers referenced with
"WATCAR" (except SEAU or TOTE) shown in the list of
participating interstate and intrastate carriers of this
Classification, or as amended.)
TWO OR MORE CLAIMS PRESENTED ON SAME
SHIPMENT
300122When investigation of a claim develops that one or more other
carriers has been presented with a similar claim on the same
shipment, the carrier investigating such claim will communicate
with each such other carrier and, prior to any agreement entered
into between or among them as to the proper disposition of such
claim or claims, will notify all claimants of the receipt of
conflicting or overlapping claims and will require further
substantiation, on the part of each claimant of his title to the
property involved or his right with respect to such claim.
REGULATIONS GOVERNING THE INSPECTION OF
ITEM FREIGHT BEFORE OR AFTER DELIVERY TO CONSIGNEE
AND ADJUSTMENT OF
CLAIMS FOR LOSS OR DAMAGE
(Provisions names herein are NOT applicable on interstate or
foreign commerce for account of carriers referenced with
"WATCAR" (except SEAU or TOTE) shown in the list of
participating interstate and intrastate carriers of this
Classification, or as amended.)
 APPLICATION
Loss of or damage to contents of package, not definitely known to
300125exist at time of delivery by carrier to consignee may be due to
negligence in packing, handling or unpacking, or abstraction from
containers, and is the subject of frequent claims and controversies.
In order to avoid any discrimination, and so that practices will be
certain and uniform in the treatment of claims of this character,
the following rules apply.
PILFERAGE
300130When offering a shipment for delivery, if any portion of shipment
bears any indication of having been pilfered, a joint inventory of
contents must be made by carrier and consignee and the results of
inventory so noted on carrier's delivery receipt.
REPORTING CONCEALED DAMAGE
When damage to contents of a shipping container is discovered by
the consignee which could not have been determined at time of
delivery it must be reported by the consignee to the delivering
300135carrier upon discovery and a request for inspection by the carrier's
representative made. Notice of loss or damage and request for
inspection may be given by telephone or in person, but in either
event must be confirmed in writng by mail. If more than fifteen
days pass between date of delivery of shipment by carrier and
date of report of loss or damage, and request for inspection by
consignee, it is incumbent upon the consignee to offer reasonable
evidence to the carrier's representative when inspection is made
that loss or damage was not incurred by the consignee after
delivery of shipment by carrier. While awaiting inspection by
carrier, the consignee must hold the shipping container and its
contents in the same condition they were in when damage was
discovered insofar as it is possible to do so.
INSPECTION BY CARRIER
 INSPECTION BY CARRIER
Inspection by carrier will be made as promptly as possible and
practicable after receipt or request by consignee. Inspection will
be made within five normal work days after receipt of request
300140from consignee, excluding Saturdays, Sundays and holidays. A
day will be considered as the passing twenty four (24) hours from
9 A.M., local time from the date of receipt of request for
inspection. Inspection of carrier will include examination of the
damaged merchandise, the shipping container, and any other
action necessary to establish all facts. If a shortage is involved,
inspector will check contents of package with invoice, weight the
shipping container and contents, or conduct any other type of
investigation necessary to establish that a loss has occurred. In
either case inspection will be limited to factual report. Consignee
must cooperate with carrier in every way possible to assist in the
inspection. A written record of carrier's findings will be made at
least in duplicate. The original of the report will be given the
consignee for claim support. Any inspection report issued must be
incorporated in claim file.
FAILURE TO INSPECT
300145In the event carrier does not make an inspection the consignee
must make the inspection and record all information to the best of
his ability pertinent to the cause. Consignee's inspection, in such
case, will be considered as the carrier's inspection and will not
jeopardize any recovery the consignee is due based on the facts
contained in the report.
SALVAGE RETENTION
When visible or open damage to a shipment has been established
by notation having been given at time of delivery or concealed
damaged established by inspection report, it is the duty of the
consignee to retain damaged merchandise and shipping container
until carrier desires to take possession of merchandise as salvage.
 until carrier desires to take possession of merchandise as salvage.
If record conclusively reflects carrier liability, carrier will take
300150possession of the damaged merchandise as soon as possible and in
any event, within thirty (30) days from date shipment was noted
damaged on carrier delivery receipt or from date of inspection
report, if damaged was concealed. If carrier does not take
possession of the damaged merchandise within the time
prescribed above, consignee must contact delivering carrier and
request removal of goods from his premises within fifteen (15)
days from the date of such communication. The above applies
only when the carrier and consignee agree that the carrier will
handle disposition of the salvage, and does not in any manner
affect the legal duty that the consignee, when there is substantial
value in the salvage, must accept and handle it in such a manner
as to mitigate the carrier's loss as much as possible. If there is
doubt of carrier liability, the carrier will so advise consignee; in
which event the consignee may hold the merchandise until
liability of carrier is determined, or may dispose of it so as to
mitigate the damage, and may file claim for such damage. Carrier
will remove the damaged goods within the fifteen (15) day period
or advise consignee that carrier liability is in doubt and that
damaged merchandise is to be retained by the consignee until
carrier has completed investigation of claim.
PRIOR TRANSPORTATION
300155If a concealed damage inspection report covers merchandise
which has had prior transportation movement, consignee is
required to assist carrier in determining if shipment was opened
and inspected by shipper prior to reshipment, and if not, shall then
assist carrier in every way possible to establish record of prior
transportation.
[ 3 ]
(Exhibit continued on next page)

 PRINCIPLES AND PRACTICES FOR THE INVESTIGATION
AND DISPOSITION OF FREIGHT CLAIMS
ITEM
(Provisions names herein are NOT applicable on interstate or foreign
commerce for account of carriers referenced with "WATCAR" (except
SEAU or TOTE) shown in the list of participating interstate and
intrastate carriers of this Classification, or as amended.)
APPLICATION
These Rules are published in compliance with the report and order of the
Interstate Commerce Commission in Ex Parte No. 263, Rules,
300100Regulations, and Practices of Regulated Carriers with Respect to the
Processing of Loss and Damage Claims, served February 24, 1972.
(a) To obtain uniformity on the part of all carriers and uniform
treatment of all claimants in the disposition of claims of like nature.
(b) To secure and preserve harmonious relationships in claim matters
between carriers and their patrons.
(c) To effect and maintain a prompt and efficient service to the public
in connection with the investigation and disposition of freight claims.
FILING OF CLAIMS
(a) Claims in writing required. A claim for loss or loss or damage to
baggage or for loss, damage, injury, or delay to cargo will not be
voluntarily paid by a carrier unless filed in writing, as provided in
subparagraph (b) below, with the receiving or delivering carrier, or
carrier issuing the bill of lading, receipt, ticket, or baggage check, or
carrier on whose line the alleged loss, damage, injury, or delay occurred,
300105 within the specified time limits applicable thereto and as otherwise may
be required by law, the terms of the bill of lading or other contract of
carriage, and all tariff provisions applicable thereto.
 (b) Minimum filing requirements. A communication in writing from a
claimant, filed with a proper carrier within the time limits specified in
the bill of lading or contract of carriage or transportation, and (1)
containing facts sufficient to identify the baggage or shipment (or
shipments) of property involved, (2) asserting liability to alleged loss,
damage, injury, or delay, and (3) making claim for the payment of a
specified or determinable amount of money, will be considered as
sufficient compliance with the provisions for filing claims embraced in
the bill of lading or other contract of carriage.
(c) Bad order reports, appraisal report of damage, notations of
exceptions on freight bills or other documents, inspection reports issued
by carrier inspectors or inspection agencies, tracers or inspection
requests do not comply with claim filing requirements.
DOCUMENTS REQUIRED IN SUPPORT OF CLAIMS
(a) A written demand for payment, asserting carrier liability for alleged
loss, damage, injury or delay, and containing facts sufficient to identify
the shipment or shipments involved will constitute a claim, regardless of
form, and will be required.
(b) When claimant does not appear from the supporting documents to be
an interested party, carrier will require any necessary written assignment
or other proof to determine the claimant is the proper party to receive
any claim payment.
(c) Claim must be supported by either the original invoice: a
photographic copy of the original invoice; an exact copy thereof, or an
extract therefrom, certified by the claimant or his authorized
300110
representative to be true and correct with respect to the property
involved in the claim and reflecting all trade or other discounts,
allowances, or deductions of any nature. When the original invoice is
not submitted, such document must be made available for inspection by
carrier representative upon request.
(d) When determined by the carrier to be a necessary part of the
investigation, the following will be required:
1. The original freight bill and bill of lading or other contract of carriage.
When claimant cannot furnish these documents, carrier may require
suitable indemnity from the claimant.
2. When the property involved in the claim has not been invoiced to the
consignee or where invoice does not show price or value, or where the
property has not been sold but transferred at bookkeeping values only,
or where property has been shipped on consignment or approval,
documentation to establish destination value in the quantity shipped and
certification of the correctness thereof.
3. In order to establish the full recoverable loss caused by the carriers,
the original account of sale, showing the date of sale and the amounts
realized on the damaged and undamaged portions, respectively, showing
grade, brands, quality, variety, size and condition, together with any
deductions, allowances, and commissions, or a copy thereof certified
correct over the signature of the claimant or an authorized representative
thereof.
4. When shipment has received prior transportation and is reshipped
from a distribution or warehousing point but has been opened and
examined and contents verified as being in undamaged condition,
certification thereof must be made by a person having actual knowledge
of such inspection and a statement to the effect incorporated in such
certification.
5. When an asserted claim for loss of an entire package or on an entire
shipment cannot be otherwise authenticated upon investigation, the
carrier will obtain from the consignee of the shipment involved, a
certified statement in writing that the property for which the claim is
filed has not been received from any source.
CLAIMS FILED FOR UNCERTAIN AMOUNTS
 Whenever a claim is presented against a proper carrier for an uncertain
300115amount, such as "$100 more or less", the carrier against whom such
claim is filed will determine the condition of the shipment involved at
the time of delivery by it, if it was delivered, and will ascertain as nearly
as possible the extent, if any, of the loss or damage for which it may be
responsible. It will not, however, voluntarily pay a claim under such
circumstances unless and until a formal claim in writing for a specified
or determinable amount of money has been filed in accordance with the
provisions of item 300105.

ACKNOWLEDGMENT AND DISPOSITION OF CLAIMS

Carrier will acknowledge claim in writing within 30 days after receipt
thereof, informing the claimant of identifying number assigned thereto,
300120and will pay, refuse payment, or make a firm compromise offer within
120 days after receipt of claim, except, that if claim cannot be disposed
of within this period, carrier will at that time and at the end of each
succeeding 60 day period thereafter while claim remains pending,
inform the claimant in writing of the reason for failure to conclude
claim.
A separately numbered file will be established for each claim filed in
accord with the provisions of this tariff. All documents, records and
correspondence pertaining to such claim will be identified with this file
number.
[ 4 ]

(Exhibit continued from previous page)

 Page 164
ment by carrier, follow-up dates, and final disposition. A good claim
procedure and file save money.
Claim Prevention
The following suggestions may help avoid the expense and bother of
filing a claim:
Ask your carrier's advice. Consult the safety or loss-prevention
department of your rail, truck, ocean, or air carrier and freight-claim-
prevention organizations.
Purchase only approved shipping containers and supplies from
reliable sources.
Perform preshipment testing of packages and packaging methods.
Package goods only in approved and/or tested packaging.
Request trailers and railcars equipped with load restraints and air
ride. Household-goods carriers operate easy-riding trailers and use
lots of blankets.
Load in accordance with the carrier's loading procedures; trained
drivers will tell you how to distribute a load evenly throughout the
vehicle.
Observe safe and correct loading procedures; develop training
courses, materials, videos, manuals.
Secure shipments with sufficient dunnage, load restraints,
blocking, and bracing.
Form a claims and damage-prevention task force.

 Page 165

Appendixes
Warehousing Documents
Disclaimer: This chapter contains guidelines and
illustrations. Documents have been presented to the best
of the author's ability. The author does not engage in
providing legal advice or assistance. Form, format,
content, and language of your individual contracts,
agreements, leases, and other legal documents must be
developed by competent, professional legal counsel.

The responsibilities, liabilities, and activities of public and contract

warehouse operators and their customers are governed by laws and
regulations. It is recommended that depositors and/or lessees of
warehouses familiarize themselves with these documents to
understand the principles and concepts involved in negotiating
agreements, contracts, and leases. The language of warehouse
documents is, for the most part, easily understandable.

 Page 167

Appendix A
Uniform Commercial Code (UCC), Article 7, Parts 1-6
[Public Document]

 Page 168
Summary
Part 1General
Sec. 7-101. Short Title
Sec. 7-102. Definitions and Index of Definitions
Sec. 7-103. Relations of Article to Treaty, Statute, Tariff,
Classification or Regulation
Sec. 7-104. Negotiable and Non-Negotiable Warehouse Receipt, Bill
of Lading or Other Document of Title
Sec. 7-105. Construction Against Negative Implication
Part 2Warehouse Receipts: Special Provisions
Sec. 7-201. Who May Issue a Warehouse Receipt; Storage Under
Government Bond
Sec. 7-202. Form of Warehouse Receipt; Essential Terms; Optional
Terms
Sec. 7-203. Liability for Non-Receipt or Misdescription
Sec. 7-204. Duty of Care; Contractual Limitation of Warehouseman's
Liability
Sec. 7-205. Title Under Warehouse Receipt Defeated in Certain Cases
Sec. 7-206. Termination of Storage at Warehouseman's Option
Sec. 7-207.Goods Must Be Kept Separate; Fungible Goods
Sec. 7-208. Altered Warehouse Receipts
Sec. 7-209. Lien of Warehouseman
Sec. 7-210. Enforcement of Warehouseman's Lien
Part 3Bills of Lading: Special Provisions[Omitted]
Part 4Warehouse Receipts and Bills of Lading: General Obligations
Sec. 7-401. Irregularities in the Issue of Receipt or Bill or Conduct of
Issuer
Sec. 7-402. Duplicate Receipt or Bill; Overissue

 Page 169
Sec. 7-403. Obligation of Warehouseman or Carrier to Deliver;
Excuse
Sec. 7-404. No Liability for Good Faith Delivery Pursuant to Receipt
or Bill
Part 5Warehouse Receipts and Bills of Lading: Negotiation and
Transfer
Sec. 7-501. Form of Negotiation and Requirements of "Due
Negotiation"
Sec. 7-502. Rights Acquired by Due Negotiation
Sec. 7-503. Document of Title to Goods Defeated in Certain Cases
Sec. 7-504. Rights Acquired in the Absence of Due Negotiation;
Effect of Diversion; Seller's Stoppage of Delivery
Sec. 7-505. Endorser Not a Guarantor for Other Parties
Sec. 7-506. Delivery without Endorsement: Right to Compel
Endorsement
Sec. 7-507. Warranties on Negotiation or Transfer of Receipt or Bill
Sec. 7-508. Warranties of Collecting Bank as to Documents
Sec. 8-509. Receipt or Bill: When Adequate Compliance with
Commercial Contract
Part 6Warehouse Receipts and Bills of Lading: Miscellaneous
Provisions
Sec. 7-601. Lost and Missing Documents
Sec. 7-602. Attachment of Goods Covered by a Negotiable Contract
Sec. 7-603. Conflicting Claims; Interpleader

 Page 170
Article 7
Warehouse Receipts, Bills of Lading and Other Documents of Title
Part 1
General
Section 7-101 Short Title.
This Article shall be known and may be cited as Uniform Commercial
CodeDocuments of Title.
Section 7-102 Definitions and Index of Definitions.
(1) In this Article, unless the context otherwise requires:
(a) ''Bailee" means the person who by a warehouse receipt, bill of
lading, or other document of title acknowledges possession of
goods and contracts to deliver them.
(b) "Consignee" means the person named in a bill to whom or to
whose order the bill promises delivery.
(c) "Consignor" means the person named in a bill as the person
from whom the goods have been received for shipment.
(d) "Delivery Order" means a written order to deliver goods to a
warehouseman, carrier or other person who in the ordinary course
of business issues warehouse receipts or bills of lading.
(e) "Document" means document of titles as defined in the general
definitions in Article 1 (Section 1-201).
(f) "Goods" means all things which are treated as movable for the
purpose of a contract of storage or transportation.
(g) "Issuer" means a bailee who issues a document except that in
relation to an unaccepted delivery order it means the person who
 orders the possessor of goods to deliver. Issue includes any person
for whom an agent or employee purports to act in issuing a
document if the agent or employee has real or apparent authority to
issue documents, notwith-

 Page 171
standing that the issuer received no goods or that the goods were
misdescribed or that in any other respect the agent or employee
violated his instructions.
(h) "Warehouseman" is a person engaged in the business of storing
goods for hire.
(2) Other definitions applying to this Article or to specified parts
thereof, and the sections in which they appear are:
"Duly negotiate." Section 7-501
"Person entitled under document." Section 7-403(4)
(3) Definitions in other Articles applying to this Article and the
sections in which they appear are:
"Contract for Sale." Section 2-106
"Overseas." Section 2-323
"Receipt of Goods." Section 2-103
(4) In addition Article 1 contains general definitions and principles of
construction and interpretation applicable throughout this Article.
Section 7-103. Relation of Article to Treaty, Statute, Tariff,
Classification or Regulation.
To the extent that any treaty or statute of the United States, regulatory
statute of this State or tariff, classification or regulation filed or issued
pursuant thereto is applicable, the provisions of this Article are subject
thereto.
Section 7-104. Negotiable and Non-Negotiable Warehouse Receipt,
Bill of Lading or Other Document of Title.
(1) A warehouse receipt, bill of lading or other document of title is
negotiable
 (a) if by its terms the goods are to be delivered to bearer or to the
order of a named person; or
(b) where recognized in overseas trade, if it runs to a named person
or assigns.

 Page 172
(2) Any other document is non-negotiable. A bill of lading in which it
is stated that the goods are consigned to a named person is not made
negotiable by a provision that the goods are to be delivered only
against a written order signed by the same or another person.
Section 7-105. Construction Against Negative Implication.
The omission from either Part 2 or Part 3 of this Article of a provision
corresponding to a provision made in the other Part does not imply
that a corresponding rule of law is not applicable.
Part 2
Warehouse Receipts: Special Provisions
Section 7-201. Who May Issue a Warehouse Receipt; Storage Under
Government Bond.
(1) A Warehouse Receipt may be issued by any warehouseman.
(2) Where goods including distilled spirits and agricultural
commodities are stored under a statute requiring a bond against
withdrawal or a license for the issuance of receipts, a receipt issued
for the goods has like effect as a warehouse receipt even though
issued by a person who is the owner of the goods and is not a
warehouseman.
Section 7-202. Form of Warehouse Receipt; Essential Terms;
Optional Terms.
(1) A warehouse receipt need not be in any particular form.
(2) Unless a warehouse receipt embodies within its written or printed
terms each of the following, the warehouseman is liable for damages
caused by the omission to a person injured thereby:
(a) the location of the warehouse where the goods are stored;
 (b) the date of the issue of the receipt;

 Page 173
(c) the consecutive number of the receipt;
(d) a statement whether the goods received will be delivered to the
bearer, to a specified person, or to a specified person or his order;
(e) the rate of storage and handling charges, except that where
goods are stored under a field warehousing arrangement a
statement of this fact is sufficient on a non-negotiable receipt;
(f) a description of the goods or the packages containing them;
(g) the signature of the warehouseman, which may be made by his
authorized agent;
(h) if the receipt is issued for goods of which the warehouseman is
the owner, either solely or jointly or in common with others, the
fact of such ownership; and
(i) a statement of the amount of advances made and liabilities
incurred for which the warehouseman claims a lien or security
interest (Section 7-209). If the precise amount of such advances
made or of such liabilities incurred is, at the time of the issue of the
receipt, unknown to the warehouseman or to his agent who issues
it, a statement of the fact that advances have been made or
liabilities incurred and the purpose thereof is sufficient.
(3) A warehouseman may insert in his receipt any other terms which
are not contrary to the provisions of this Act and do not impair his
obligation of delivery (Section 7-403) or his duty of care (Section 7-
204). Any contrary provisions shall be ineffective.
Section 7-203. Liability for Non-Receipt or Misdescription.
A party or purchaser for value in good faith of a document of title
other than a bill of lading relying in either case upon the description
therein of the goods may recover from the issuer damages caused by
the non-receipt or misdescription of the goods, except to the extent
that the document conspicuously indicates that the issuer does not
know whether any part or all of the goods in fact were received or
conform to the description, as where the description is in terms of
marks or labels or kind, quantity or condition, or the receipt or
description is qualified by "contents, condition and quality un-

 Page 174
known," "said to contain" or the like, if such indication be true, or the
party or purchaser has otherwise notice.
Section 7-204. Duty of Care; Contractual Limitation of
Warehouseman's Liability.
(1) A warehouseman is liable for damages for loss of or injury to the
goods caused by his failure to exercise such care in regard to them as
a reasonably careful man would exercise under like circumstances but
unless otherwise agreed he is not liable for damages which could not
have been avoided by the exercise of such care.
(2) Damages may be limited by a term in the warehouse receipt or
storage agreement limiting the amount of liability in case of loss or
damage, and setting forth a specific liability per article or item, or
value per unit of weight, beyond which the warehouseman shall not
be liable; provided, however, that such liability may on written
request of the bailor at the time of signing such storage agreement or
within reasonable time after the receipt of the warehouse receipt be
increased on part or all of the goods thereunder, in which event
increased rates may be charged based on such increased valuation, but
that no such increase shall be permitted contrary to a lawful limitation
of liability contained in the warehouseman's tariff, if any. No such
limitation is effective with respect to the warehouseman's liability for
conversion to his own use.
(3) Reasonable provision as to the time and manner of presenting
claims and instituting actions based on the bailment may be included
in the warehouse receipt or tariff.
(4) This section does not impair or repeal . . .
NOTE: Insert in subsection (4) a reference to any statute which
imposes a higher responsibility upon the warehouseman or invalidates
contractual limitations which would be permissible under this Article.

 Page 175
Section 7-205. Title Under Warehouse Receipt Defeated in Certain
Cases.
A buyer in the ordinary course of business of fungible goods sold and
delivered by a warehouseman who is also in the business of buying
and selling such goods takes free of any claim under a warehouse
receipt even though it has been duly negotiated.
Section 7-206. Termination of Storage at Warehouseman's Option.
(1) A warehouseman may on notifying the person on whose account
the goods are held and any other person known to claim an interest in
the goods require payment of any charges and removal of goods from
the warehouse at the termination of the period of storage fixed by the
document, or, if no period is fixed, within a stated period not less than
thirty days after the notification. If the goods are not removed before
the date specified in the notification, the warehouseman may sell them
in accordance with the provisions of the section on enforcement of a
warehouseman's lien (Section 7-210).
(2) If a warehouseman in good faith believes that the goods are about
to deteriorate or decline in value to less than the amount of his lien
within the time prescribed in subsection (1) for notification,
advertisement and sale, the warehouseman may specify in the
notification any reasonable shorter time for removal of the goods and
in the case the goods are not removed, may sell them at public sale
held not less than one week after a single advertisement or posting.
(3) If as a result of a quality or condition of the goods of which the
warehouseman had no notice at the time of deposit the goods are a
hazard to other property or to warehouse or to persons, the
warehouseman may sell the goods at public or private sale without
advertisement on reasonable notification to all persons known to
claim an interest in the goods. If the warehouseman after a reasonable
effort is unable to sell the goods he may dispose of them in any lawful
manner and shall incur no liability by reason of such disposition.

 Page 176
(4) The warehouseman must deliver the goods to any person entitled
to them under this Article upon due demand made at any time prior to
sale or other disposition under this section.
(5) The warehouseman may satisfy his lien from the proceeds of any
sale or disposition under this section but must hold the balance for
delivery on the demand of any person to whom he would have been
bound to deliver the goods.
Section 7-207. Goods Must Be Kept Separate; Fungible Goods.
(1) Unless the warehouse receipt otherwise provides, a warehouseman
must keep separate the goods covered by each receipt so as to permit
at all times identification and delivery of those goods except that
different lots of fungible goods may be commingled.
(2) Fungible goods so commingled are owned in common by the
persons entitled thereto and the warehouseman is severally liable to
each owner for that owner's share. Where because of overissue a mass
of fungible goods is insufficient to meet all the receipts which
warehouseman may have issued against it, the persons entitled include
all holders to whom overissued receipts have been negotiated.
Section 7-208. Altered Warehouse Receipts.
Where a blank in a negotiable warehouse receipt has been filled in
without authority, a purchaser for value and without notice of the want
of authority may treat the insertion as authorized. Any other
unauthorized alteration leaves any receipt enforceable against the
issuer according to its original tenor.
Section 7-209. Lien of Warehouseman.
(1) A warehouseman has a lien against the bailor on the goods
covered by a warehouse receipt or on the proceeds thereof in his
possession for charges for storage or transportation (including
demurrage and terminal charges), insurance, labor, or charges present
or future in relation to the goods, and for expenses necessary for
preservation of the goods or reasonably incurred in

 Page 177
their sale pursuant to law. If the person on whose account the
goods are held is liable for like charges or expenses in relation to
other goods whenever deposited and it is stated in the receipt that a
lien is claimed for charges and expenses in relation to other goods, the
warehouseman also has a lien against him for such charges and
expenses whether or not the other goods have been delivered by the
warehouseman. But against a person to whom a negotiable warehouse
receipt is duly negotiated a warehouseman's lien is limited to charges
in an amount or at a rate specified on the receipt or if no charges are
so specified then to a reasonable charge for storage of the goods
covered by the receipt subsequent to the date of the receipt.
(2) The warehouseman may also reserve a security interest against the
bailor for a maximum amount specified on the receipt for charges
other than those specified in subsection (1), such as for money
advanced and interest. Such a security interest is governed by the
Article on Secured Transactions (Article 9).
(3) A warehouseman's lien for charges and expenses under subsection
(1) or a security interest under subsection (2) is also effective against
any person who so entrusted the bailor with possession of the goods
that a pledge of them by him to a good faith purchaser for value
would have been valid but is not effective against a person as to
whom the document confers no right in the goods covered by it under
Section 7-503.
(4) A warehouseman loses his lien on any goods which he voluntarily
delivers or which he unjustifiably refuses to deliver.
Section 7-210. Enforcement of Warehouseman's Lien.
(1) Except as provided in subsection (2), a warehouseman's lien may
be enforced by public or private sale of the goods in bloc or in
parcels, at any time or place and on any terms which are
commercially reasonable, after notifying all persons known to claim
any interest in the goods. Such notification must include a statement
of the amount due, the nature of proposed sale and the time and place
of any public sale. The fact that a better price could have been
obtained by a sale at a different time or in a

 Page 178
different method from that selected by the warehouseman is of
itself not sufficient to establish that the sale was not made in a
commercially reasonable manner. If the warehouseman either sells the
goods in the usual manner in any recognized market therefor, or if he
sells at the price current in such market at the time of his sale, or if he
has otherwise sold in conformity with commercially reasonable
practices among dealers in the type of goods sold, he has sold in a
commercially reasonable manner. A sale of more goods than
apparently necessary to be offered to ensure satisfaction of the
obligation is not commercially reasonable except in cases covered by
the preceding sentence.
(2) A warehouseman's lien on goods other than goods stored by a
merchant in the course of his business may be enforced only as
follows:
(a) All persons known to claim an interest in the goods must be
notified.
(b) The notification must be delivered in person or sent by
registered letter to the last known address of any person to be
notified.
(c) The notification must include an itemized statement of the
claim, a description of the goods subject to the lien, a demand for
payment within a specified time not less than ten days after the
receipt of the notification, and a conspicuous statement that unless
the claim is paid within that time the goods will be advertised for
sale by auction at a specified time and place.
(d) The sale must conform to the terms of the notification.
(e) The sale must be held at the nearest suitable place to that where
the goods are held or stored.
 (f) After the expiration of the time given in the notification, an
advertisement of the sale must be published once a week for two
weeks consecutively in a newspaper of general circulation where
the sale is to be held. The advertisement must include a description
of the goods, the name of the person on whose account they are
being held, and the time and place of the sale. The sale must take
place at least fifteen days after the first publication. If there is no
newspaper of general circulation where the sale is to be held, the
adver-

 Page 179
tisement must be posted at least ten days before the sale in not
less than six conspicuous places in the neighborhood of the
proposed sale.
(3) Before any sale pursuant to this section any person claiming right
in the goods may pay the amount necessary to satisfy the lien and the
reasonable expenses incurred under this section. In that event the
goods must not be sold, but must be retained by the warehouseman
subject to the terms of the receipt of this Article.
(4) The warehouseman may buy at any public sale pursuant to this
section.
(5) A purchaser in good faith of the goods sold to enforce a
warehouseman's lien takes the goods free of any rights of persons
against whom the lien was valid, despite noncompliance by the
warehouseman with the requirements of this section.
(6) The warehouseman may satisfy his lien from the proceeds of any
sale pursuant to this section but must hold the balance, if any, for
delivery on demand to any person to whom he would have been
bound to deliver the goods.
(7) The rights provided in this section are in addition to all other
rights allowed by law to a creditor against his debtor.
(8) Where the lien is on goods stored by a merchant in the course of
his business the lien may be enforced in accordance with either
subsection (1) or (2).
(9) The warehouseman is liable for damages caused by the failure to
comply with the requirements for sale under this section and in case
of willful violation is liable for conversion.

 Page 180
Part 3
Bills of Lading: Special Provisions
[Omitted]
Part 4
Warehouse Receipts and Bills of Lading: General Obligations
Section 7-401. Irregularities in the Issue of Receipt or Bill or Conduct
of Issuer.
The obligations imposed by this Article on an issuer apply to the
document of title regardless of the fact that
(a) the document may not comply with the requirements of this
Article or of any other law or regulation regarding its issue, form or
content; or
(b) the issuer may have violated laws regulating the conduct of his
business; or
(c) the goods covered by the document were owned by the bailee at
the time the document was issued; or
(d) the person issuing the document does not come within the
definition of warehouseman if it purports to be a warehouse receipt.
Section 7-402. Duplicate Receipt or Bill; Overissue.
Neither a duplicate nor any other document of title purporting to cover
the goods already represented by an outstanding document of the
same issuer confers any right in the goods, except as provided in the
case of bills in a set, overissue of documents for fungible goods and
substitutes for lost, stolen or destroyed documents. But the issuer is
liable for damages caused by his overissue or failure to identify a
duplicate document as such by conspicuous notation on its face.

 Page 181
Section 7-403. Obligation of Warehouseman or Carrier to Deliver;
Excuse.
(1) The bailee must deliver the goods to a person entitled under the
document who complies with subsections (2) and (3), unless and to
the extent that the bailee establishes any of the following:
(a) delivery of goods to a person whose receipt was rightful as
against the claimant;
(b) damage or delay, loss or destruction of the goods for which the
bailee is not liable [but the burden of establishing negligence in
such cases is on the person entitled under the document];
NOTE: The brackets in (1)(b) indicate that State enactments may
differ on this point without serious damage to the principle of
Uniformity.
(c) previous sale or other disposition of the goods in lawful
enforcement of a lien or on warehouseman's lawful termination of
storage;
(d) the exercise by a seller of his right to stop delivery pursuant to
the provisions of the Articles on Sales (Section 2-705);
(e) a diversion, reconsignment or other disposition pursuant to the
provision of this Article (Section 7-303) or tariff regulating such
right;
(f) release, satisfaction or any other fact affording a personal
defense against the claimant;
(g) any other lawful excuse.
(2) Any person claiming goods covered by a document of title must
satisfy the bailee's lien where the bailee so requests or where the
bailee is prohibited by law from delivering the goods until the charges
are paid.
(3) Unless the person claiming is one against whom the document
confers no right under Section 7-503(1), he must surrender for
cancellation or notation of partial deliveries any outstanding
negotiable document covering the goods, and the bailee must cancel
the document or conspicuously note the partial delivery

 Page 182
thereon or be liable to any person to whom the document is duly
negotiated.
(4) ''Person entitled under the document" means holder in the case of a
negotiable document, or the person to whom delivery is to be made by
the terms of or pursuant to written instructions under a non-negotiable
document.
Section 7-404. No Liability for Good Faith Delivery Pursuant to
Receipt or Bill.
A bailee who in good faith including observance of reasonable
commercial standards has received goods and delivered or otherwise
disposed of them according to the terms of the document of title or
pursuant to this Article is not liable therefor. This rule applies even
though the person from whom he received the goods had no authority
to procure the document or to dispose of the goods and even though
the person to whom he delivered the goods had no authority to receive
them.
Part 5
Warehouse Receipts and Bills of Lading: Negotiation and Transfer
Section 7-501. Form of Negotiation and Requirements of "Due
Negotiation."
(1) A negotiable document of title running to the order of named
person is negotiated by his endorsement and delivery. After his
endorsement in blank or to bearer any person can negotiate it by
delivery alone.
(2)
(a) A negotiable document of title is also negotiated by delivery
alone when by its original terms it runs to bearer.
 (b) When a document running to the order of a named person is
delivered to him the effect is the same as if the document had been
negotiated.

 Page 183
(3) Negotiation of a negotiable document of title after it has been
endorsed to a specified person requires endorsement by the special
endorsee as well as delivery.
(4) A negotiable document of title is "duly negotiated" when it is
negotiated in the manner stated in this section to a holder who
purchases in good faith without notice of any defense against or claim
to it on the part of any person and for value, unless it is established
that the negotiation is not in the regular course of business or
financing or involves receiving the document in settlement or
payment of a money obligation.
(5) Endorsement of a non-negotiable document neither makes it
negotiable nor adds to the transferee's rights.
(6) The naming in a negotiable bill of a person to be notified of the
arrival of the goods does not limit the negotiability of the bill nor
constitute notice to a purchaser thereof of any interest of such person
in the goods.
Section 7-502. Rights Acquired by Due Negotiation.
(1) Subject to the following section and the provisions of Section 7-
205 on fungible goods, a holder to whom a negotiable document of
title has been duly negotiated acquires thereby:
(a) title to the document;
(b) title to the goods;
(c) all rights accruing under the law of agency or estoppel,
including rights to goods delivered to the bailee after the document
was issued; and
(d) the direct obligation of the issuer to hold or deliver the goods
 according to the terms of the document free of any defense or claim
by him except those arising under the terms of the document or
under this Article. In the case of a delivery order the bailee's
obligation accrues only upon acceptance and the obligation
acquired by the holder is that the issuer and any indorser will
procure the acceptance of the bailee.

 Page 184
(2) Subject to the following section, title and rights so acquired are
not defeated by any stoppage of the goods represented by the
document or by surrender of such goods by the bailee, and are not
impaired even though the negotiation or any prior negotiation
constituted a breach of duty or even though any person has been
deprived of possession of the document by misrepresentation, fraud,
accident, mistake, duress, loss, theft or conversion, or even though a
previous sale or other transfer of the goods or document has been
made to a third person.
Section 7-503. Document of Title to Goods Defeated in Certain Cases.
(1) A document of title confers no rights in goods against a person
who before issuance of the document had a legal interest or a
perfected security interest in them and who neither
(a) delivered or entrusted them or any document of title covering
them to the bailor or his nominee with actual or apparent authority
to ship, store or sell or with power to obtain delivery under this
Article (Section 7-403) or with power of disposition under this Act
(Sections 2-403 and 9-307) or other statute or rule of law; nor
(b) acquiesced in the procurement by the bailor or his nominee of
any document of title.
(2) Title to the goods based upon an unaccepted delivery order is
subject to the rights of anyone to whom a negotiable warehouse
receipt or bill of lading covering the goods has been duly negotiated.
Such a title may be defeated under the next section to the same extent
as the rights of the issuer or a transferee from the issuer.
(3) Title to goods based upon a bill of lading issued to a freight
forwarder is subject to the rights of anyone to whom a bill issued by
the freight forwarder is duly negotiated; but delivery by the carrier in
accordance
with Part 4 of this Article pursuant to its own bill of lading discharges
the carriers' obligation to deliver.

 Page 185
Section 7-504. Rights Acquired in the Absence of Due Negotiation;
Effect of Diversion; Seller's Stoppage Delivery.
(1) A transferee of a document, whether negotiable or non-negotiable,
to whom the document has been delivered but not duly negotiated,
acquires the title and rights which his transferor had or had actual
authority to convey.
(2) In the case of a non-negotiable document, until but not after the
bailee receives notification of the transfer, the rights of the transferee
may be defeated
(a) by those creditors of the transferor who could treat the sale as
void under Section 2-402; or
(b) by a buyer form the transferor in ordinary course of business if
the bailee has delivered the goods to the buyer or received
notification of his rights; or
(c) as against the bailee by good faith dealings of the bailee with
the transferor.
(3) A diversion or other change of shipping instructions by the
consignor in a non-negotiable bill of lading which causes the bailee
not to deliver to the consignee defeats the consignee's title to the
goods if they have been delivered to a buyer in ordinary course of
business and in any event defeats the consignee's rights against the
bailee.
(4) Delivery pursuant to a non-negotiable document may be stopped
by a seller under Section 2-705, and subject to the requirement of due
notification there provided. A bailee honoring the seller's instructions
is entitled to be indemnified by the seller against any resulting loss or
expense.
Section 7-505. Endorser Not a Guarantor for Other Parties.
The endorsement of a document of title issued by a bailee does not
make the endorser liable for any default by the bailee or by previous
endorsers.

 Page 186
Section 7-506. Delivery Without Endorsement: Right to Compel
Endorsement.
The transferee of a negotiable document of title has a specifically
enforceable right to have his transferor supply any necessary
endorsement but the transfer becomes a negotiation only as of the
time the indorsement is supplied.
Section 7-507. Warranties on Negotiation or Transfer of Receipt or
Bill.
Where a person negotiates or transfers a document of title for value
otherwise than as a mere intermediary under the next following
section, then unless otherwise agreed he warrants to his immediate
purchaser only in addition to any warranty made in selling the goods
(a) that the document is genuine; and
(b) that he has no knowledge of any fact which would impair its
validity or worth; and
(c) that his negotiation or transfer is rightful and fully effective with
respect to the title to the document and the goods it represents.
Section 7-508. Warranties of Collecting Bank as to Documents.
A collecting bank or other intermediary known to be entrusted with
documents on behalf of another or with collection of a draft or other
claim against delivery of documents warrants by such delivery of the
documents only its own good faith and authority. This rule applies
even though the intermediary has purchased or made advances against
the claim or draft to be collected.
Section 7-509. Receipt or Bill: When Adequate Compliance with
Commercial Contract.
The question whether a document is adequate to fulfill the obligation
of a contract for sale or the conditions of a credit is governed by the
Articles of Sales (Article 2) and on Letters of Credit (Article 5).

 Page 187
Part 6
Warehouse Receipts and Bills of Lading: Miscellaneous Provisions
Section 7-601. Lost and Missing Documents.
(1) If a document has been lost, stolen or destroyed, a court may order
delivery of the goods or issuance of a substitute document and the
bailee must without liability to any person comply with such order. If
the document was negotiable the claimant must post security
approved by the court to indemnify any person who may suffer loss as
a result of non-surrender of the document. If the document was not
negotiable, such security may be required at the discretion of the
court. The court may also in its discretion order payment of the
bailee's reasonable costs and counsel fees.
(2) A bailee who without court order delivers goods to a person
claiming under a missing negotiable document is liable to any person
injured thereby, and if the delivery is not in good faith becomes liable
for conversion. Delivery in good faith is not conversion if made in
accordance with filed classification or tariff or, where no
classification or tariff is filed, if the claimant posts security with the
bailee in an amount at least double the value of the goods at the time
of posting to indemnify any person injured by the delivery who files a
notice of claim within one year after the delivery.
Section 7-602. Attachment of Goods Covered by a Negotiable
Contract.
Except where the document was originally issued upon delivery of the
goods by a person who had no power to dispose of them, no lien
attaches by virtue of any judicial process to goods in the possession of
a bailee for which a negotiable document of title is outstanding unless
the document be first surrendered to the bailee or its negotiation
enjoined, and the bailee shall not be compelled to deliver the goods
pursuant to process until the document is surrendered to him or
impounded by the court. One who purchases the

 Page 188
document for value without notice of the process of injunction takes
free of the lien imposed by the judicial process.
Section 7-603. Conflicting Claims; Interpleader.
If more than one person claims title or possession of the goods, the
bailee is excused from delivery until he has had a reasonable time to
ascertain the validity of the adverse claim or to bring an action to
compel all claimants to interplead and may compel such interpleader,
either in defending an action for non-delivery of the goods, or by
original action, whichever is appropriate.

 Page 189

Appendix B
Cargo Security Advisory Standards
Code of Federal Regulations Title 49
Par. 1 (10-1-92 Edition), Part 101
Subchapter ATransportation Programs Bureau
[Public Document]
Republication of Material: There are no restrictions on the
republication of material appearing in the Code of Federal
Regulations; Martha Girard, Director, Office of the Federal Register,
October 1, 1992.

<><><><><><><><><><><><>

The reader is encouraged to study the Cargo Security Advisory

Standards carefully. They address procedures for the use, application,
accountability, and removal of sea1ls, shipper's load and count
(SL&C), "in bond" cargo, and loss reporting, to ensure physical and
liability protection for goods in storage and in transit.

 Page 190
Subchapter ATransportation Programs Bureau
APPENDIX TO PART 101CARCO SECURITY ADVISORY STANDARDS
Part PART 101OFFICE Of TRANSPORTATION
SECURITYCARGO SECURITY ADVISORY STANDARDS
Subpart AGeneral
Sec.
101.1 Applicability.
101.3 Initiation of advisory standard setting.
101.5 Participation by interested persons. 101.7 Docket.
Subpart BPetitions, for Advisory Standard Setting
101.11 Filling of petitions.
101.13 Processing of petitions.
Subpart CPrecedures
101.21 General.
101.23 Contents of notices.
101.25 Petitions for extension of time to comment.
101.27 Consideration of comments received.
101.29 Additional advisory standard setting proceedings.
101.31 Hearings.
101.33 Adoption of final advisory standards.
APPENDIX TO PART 101CARGO SECURITY ADVISORY
STANDARDS
AUTHORITY: Sec. 9(e)(1) 80 Stat. 944 (49 U.S.C. 1657(e)(1)); Pub.
L. 89-670 (49 U.S.C. 1653(d), 1655, 1657(e)) (18 U.S.C. 831-835; 49
CFR 1.45 and 1.53).
SOURCE: 38 FR 6998, Mar. 15. 1973. Redesignated by Amdts. 85-1.
and 101-1, 43 FR 43305. Sept. 25, 1978, unless otherwise noted.
Subpart AGeneral
§ 101.1 Applicability.
(a) This part prescribes the procedures for the development and
promulgation of Cargo Security Advisory Standards. These advisory
standards are suggested procedures and policies intended to assist all
parts of the transportation industry in reducing the incidence of loss
and theft of cargo entrusted to their care. The advisory standards are
not mandatory, and nothing in them replaces or modifies any statutory
requirement or any regulatory authority vested in any Federal, State,
or local governmental body.
Part 101-1Seal Accountability and Procedures
Subpart AGeneral
Sec.
101-1.1 Purpose.
101-1.3 Definitions.
Subpart BDistribution ans Accountability
101-1.11 Purpose.
101-1.13 Ordering seals from the manufacturer.
101-1.15 Company identification.
101-1.17 Storage.
101-1.19 Records.
101-1.21 Employee accountability.
101-1.23 Accountability at terminals.
Subpart CSeal Records
101-1.31 Purpose.
101-1.33 Seal serial numbers.
101-1.35 Broken seals.
101-1.37 Use of guards.
Subpart DSeal Application
101-1.41 Time of seal application.
101-1.43 Authority to apply seals.
101-1.45 Application.
101-1.47 Final check.
Subpart EDestination Removal
101-1.51 Authority to remove seals.
101-1.53 Discrepancies.
Subpart FRoad Procedures
101-1.61 Truck trailers.
101-1.63 Container and piggyback operations.
101-1.65 Rail cars.
Subpart GShipper's Load and Count (SL&C)
101-1.71 General.
101-1.73 Application.
101-1.75 Removal for inspection.
101-1.77 Destination procedure.
101-1.79 Responsibility of the driver.
Subpart HU.S. Government and "In Bond" Seals
101-1.81 General.
AUTHORITY: Sec. 9(e)(l). 80 Stat. 944 (49 U.S.C. 1657(e)(1)); 49
CFR 101.3.
Subpart AGeneral
SEC. 101-1.1 Purpose. (a) The purpose of this Part is to set forth
minimum procedures and guidelines that should be observed in order
to institute and maintain an effective seal program.

 Page 191
(b) The provisions herein are general and each may not apply to every
transportation mode.
Sec. 101-1.3 Definitions. As used in this part:
Seal means a device applied to a rail car, trailer, marine container, or
air cargo container door fastening which:
(1) Indicates whether the door has been opened or the fastening
tampered with, and. if so. at what point in the chain of custody the
tampering occurred;
(2) Is easily applied to all types of fastenings;
(3) Readily shows when it is not properly fastened;
(4) Is of sufficient strength to resist accidental breaking;
(5) Cannot be made to appear intact when broken;
(6) Has sufficient letters to identify the carrier or shipper; and
(7) Is serially numbered to facilitate identification of the person who
applied the seal.
Transportation unit means a container, piggyback trailer, or standard
semi-trailer used by a motor carrier.
Subpart BDistribution ans Accountability
SEC. 101-l.11 Purpose. The purpose of this subpart is to suggest
measures designed to assure that seals are strictly accounted for from
receipt from the manufacturer to time of application. Resources
devoted to a seal program are wasted unless this goal is achieved
SEC. 101-1.13 Ordering seals front the manufacturer. (a)(1) To
simplify security control for both the company using the seals and the
manufacturer, all seals should be ordered from the manufacturer by
one person or office. preferably in company headquarters, regardless
of the number of terminals or other locations involved.
(2) The manufacturer can send the necessary seals directly to the
individual terminals, but only at the request of the person or office
identified in paragraph (a)(1) of this section.
(b) Seals should be ordered for each terminal in such a way that the
terminal responsible for a particular group of seals is readily
identifiable. This can be done by assigning specific blocks of numbers
to each terminal. or. more easily in most cases. by using terminal
prefix numbers.
SEC. 101-1.15 Company identification. In addition to a prefix and a
serial number, the name or initials of the company rising the seal or of
the carrier should be stamped on each seal.
SEC. 101-1.17 Storage. (a) The purpose of storage is to prevent seals
from being acquired by unauthorized persons for substitution or other
illegal use.
(b) Seals should be stored in a locked room. cabinet or drawer.
depending on the number of seals to be stored.
SEC. 101-1.19 Records. (a) If seals are sent from the manufacturer to
a central office for further distribution to terminals. precise records. by
seal serial number. should be maintained showing how many seals
were sent to each location.
(b) When the terminals or other locations receive seals. either directly
from the manufacturer or from company headquarters. a log should be
maintained showing the lowest aerial number and highest serial
number of any seal received. and the date the seals were received.
SEC. 101-1.21 Employee accountability. (a) To maintain positive
accountability. each employee authorized to apply seals should be
required to sign or initial for the seals he applies, by their serial
numbers.
(b) The person responsible for dispensing seals at a terminal should
maintain a Seal Application Log showing. for each seal. the (1) Date
tile seal is applied;
(2) Number of the transportation unit to which it is applied;
(3) Name of the person to whom the seal is issued; and
(4) Name of the person applying the seal to the transportation unit, if
other titan the person to whom the seal is issued.
SEC. 101-1.23 Accountability at terminals. The manager of the
terminal where seals are applied should assign one person
responsibility for the safekeeping. issuance. and record keeping of
seals applied at that terminal. This is the most important step in an
effective seal program.
Subpart CSeal Records
SEC. 101-1.31 Purpose. (a) Common sense and the particular
circumstances. of each company dictate the types of records
necessary. The goal of seal records is to pinpoint where in the chain of
custody a transportation unit's security was breached. in order to
simplify determination of where the loss occurred, who was
responsible. and other in formation necessary to prevent future losses.
Problem areas cannot be pinpointed unless there are adequate
accountability and complete records.
(b) The purpose of tiffs subpart is to suggest. measures designed to
determine:
(1) Who had custody of each seal;
(2) When, where, and to which unit each seal was applied; and
(3) When, where. and by whom each seal was broken.
SEC. 101-1.33 Seal serial numbers. (a) Record should be maintained
d of the serial numbers of seals:
(1) Received at each terminal; and
(2) Issued to authorized employees for application to transportation
units.
(b) In addition to being entered in seal record books. forms. and logs
used by a company. seal serial numbers should also be entered on all
pertinent documents (e.g., manifests. load charts or diagrams, travel
orders, gate passes, bills of lading. freight bills).

 Page 192
SEC. 101-1.35 Broken seals. When necessary to break a seal en route
or at an intermediate terminal, the following minimum information
should be entered on the manifest (and seal log, If used):
(a) Date and time seal was broken;
(b) Nine of person who broke seal;
(c) Reason seal was broken;
(d) Serial number of the seal replacing the broken seal (and the serial
number of the broken seal, if a seal log Is used);
(e) Name of person applying the replacement seal; and
(f) Names of witness.
SEC. 101-1.37 Use of guards. Where a gate guard is used, he should
check the seal serial number against the gate pass and travel order
and, ideally, enter in a gate log the serial number of:
(a) Each seal;
(b) The transportation unit to which the seal Is applied; and
(c) The tractor to which a trailer is attached.
Subpart DSeal Application
SEC. 101-1.41 Time of seal application. (a) Seals should be applied:
(1) As soon as the transportation unit has been loaded, or
(2) As soon as a loaded unsealed or improperly sealed unit is detected,
or
(3) After a necessary opening en route, as soon as the rein for the
opening has been accomplished. A ''necessary opening en route" may
be dictated by either an authorized person or an emergency situation.
(b) Application of seals should be supervised. Failure to supervise or
allowing the hostler to move an unsealed transportation unit to a
staging area offers opportunity to:
(1) Pilfer prior to applying the seal; or
(2) Apply a bogus seal, break the seal later, remove cargo, and then
apply the legitimate seal.
SEC. 101-1.43 Authority to apply seals. (a) The manager of the
terminal should authorize specific persons on each shift to apply seals
at that terminal, and only those so authorized should be permitted to
apply seals.
(b) The number of persons who should be authorized to apply seals
depends on the particular circumstances at each terminal. The number
should be kept to a minimum to facilitate adequate supervision to
assure that operational expediency does not permit application of seals
by unauthorized persons.
SEC. 101-1.45 Application. Locking device nuts on trailers and
containers should be spot welded to prevent release of the locking
handle without disturbing the seal.
SEC. 101-1.47 Final check. (a) The seal should be choked by the line
haul or interline driver before the vehicle to which it is applied leaves
the terminal.
(b) If there is a guard at the gate, he should ensure that the seal Is
legitimate and intact before releasing the vehicle to which it is
applied.
Subpart EDestination Removal
SEC. 101-1.51 Authority to remove seals. (a) The terminal manager
should authorize specific persons to remove seals from inbound
transportation units, and, except as otherwise provided in paragraph
(b) of this section, only those so authorized should be permitted to
remove seals.
(b) To insure before unloading that the seal removed is the original, if
a hostler has to break and remove a seal on a swing-door
transportation unit before spotting it at the dock, the breaking of the
seal should be witnessed from the dock by an authorized person
described in paragraph (a) of this section, who should physically
check the serial number on the seal against the seal serial number
entered on the pertinent documents. A hostler should not be permitted
to break a seal prior to spotting the transportation unit to which it is
applied when the breaking cannot be observed from the dock.
SEC. 101-1.53 Discrepancies. (a) A seal removed from a
transportation unit should be kept with the manifest and bills until the
transportation unit is stripped.
(b) If there is not a discrepancy between the manifest and the cargo
the seal may be discarded; if there is a discrepancy, especially in tail-
loaded freight, the seal should be sent with a report on the discrepancy
to the security section.
(c) A discrepancy between the serial number on the seal and the seal
serial number entered on the manifest should be reported immediately
to a supervisor and a notation of the details made on the manifest and
other pertinent documents.
Subpart FRoad Procedures
SEC. 101-1.61 Truck trailers. (a) Each seal should be checked prior to
leaving the terminal and at each stop en route to destination, including
truck stops, diners, and other service areas.
(b) If a highway unit's seal has been tampered with, the driver should
immediately contact home terminal, central dispatch, or the nearest
company terminal for instructions.
SEC. 101-1.63 Container and piggyback operations. (a) In a container
or piggyback operation each seal should be checked at each transfer
point and the serial number on each seal recorded.
(b) As used in this section, "transfer" includes:
(1) Movement of containers on and off vessels;
(2) Movement of trailers on and off flat cars: and
(3) Trailer-on-flat-car movements from one railroad to another.
SEC. 101-1.65 Rail cars. Consistent with manpower and available
time. but at the very least when high value/high risk shipments are
involved, each seal on a rail car should be checked at each interchange

 Page 193
point to establish the responsibility of individual railroads for losses
that occur.
Subpart GShipper's Load and Count (SL&C)
SEC. 101-1.71 General. It is to the advantage of carriers in every
mode to insure the security of Shipper's Load and Count Seals. This
could be accomplished by use of "seal locks", offering both physical
and liability protection, or, at a minimum, strong wire or cable in
addition to a normal seal. This precaution increases the time and effort
necessary to break into a rail car, container, or trailer. with
concomitant protection to a carrier against errors in count by shipper
and/or consignee.
SEC. 101-1.73 Application. (a) The Shipper's Load and Count Seal
should be applied at the shipper's premises by the shipper's
representative.
(b) The seal serial number should be recorded on all copies of the bill
of lading and transcribed to the waybill.
SEC. 101-1.75 Removal for inspection. When a Shipper's Load and
Count Seal is removed to inspect the load, the following minimum
information should be entered in the bill of lading and freight bills;
(a) Date seal was removed;
(b) Name of person who broke the original seal and applied the new
seal;
(c) Reason the seal was broken;
(d) Serial number of the seal which replaced the broken seal; and
(e) Location where seal was broken.
SEC. 101-1.77 Destination procedure. At destination, whether
interline or consignee, the person receiving a trailer or rail car sealed
with a Shipper's Load and Count Seal should examine the seal and
record its serial number above his signature on the delivery receipt
and/or interchange agreement.
SEC. 101-1.79 Responsibility of the driver. (a) A driver should not
break a Shipper's Load and Count (SL&C) Seal under any
circumstances unless he is so directed by the consignee or his
representative and the person so directing witnesses the breaking of
the seal.
(b) If the consignee or his representative directs a driver to break an
SL&C seal:
(1) The consignee or his representative should examine the broken
seal; and
(2) The consignee or his representative, or if necessary, the driver,
should record the seal serial number on the delivery receipt.
Subpart HU.S. Government and "In Bond" Seals
SEC. 101-1.81 General Notwithstanding any other provision of this
part, neither a U.S. Government seal nor any "in bond" seal applied
under U.S. Customs supervision should be broken without adhering to
the rules and regulations pertaining thereto.
[38 FR 16873, June 27, 1973. Redesignated by Amdts. 85-1. and 101-
1. 43 FR 43305, Sept. 25, 1978]
Part 101-2High Value Commodity Storage
Subpart AGeneral
Sec.
101-2.1 Purpose.
101-2.3 Definitions.
Subpart BLocation of Security Crib
101-2.11 Location.
101-2.13 Separation from over, short. and damaged crib.
101-2.15 Small facilities.
Subpart CConstruction of Security Crib
101-2.21 Materials.
101-2.23 Size.
101-2.25 Visual observation.
101-2.27 Portable security crib.
Subpart DAccess and Control
101-2.31 Custodian.
101-2.33 Entrance in absence of custodian.
Subpart EAccountability
101-2.41 Control log.
101-2.43 Physical inventory.
101-2.45 Theft or pilferage.
101-2.47 Discrepancies.
101-2.49 Completed logs.
Subpart FSecurity
101-2.51 Lock.
101-2.53 Keys.
101-2.55 Surrounding area.
101-2.57 Electronic surveillance.
101-2.59 Procedures in lieu of a security crib.
101-2.6l Protective lighting.
AUTHORITY: Sec. 9(e)(1), 80 Stat. 944 (49 U.S.C. 1657(e)(1)); 49
CFR 101.3.
Subpart AGeneral
SEC. 101-2.1 Purpose. (a) The purpose of this part is to set forth
minimum procedures and guidelines that should be observed in order
to minimize the risk of loss of high-value cargo.
(b) The provisions herein are general and each may not apply to every
transportation mode.
SEC. 101-2.3 Definitions. As used in this part:
Custodian means a person having direct day-to-day control of a
security crib, including custody of and responsibility for the contents
thereof.
High-value cargo means cargo handled at a facility, which cargo.
because of its monetary value. utility, desirability, or history of
frequent theft, requires greater protection than other commodities
normally handled at the facility.
Security crib means an enclosure for tem-

 Page 194
porary storage of high-value cargo; also referred to as cage, corral,
vault, or lockup.
Subpart BLocation of Security Crib
SEC. 101-2.11 Location. (a) A security crib should be located in the
vicinity of and, ideally, within sight of, the terminal or dock office. It
should not be located in a remote area of the facility.
(b) The location should be conducive to frequent, if not continuous,
surveillance by supervisory personnel.
(c) Large facilities may require two security cribs, one at each end,
provided there is opportunity for reasonable surveillance of both
security cribs.
SEC. 101-2.13 Separation from over, short, and damaged crib. A
security crib should be separate from an over, short, and damaged
crib. Over and damaged freight should not be stored in a security crib
unless it is of high value.
SEC. 101-2.15 Small facilities. (a) In a small facility space limitations
may prevent the use of a security crib. In such an instance high value
cargo should be stored in an area specifically designated and reserved
for this purpose.
(b) The area described in paragraph (a) of this section should be:
(1) Clearly marked;
(2) Made off-limits to unauthorized personnel;
(3) Within sight of the dock office; and
(4) Capable of constant supervisory observation.
Subpart CConstruction of Security Crib
SEC. 101-2.21 Materials. A security crib should be constructed of
substantial materials which make the crib resistant to forced entry on
all sides, underneath, and overhead.
SEC. 101-2.23 Size. (a) A security crib should be of a size adequate
for storage of all high-value cargo present at the facility at any time. It
should not be so large, however, as to encroach upon space necessary
for normal operations, thereby resulting in the use of security crib
space for other than high-value cargo.
(b) The walls of a security crib should extend to the ceiling of the
room in which it is located or be at least 10 feet high with a
substantial top or roof resistant to forced entry.
(c) When a shipment of high-value cargo is too large to be stored
entirely within a security crib, it should be:
(1) Segregated from other cargo;
(2) Stored within sight of supervisory personnel; and
(3) Physically inspected at least daily by a supervisor for indication of
theft or pilfer-age.
SEC. 101-2.25 Visual observation. Construction should permit visual
observation of the entire security crib from the outside to deter
unauthorized entry and covert tampering with the high-value cargo
therein.
SEC. 101-2.27 Portable security crib. In the event that use of a
portable security crib is necessary, its sides should be securely
fastened to the ground to prevent entry underneath by raising of the
security crib with a forklift, jack, or other lift equipment.
Subpart DAccess and Control
SEC. 101-2.31 Custodian. (a) When size of an operation or volume of
high-value cargo requires extensive use of a security crib, a custodian
should be designated as the one person directly responsible for control
of the security crib. At all times access to the security crib should be
under the direct control of the custodian and should be limited to those
persons having legitimate business in the security crib.
(b) If the size or nature of the particular operation does not warrant the
designation of a custodian, supervisory or other predesignated
responsible personnel should be authorized to conduct necessary
business at the security crib so long as access is properly documented.
SEC. 101-2.33 Entrance in absence of custodian. (a) Where the
volume of business conducted at a security crib is substantial and a
custodian has been designated, any additional duties assigned to the
custodian should be limited to minimize the necessity to enter a
security crib in his absence.
(b) If entrance to a security crib in the absence of the custodian is
unavoidable, the entrance should be:
(1) Conducted in the presence of supervisory personnel;
(2) Subsequently reported to the custodian; and
(3) Entered on appropriate records.
Subpart EAccountability
SEC. 101-2.41 Control log. (a) A control log should be maintained at
a security crib, listing all cargo transferred into and out of the security
crib.
(b) The log should contain information sufficient to identify
positively:
(1) The cargo transferred;
(2) The time of the transfer; and
(3) The identity of the persons involved in the transfer.
(c) Every transfer should be observed by a supervisor or other
predesignated responsible person. or the custodian if one has been
designated, and entered in the log.
SEC. 101-2.43 Physical inventory. (a) Consistent with the size of the
security crib and the amount of cargo stored therein, a physical
inventory of all freight in the security crib should be made
periodically. Comparison should then be made with the log described
in § 101-2.41 of the part or with a running inventory.
(b) The interval between inventories should not exceed 30 days.
Cleared inventory records should remain on file.

 Page 195
SEC. 101-2.45 Theft or pilferage. Whenever there is evidence of theft
or pilferage from the security crib an immediate and thorough
investigation should be conducted. Proper records will indicate when
a loss occurred and the persons involved.
SEC. 101-2.47 Discrepancies. A security crib should be inspected
daily by the facility manager or his representative with discrepancies
investigated immediately and errors in procedures brought to the
attention of supervisors concerned as quickly as possible.
SEC. 101-2.49 Completed logs. Completed logs should be kept in a
secure place for at least one year or such other period of time as the
company feels they may be needed for investigation of claims.
Subpart FSecurity
SEC. 101-2.51 Lock. (a) A security crib should be securely locked
when unattended.
(b) The lock should be changed:
(1) Periodically to minimize the effect of unauthorized duplication of
the key; and
(2) Immediately whenever a key to the lock Is miming or otherwise
unaccounted for.
(c) Serial numbers should be removed from the lock and all keys.
SEC. 101-2.53 Keys. (a) Keys to the lock on a security crib should be
kept by authorized supervisory or other predesignated responsible
personnel, or the custodian if one has been designated, and be placed
in a locked key box or other secure place at the close of business.
(b) To preclude surreptitious duplication, keys should never leave the
facility nor be given, even temporarily, to unauthorized persons.
(c) The number of duplicate keys should be kept to a minimum, and
duplicate keys should be accorded the nine protection as the original
keys.
SEC. 101-2.55 Surrounding area. Floor space immediately adjacent
to a security crib should be kept clear of stocked cargo which can
reduce visibility.
SEC. 101-2.57 Electronic surveillance. Depending upon the value of
cargo stored in a security crib. the number of transfers thereto and
from. and other variables, continuous electronic surveillance of a
security crib may be advisable. In such a case, a responsible person or
persons should be assigned responsibility of monitoring the television
receivers. The versatility of closed circuit television combined with a
video tape recorder is ideal for electronic surveillance of a security
crib when continuous monitoring of the television receivers is not
possible. If tapes are used, they should be reviewed periodically to
determine whether unauthorized entry occurs.
SEC. 101-2.59 Procedures in lieu of a security crib. The size of an
operation. the geographic area in which a facility is located, and the
prior loss record may indicate that a security crib is not needed at a
particular facility. Special procedures for controlling high-value cargo
should still be used and may include:
(a) Storage in a special area;
(b) Storage in the over, short, and damaged crib;
(c) Daily inventories; and
(d) Continuous surveillance.
SEC. 101-2.61 Protective lighting. To enhance visual surveillance of
and to deter the theft of items from security cribs, adequate lighting
should be provided within and without the crib. Such lighting should
be sufficient to permit detection and later identification of intruders by
electronic surveillance or by security guards.
[38 FR 22383, Aug. 20, 1973. Redesignated by Amdts, 85-1, and 101-
1, 43 FR 43305, Sept. 25. 1978]
Part 101-3Internal Accountability Procedures
Subpart AGeneral
Sec.
101-3.1 Purpose.
101-3.3 General.
101-3.5 Definitions.
Subpart BShipper Cargo Accountability and Procedures
101-3.11 Purpose.
101-3.13 General.
Subpart CCarrier Cargo Accountability and Procedures
10l-3.21 Equipment controls.
101-3.23 Outbound freight procedures: Pickup.
Sec.
101-3.25 Outbound freight procedures: Stripping and loading.
101-3.27 Return freight.
101-3.29 Inbound freight procedures: Striping and loading.
101-3.31 Inbound freight procedures: Delivery.
Subpart DExceptions
101-3.41 LTL freight.
101-3.43 Dockman responsibilities.
101-3.45 Driver responsibility.
101-3.47 Supervisor responsibility.
Subpart EInterchange
101-3.51 General.
101-3.53 Air cargo.
101-3.55 Marine cargo.
101-3.57 Interchange: Truck and rail or vessel and rail.
Subpart FContainers, Palletizing, and Unitizing
101-3.61 Intermodal containers.
101-3.63 Air cargo containers.

 Page 196
Appendixes
Subpart GConsignee Cargo Accountability and Procedures
101-3.71 General.
Subpart H"In Bond" Cargo
101-3.81 General.
AUTHORITY: Sec. 9(e)(l). 80. Stat. 944 (49 U.S.C. 1657(e)(1)); 49
CFR 101.3.
Subpart AGeneral
SECTION 101-3.1 Purpose. (a) The purpose of this part is to set forth
minimum procedures and guidelines that should be observed in order
to account for each step in the cargo movement process and to fix
responsibility when exceptions occur.
(b) The provisions herein are general and each may not apply to every
transportation mode.
SEC. 101-3.3 General. (a) All areas in which documents necessary for
the proper movement or accountability of cargo are processed or
handled should be treated as maximum security areas. Specifically,
personnel should be restricted from:
(1) Congregating in or using for breaks. and
(2) Entering unless authorized:
these areas, and bills of lading and other documents should not be left
unattended in these areas.
(b) Personnel preparing or processing the flow of documents and
those having access to documents in any way should be included in
the chain of accountability of those documents, Generally, such
documents should be retained for at least one year: bills of lading
should be retained for three years.
SEC. 101-3.5 Definitions. As used in this part:
Airbill means the shipping document used for both the air and motor
portions of a freight movement.
Bill of lading means the document by which a carrier acknowledges
receipt of freight and contracts for its carriage.
Carrier means a common or contract carrier, but does not mean a
private carrier.
Dock receipt means tile receipt given for a shipment received or
delivered at a pier or dock covering cargo for export.
Freight bill means the carrier invoice for charges rendered to the
consignee, the con-signor. or a third party. according to the terms of
the bill of lading. and showing:
(1) Consignor and origin:
(2) Consignee and destination:
(3) Route;
(4) Transportation unit number;
(5) Description of shipment;
(6) Weight. rate. and charges; and
(7) Charges prepaid, collect. or billed to a third party.
High-value cargo means cargo handled at a facility. which cargo.
because of its monetary, value, utility. desirability, or history of
frequent theft, requires greater protection than other commodities
normally handled at the facility.
Manifest means the document describing a vessel's cargo or the
contents of a truck.
Sensitive cargo means cargo handled at a facility, which cargo,
because of its strategic value, constitutes a significant national
security risk requiring greater protection than other commodities
normally handled at the facility.
Shipper Load and Count means that the contents of the transportation
unit were loaded and counted by the shipper and not verified by the
carrier.
Shipping container means any receptacle used for shipping a product.
Transportation unit means a trailer, inter-modal container, truck,
vessel. or railcar.
Waybill means the document prepared by a carrier at the point of
origin of a shipment and forwarded with the shipment. or directly by
mail, to the agent at the transfer point or waybill destination. and
showing:
(1) Point of origin;
(2) Destination;
(3) Route;
(4) Consignor;
(5) Consignee;
(6) Description of shipment;
(7) Amount charged for carriage; and
(8) Charges prepaid or collect.
Subpart BShipper Cargo Accountability and Procedures
SEC. 101-3.11 Purpose. The purpose of this subpart is to set forth
minimum procedures and guidelines to assist shippers in preparing
cargo for shipment.
SEC. 101-3.13 General. Shippers should:
(a) Number all shipping containers in a shipment and record such
numbers on the shipping documents. In addition, each container in a
shipment of more than one container should be marked thusly: One of
four, two of four, etc.
(b) Place clear and complete delivery and handling instructions on one
end, one side, and the top of each shipping container.
(c) In marking shipping containers. use indelible inks and paints and
water-resistant labels to preclude phiiteration or loss of marks,
shipping instructions, and handling symbols.
(d) Forward all shipping documents promptly to minimize delay at
domestic and international transfer points.
(e) Count the number of pieces in each shipment and retain a record
of the count and condition of the pieces and of the legible signature
and employee number of the employee making the count.
(f) When practical, enclose a packing list in each container in a
shipment to permit timely and complete investigation of any pilferage
or damage.

 Page 197
(g) Consolidate small or non-uniform containers into single-load
units. Unitize, palletize, and use intermodal containers whenever
possible. Pilfer-proof sealing tape, corrugated fasteners, string
wrapping. strapping. and banding reduce theft and pilferage.
(h) Require carrier personnel to verify their identity and restrict them
to authorized areas. For each shipment. record the names of the driver
and carrier, vehicle number. name of consignee, and number of pieces
and total weight of the shipment.
(i) Before releasing a shipment to a carrier obtain in ink or indelible
pencil the of the driver verifying receipt of the freight listed on the
manifest.
(j) File in tamper- and theft-proof repository all copies of bills of
lading, dock receipts, airbills, waybills, manifests and other
documents. Generally, documents should be kept for one year; bills of
lading should be kept for three years.
(k) Refrain from preprinting well-known trade names. or stenciling
information about contents, on shipping cartons.
(l) If secondhand containers are used. obliterate all previous markings.
Subpart CCarrier Cargo Accountability and Procedures
SEC. 101-3.21 Equipment controls. At facilities at which cargo is
handled, there should be established and maintained controls on the
use on docks and platforms of all handling and moving equipment
such as handcarts, forklifts, etc.
SEC. 101-3.23 Outbound freight procedures: Pickup. (a)(1) When a
pickup call is received. a pickup order or slip for the pickup driver
should be prepared.
(2) The pickup order should Include the date and time of call, the
names of the shipper and the consignee, the number of pieces and
total weight of the shipment, and the name of the driver.
(b) When the pickup driver arrives at the shipper's facility, he should
note the condition of the shipment, count the pieces therein, and
compare the count with that shown on the bill of lading. He should
then record the date, the number of pieces, and his truck number on
the pickup order and the bill .of lading and sign his name legibly in
ink or indelible pencil.
(c) Upon return to the carrier's terminal, the pickup driver should
report to the cashier and surrender all documents and receipts. At this
time all documents and receipts should be checked for completeness
and accuracy.
(d)(1) The cashier should forward the bills of lading and pickup orders
to the manifest clerk who prepares the dock manifest showing the
names of the driver, the shipper, and the consignee, the unit number,
date, and number of pieces and total weight of the shipment. A copy
of the bill of lading should be forwarded to the billing office where
the invoice is prepared, the bill of lading is retained. and the line haul
manifest is prepared.
(2) Control copies of all bills of lading and other documents used at
the terminal should be retained.
(3) Documents for high-value cargo should be specially designated, as
by a stamp such as "Supervisor sign". Such cargo itself should be
handled in accordance with part 101-2 of this appendix, "High-Value
Commodity Storage".
SEC. 101-3.25 Outbound freight procedures: Stripping and loading.
(a) At the carrier's terminal. a separate area should be designated for
each of the following types of cargo; outbound. inbound. hold-on-
dock. order notify. and OS&D (over. short and damaged).
(b) Upon receiving a dock manifest. a supervisor should code the
manifest as to door and unit number and assign a dockman to the
particular manifest. Bay doors and equipment should be clearly and
properly marked.
(c) The dockman should work from the dock manifest. He should strip
the unit and, if freight is docked, note its location on the bill of lading
and forward the bill to the office. Bills of lading should not be left
with docked freight. If high-value commodities are docked, they
should be placed in a security crib pending delivery or transfer in
accordance with part 101-2 of this appendix, "High-Value Commodity
Storage."
(d) If freight is loaded the dockman should note on the manifest, in
ink or indelible pencil, the number of the outbound trailer, dock
number, number of pieces and total weight of the shipment. date,
origin number, and his legible signature, and return the manifest to the
supervisor.
(e) Exceptions should be brought to the attention of the O. S. & D.
clerk and the supervisor immediately. Drivers should be questioned
about exceptions as soon as practical. Any trends should be noted,
recorded, and acted upon.
(f) The supervisor should compare the manifest with the typed bills of
lading, record the line haul unit number on the bills, and sort the bills
by destination terminal and line haul unit. Matching bills with freight
maintains the audit trail and obviates having bills for which there Is no
freight and freight for which there are no bills.
(g) The line haul unit should then be closed by a switcher or
supervisor. Whoever Is authorized to apply seals should then seal the
unit and record on the seal log, in ink or indelible pencil, the seal
serial number and his legible signature.
(h) The outbound manifest and typed bills by unit should be put
together and seal serial numbers recorded in the office by a
supervisor.
(f) The outbound manifest and bills of lading should be given to the
line haul driver and the unit and seal serial numbers should be
checked at the gate upon depar-

 Page 198
ture Both verbally and in writing, the driver should be given
instructions regarding handling of any high-value, sensitive, or
hazardous cargo.
SEC. 101-3.27 Return freight. (a) Procedures should be established
requiring that all returned high-value cargo and other selected
commodities be stripped and the appropriate bills of lading returned to
the office. Common sense should dictate the handling of bulk cargo.
(b) Return freight and its paperwork should be reinserted into the
cargo handling process as soon as possible. The driver's legible
signature, the location of the return freight on the dock, and the reason
for its return should become permanent records of the carrier. A
substantial part of claims paid is attributable to improper handling of
return freight.
SEC. 101-3.29 Inbound freight procedures: stripping and loading. (a)
When the line haul unit arrives at the destination terminal, the unit
number and seal serial number should be checked at the gate and
recorded. The driver should take the inbound manifest and bills of
lading to the office where the bills should be routed to the delivery
unit by door number. One control copy of the manifest and of each
bill should be kept in the office.
(b) Only authorized personnel should remove a seal from an inbound
trailer. If a hostler has to break and remove a seal on a swing-door
trailer before spotting it at the dock, the breaking of the seal should be
witnessed from the dock by an authorized person who should check
the serial number on the seal against the seal serial number entered on
pertinent documents, in accordance with part 101-1 of this appendix,
"Seal Accountability and Procedures."
(c) The Inbound Supervisor should record on the line haul dispatch
sheet the date, arrival time, and unit number. He should also check the
number of bills against the manifest and record the date and unit
number on each bill.
(d) When the dockman receives the bills he should begin to strip and
load. If freight is docked, he should record on the appropriate bill, in
ink or indelible pencil. the location of the freight on the dock. his
legible signature, and dock number. If high-value commodities are
docked, they should be placed in a security crib in accordance with
the provisions of part 101-2 of this appendix, "High-Value
Commodity Storage" If the freight is loaded, the dockman should
record on each bill, in ink or indelible pencil, the unit number and his
legible signature before returning the bills to the supervisor.
SEC. 101-3.31 Inbound freight procedures: Delivery. (a) The
supervisor should match the bills of lading signed and returned by the
dockman with the control copies and verify the signature of the
dockman. He should then prepare the city manifest and put it into the
unit "pigeon hole", pouch, or file.
(b) The assigned driver should receive the city manifest and bills from
dispatch. He should note and place in the driver pouch the delivery
receipt, consignee memo, driver work card, tally sheet, and detention
slip.
(c) Upon leaving the terminal, the driver should be checked at the gate
for seal or lock, as appropriate. Unit number, time, and date should be
recorded.
(d) Upon return to terminal, the city driver should turn in to the
cashier the receipts, bills, and city manifests.
Subpart DExceptions
SEC. 101-3.41 LTL freight. LTL (Less Than Truck Load) freight
should be counted and checked for visible damage at each step of the
cargo handling process. This should begin at pickup where the
carrier's liability attaches with the driver's signature. This should
continue as the freight moves through the carrier's operation and
should terminate only when the consignee accepts delivery with a
clear receipt.
SEC. 101-3.43 Deckman responsibilities. The dockman who strips the
pickup unit. the one who loads the line haul unit, the one who unloads
the line haul unit, and the one who loads the delivery unit each should
sign for the count and apparent physical condition of each shipment
that he handles,
SEC. 101-3.45 Driver responsibility. Drivers should call in any
exceptions immediately and a call-in log should be maintained.
SEC. 101-3.47 Supervisor responsibility. Exceptions should be
immediately reported to a supervisor who should attempt to resolve
them immediately. Exceptions which should be reported to
supervisors include not only those of count and damage but also those
of instances of bills of lading for which there is no freight and freight
for which there are no bills.
Subpart EInterchange
SEC. 101-3.51 General. A substantial part of cargo is interchanged
between carriers, often in the same mode. Cargo moving by water or
air often must be handled at terminals and/or over piers, where cargo
moves from railroad or truck to forwarder or stevedoring company
and then to aircraft or vessel. At the terminus of the movement, the
process is reversed. These transfer points are the most vulnerable
places for loss of cargo. The same type of accountability procedures
apply equally well to export, import, and domestic cargo.
SEC. 101-3.53 Air cargo. (a) Air carriers should count the number of
shipping containers and their condition when receiving or delivering
cargo. Cargo going from terminal to ramp via cart should be counted
as it enters the belly of the aircraft. At destination, it should again be
counted as it comes out of the aircraft prior to arrival at the terminal.

 Page 199
(b) The carrier should manifest all shipments for delivery on a
trucking manifest. The manifest should show:
(1) Names of drivers and the motor carrier and truck number.
(2) Name of air carrier employee checking cargo into truck.
(3) Date and station preparing manifest.
(4) Names of shipper and consignee. air bill number, number of
pieces and total weight of shipment.
(5) Any exceptions and name of agent preparing manifest.
(6) Legible signature of the truck driver. in ink or indelible pencil,
verifying receipt of cargo as shown on manifest.
SEC. 101-3.55 Marine cargo. (a) Stevedoring companies or terminal
operators should keep a tally of cargo as it is off-loaded from the
vessel to the terminal and provide tally and O. S. & D. reports to the
water carrier or his agent.
(b) Marine checkers should be assigned to count pieces. verify count
and legibly sign appropriate documents in ink or indelible pencil. The
original dock receipt should be retained as a permanent record.
(c) Cargo should not remain in terminals overly long. Delay in
sorting, depalletizing. vanning. or devanning contributes to theft and
pilferage.
(d) Longshoremen should be supervised and cargo checked when
loaded from terminals. Marine checkers should be present to count
and verify and obtain legible signatures. during loading and tie-down
on truck or railcars.
SEC. 101-3.57 Interchange: truck and rail or vessel and rail.
Interchange between truck and rail or vessel and rail generally
involves movement into a terminal and then to a railcar.
Accountability is generally assumed by the party responsible for the
loading. counting. and sealing per tariffs duly filed with the Federal
Maritime Commission or the Interstate Commerce Commission. The
rail carrier checks the seal and as long as the seal remains intact
assumes no liability for shortages discovered at destination. In a
situation of Shipper Load and Count. if seals remain intact. the
shipper assumes liability for shortage.
Subpart FContainers, Palletizing, and Unitizing
SEC. 101-3.61 Intermodal containers. (a) Intermodal containers.
adaptable to carriage by truck, railcar, barge. and ocean-going vessel,
reduce vulnerability to pilfer-age and theft and eliminate multiple
handling of individual items of cargo. A shipper can use such
containers to convey goods directly from his premises to his
customers.
(b) Reduced handling requirements simplify accountability for
shipper, carrier. and consignee. Shippers assume responsibility for
accuracy of the count; so long as containers remain sealed and intact.
carriers are not liable for shortages.
(c) Verification and recording of seal serial numbers in accordance
with company procedures (see part 101-1 of this appendix. "Seal
Accountability and Procedures") assures accountability in the chain of
custody.
SEC. 101-3.63 Air cargo containers. Air cargo containers designed
specifically for the configuration of aircraft offer the same advantages
as intermodal containers. They provide for more efficient use of the
capacity of the aircraft, reduce the number of pieces that must be
counted and handled. and minimize exposure to weather. theft.
pilferage. and damage, thereby simplifying accountability.
Subpart GConsignee Cargo Accountability and Procedures
SEC. 101-3.71 General Delay in taking delivery or cargo increases
the possiblity of theft and pilferage and makes recovery of lost
shipments and pieces more difficult Since pilferage from shipping
containers can sometimes escape detection at time of delivery,
consignees should:
(a) Inspect shipping containers for signs of break-in. opening.
crushing, and resealing. Shipping containers should be inventor-led in
the presence of a carrier employee.
(b) Weigh shipping containers and compare the weights with those
recorded on pertinent documents.
(c) Note on the carrier's receipt the number of pieces in each shipping
container as well as their condition.
(d) Obtain, in ink or indelible pencil, the legible signature of the
driver on consignee's copy of the receipt.
(e) Inspect cargo as soon after receipt as practical to determine any
loss or damage, regardless of the apparent condition of the cargo at
time of delivery, and report any exceptions.
(f) Obtain a copy of the carrier's delivery receipt and file it with
copies of the other documents concerning the cargo.
(g) Retain as a permanent record the legible signature, in ink or
indelible pencil. piece count, and condition verification of the
employee accepting the cargo.
(h) Retain all essential documents for at least one year;, bills of lading
should be retained for three years.
Subpart H"In Bond" Cargo
SEC. 101-3,81 General. Special care should be taken with "in bond"
cargo handled under Customs supervision. United States Customs
inspectors count, to the greatest extent possible. merchandise landed
and quantities delivered. They also verify selected bills of lading at
time of unloading. Ordinarily they do not use tally sheets, O. S. & D.
(over. short, and dam-

 Page 200
aged reports, or other records of the importing carrier to determine
quantity.
[39 FR 4085, Feb. 1, 1974; 39 FR 5190, Feb. 11, 1974. Redesignated
by Amdt. 85-1, and 101-1.43 FR 43305. Sept. 25, 1978]
Part 101-4Cargo Loss Reporting System and Procedures
Subpart AGeneral
Sec.
101-4.1 Purpose.
101-4.3 General.
101-4.5 Definitions.
Subpart BElements of a System
101-4.11 General.
101-4.13 Procedures.
101-4.15 Training.
101-4.17 Management Review and Analysis.
Subpart CSystem Organization, Guidlines and Procedures
101-4.21 General.
101-4.23 Organization.
101-4.25 Guidelines.
101-4.27 Procedure.
101-4.29 Training.
101-4.31 Review and Analysis.
Subpart AGeneral
Sec. 101-4.1 Purpose. (a) The purpose of this part is to set forth
minimum procedures and guidelines that should be observed in
establishing a cargo loss reporting system.
(b) The provisions herein are general and each may not apply to every
transportation mode. Adaptation may be necessary to suit mode
pecularities and individual carrier needs.
Sec. 101-4.3 General. The movement of cargo by carrier involves an
inherent risk of loss from theft and other pauses due mainly to its
exposure in the transportation system. Thus, the transportation carrier
with this inherent characteristic should establish a cargo loss reporting
system which will provide information, safeguards, and practices to
protect the cargo entrusted to him by the shipping public. The need for
timely, accurate and definitive cargo loss information is essential to a
successful cargo claims prevention program. Early identification of
the cause of cargo losses through theft. hijack, pilferage, or other
reasons is an essential step to prevention and cure.
Sec. 101-4.5 Definitions. As used in this part:
Bill of lading means the document by which a carrier acknowledges
receipt of freight and contracts for its carriage. Also known u ocean
bill of lading and air bill of lading.
Carrier means a common or contract carrier, but does not mean a
private carrier.
C.O.D. means collect on delivery for invoice value of the goods.
Connecting line means another carrier with whom the original carrier
interlines a shipment for thru movement from origin to destination.
Also known as interline.
Consignee means the designated receiver of merchandise.
Consignor means the shipper of merchandise.
Damage means impairment of cargo shipment or contents.
Destination terminal means the terminal from which carrier makes
final delivery. Also known as destination port.
Exception means a deviation from the condition or quantity as
shipped.
Forced billing means an internal document used by carriers to cover
movement of a shipment from one terminal to another. when there is
no way bill to cover, and is also used as a delivery receipt until the
proper paperwork is found or prepared.
Free astray means a form used by carriers to cover movement of an
over-shipment from one terminal to another until it can be matched up
with paperwork or other disposition made.
Hijack means stealing a cargo vehicle by force or threat of bodily
harm.
High-value cargo means cargo handled at a facility, which because of
its monetary value. utility, desirability, or history of frequent theft,
requires greater protection than other commodities normally handled
at the facility.
Intermediate terminal means a location through which a shipment
moves at some point between origin and destination. It can also be a
carrier's break-bulk terminal or re-handling location. Also known as
intermediate point and intermediate port.
Loss means disappearance of cargo under circumstances where the
cause cannot be defined.
Manifest means tabulation of waybills on the loaded vehicle. Often
used by checkers as a check sheet when loading and unloading to
verify the count.
Order notify means a shipment is consigned to order of the shipper,
with instructions to notify another party of the arrival of the freight
who can claim the shipment by surrendering the original bill of
landing. Also known as sight draft.
Origin terminal memos the terminal at which the shipment begins its
travel to destination. Also known as origin port.
O. S. & D. means over. short. and damaged cargo.
Overage means a cargo shipment that is not covered by a bill of
lading or waybill.
Pilferage means theft of cargo in small amounts.
Proof of delivery means a request by shipper or consignee for proof of
delivery. requesting name, date and exceptions.
Seal procedure means an internal procedure detailing company
practices in seal application and removal.

 Page 201
Security means human or mechanical protection for cargo Shipments.
Shortage means a shipment that is incomplete as compared with its
description on the bill o/ lading or waybill.
S.L. & C. means shipper's load and count.
Theft means larcency or unlawfully taking goods of another without
force.
Tracer means an internal inquiry between terminals to determine
location or status of a shipment.
Traffic means goods moved by a transportation carrier. Also known as
cargo or freight.
Waybill means a document prepared from a bill of lading that
accompanies shipment from origin to destination. Also known as
freight bill.
Subpart BElements of a System
Sec. 101-4.11 General. An effective cargo loss reporting system must
contain certain elements for successful implementation by employees
and management. This subpart sets forth the minimal elements of such
a system.
Sec. 101-4.13 Procedures. Detailed procedures for identifying and
handling over. short, and damage cargo should be prepared by each
carrier's management office and placed in terminals for reference.
guidance, and training of all personnel involved in the cargo
movement.
Sec. 101-4.15 Training. (a) Employees should have knowledge of the
operating authority and traffic patterns of the carrier. This includes
terminal locations, points served, service restrictions and exceptions.
and average service schedule to all points.
(b) Drivers. dock workers and others involved with the traffic should
have known. edge of customer freight movements, commodities
shipped and pecularities of specific customers.
(c) Employees should have full knowledge of the loss reporting
system and the company's claim prevention program.
(d) All supervisory and management per-sonnet should be involved in
the training and fully understand the loss reporting system, how it
functions, its objectives. the mechanics thereof, and who to contact in
making the system work.
Sec. 101-4.17 Management Review and Analysis. (a) Reports in
appropriate detail from the Cargo Loss Reporting System should be
reviewed by the following: (1) General management, (2) security
officers, (3) claims managers, (4) directors of operations. and (5)
terminal managers.
(b) The cargo loss data should form the basis for reports on cargo
claims which are or may be required by a regulatory agency.
(c) Reports should be analysed to pinpoint needed improvements in
the claims prevention program.
Subpart CSystem Organization, Guidlines and Procedures
Sec. 101-4.21 General. (a) The cargo loss reporting system is
intended to be responsive to management in the claims prevention
program.
(b) The system should provide the most effective means and times to
report all discrepancies in shipments to minimize claims exposure.
and to provide better service to the customer.
(c) The reports generated by tile system will serve u information to the
claims department for denial or approval of claims presented by
customers.
Sec. 101-4.23 Organization. (a) A central office to serve as the
clearinghouse for all reports of shipment discrepancies should be
established preferably at the corporate or company headquarters.
(b) This central office should be the focal point for all reports of
overages. shortages. and damages and is responsible for: (1) Clearing
reports on discrepancies; (2) matching overages and shortages; (3)
issuing disposition instructions to terminals; and (4) developing
advisory instructions for terminals with special problems.
(c) The central office should be in the claims department with direct
communication with all terminals by means of teletype or telephone.
Sec. 101-4.25 Guidelines. (a) The loss reporting procedures should be
implemented immediately upon discovery of an overage, shortage, or
damage in shipment.
(b) The reports of an overage, shortage, or damage shoed include
information defining who, what, when, where and how.
(c) Effectiveness of the procedures depends on detailed facts and
prompt action.
(d) When a shortage is discovered at a terminal. usually one of the
following errors has occurred:
(1) A billing error was made.
(2) Driver failed to pick up the entire shipment.
(3) A theft occurred from the pickup unit enroute to the terminal.
(4) The freight was loaded on the wrong unit at the shipper's dock.
(5) Another carrier picked up the freight In error.
(e) Action to be taken when such shortages are discovered:
(1) Check for billing or typographical error on bill of lading.
(2) Review with checker and crew that unloaded pickup unit.
(3) Check dock area for the missing freight.
(4) Interview the pickup driver promptly. by telephone if necessary,
for his recollection of facts surrounding pickup and his count.
(5) Contact the shipper for possible error in his billing and have him
recheck his dock for the missing freight. Obtain names of

 Page 202
other carriers who made pick ups that day at his dock.
(6) Call other carriers and ask them to check for the missing freight.
(7) Check with the consignee to determine if he received the freight
via another carrier.
(8) Advise the central clearing office and other terminals of the
shortage with a full description.
(f) Other actions that should be taken:
(1) If shortage was part of a shipment, move the balance to destination
with accompanying shortage report. Do not hold up the freight.
(2) If shortage is a complete shipment, a report should be prepared
immediately for the central clearing office.
(3) If theft is indicated. notify all appropriate law enforcement
authorities.
(4) Make a daily check for the missing freight with other terminals for
the next five workdays.
(5) If the missing freight is located as a complete shipment, ship it
promptly to destination on original waybill, free-astray bill or forced
billing, depending on circumstances.
(6) If the recovered freight is a part shipment. and the balance of the
shipment has already moved to destination, prepare a free-astray bill
and move the freight to destination promptly for final delivery.
(7) If the shortage is from an interline carrier, a signed and dated
exception should be noted by the checker on connecting carriers
freight bill.
(8) If the shortage is noted at an intermediate terminal, it should be
recorded by the checker who should notify his supervisor. The central
clearing office should be notified as well as the original and
destination terminal.
(g) Copies of all over. short, and damage reports should be sent to the
central clearing office where records and statistics should be compiled
from each day's receipts, detailing all pertinent facts regarding each
incident. Such facts should serve to furnish the carrier's management
with facts and figures to formulate an improved claim prevention
program.
(h) The central clearing office should maintain a daily follow-up with
terminals on outstanding shortages and other omissions, thereby
encouraging the terminals to intensify the search for facts to close out
those files.
(i) When discrepancies are found and reported, immediate action
should commence to correct the cause or causes.
(j) A daily schedule should be established for reporting all shortages
and overages. Each carrier, based on experience, length of haul, and
other factors should establish a timeframe within which discrepancies
are reported to the central office and to other terminals to clear them
and for a match-up. The report on losses should contain the following
information:
(1) Name of Shipper;
(2) Name of Consignee;
(3) Waybill number;
(4) Date of shipment;
(5) Commodity;
(6) Weight;
(7) Type of shipment (container, truckload, pallet, etc.);
(8) Part missing (in shortage shipment);
(9) Part damaged;
(10) C.O.D. or order notify:
(11) Prepaid/collect;
(12) Where checked and by whom;
(13) How many times handled;
(14) Type loss (theft/hijack/pilferage/unknown) and
(15) Location where loss was detected.
(k) Any failure of the system in reporting losses should be
investigated to determine and institute corrective measures.
(l) Prompt investigation of distressed freight and immediate reporting
to the central control is essential to curtail cargo loss claims. This
enhances the opportunity for correction and recovery before the audit
trail becomes obliterated.
(m) Liaison should be established with all law enforcement agencies
for help as needed. All theft losses and break-ins or attempted break-
ins of facilities should be reported to these agencies.
(n) Shipments found without identification should be segregated and
placed in the security cage while a search is made by an authorized
person for packing slips or invoices to determine ownership. If
identification is made, the freight should be recoopered and proper
marking should be applied to each shipping container for prompt
movement to destination.
(o) Overages found in the carrier's terminals should be reported in the
sane manner u shortages, for an overage can well mean a shortage
elsewhere.
(p) All damaged freight should be reported to the central office. Local
terminals should recooper such freight promptly to prevent further
damage. Dry freight containers (cartons, bags, etc.) should be securely
recoopered with sealing tape, banding wire, or other material to
prevent further loss of contents or further damage. Waybills should be
marked to indicate that shipment has been damaged.
(q) Each carrier should have printed forms for all reports in a format
best suited to its needs for recording all types of discrepancies. The
data content of the form should be tailored to its loss reporting system
so that information can be retrieved.
(r) The carrier should issue advisory bulletins as needed to all
terminals on specific problems or situations that arise. Changes in the
existing Loss Reporting System should be made as necessary.
Sec. 101-4.27 Procedure. (a) A comprehensive over. short, and
damage manual

 Page 203
should be prepared and maintained based on the guidelines in section
85-4.25 of this subpart.
(b) An employee at each terminal should be designated the O. S. & D.
clerk. Such person should be experienced in freight. movement,
company routes, customer identify, commodities shipped. all
movements of specialized cargoes, and high-risk movements. The O.
S. & D. clerk should also possess a knowledge of claims handling,
cargo claims prevention procedures. cargo security. packaging
required by tariffs, recoopering practices, customer service, tracing.
and related activities. He should be able to detect and correct flaws in
handling and checking procedures, security measures and
identification of problems relating to cargo claims prevention.
(c) The O. S. & D. clerk, who may be the terminal's Claims
Prevention Manager. should be knowledgeable enough to judge when
security has been breached and advise management. who in turn
should call in law enforcement personnel.
(d) A daily inventory should be taken of freight docks to detect over
and damaged freight. Such discoveries should be taken to recoop any
damaged shipments, segregating those that are likely to damage other
cargo, and to provide security for high-value cargo. The O. S. & D.
Clerk and the Tracer Clerk should maintain close coordination to
expedite delivery of overages.
(e) A centralized reporting procedure for O. S. & D.'s should be
established for the central office to receive reports of all discrepancies
from all locations, both verbal and written. This will enable that
office, along with terminal help, to match up shortages, clear other
discrepancies, and provide for disposition of O. S. & D. freight.
(f) The central office should have final authority in advising terminals
on disposition of shipments involved in discrepancies and possible
claims. This insures that all overages are promptly forwarded to
proper destination with bills to cover until they can be matched up
with proper billing at destination. Shortages should be given preferred
attention, since they represent the single greatest dollar loss to a
carrier.
(g) The central office should establish daily reports to account
statistically for O. S. & D. activity and provide management with
information to reflect error experience each day. High O. S. & D.
activity is a sign of operational problems and a forerunner to severity
in cargo loss claims.
(h) Daily written records of all events relating to O. S. & D.'s must be
maintained and be part of the carrier's files and available for
inspection by the claims department as needed.
(i) The central office should maintain a cross-reference file of O. S. &
D.'s that is continually updated for accurate reference. It should be
posted and purged daily. It is a source of reference for terminals
seeking information on outstanding O. S. & D. items. for tracer
information. and other O. S. & D. information. It also serves as the,
source for daily trends.
(j) The central office should compile discrepancy data on shippers.
such as failure to mark shipments properly. and the use of poor quality
containers. Such discrepancies should be called to the shipper's
attention for correction.
(k) A daily conference call among terminals on the communications
network should be established, preferably at an hour when telephone
traffic is light and most of the in-bound traffic is out for delivery. This
provides the best opportunity to have a clear picture of the day's
discrepancies. This call should be monitored by the central office
since it provides information to and about all terminals.
(l) When teletype is used in lieu of telephone, messages should be
short and meaningful, delivered on receipt to the O. S. & D. clerk and
other addresses. and acted upon promptly.
Sec. 101-4.29 Training. (a) Training sessions should be held at each
terminal location for all personnel in relation to their participation in
the loss reporting procedures. Office. dock, and driving employees as
well as management should participate in order to be acquainted fully
with the carrier's practices involving O. S. & D.'s and reporting
procedures.
(b) Personnel trained in the Loss Reporting System must of necessity
be knowledgeable of the carriers's physical operations. routings,
points served and terminal locations, as well as the care and handling
of specialized cargo, hazardous materials, and high-risk cargo.
Sec. 101-4.31 Review and Analysis. (a) The Loss Reporting System's
explicit purpose is loss prevention through Intensified management of
freight handling activities. Information developed in the Loss
Reporting System will assist management in identifying problem
areas within the system. and prompt corrective action.
(b) Periodic reports should indicate trends, problem areas, problem
freight, problem customers, and problem employees and proposed
corrective action. They will identify theft-prone areas and
commodities.
(c) The report should advise management of the relationship of O. S.
& D.'s to cargo claims filed. O. S. & D.'s to shortages never
recovered, and O. S. & D.'s to claims never filed. billing errors,
checker errors, and causes previously unknown or ignored.
(d) The report will also furnish data on other matters such as:
(1) Frequency of billing errors;
(2) Errors on S. L. & C. trailers, at shipper's dock. where drivers
signing for loads tip not count the freight: and
(3) Packaging problems on S. L. & C.
(e) The report should also:

 Page 204
(l) Identify geographic areas of loss such as large distribution centers.
high-value cargo shippers and receivers. and dangerous and hazardous
material shipment problems;
(2) Provide data on frequency of shipments picked up that lack proper
or complete address which prevent delivery or seriously delay
shipment and cost carrier time and money in determining the correct
identification; and
(3) Identify shipments pickup up lacking any markings which must be
delayed until somewone with proper authority opens cartons and
checks for identification in the form of packing slips. invoices. or
advertising.
(f) The report can provide data on shippers who should unitize their
small carton shipments. Small containers are easily lost, stolen, or
damaged when shipped loose. These multiple small pieces are costly
to the carrier in extra labor as well as claims exposure. Unitizing can
reduce carrier's handling cost and protect contents of shipment from
loss and damage.
(g) A periodic review of the Loss Reporting System and its results
should be done by
management to determine:
(1) Its effectiveness, and
(2) Methods for improvement.
[42 FR 45800. Sept. 12, 1977. Redesignated by Amdts. 85-1, and 101-
1. 43 FR 43305, Sept. 25. 1978]
Part 101-5Pilferable High-Value or Sensitive Cargo Transit
Procedures
Subpart AGeneral
Sec.
101-5.1 Purpose.
101-5.3 Application.
101-5.5 Definitions.
Subpart BRouting and Communication
101-5.11 General.
101-5.13 Routes.
101-5.15 Communication.
101-5.17 Escorts.
Subpart COperating Procedures
101-5.21 General.
101-5.23 Delivery.
101-5.25 Seals.
101-5.27 Physical security.
101-5.29 Terminal security.
101-5.31 Security crib.
101-5.33 Supervisor responsibilities.
AUTHORITY: Sec, 9(c)(1), Department of Transportation Act (80
Stat. 944, 49 U.S.C. 1657(e)(1)), E.O. 11836 (3A CFR 123. Comp.
(1975)), and sec. 101.3 of the Regulations of the Office of the
Secretary of Transportation (49 CFR 101-3).
Subpart AGeneral
SEC. 101-5.1 Purpose. (a) The purpose of this part is to set forth
special transit procedures designed to protect high-value or sensitive
cargo against theft and pilferage.
(b) The provisions herein are general and each may not apply to every
transportation mode.
SEC. 101-5.3 Application. The guidelines presented herein apply
equally to high-value or sensitive cargo in full load trailers/
containers/rail cars moving in line haul and in less than full load
shipments. Compliance with this advisory standard is voluntary and
not mandatory. This standard does not repeal or modify any statutory
requirement or regulatory authority vested in any Federal, State or
local governmental body.
SEC. 101-5.5 Definitions. As used in this part:
High-value cargo means cargo which because of its monetary value,
utility, desirability, or history of frequent theft requires greater
protection than other commodities normally handled in the
transportation facility. In addition. it includes commodities which are
attractive, pilferable and highly salable, such as clothing, jewelry, and
alcoholic beverages.
Sensitive cargo means cargo which because of its strategic value or
potentially hazardous nature warrants greater security protection and
care than other commodities normally handled in the transportation
facility. Such sensitive cargo, if lost, could constitute a threat to law
and order or to the safety and tranquility of the general public.
Subpart BRouting and Communication
SEC. 101-5.11 General. Routing and communications should be
carefully planned for high-value or sensitive shipments. Written
instructions to drivers would eliminate the possibility of a breakdown
in personal communications or misunderstandings.
SEC. 101-5.13 Routes. (a) Whenever possible. travel should be
restricted to limited access highways, turnpikes, freeways, etc.
(b) Unnecessary stops should be avoided. The shipment is most
vulnerable when stopped.
(c) Trailers, containers or rail cars should be locked and protective
devices activated.
(d) Estimated arrival times and delays should be expeditiously
communicated to destination stations.
SEC. 101-5.15 Communication. (a)Where radios are available on
local delivery vehicles, the route should be designated. and scheduled
radio contact between the dispatcher and the vehicle should be
maintained.
(b) For pickup or delivery vehicles without radio, the driver should
telephone the dispatcher when leaving the shipper or arriving at the
consignee, as appropriate. The dispatcher should notify the police if
the

 Page 205
driver does not contact him within the scheduled or reasonable time.
SEC. 101-5.17 Escorts. In cases where extremely high-value or
sensitive cargo is transported, an escort should be used especially in
areas which are high-risk or shipment is highly vulnerable. The escort
should have radio communication with a central station. Any use of
armed escorts must be in conformity with laws governing the use of
firearms and armed escorts.
Subpart COperating Procedures
SEC. 101-5.21 General. The general details for high-value or
sensitive cargo shipments should be standard operating procedures.
(a) To facilitate planning of necessary or special procedures, details of
quantity, value, destination, etc., should be ascertained when initial
pickup is arranged.
(b) High security padlocks should be provided on all pickup and
delivery trucks.
(c) The dispatcher should know the identity of the shipper and
consignee of each high-value or sensitive cargo and coordinate pickup
and delivery with each.
(d) The company's operating procedures for transporting high-value or
sensitive shipments should be published and maintained in each
vehicle and at all loading terminals. The procedures should be readily
accessible for use by drivers, shippers. consignees and dispatchers.
SEC. 101-5.23 Delivery. Every attempt should be made to have the
load arrive at the local terminal for same-day delivery. This is
extremely important in high-crime areas where cargo may be
vulnerable in terminals or railyards.
SEC. 101-5.25 Seals. (a) Seal Accountability and Procedures are
covered in part 101-1 of this appendix.
(b) The use of security type seals is highly recommended. As a
minimum, use security wire twist in conjunction with nonsecurity type
seals.
(c) The serial number of a seal applied at the shipper's facility or the
terminal should be recorded on the bill of lading and the manifest.
(d) The condition of the seal and its serial number should be checked
upon entering and leaving each terminal or facility. The seal should
also be checked by the driver after any other stops, and by railroad
personnel on interchange of rail cars.
SEC. 101-5.27 Physical security. (a) Trailers, containers and rail car
door hasps should be secured with a lock, wire or cable to deter the
casual pilferer and delay more persistent thieves. Cable or wire
twisted and secured through the safety latch, to be cut at destination,
has proven to be an effective preventive measure.
(b) Door bolts, especially those on the locking bar and latch, should be
peened or welded.
(c) Motion alarms are available commercially. These can be attached
to trailers, containers and rail cars when parked to signal attempts at
access or movement.
SEC. 101-5.29 Terminal security. (a) High-value or sensitive cargo
temporarily placed on the dock or spotted in a railyard should be
located in a special area which affords good visibility from the
terminal office and should be checked frequently.
(b) Kingpin-locked trailers can be parked door-to-door to block access
to other high-value or sensitive cargo. In the absence of kingpin locks,
security can be achieved by hooking the tractor to the trailer,
removing the Ignition key and locking the tractor.
(c) Unauthorized persons should not be allowed entry into the
terminal area.
(d) When company identification badges are used, they should be
worn at all times by employees.
(e) Procedures should be established to have the count certified by
drivers and loaders. Any exceptions should be reported immediately
to the supervisor.
SEC. 101-5.31 Security crib. (a) High-value or sensitive cargo which
cannot be outloaded immediately should be placed in a security crib
or cage, in accordance with part 101-2 of this appendix, ''High-Value
Commodity Storage.''
(b) The following should be recorded:
(1) The count and the name of the person doing the counting;
(2) The condition of the shipment; and
(3) The fact that the shipment was intact when placed in the crib.
(c) Cargo should only be removed from the crib when scheduled for
immediate placement in a delivery or line unit. The count and
condition should be certified by a supervisor.
SEC. 101-5.33 Supervisor responsibilities. (a) An effective loss
control program requires participation by all supervisory personnel.
(b) A supervisor should inspect all bills of lading from incoming
pickups promptly to identify high-value or sensitive items and provide
necessary security.
(c) A supervisor should verify the count and condition when cargo is
stripped from pickup or interline unit and direct the movement into
the line trailer, container or rail car.
(d) Any overages, shortages or damages should be reported in
accordance with Part 100-4 of this Appendix, "Cargo Loss Reporting
System and Procedures."
(e) High-value or sensitive cargo should be loaded in the front end of
the trailer, container or rail car. The supervisor should monitor the
loading to ensure that the commodity is "buried" and to provide
necessary documentation for accountability. Adherence to safe
loading procedures is necessary to avoid overloading the front end or
creation of unsafe conditions.

 Page 206
NOTE: OST Docket No. 32, containing all previous cargo security
Advisory standards and pertinent comments thereto. has been
transferred from the Office of the Secretary to the Research and
Special Programs Administration and is now available to the public in
the Office of the Chief Counsel, Research and Special Programs
Administration Room 6222, Trans Point Building, 2100 Second Street
SW., Washington, DC 20590. All future Advisory standards will be
published under RSP Docket No. 1.
[43 FR 24693, June 7, 1978. Redesignated by Amdts. 85-1 and 101-1,
43 FR 43305, Sept. 25, 1978]

 Page 207

Appendix C
Standard Terms and Conditions for Public and Contract Warehouse
Operators
Reprinted with permission of the American Warehouse Association,
1300 West Higgins Road, Suite 111, Park Ridge, III. 60068.

 Page 208
Approved and promulgated by the American Warehousemen's
Association, October 1968
AcceptanceSection 1.
(a) This contract and rate quotation including accessorial charges
endorsed on or attached hereto must be accepted within 30 days from
the proposal date by signature of depositor on the reverse side of the
contract. In the absence of written acceptance, the act of tendering
goods described herein for storage and other services by
warehouseman within 30 days from the proposal date shall constitute
such acceptance by depositor.
(b) In the event that goods tendered for storage or other services do
not conform to the description contained herein, or conforming goods
are tendered after 30 days from the proposal date without prior written
acceptance by depositor as provided in paragraph (a) of this section,
warehouseman may refuse to accept such goods. If warehouseman
accepts such goods, depositor agrees to rates and charges as may be
assigned and invoiced by warehouseman and to all terms of this
contract.
(c) This contract may be canceled by either party upon 30 days written
notice and is canceled if no storage or other services are performed
under this contract for a period of 180 days.
ShippingSection 2.
Depositor agrees not to ship goods to warehouseman as the named
consignee. If, in violation of this agreement, goods are shipped to
warehouseman as named consignee, depositor agrees to notify carrier
in writing prior to such shipment, with copy of such notice to
warehouseman, that warehouseman named as consignee is a
warehouseman and has no beneficial title or interest in such property
and depositor further agrees to indemnify and hold harmless
warehouseman from any and all claims for unpaid transportation
charges, including undercharges, demurrage, detention and charges of
any nature in connection with goods so shipped. Depositor fur-
[l]

 Page 209
ther agrees that, if it fails to notify carrier as required by the next
preceding sentence, warehouseman shall have the right to refuse such
goods and shall not be liable or responsible for any loss, injury or
damage of any nature to, or related to, such goods. Depositor agrees
that all promises contained in this section will be binding upon
depositor's heirs, successors and assigns.
Tender for StorageSection 3.
All goods for storage shall be delivered at the warehouse properly
marked and packaged for handling. The depositor shall furnish at or
prior to such delivery, a manifest showing marks, brands, or sizes to
be kept and accounted for separately, and the class of storage and
other services desired.
Storage Period and ChargesSection 4.
(a) All charges for storage are per package or other agreed unit per
month.
(b) Storage charges become applicable upon the date that
warehouseman accepts care, custody and control of the goods,
regardless of unloading date or date of issue of warehouse receipt.
(c) Except as provided in paragraph (d) of this section, a full month's
storage charge shall apply on all goods received between the first and
the 15th, inclusive, of a calendar month; one half month's storage
charge will apply on all goods received between the 16th and last day,
inclusive, of a calendar month, and a full month's storage charge will
apply to all goods in storage on the first day of the next and
succeeding calendar months. All storage charges are due and payable
on the first day of storage for the initial month and thereafter on the
first day of the calendar month.
(d) When mutually agreed by the warehouseman and the depositor, a
storage month shall extend from a date in a calendar month to, but not
including, the same date of the next and all succeeding
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 Page 210
months. All storage charges are due and payable on the first day of the
storage month.
Transfer, Termination of Storage, Removal of GoodsSection 5.
(a) Instructions to transfer goods on the books of the warehouseman
are not effective until delivered to and accepted by warehouseman,
and all charges up to the time transfer is made are chargeable to the
depositor of record. If all transfer involves rehandling the goods, such
will be subject to a charge. When goods in storage are transferred
from one party to another through issuance of a new warehouse
receipt, a new storage date is established on the date of transfer.
(b) The warehouseman reserves the right to move, at his expense, 14
days after notice is sent by certified or registered mail to the depositor
of record or to the last known holder of the negotiable warehouse
receipt, any goods in storage from the warehouse in which they may
be stored to any other of his warehouses; but if such depositor or
holder takes delivery of his goods in lieu of transfer, no storage
charges shall be made for the current storage month. The
warehouseman may, without notice, move goods within the
warehouse in which they are stored.
(c) The warehouseman may, upon written notice to the depositor of
record and any other person known by the warehouseman to claim an
interest in the goods, require the removal of any goods by the end of
the next succeeding storage month. Such notice shall be given to the
last known place of business or abode of the person to be notified. If
the goods are not removed before the end of the next succeeding
storage month, the warehouseman may sell them in accordance with
applicable law.
(d) If warehouseman in good faith believes that the goods are about to
deteriorate or decline in value to less than the amount of
warehouseman's lien before the end of the next succeeding storage
month, the warehouseman may specify in the notification any rea-
[3]

 Page 211
sonable shorter time for removal of the goods and in case the goods
are not removed, may sell them at public sale held one week after a
single advertisement or posting as provided by law.
(e) If, as a result of a quality or condition of the goods of which the
warehouseman had no notice at the time of deposit the goods are a
hazard to other property or the warehouse or to persons, the
warehouseman may sell the goods at public or private sale without
advertisement on reasonable notification to all persons known to
claim an interest in the goods. If the warehouseman after a reasonable
effort is unable to sell the goods he may dispose of them in any lawful
manner and shall incur no liability by reason of such disposition.
Pending disposition, sale or return of the goods, the warehouseman
may remove the goods from the warehouse and shall incur no liability
by reason of such removal.
HandlingSection 6.
(a) The handling charge covers the ordinary labor involved in
receiving goods at warehouse door, plating goods in storage, and
returning goods to warehouse door. Handling charges are due and
payable on receipt of goods.
(b) Unless otherwise agreed, labor for unloading and loading goods
will be subject to a charge. Additional expenses incurred by the
warehouseman in receiving and handling damaged goods, and
additional expense incurred in unloading from and loading into cars or
other vehicles not at warehouse door will be charged to the depositor.
(c) Labor and materials used in loading rail cars or other vehicles are
chargeable to the depositor.
(d) When goods are ordered out in quantities less than in which
received, the warehouseman may make an additional charge for each
order or each item of an order.
(e) The warehouseman shall not be liable for demurrage, delays in
unloading inbound cars, or delays in obtaining and loading cars for
[4]

 Page 212
outbound shipment unless warehouseman has failed to exercise
reasonable care.
Delivery RequirementsSection 7.
(a) No goods shall be delivered or transferred except upon receipt by
the warehouseman of complete instruction properly signed by the
depositor. However, when no negotiable receipt is outstanding, goods
may be delivered upon instructions by telephone in accordance with a
prior written authorization, but the warehouseman shall not be
responsible for loss or error occasioned thereby.
(b) When a negotiable receipt has been issued no goods covered by
that receipt shall be delivered, or transferred on the books of the
warehouseman, unless receipt, properly endorsed, is surrendered for
cancellation, or for endorsement of partial delivery thereon. If a
negotiable receipt is lost or destroyed, delivery of goods may be made
only upon order of a court of competent jurisdiction and the posting of
security approved by the court as provided by law.
(c) When goods are ordered out a reasonable time shall be given the
warehouseman to carry out instructions, and he is unable because of
acts of God, war, public enemies, seizure under legal process, strikes,
lockouts, riots and civil commotions, or any reason beyond the
warehouseman's control, or because of loss or destruction of goods for
which warehouseman is not liable, or because of any other excuse
provided by law, the warehouseman shall not be liable for failure to
carry out such instructions and goods remaining in storage will
continue to be subject to regular storage charges.
Extra Services (Special Services)Section 8.
(a) Warehouse labor required for services other than ordinary
handling and storage will be charged to the depositor.
(b) Special services requested by the depositor including but not
limited to compiling of special stock statement; reporting marked
[5]

 Page 213
weights, serial numbers or other data from packages; physical check
of goods; and handling transit billing will be subject to a charge.
(c) Dunnage, bracing, packing materials or other special supplies, may
be provided for the depositor at a charge in addition to
warehouseman's cost.
(d) By prior arrangement, goods may be received or delivered during
other than usual business hours, subject to a charge.
(e) Communication expense including postage, teletype, telegram, or
telephone will be charged to the depositor if such concern more than
normal inventory reporting or if, at the request of the depositor,
communications are made by other than regular United States Mail.
Bonded StorageSection 9.
(a) A charge in addition to regular rates will be made for merchandise
in bond.
(b) Where a warehouse receipt covers goods in U.S. Customs bond,
such receipt shall be void upon termination of the storage period fixed
by law.
Minimum ChargesSection 10.
(a) A minimum handling charge per lot and a minimum storage
charge per month will be made. When a warehouse receipt covers
more than one lot or when a lot is in assortment, a minimum charge
per mark, brand, or variety will be made.
(b) A minimum monthly charge to one account for storage and/or
handling will be made. This charge will apply also to each account
when one customer has several accounts, each requiring separate
records and billing.
 [6]

 Page 214
Liability and Limitation of DamagesSection 11.
(A) THE WAREHOUSEMAN SHALL NOT BE LIABLE FOR ANY
LOSS OR INJURY TO GOODS HOWEVER CAUSED UNLESS
SUCH LOSS OR INJURY RESULTED FROM THE FAILURE OF
THE WAREHOUSEMAN TO EXERCISE SUCH CARE IN
REGARD TO THEM AS A REASONABLY CAREFUL MAN
WOULD EXERCISE UNDER LIKE CIRCUMSTANCES AND
WAREHOUSEMAN IS NOT LIABLE FOR DAMAGES WHICH
COULD NOT HAVE BEEN AVOIDED BY THE EXERCISE OF
SUCH CARE
(B) GOODS ARE NOT INSURED BY THE WAREHOUSEMAN
AGAINST LOSS OR INJURY HOWEVER CAUSED.
(C) THE DEPOSITOR DECLARES THAT DAMAGES ARE
LIMITED TO ____________, PROVIDED, HOWEVER, THAT
ANY SUCH LIABILITY AT THE TIME OF ACCEPTANCE OF
THIS CONTRACT AS PROVIDED IN SECTION 1 BE
INCREASED ON PART OR ALL OF THE GOODS HEREUNDER
IN WHICH EVENT A MONTHLY CHARGE OF ____________
WILL BE MADE IN ADDITION TO THE REGULAR MONTHLY
STORAGE CHARGE.
Notice of Claim and Filing of SuitSection 12.
(A) Claims by the depositor and all other persons must be presented to
the warehouseman within a reasonable time, and in no event longer
than either 60 days after the delivery of the goods by the
warehouseman or 60 days after the depositor of record or last known
holder of a negotiable warehouse receipt is notified by the
warehouseman that loss or injury to part or all of the goods has
occurred, whichever is shorter.
(B) No action may be maintained by the depositor or others against
the warehouseman for loss or injury to the goods stored unless timely
written claim has been given as provided in paragraph (a) of this
section and unless such action is commenced either within nine
months after the delivery by warehouseman or within nine months
after depositor of record or the last known holder of a negotiable
[7]

 Page 215
warehouse receipt is notified that loss or injury to part or all of the
goods has occurred, whichever time is shorter.
(C) When goods have not been delivered, notice may be given of
known loss or injury to the goods by mailing of a registered or
certified letter to the depositor of record or the last known holder of a
negotiable warehouse receipt. Time limitations for presentation of
claim in writing and maintaining of action after notice begin on the
date of such notice by warehouseman.
Additional terms and conditions applicable to the contract and rate
quotation.
1. The Warehouseman claims a lien against the depositor on the goods
covered by this warehouse receipt or against the holder of this receipt,
or on the proceeds thereof in his possession for charges for storage or
transportation (including demurrage and terminal charges), insurance,
labor or charges, present and future, in relation to the goods, and for
expenses necessary for preservation of the goods or reasonably
incurred in this sale pursuant to law: it also claims a lien for such
charges and expenses in relation to other goods whenever deposited
whether or not they have been delivered by the warehouseman.
2. Nothing entered hereon shall be constructed to extend the
warehouseman's liability beyond the standard of care specified in
Section 11 above.
3. No claims for shortages discovered on physical inventories will be
considered unless the storer allows corresponding credit for overages
found on physical inventories.
4. Any charges incurred as a result of local, state, or federal
environmental laws will be billed to the depositor.
 [8]

 Page 216

Appendix D
Contract Warehouse Agreement
Reprinted with permission of the American Warehouse Association,
1300 West Higgins Road, Suite 111, Park Ridge, Ill. 60068.

 Page 217
The terms and conditions of this sample document are
given as an example of elements that should be
considered for inclusion in a contract warehouse
agreement. The parties' legal counsel most likely will
negotiate and agree on changes in intent, content,
format, sequence, grammar, and language of specific
agreements.

THIS AGREEMENT is made as of (Date) by and between (Name of

Depositor) with its principal place of business (Address) and (Name
of Warehouse), a (State) corporation with its principal place of
business at (Address), a (State) corporation; and
WHEREAS, (Name of Depositor) is engaged in the business of
(Description of Business) and whereas (Depositor) has need of a
warehouse facility to provide storage space and to provide services
related to the storing, packing loading, routing and shipping of
(Description of Goods) (''Goods"); and
WHEREAS, (Name of Warehouse) is engaged in the space rental and
contract warehouse business and possesses the necessary storage
facilities and the workforce to load, unload, store, route pack and
prepare for shipping such Goods; and
WHEREAS, (Warehouse) is desirous of renting (Type of Facilities)
facilities and services and (Warehouse) agrees to provide services and
make its facilities available for use by (Depositor) for the following
purposes;
THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties do hereby agree as follows:
1.0 TERM OF AGREEMENT.
1.1 Initial Term. The term of this Agreement shall be for (period in
number of months, years) commencing (Date) and ending (Date).
1.2 Renewal Agreement. [____________] shall have the option to
renew this Agreement on the same terms and conditions for (number
[1]

 Page 218
of months, years) ("Renewal Terms"). Such option may be exercised
by [____________] by giving [____________] sixty (60) days written
notice prior to the expiration of the Initial Term or any other Renewal
Term. It is agreed that [____________] may, without cause, elect not
to renew this Agreement at the end of the Initial Term or any renewal
term which election will have the effect of terminating the Agreement
at the end of the then existing term.
1.3 Renewal of Agreement on Revised Terms. Any party wanting to
renew the Agreement upon different terms or conditions shall give the
other party written notice of the proposed Renewal Terms and
conditions at least ninety (90) days prior to the end of the Initial Term
or any Renewal Term. Any proposed rate increases requested by
[____________] shall be accompanied by a summary statement of the
economic justification for the request and adequate documentation of
increased costs. The parties agree to negotiate in good faith to reach
agreement on renewal rates. If agreement is reached, the new rates
will take effect on the effective date of the Renewal Term. If the
parties enter into good faith negotiations to renew upon different
terms and conditions and if such negotiations are unsuccessful and
extend beyond the expiration date of the term, [____________] agrees
to accept the applicable contract rates until such time (not to exceed
sixty [60] days of the expiration of the then existing term) as
[____________] is able to relocate its facility.
2.0 DUTIES OF (WAREHOUSE).
2.1 Warehouse Space. [____________] agrees to make available up to
[____________] of square feet of space for use by [____________] at
its warehouse and dock facility, Building (No.) Zones (No.), at
(Address). Space will be released to [____________] in the following
increments and in accord with the following target schedule:
 Occupancy Total Space
Increment Target Date (square feet) Location
1. ____________________________________
2. ____________________________________
3. ____________________________________

[2]

 Page 219
[____________] shall take possession of Increment 1 on (Date) and
anticipates that it will take possession of Increment 2 on or about
(Date) and agrees to give [____________] thirty (30) days notice of
the dates it will require space shown in subsequent Increments.
2.2 Office Space in Facility. Within the space defined in Subsection
2.1, [____________] will provide office space per [____________]
approved specifications for use by [____________] personnel and
data processing equipment. [____________] will furnish at its own
cost all required utility service for such office space, excluding
charges for telephone and data processing services separately
contracted for by [____________].
2.3 Utilities and Maintenance. At its cost, [____________] shall
furnish the warehouse facility with all services (except telephone)
required for [____________] use of the premises pursuant to this
Agreement, including, but not limited to, gas, electricity, water, trash
collection, sewer charges, cleaning services, repair and maintenance.
[____________] shall be responsible for all taxes, assessments, and
insurance related to the ownership of the facility. [____________]
shall be responsible for any personal property or inventory taxes and
insurance covering [____________] Goods.
2.4 Labor and Equipment. [____________] agrees to make available
qualified warehouse personnel to load, unload, store, route, pack and
prepare for shipping [____________] Goods (hereinafter "warehouse
handling functions") upon request by [____________].
2.5 Coordinator's Personnel.
(a) At all times during regular operating hours, [____________] shall
have available within the [____________] warehouse complex
(Number of) full-time Warehouse Coordinator and (Number of)
"Back-up" Coordinator to coordinate with [____________] personnel
with respect to (specify Tasks) obligations pursuant to this Agreement.
(b) In addition, [____________] shall identify and designate. one or
more persons who may be contacted by
[3]

 Page 220
[____________], if necessary, at any time, including weekends,
holidays and outside regularly scheduled operating hours with respect
to [____________] obligations pursuant to this Agreement.
2.6 Hours of Operation.
(a) Regular Hours. [____________] facility will be open to receive,
rocess and ship [____________] Goods and [____________]
warehouse handling personnel and [____________] services will be
available during the hours of (Time) a.m. and (Time) p.m., Monday
through Friday, excluding Holidays.
(b) Additional Hours. Upon request of [____________],
[____________] will make its facility, personnel and services
available to [____________] on an as-needed basis outside the regular
hours set forth above.
(c) If additional operating hours for the facility are needed on a
regular basis, [____________] and [____________] shall mutually
agree on the appropriate hours for warehouse operations and further
agree to adjust storage space fees to reflect any additional operating
costs for electrical power and heat associated with such extended
hours.
2.7 Incoming Freight. [____________] agrees to receive and process
two (2) types of incoming shipments of [____________] Goods:
(a) Flow Through Shipments. Flow Through Shipments will be
received by [____________] personnel and held in designated staging
areas for the time necessary to re-ship the Goods as directed by
[____________].
(b) Storage and Handling Shipments. Storage and handling shipments
of Goods will be received, stored in the warehouse and re-shipped as
directed by [____________].
(c) Verification of Documentation. [____________] personnel shall
verify receipt of all incoming freight and documentation with respect
thereto including, but not limited to, any
[4]

 Page 221
packing slips, trailer manifests and bills of lading. [____________]
shall acknowledge such verification by signing such documentation
before delivery to [____________] personnel.
2.8 Loading and Dispatching Shipments.
(a) [____________] personnel will load all outbound shipments of
[____________] Goods on line haul carriers or LTL carriers
designated and scheduled by [____________]. All loading shall be
completed in the presence of a representative of the carrier.
(b) [____________] will schedule and coordinate all loading of
shipments into trailers supplied by designated carriers.
(c) [____________] personnel will prepare a load plan manifest for
each shipment of Goods in a form acceptable to [____________] and
the carrier designated by [____________].
(d) Prior to release of a shipment from the facility, [____________]
personnel will obtain a signature of the carrier's representative on the
Bill of Lading.
(e) [____________] personnel will give prompt notice to
[____________] personnel of the departure of each outbound trailer.
(f) [____________] personnel will promptly inform [____________]
of any difficulties or service-level problems with any carrier
providing service to or from the facility.
2.9 Housekeeping. At all times throughout the term of the Agreement
[____________] will operate and maintain the facility in a clean and
orderly condition satisfactory to [____________].
2.10 Safety. [____________] and [____________] each agree to
establish, observe and enforce rules and regulations for performance
of warehouse handling functions and equipment operation so as to
ensure maximum safety of personnel and Goods.
[5]

 Page 222
3.0 RATES.
3.1 Labor Charges. [____________] agrees to pay [____________]
for labor furnished pursuant to this Agreement at the rate of $
(Number) per hour actually worked, up to a maximum of forty (40)
hours per week, with a minimum of four (4) hours per employee per
regular workday.
3.2 Overtime Labor Charges.
(a) On request and with prior approval [____________],
[____________] shall charge an hourly fee for actual overtime
performed by [____________] warehouse personnel pursuant to this
Agreement. Provided requisite approvals have been given,
[____________] shall pay for such overtime according to the
following rate schedule:
(Number) per hour worked in excess of forty (40) hours per week
or outside of regular working hours Monday through Friday, or
anytime on Saturday or Sunday;
$ (Number) per hour worked on Holidays.
(b) [____________] shall impose a minimum hourly charge (at the
rate specified above) for each warehouse employee performing
overtime pursuant to this Agreement as follows:
(1) Monday through Friday: one (1) hour minimum.
(2) Saturday, Sunday and Holidays: four (4) hour minimum.
(c) For purposes of this Agreement, Holidays shall be limited to the
following days: (List of designated Holidays).
3.3 Approved Adjustment of Labor Charges. [____________] may
submit for [____________] approval a request for increase in the
labor rates set forth in Subsections 3.1. and 3.2 at least sixty (60) days
[6]

 Page 223
prior to commencement of the second year of the term. Any such
request shall be limited to [____________] actual percentage
increases in labor costs, but in no event shall such increases exceed
(Definition of limits). [____________] agrees to furnish
[____________] with adequate documentation to substantiate any
such request. If approved in writing by [____________] in whole or
in part, the adjusted labor charges shall be effective (Date) to the end
of the term.
3.4 Forklift Charges. [____________] agrees to pay forklift charges,
for standard 5,000 lb. lift trucks, including gas, oil and maintenance,
at the rate of $ (Number) per hour actually worked as recorded on
[____________] documentation countersigned by [____________]
personnel; provided, however, the total charges per month shall not
exceed $ (Number) per month, and, provided, further, that if total
usage exceeds (Number) hours per month, [____________] will pay
an additional $ (Number) per hour for each hour worked in excess of
(Number) hours per month.
3.5 Other Material Handling Charges. [____________] will furnish all
of the material handling equipment (excluding forklifts), required to
perform warehouse handling functions, including, but not limited to
(Define functions). Upon written request from [____________],
[____________] may procure all or any part of such equipment from
[____________] specified or approved vendors. [____________] will
reimburse [____________] for the actual cost of the equipment
procured, plus (state upcharge).
3.6 Snow Removal Charges. [____________] shall have
responsibility for all snow removal required to permit ingress and
egress to and from the (Name and Address) warehouse facility and
loading docks in Building (number) during regular working hours.
[____________] agrees to pay for snow removal (specify exact,
additional locations; e.g., immediately to the west of Building 5, . . .)
at the rate of $ (number) per hour actually worked with a minimum of
one-half (½) hour per occasion.
3.7 Security Alarm Charges. A security Alarm system acceptable to
[_____________________] for the warehouse doors will be installed
by
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 Page 224
[____________] at [____________] sole cost and expense. After
installation, [____________] shall pay the monthly service fees for
the alarm system. [____________] will have no responsibility for
payment of monthly service fees.
3.8 Warehouse Space Charges. [____________] shall pay
[____________] storage fee charges as follows:
Upon occupancy of
____________
____________
(List Buildings; areas)

[____________] shall pay applicable storage warehouse space

charges on the first of each month, commencing (Date).
(a) Except as otherwise provided herein, the payments pursuant to
Subsection 3.8 shall be the full charge for [____________] use and
occupancy of the warehouse facility and shall be in lieu of any other
charges, surcharges, expenses or fees. Other than the charges set forth
in this Section, [____________] shall impose no additional charges
for utilities, cleaning, maintenance or other building services.
4.0 OPERATION.
4.1 Personnel On Site. At all times during regular and overtime
working hours [____________] will have personnel on site including
adequate management and supervisory personnel. It is the intent of
[____________] to provide the following personnel:
Parts Redistribution Center Manager
(Number)
Warehouse Operations Administrator
"
Clerical Personnel
"
Receiving Inspectors
 "

4.2 Quality Control Inspection. [____________] will perform a

receiving inspection function for all inbound freight.
[8]

 Page 225
5.0 REPORTS AND BILLS OF LADING.
[____________] personnel shall verify all packing slips, trailer
manifests and bills of lading and other documentation with respect to
the receipt of Goods at the warehouse facility and shipments from the
warehouse facility.
6.0 LIABILITY AND INSURANCE.
6.1 Duty of Care/Liability for Negligence. [____________] shall be
responsible for loss or damage to Goods, except for loss or damage
arising from the negligence of [____________] in the material
handling function or arising from the intentional misconduct of
[____________] or [____________] personnel. [____________] shall
be obligated to reimburse [____________] for the cost of Goods
damaged or lost as a result of such negligence or intentional
misconduct, such reimbursement shall be linked to the price of such
Goods FOB the warehouse.
6.2 Building Insurance. At its own cost and expense, [____________]
shall provide insurance on the warehouse facility.
6.3 General Liability Insurance. [____________] and
[____________] shall separately obtain and maintain, at their own
cost and expense a policy or policies of general liability insurance
with carriers acceptable to the other, insuring against liability for
injury to, or death of, persons, and damage to, or destruction of,
property arising out of or based upon an act or omission of
[____________] or [____________], or their respective officers,
directors, employees or agents. Such general liability insurance shall
have limits of not less than One Million Dollars ($1,000,000)
combined single limit for bodily injury and property damage. As soon,
as practicable, after execution of this Agreement, [____________] and
[____________] shall each supply the other with written certificate(s)
evidencing such coverage which certificate(s) shall name the other
party as Additional Named Insured and provide thirty (30) days notice
to the other of cancellation and expiration of such insurance. The
provisions of this section shall not be deemed to limit the liability or
responsibility of [____________] or [____________].
[9]

 Page 226
7.0 INDEPENDENT CONTRACTOR.
7.1 [____________] shall be deemed to be an independent contractor
hereunder and shall not be considered or permitted to be an
agent, servant, joint venturer or partner [____________]. All persons
furnished, used, retained or hired by or on behalf of
[____________]shall be considered to be solely the employees of
[____________] and [____________] shall be responsible for
payment of any and all unemployment, social security and other
payroll taxes for such persons, including any related assessments or
contributions required by law.
7.2 [____________] and [____________] shall maintain, at their own
expense, throughout the term of this Agreement, policies of workers'
compensation insurance with such limits as may be required by law.
7.3 [____________] and [____________] each agree to defend,
indemnify and hold harmless the other, and their respective
subsidiaries, officers, directors, employees, agents and servants from
and against any and all causes of action, claims, demands and
expenses, including actual legal fees and expenses, that may be made
or asserted by or on behalf of any persons furnished, supplied or
retained by [____________] or [____________] under the workers'
compensation laws of any jurisdiction.
8.0 BILLING AND PAYMENT.
8.1 Billing. [____________] shall submit weekly statements to
[____________] specifying in detail charges payable by
[____________] for labor, equipment, material handling and other
charges for services pursuant to this Agreement. Monthly statements
shall be submitted for space rental charges. All weekly and monthly
statements must be reviewed and approved in writing by
the [____________] representative on site before submission for
payment.
8.2 Accounting. Upon reasonable notice and during normal business
hours, [____________] shall have the right through its authorized
auditing representatives to make an examination and audit of
[10]

 Page 227
all records kept in connection with services rendered pursuant to this
Agreement and such other records and accounts which contain
information bearing upon the charges payable by [____________]
under this Agreement. Prompt adjustment shall be made by
[____________] to compensate for any errors or omission disclosed
by such examination or audit. Neither such right to examine or audit
nor the right to receive such adjustment shall be affected by any
statement to the contrary, appearing on checks or otherwise,
unless such statement appears in a letter, signed by [____________]
specifically waiving such right.
8.3 Payment. All statements shall be due and payable in full thirty
(30) days after receipt by [____________].
9.0 OPTIONS.
9.1 Option to Perform Warehouse Handling Functions.
[____________] shall have the right to perform any or all warehouse
handling functions set forth in Subsections 2.4, 2.7, 2.8, itself or
through a related
or affiliated entity, provided, [____________] gives [____________]
(Number) days written notice. [____________] agrees to cooperate in
handing over such functions to [____________] or its authorized
agent and [____________] agrees to permit all required personnel and
equipment to have access to the premises to perform such functions
during regular work hours.
9.2 Repackaging of Goods. [____________] reserves the right to
utilize warehouse space occupied pursuant to this Agreement to
conduct operations related to the repackaging of Goods for retail
distribution. [____________] agrees that employees of
[____________] or of a related or affiliated entity may perform such
functions; provided, however, that no third party may perform such
functions within the warehouse facility premises. At the written
request of [____________], [____________] agrees to provide
qualified personnel to perform such functions and [____________]
shall pay for labor at the rates set forth in Subsections 3.1 and 3.2.
[____________] shall procure any [____________]-specified
packaging materials from vendors designated by [____________].
[____________] agrees to pay for such materials at cost plus (Define
[11]

 Page 228
amount of up-charge). [____________] may, without cause, cancel all
or any part of [____________] packaging functions upon thirty (30)
days written notice.
10.0 GENERAL PROVISIONS.
10.1 Title. [____________] shall retain title to all [____________]
Goods received by [____________] personnel and/or stored in the
warehouse facility. [____________] shall retain its right to possession
of such Goods at any time upon reasonable notice. [____________]
shall have no right to retain possession of [____________] Goods
after receipt of notice from [____________]. Notice shall be made
pursuant to the provisions of Subsection 10.3 of this Agreement.
10.2 Force Majeure. Neither party hereto shall be deemed to be in
default of any provisions of this Agreement, or for any failure in
performance, or for any damage resulting from acts or events beyond
the reasonable control of such party. For purposes of this Agreement,
such acts shall include but not be limited to acts of God, civil or
military authority, civil disturbance, war, strikes, fires, other
catastrophes or other ''force majeure" events beyond the parties'
reasonable control.
10.3 Notices. All notices required or permitted to be given under this
Agreement shall be given in writing and delivered personally or given
by prepaid telegram, or mailed first-class, postage prepaid, registered
or certified mail, or mailed by express mail, return receipt requested,
as follows:
(Warehouse) (Complete Name and Address)
(a) If to
(b) (Depositor) (Complete Name and Address)
If to

10.4 Assignment. [____________] shall make no assignment of its

rights or obligations under this Agreement without the prior written
consent of [____________]. Any attempted assignment without
consent shall be void. [____________] shall have the fight to assign
its rights under this Agreement to a related or affiliated entity
provided notice is given to [____________] within thirty (30) days of
such assignment.
[12]

 Page 229
10.5 Advertising. [____________] shall not refer to [____________]
or to any entity related to [____________] or to [____________] and
shall not use any trade name or trademark symbol belonging to
[____________] in any advertising, letterheads, bills, invoices or in
any other public or media communications except with the prior
written permission of [____________].
10.6 Confidentiality and Non-Disclosure. [____________] and its
agents, representatives and employees will keep confidential any
information concerning [____________] business or business
operations which may be discussed or disclosed in the course of the
relationship created by this Agreement and will not disclose any such
information to any third party without the written permission of
[____________].
10.7 Compliance With Law. [____________] shall obtain as its sole
expense all permits and licenses required to operate the
[____________] facility and provide the services provided herein.
[____________] shall comply with all applicable federal, state and
local laws, rules and regulations and agrees to defend, indemnify and
hold harmless [____________] for any fines or penalties imposed by
any governmental body as a result of performance of or failure to
perform its obligations under said laws, rules and regulations.
10.8 Successors and Assigns. This Agreement shall inure to the
benefit of, and be binding upon, the respective successors and assigns,
if any, of the parties hereto, except that nothing contained in this
Section shall be construed to permit any attempted assignment which
would be unauthorized or void pursuant to Section 10.4 above.
10.9 Severability. The invalidation of any one of the terms,
conditions, or other provisions herein by judgment or court order shall
in no way affect any of the other terms, conditions, and provisions
hereof, and the remainder of this Agreement shall remain in full force
and effect.
[13]

 Page 230
10.10 Jurisdiction. This Agreement shall be governed and construed
in accordance with the laws of the State of (State).
10.11 Amendments. No provision of this Agreement may be amended
or modified in any manner except by an instrument in writing making
specific references to this Agreement, signed by the duly authorized
representatives of both parties hereto.
10.12 Waiver. Any waiver by either party of any term, covenant or
condition maintained herein shall be effective only if in writing signed
by the duly authorized representative in making the waiver. The
waiver by [____________] of any term, covenant or condition
contained herein shall not be deemed a waiver of any different or
subsequent breach.
10.13 Whereas Clauses. The matters set forth in the "WHEREAS"
clauses on page one (1) hereof are incorporated into and made part of
this Agreement.
10.14 Headings. The Section and Subsection headings contained in
this Agreement are for convenience in reference only and are not
intended to define or limit the scope of this Agreement or any term
thereof.
10.15 Entire Agreement. This Agreement constitutes the whole
agreement between [____________] and [____________]. There are
no promises, terms, conditions, or obligations other than those
contained herein; and this Agreement supersedes all previous
communications, representations or agreements, whether oral or
written, between the parties.
Witnessed by:
Signed by:
[Title] [Depositor]
 Title:
Witnessed by:
Signed by:
[Title] [Warehouse]
Title:

[14]

 Page 231

Appendix E
Lease Agreement
Reprinted with permission of the American Warehouse Association,
1300 West Higgins Road, Suite 111, Park Ridge, III. 60068.

 Page 232
Note: The names, addresses, dates, and data in this
sample lease agreementshown in italicsare fictitious and
used for purposes of illustration on/y. The terms and
conditions set forth herein are given as an example of
elements that should be considered for inclusion in o
lease agreement. Lessors' and lessees' legal counsel
most likely will negative and agree on changes in intent,
content, format, sequence, grammar, and language of
specific lease agreements.

THIS AGREEMENT, made this 1st day of December, 1982, between

Best Warehousing, Inc., a Corporation organized under the laws of the
State of Illinois, first party (hereinafter called Lessor), and Jones
Distributing Company, Inc., a corporation under the laws of the State
of Illinois, second party (hereinafter called Lessee):
1. Lessor, for and in consideration of the rents and covenants
hereinafter mentioned, does hereby demise, lease and let unto Lessee,
and Lessee does hereby hire, lease and take from Lessor 30,000
square feet of warehouse space in the city of Great Midwest, State of
Illinois, within the building and premises commonly known as "Best
Warehousing, Inc.," as more particularly described on Exhibit "A"
attached hereto and made part hereof, in accordance with the schedule
hereinafter set forth, viz.:
(a) 30,000 square feet for a term of eleven (11) years beginning
December 1, 1982, and terminating November 30, 1993.
2. Lessee covenants and agrees to pay Lessor as rental for the above
described premises the amounts hereinafter set forth, payable on or
before the first day of each and every month during the terms of this
lease:
(a) $4,167.50 per month for the period of December 1, 1982,
 through November 30, 1993. It is agreed that the rent for the first
month
[1]

 Page 233
(December 1, 1982, to December 31, 1982) is waived by Lessor.
3. The premises shall be used for warehouse and distribution purposes
and any other purposes incidental to Lessee's particular type of
business and no other. Premises shall not be used for any illegal
purposes; nor in violation of any valid regulation of any governmental
body, nor in any manner that would vitiate the insurance on premises;
unless Lessee pays for any such increase.
4. Lessee accepts premises for use as packaged food warehouse.
Lessor shall not be required to make any repairs for improvements to
premises, except structural repairs necessary for safety and
tenantability. Lessor shall keep in good repair and order the roof,
exterior walls, and outside water and sewer provided that Lessor shall
be under no obligation to repair any defect unless and until Lessee
gives Lessor written notice of the existence of such defect or Lessor
knows or should know of the existence of such defect. Lessor also
agrees to maintain the sprinkler system. Lessee agrees to keep and
maintain demised premises in good condition during the term of this
Lease, reasonable wear and tear excepted. Lessee shall supply
janitorial services at its own cost and expense.
5. The Lessor shall maintain Fire Insurance with Extended Coverage
on the building structures and demised premises. Lessor and Lessee
hereby release each other from responsibility for loss and damage
occurring on or to the demised premises or the premises of which they
are a part or the contents thereof caused by fires or other hazards
ordinarily covered by Fire and Extended Coverage Insurance policies
and each waives all fights of recovery against the other for such loss
and damage; negligence lawfully attributable to either party, whether
in whole or in part a contributing cause of the casualty giving rise to
the loss or damage, shall not affect the foregoing release and waiver.
 Within the use set forth in Paragraph 3 of this Lease, Lessee shall
not use or permit said premises or any part thereof to be
[2]

 Page 234
used, nor acts to be done, which will increase the existing rate of
insurance upon the building in which said premises are located, or
upon Lessor's adjacent property or cause a cancellation of any
insurance policy covering said building or property or any part
thereof, nor shall Lessee keep in or about said premises any article
which may be prohibited by any standard form of Fire Insurance.
Lessee shall at Lessee's expense, comply with all insurance company
requirements pertaining to the use of said premises so that said
premises shall at all times be insurable for fire and extended coverage.
6. All personal property of every kind and description which may at
any time be in the leased premises shall be at the sole risk of Lessee,
or of those claiming under Lessee. Lessor shall in no event be liable
for loss or damage to said property, or loss suffered by the business or
occupation of the Lessee including loss or damage to the property
held by Lessee on the leased premises as bailee, arising from the
bursting, overflowing or leaking of water, drain, soil or sewer pipes,
sprinkler leakage, or from the heating or plumbing fixtures, or from
electric wires, or from gas or odors in any manner whatsoever, or
from any other condition of the leased premises, including loss or
damage of any kind or nature whatsoever arising from or occasioned
by the failure of the sewage and water systems.
7. Lessee shall protect, indemnify and hold Lessor harmless from and
against claims, demands and liabilities of any nature whatsoever
including legal expenses arising from injury to or death of person or
persons or loss of or damage to property occurring in, on, or about the
leased premises, or in any manner growing out of or connected with
Lessor's ownership or Lessee's use and occupancy of the leased
premises or the conditions thereof during the term of this lease or any
renewal hereof, unless such injury, death, loss or damage is caused by
the negligence of Lessor.
8. Lessee shall not assign this Lease or any interest thereunder or
subject the premises or any part thereof, or permit the use
[3]

 Page 235
thereof without first obtaining the written consent of Lessor, which
consent shall not be unreasonably withheld. Consent to one
assignment or subletting shall not be deemed a waiver of this
provision as to any subsequent assignment or subletting. Lessee shall
nevertheless remain liable for all the terms, covenants and conditions
of this Lease. If any subletting is at a rental higher than that which is
paid by the Lessee hereunder, the rental paid to the Lessor shall be
increased by fifty per cent (50%) of the difference between such
rentals.
9. If the premises are totally destroyed (or so substantially damaged as
to be untenantable) by storm, fire, earthquake or other casualty, this
lease shall terminate as of the date of such destruction or damage, and
rental shall be accounted for as between Lessor and Lessee as of that
date. If premises are damaged but not rendered wholly untenantable
by any such casualty, rental shall abate in proportion as the premises
have been damaged and Lessor shall commence restoration within
fifteen (15) days from the date of said damage and complete
restoration within a reasonable time, in no case exceeding one
hundred-twenty (120) days, from the date of said damage. Full rent
shall recommence on completion of restoration. In the event there is a
dispute as whether or not any damage occasioned by reason of this
paragraph renders the premises wholly untenantable, then and in such
event each of the parties shall choose an arbitrator, who shall together
choose a third, and the decision of the majority shall be binding upon
the parties hereto.
In the event the entire leased premises are taken under the power
of Eminent Domain proceedings, this lease shall terminate as of the
date of such taking and all rent paid or payable by the Lessee shall be
apportioned as of such date. If a portion of the leased premises are
taken under Eminent Domain, either party may elect to terminate this
Lease by written notice to the other party within fifteen (15) days of
such taking and rentals shall be accounted for as of the date the
Lessee surrenders possession.
[4]

 Page 236
10. Lessee may, at its sole cost and expense, with the prior approval
of Lessor, make and install such fixtures, items and equipment, and
other improvements in the premises, herein leased as may be
necessary or convenient in the use of such premises. Lessee shall (if
not in default hereunder), prior to the expiration of this Lease, remove
these improvements which it has installed and restore the premises to
their condition at the installation thereof, reasonable wear and tear
excepted. The erection of signs by Lessee on the exterior of the
premises herein leased shall be done only with the prior written
approval of the Lessor.
11. Lessor agrees to provide snow removal services at no additional
cost to Lessee. Lessee shall pay for electricity (to be separately
metered), telephone, water, sewer, existing and additional security
service and heat attributable to Lessee's occupancy. Heat shall be
apportioned on the basis of occupancy and temperature maintenance.
If Lessee does not pay the same, Lessor may pay the same and any
amounts so paid shall be additional rent due hereunder.
12. As additional rental during the term of the Lease, or any extension
thereof, the Lessee shall pay its proportionate share of any increase in
the annual real estate taxes and installments of special assessments
over those due and payable in 1982, payable by Lessor on the
building and appurtenances leased and demised herein, including real
estate taxes applicable to land on which said building and
appurtenances and parking lot are situated for each of the years
contained in said term. It is further understood that Lessee shall pay
all taxes applicable to any leasehold improvements whether such
improvements are considered for tax purposes as part of the realty or
as personality.
13. This Lease contains the entire agreement of the parties and no
representations, inducements, promises, or agreements, oral and
otherwise, made between the parties prior to the date of the execution
of this Lease and not embodied herein, shall be of any force or effect.
[5]

 Page 237
14. Lessee shall take good care of the demised premises and suffer no
waste and at the termination of this Lease shall surrender premises to
Lessor in the same condition as at commencement of term, ordinary
wear and tear and damage by fire and other hazards covered under
extended insurance and the elements excepted.
15. The Lessor covenants that he is lawfully seized of the demised
premises and has the right and lawful authority to enter this Lease for
the full term aforesaid and that Lessor will put the Lessee in actual
possession of the demised premises at the beginning of the term
aforesaid and that, if the Lessee pays the rent herein provided for, and
performs the covenants of this Lease on its part to be performed,
Lessee shall be entitled to hold, occupy and enjoy the demised
premises peaceably and quietly without any let, hindrance or
molestation by any person or persons whomsoever.
16. The terms "Lessor" and "Lessee" shall include the successors and
assigns of both parties hereto.
17. Wherever in this Lease it shall be required or permitted that notice
or demand to be given or served by either party to this Lease to or on
the other, such notice or demand shall be given or served and shall not
be deemed to have been served unless in writing and forwarded by
mail addressed as follows:
Best Warehousing, Inc.
To the Lessor at:
Main Street
Great Midwest, Illinois 61550
To the Lessee at: Jones Distributing Co., Inc.
Eastern Avenue
Great Midwest, Illinois 62890

Such addresses may be changed from time to time by either party by

serving notice as above provided. Rental payments shall be mailed to
Lessor at the above address.
[6]

 Page 238
18. The Lessor agrees that it will neither initiate, participate nor
concur, by any means in any petition, instrument or legislative (state
or local) act or process that would affect the zoning, existing
municipal or government jurisdiction, or taxing district without the
consent of the Lessee.
IN WITNESS, WHEREOF, the parties hereto have signed and sealed
this instrument this day and year as set above set forth.
BEST WAREHOUSING, INC. (Lessor)
In the
presence
of:
By_________________________________
President
[Corporate Seal]
In the JONES DISTRIBUTING CO, INC.
presence (Lessee)
of:
By_________________________________
(President)
[Corporate Seal]

[7]

 Page 239

EXHIBIT A
December 1, 1982 JONES DISTRIBUTION COMPANY

BEST WAREHOUSING, INC.

[8]

 Page 240

Appendix F
Bill of Lading (Domestic) Terms and Conditions

 Page 241
The Trucking Industry Regulatory Reform Act of 1994 (TIRRA)
provides that: ''a motor carrier of property, the application of whose
rates is determined or governed by a tariff on file with the [Interstate
Commerce] Commission cannot collect its rates unless the carrier is a
participant in those tariffs" (Section 206(b)(3), amending par. 10761
(a) of USC 49). The use of provisions contained in the NMFC,
including, but not limited to . . . bills of lading . . . is reserved
exclusively for the benefit of carriers listed as participants in the
NMFC. Motor carriersand shippersthat are participants in the NMFC
may use the Standard B/L forms, terms, and conditions published in
NMFC 100. Shippers must confirm carriers' participation in this tariff.
Customer Pickup Disclaimer
Pickup in the customer's vehicle (usually a private truck) constitutes a
nonregulated carriage, which is not subject to the terms and conditions
of the bill of lading. To avoid any liability for negative events that
may occur during this kind of transit, shippers are advised to disclaim
any responsibility and liability, and make an appropriate notation on
the shipping document/s; for instance:
This is not a bill of lading subject to the terms and conditions printed
thereon or contained in freight classifications. It is a receipt only issued by
the private carrier for goods shown on the shipping paper/s. The person,
firm or corporation shown on these shipping papers as carrier represents
that it is providing or arranging a transportation service which is not
regulated by any federal, state or local agency or commission and agrees to
accept full responsibility and liability for any and all loss, damage and/or
delay of the property described herein and delivered to consignee. Title to
picked-up goods passes to consignee when goods are loaded onto
customer's conveyance and have been signed for by the driver.

It is recommended that, on customer pickups, the consignor elect

freight terms to assure passage of title when goods have been

 Page 242
loadedfor example, "F.O.B. [origin]." Origin must be defined as a
geographical location, such as "F.O.B. ABC Company, Pontiac,
Mich."
Bill of Lading Terms and ConditionsSummary
The following summary presents a brief overview of the language
printed either on the back of bill of lading forms or in the applicable
classifications and/or carrier rules. Application and interpretation of
specific terms must be made only in connection with the complete text
of the terms and conditions.
Section 1. Liability. Carriers are subject to common law bill of lading
liability and warehouse liability. Common carriers are completely
liable for loss and damage without proof of negligence. Exceptions
are acts of God, government authorities, the public enemy, acts of
negligence or omissions by the shipper, and inherent vice of the goods
transported.
Section 2. Reasonable dispatch. Shipper instructions to deliver at
specified times are not binding on the carrier. The carrier may observe
such notations or, if requested to deliver at specified times, charge for
the extra service.
Section 3. Repackaging. Where necessary, the carrier will perform
repackaging and recoopering at shipper's cost.
Section 4. Warehousing and storage of unclaimed freight (including
storage and disposition of perishable freight). When, after reasonable
attempts, carrier is unsuccessful in delivering freight, carrier's liability
as common carrier ends. Subsequent liability while in storage will be
limited to that of warehouse only for the storage period. Shipper will
be responsible for all related charges.
Section 5. Articles of extraordinary value. Carriers will not transport,
and having transported unknowingly, will not be liable for loss and
damage.
Section 6. Hazardous materials. Carrier will transport only in
accordance with applicable regulations.
Section 7. Responsibility for freight charges. The owner or consignee
of the goods or consignee must pay freight charges. The carrier must
not deliver goods until all charges have been paid, except

 Page 243
when carrier has been authorized to do so. The "without recourse"
clause states that on "collect" shipments the shipper is liable for
freight charges even when the carrier makes delivery without first
collecting the freight charges. However, if consignor signs the
"without recourse" clause, there is no liability for freight charges.
Section 8. Substitute bill of lading. This provides for the liability of a
shipper when a substitute or exchange bill of lading is issued.
Shipper's signature on the prior bill of lading with respect to value is
considered same as if written thereon.
Section 9. Water carrier exceptions. (Refer to Exhibit 7-2.)
Section 10. Unauthorized changes. These are prohibited and, when
made, not effective.
Note: Terms and 'conditions used for export, government traffic,
household goods, and air and water transportation are different from
the standard bill of lading terms.

 Page 244
CONTRACT TERMS AND CONDITIONS
Sec. 1.(a) The carrier or the party in possession of any of the property
described in this bill of lading shall be liable as at common law for
any loss thereof or damage thereto, except as hereinafter provided.
Sec. 1.(b)
1. No carrier or party in possession of all or any portion of the
property described in this bill of lades shall be liable for any loss of or
damage to the said property or for any delay caused by an Act of God,
the public enemy, the authority of law, or the act or default of the
shipper or owner. Further, no carrier or party in possession of all or
any portion of the said property shall be liable for any natural
shrinkage of the property.
2. The carrier shall be liable solely as a warehouseman for loss,
damage or delay resulting from fire occurring after the expiration of
free time (if any) allowed by the lawful tariffs in effect (such free time
to be computed as provided in said tariffs) where such loss, damage or
delay occurs:
(a) after notice of the arrival of the property at the destination (or, if
the property is intended for export, after notice of the arrival of said
property at the port of export) has been duly sent or given, and
(b) after placement of the property for delivery at destination or tender
of delivery of the property to the party entitled to receive it has been
made.
3. Except in the case of negligence of the carrier or the party in
possession, the carrier or party in possession shall not be liable for
country damage to cotton, or for loss, damage or delay which results:
(a) when the property is stopped and held in transit upon request of
the shipper, owner or party entitled to make such request or
(b) from a defect or vice in the property, or
(c) from riots or strikes.
The burden to prove freedom from such negligence is on the carrier or
the party in possession.
4. Except in the case of negligence of the carrier, no carrier or party in
possession of all or any of the property described in this bill of lading
shall be liable for delay caused by highway obstruction, by faulty or
impassable highway, or by lack of capacity of any highway bridge or
ferry. The burden to prove freedom from such negligence is on the
carrier or party in possession.
Sec. 1(c) In case of quarantine, the property may be discharged at the
owner's risk and expense into a quarantine depot or elsewhere as
required by quarantine regulations or authorities, or for the carrier's
dispatch, the property may be discharged at the owner's risk and
expense at the nearest available point in the camps judgement. The
carrier's responsibility shall cease when the property is so discharged,
or the property may be returned by the carrier at the owner's expense
to the shipping point, earning freight both ways. All quarantine
expenses of whatever nature or kind which are incurred with respect
to the property shall be borne by the owners of the property or shall
become a lien on the property. The carrier shall not be liable for loss
or damage caused by fumigation, disinfection or other acts required or
done by quarantine regulations or authorities even though these acts
may have been done by the carrier's officers, agents or employees. In
addition, the carrier shall not be liable for detention, loss, or damage
of any kind occasioned by the quarantine or the enforcement of the
quarantine. No carrier shall be liable except in the case of negligence,
for any mistake or inaccuracy in any information furnished by the
carrier, its agents or officers, as to quarantine laws or regulations. The
shipper shall indemnify the carrier for any expense incurred or
damages the carriers may be required to pay as a result of introducing
the property covered by contract into any place against the quarantine
laws or regulations in effect at such place.
Sec. 2.(a)
1. No carrier is bound to transport said property by any particular
schedule, train, vehicle or vessel, or in time for any particular market,
or in any manner other than with reasonable dispatch. Every carrier
shall have the right, in case of physical necessity, to forward said
property by any carrier or route between the point of shipment and the
point of destination.
2. In all cases not probated by law, where a lower value than the
actual value of the said property has been stated in writing by the
shipper or has been agreed upon in writing as the released value of the
property as determined by the classification or tariffs upon which the
rate is based, such lower value plus freight charges if paid shall be the
maximum recoverable amount for loss or damage, whether or not
such loss or damage occurs from negligence.
Sec. 2.(b) As a condition precedent to recovery, claims must be filed
in writing with:
1. the receiving of delivering carrier; or
2. the carrier issuing this bill of lading; or
3. the carrier whose line the loss, damage, injury or delay occurred; or
4. the carrier in possession of the property when the loss, damage,
injury or delay occurred.
Such claims must be filed within nine months after the delivery of the
property (or, in the case of export traffic, within nine months alter
delivery at the port of export), except that claims for failure to make
delivery must be filed within nine months after a reasonable time for
delivery has elapsed.
Suits for loss, damage, injury or delay shall be instituted against any
carrier no later than two years and one day from the day when written
notice is given by the carrier to the claimant that the carrier had
disallowed the claim or any part or parts of the claim specified in the
notice. Where claims are not filed or suits are not instituted thereon in
accordance with the foregoing provisions, no carrier shall be liable,
and such claims will not be paid.
Sec. 2.(c) Any carrier or party liable for loss of or damage to any said
property shall have the full benefit of any insurance that may have
been effected, upon or on account of said property, so far as this shall
not avoid the policies or contracts of insurance, PROVIDED, that the
career receiving the benefit of such insurance will reimburse the
claimant for the premium paid on the insurance policy or contract.
Reprinted with permission of the National Motor Freight Traffic
Association, Inc., Agent, 2200 Mill Road, Alexandria, Va. 22314.

 Page 245
Sec. 3. All property shall be subject to necessary cooperage and baling
at owner's cost, except where such service is required as the result of
carrier's negligence. Each carrier over whose route cotton or cotton
linters is to be transported under this bill of lading shall have the
privilege, at its own cost and risk, of compressing the cotton or cotton
linters for greater convenience in handling or forwarding, and shall
not be held responsible for deviation or unavoidable delays in
procuring such compression.
Grain in bulk consigned to a point where there is a railroad, public or
licensed elevator, may (unless otherwise expressly noted in this bill of
lading and then only if the grain in bulk is not promptly unloaded) be
there delivered, and placed with other grain of the same kind and
same kind and grade without respect to ownership and prompt notice
thereof shall be given to the consignor. If the grain in bulk is so
delivered, it shall be subject to a lien for elevator charges in addition
to all other applicable charges.
Sec. 4.(a) In the event that:
1. Said property is not removed by the party entitled to receive it
within the free time (if any) allowed by the lawful tariffs in effect
(such free time is to be computed as provided in the said tariffs) and
notice of the arrival of the property at the destination (or at the port of
export, if intended for export) has been duly sent or given, and
placement of the property for delivery at destination has been made,
or
2. Property is not received at the time tender of the property to the
party entitled to receive it has been made.
Such property may be kept in vessel, vehicle, car, depot, warehouse,
or place of business of the carrier, subject to the tariff charge for
storage and to the carrier's responsibility solely as warehouseman.
Alternatively, at the option of the carrier, such property may be
removed to and stored in a public or licensed warehouse at the point
of delivery or at another available point, or if no such warehouse is
available at the point of delivery or at another available point, then the
property may be removed to and stored in another available storage
facility, at the owner's cost and held there without liability on the part
of carrier and subject to a lien for all freight and other lawful charges,
including a reasonable charge for storage. In the event consignee
cannot be found at the address given for delivery, the notice of the
placing of such goods in warehouse shall be mailed to the address
given on the bill of lading for delivery and to any other address given
on the bill of lading for notification, showing the warehouse in which
the property has been placed subject to provisions of this paragraph.
Sec. 4.(b) Where non-perishable property transported to the
destination stated in this bill of lading is refused by consignee or the
party entitled to receive it upon tender of delivery, or said consignee
or party entitled to receive the property fails to receive or claim it
within 15 days after notice of arrival shall have been duly sent or
given, the carrier may sell the property at public auction to the highest
bidder, at such place as may be designated by the carrier.
PROVIDED, that the carrier shall have first mailed, sent, or given to
the consignor notice that the property has been refused or remains
unclaimed, as the case may be, and that it will be subject to sale under
the terms of the bill of lading if disposition is not arranged arranged
for, and that after 30 days have elapsed from the time said notice to
the consignor was mailed, sent or given, the carrier shall also have
published a notice containing a description of the property, the name
of the party to whom consigned (or if shipped order notify, the name
of the party to be notified), and the time and place of sale, once a
week for two consecutive weeks, in a newspaper of general
circulation at the place of sale or nearest place where such newspaper
is published.
Sec 4.(c) Where perishable property transported to the destination
stated in this bill of lading is refused by consignee or party entitled to
receive it, or said consignee or party entitled to receive the property
fails to receive it promptly, the carrier may, in its discretion, to
prevent deterioration or further deterioration, sell the property to the
best advantage at private or public sale, PROVIDED, that if there is
sufficient time to notify the consignor or owner of the refusal of the
property or the failure to receive it and to request for disposition of the
property, such notification shall be given, in such manner as the
exercise of due diligence requires, before the property is sold.
Sec. 4.(d) Where the procedure provided for in Sections 4(b) and 4(c)
of this bill of lading is of not possible, it is agreed that nothing in these
paragraphs shall be construed to abridge the right of the carrier at its
option to sell the property under such circumstances and in such
manner as may be authorized by law.
Sec. 4.(e) The proceeds of any sale made under this section shall be
applied by the carrier: to the payment of freight, demurrage, storage,
and any other lawful charges; to the expense of notice, advertisement,
sale, and other necessary expense and to the expense of caring for and
maintaining the property, if proper care of the property requires
special expense. Should there be a balance remaining after all charges
and expenses are paid, such balance shall be paid to the owner of the
property sold hereunder.
Sec. 4.(f) Property destined to or taken from a station, wharf, landing
or other place at which there is no regularly appointed freight agent,
shall be entirely at risk of owner after being unloaded from cars,
vehicles or vessels or until loaded into cars, vehicles or vessels.
Further, except in case of carrier's negligence, when property is
received from or delivered to such stations, wharfs, landings, or other
places, the property shall be at the owner's risk until the cars are
attached to and after they are detached from locomotive or train, or
until loaded into and after unloaded from vessels, or if property is
transported in motor vehicle trailers or semi-trailers, until such trailers
or semi-trailers are attached to and after they are detached from power
units. Where a carrier is directed to unload or deliver property
transported by motor vehicle at a particular location where consignee
or consignor's agent is not regularly located, the risk after unloading,
or delivery, shall be that of the owner.
Sec. 5. No carrier hereunder will carry or be liable in any way for any
documents, coin money, or for any articles of extraordinary value not
specifically rated in the published classification or tariffs unless a
special agreement to do so and a stipulated value of the articles are
endorsed on this bill of lading.
Sec. 6. Every party, whether principal or agent, who ships explosives
or dangerous goods, without previous full written disclosure to the
carrier of their nature, shall be liable for and indemnify the carrier
against all loss damage caused by such goods. Such goods may be
warehoused at owner's risk and expense or destroyed without
compensation.
Sec. 7. The owner or consignee shall pay the freight and average, if
any, and all other lawful charges accruing on said property according
to lawful tariffs of the carrier; but, except in those instances where it
may lawfully be authorized to do so, no carrier shall deliver or
relinquish possession at destination of the property covered by this bill
of lading until all lawful tariff rates and charges thereon have been
paid. The consignor shall be liable for the freight and all other lawful
charges, except that if the consignor stipulates, by signature, in the
space provided for that purpose on the face of this bill of lading that
the carrier shall not make delivery without requiring payment of such
charges and the carrier, contrary to such stipulation shall make
delivery without requiring such payment, the consignor (except as
hereinafter provided) shall not be liable for such charges,
PROVIDED, that, a consignee shall not be liable for transportation
charges (beyond those billed against him at the time of delivery for
which he is otherwise liable) which may be found to be due after the
property has been delivered to him subject to all of the following
conditions:
(a) The shipper or consignor has instructed the carrier to deliver the
property to a consignee other than the shipper or consignor.
(b) The consignee is an agent only and has no beneficial title in the
property and
(c) Prior to delivery the consignee has notified the delivering carrier
in writing that he is only an agent and has no beneficial title in the
property (provided that this requirement does not apply if the
consignee is a for-hire carrier), and

 Page 246
(d) In cases where the shipment has been reconsigned or diverted to a
point other than that specified in the bill of lading the consignee has
also notified the delivering carrier in writing of the name and address
of the beneficial owner of said property. Where the consignee is not
liable for certain transportation charges in accordance with this
provision and the preceding conditions, the shipper or consignor, or,
in the case of a shipment so reconsigned or diverted as specified in
condition (d), the beneficial owner shall be liable for such additional
charges.
PROVIDED FURTHER, that where the shipment is designated
'prepaid,' the shipper or consignor shall remain liable for undercharges
which result from an erroneous determination of the transportation
charge assessed.
If the consignee has given to the carrier erroneous information as to
who the beneficial owner is, such consignee shall himself be liable for
such additional charges. Nothing herein shall limit the right of the
carrier to require at time of shipment the prepayment or guarantee of
the charges. If upon inspection it is ascertained that the articles
shipped are not those described in this bill of lading, the freight
charges must be paid upon the articles actually shipped.
Sec. 8. If this bill of lading is issued on the order of the shipper, or his
agent, in exchange or in substitution for another bill of lading, the
shipper's signature on the prior bill of lading or in connection with the
prior bill of lading as to the statement of value or otherwise, or as to
the election of common law or bill of lading liability shall be
considered a part of this bill of lading as fully as if the same were
written on or made m connection with this bill of lading.
Sec. 9.(a) If all or any part of said property is carried by water over
any part of said route, such water carriage shall be performed subject
to all the terms and provisions of, and all the exemptions from liability
contained in the Act approved by the United States Congress on
February 13, 1893, and entitled 'An act relating to the navigation of
vessels, etc.' and in other United States Statutes according carriers by
water the protection of limited liability. Such water carriage shall also
be performed subject to the conditions contained in this bill of lading
which are not inconsistent with the said Act of Congress and United
States Statutes or with this section.
Sec. 9(b) No such carrier by water shall be liable for any loss or
damage resulting from any fire happening to or on board the vessel or
from explosion, bursting of boilers or breakage of shafts, unless
caused by the design or neglect of such carrier.
Sec. 9(c) If the owner shall have exercised due diligence in making
the vessel in all respects seaworthy and properly manned, equipped
and supplied, no such carrier shall be liable for any loss or damage
resulting from the perils of the lakes, seas, or in other waters or from
latent defects in the hull, machinery, or appurtenances whether
existing prior to, at the time of, or after sailing or from collision,
stranding, or other accidents of navigation, or from prolongation of
the voyage. And, when for any reason it is necessary, any vessel
carrying any or all of the property described in this bill of lading shall
be at liberty to call at any port or ports, in or out of the customary
route, to tow and be towed, to transfer, trans-ship, or lighter, to load
and discharge goods at any time, to assist vessels in distress, to
deviate for the purpose of saving life or property, and for docking and
repairs. Except in the case of negligence, such carrier shall not be
responsible for any loss or damage to property if it is necessary or is
usual to carry the property upon deck.
Sec. 9.(d) General Average shall be payable according to the York-
Antwerp Rules of 1924, Sections 1 to 15 inclusive, and Sections 17 to
22, inclusive, and as to matters not covered in the said rules,
according to the laws and usages of the Port of New York. If the
owners shall have exercised due diligence to make the vessel in all
respects seaworthy and properly manned, equipped and supplied, it is
hereby agreed that in case of danger, damage or disaster resulting
from faults or errors in navigation, from the management of the
vessel, or from any latent or other defects in the vessel the machinery
or appurtenances (provided the latent or other defects were not
discoverable by the exercise of due diligence); or from
unseaworthiness, whether existing at the time of shipment or at the
beginning of the voyage (provided the unseaworthiness was not
discoverable by the exercise of due diligence) the shippers, consignees
and/or owners of the cargo shall nevertheless pay salvage and any
special charges incurred in respect of the cargo, and shall contribute
with the shipowners in general average to the payment of any
sacrifices, losses or expenses of a general average nature that may be
made or incurred for the common benefit or to relieve the adventure
from any common peril.
Sec.9.(e) If the property is being carried under a tariff which provides
that any career or carriers party thereto shall be liable for loss from
perils of the sea, then as to such carrier or carriers the provisions of
this section shall be modified in accordance with the tariff provisions
and the tariff provisions shall be regarded as incorporated into the
conditions of this bill of lading.
Sec. 9.(f) The term 'water carriage' in this section shall not be
construed as including lighterage in or across rivers, harbors or lakes,
when performed by or on behalf of carriers other than water carriers.
Sec. 10. Any alteration, addition or erasure in this bill of lading which
is made without the special notation hereon of the agent of the carrier
issuing this bill of lading, shall be without effect, and this bill of
lading shall be enforceable according to its original tenor.

 Page 247

Appendix G
Hazardous Materials Communications Standards

 Page 248
§ 1910.1200 Hazard communication.
(a) Purpose. (1) The purpose of this section is to ensure that the
hazards of all chemicals produced or imported are evaluated, and that
information concerning their hazards is transmitted to employers and
employees. This transmittal of information is to be accomplished by
means of comprehensive hazard communication programs, which are
to include container labeling and other forms of warning, material
safety data, sheets and employee training.
(2) This occupational safety and health standard is intended to address
comprehensively the issue of evaluating the potential hazards of
chemicals, and communicating information concerning hazards and
appropriate proactive measures to employees, and to preempt any
legal requirements of a state, or political subdivision of a state,
pertaining to this subject. Evaluating the potential hazards of
chemicals, and communicating information conceding hazards and
appropriate protective measures to employees, may include, for
example, but is not limited to, provisions for: developing and
maintaining a written hazard commutation program for the workplace,
including lists of hazardous chemicals present; ladling of containers of
chemicals In the workplace, as well as of containers of chemicals
being shipped to other workplaces; preparation and distribution of
material safety data sheets to employees and downstream employers;
and development and implementation of employee training programs
regarding hazards of chemicals and proactive measures. Under section
18 of the Act, no state or political subdivision of a state may adopt or
enforce, through any court or agency, any requirement relating to the
issue addressed by this Federal standard, except pursuant to a
Federally-approved state plan.
(b) Scope and application. (1) This section requires chemical
manufacturers or importers to assess the hazards of chemicals which
they produce or import, and all employers to provide information to
their employees about the hazardous chemicals to which they are
exposed, by means of a hazard communication program, labels and
other forms of warning, material safety data sheets, and information
and training. In addition, this section requires distributors to transmit
the required information to employers. (Employers who do not
produce or import chemicals need only focus on those parts of this
rule that deal with establishing a workplace program and
communicating information to their workers. Appendix E of this
section is a general guide for such employers to help them determine
their compliance obligations under the rule.)
(2) This section applies to any chemical which is known to be present
in the workplace in such a manner that employees may be exposed
under normal conditions of use or in a foreseeable emergency.
(3) This section applies to laboratories only as follows:
(i) Employers shall ensure that labels on incoming containers of
hazardous chemicals are not removed or defaced;
(ii) Employers shall maintain any material safety data sheets that are
received with incoming shipments of hazardous chemicals, and ensure
that they are readily accessible during each workshift to laboratory
employees when they are in their work areas;
(iii) Employers shall ensure that laboratory employees are provided
information and training in accordance with paragraph (h) of this
section, except for the location and availability of the written hazard
communication program under paragraph (h)(2)(iii) of this section;
and,
(iv) Laboratory employers that ship hazardous chemicals are
considered to be either a chemical manufacturer or a distributor under
this rule, and thus must ensure that any containers of hazardous
chemicals leaving the laboratory are labeled in accordance with
paragraph (f)(1) of this section, and that a material safety data sheet is
provided to distributors and other employers in accordance with
paragraphs (g)(6) and (g)(7) of this section.
(4) In work operations where employees only handle chemicals in
sealed containers which are not opened under normal conditions of
use (such as are found in marine cargo handling, warehousing, or
retail sales), this section applies to these operations only as follows:
(i) Employers shall ensure that labels on incoming containers of
hazardous chemicals are not removed or defaced:
(ii) Employers shall maintain copies of any material safety data sheets
that.

 Page 249
are received with incoming shipments of the sealed containers of
hazardous chemicals, shall obtain a material safety data sheet as soon
as possible for sealed containers of hazardous chemicals received
without a material safety data sheet if an employee requests the
material safety data sheet. and shall ensure that the material safety
data sheets are readily accessible during. each work shift to
employees whet, they are in their work area(s); and,
(iii) Employers shall ensure that employees are provided with
information and training in accordance with paragraph (h) of this
section (except for the location and availability of the written hazard
communication program under paragraph (h)(2)(iii) of this section). to
the extent necessary to protect them in the event of a spill or leak of a
hazardous chemical from a sealed container.
(5) This section does not require labeling of the following chemicals:
(i) Any pesticide as such term is defined in the Federal Insecticide.
Fungicide, and Rodenticide Act (7 U.S.C. 136 et seq.). when subject
to the labeling requirements of that Act and labeling regulations
issued under that Act by the Environmental Protection Agency;
(ii) Any chemical substance or mixture as such terms are defined in
the Toxic Substances Control Act (15 U.S.C. 2601 et seq.), when
subject to the labeling requirements of that Act and labeling
regulations issued under that Act by the Environmental Protection
Agency.
(iii) Any food, food additive, color additive, drug, cosmetic. or
medical or veterinary device or product. including materials intended
for use as ingredients in such products (e.g. flavors and fragrances), as
such terms are defined in the Federal Food. Drug. and Cosmetic Act
(21 U.S.C. 301 et seq.) or the Virus-Serum-Toxin Act of 1913 (21
U.S.C, 151 et seq.). and regulations issued under those Acts, when
they are subject to the labeling requirements under those Acts by
either the Food and Drug Administration or the Department of
Agriculture;
(iv) Any distilled spirits (beverage alcohols). wine, or malt beverage
intended for nonindustrial use, as such terms are defined in the
Federal Alcohol Administration Act (27 U.S.C. 201 et seq.) and
regulations issued under that Act, when subject to the labeling
requirements of that Act and labeling regulations issued under that
Act by the Bureau of Alcohol, Tobacco, and Firearms;
(v) Any consumer product or hazardous substance as those terms are
defined in the Consumer Product Safety Act (15 U.S.C. 2051 et seq.)
and Federal Hazardous Substances Act (15 U.S.C. 1261 et seq.)
respectively, when subject to a consumer product safety standard or
labeling requirement of those Acts, or regulations issued under those
Acts by the Consumer Product Safety Commission; and,
(vi) Agricultural or vegetable seed treated with pesticides and labeled
in accordance with the Federal Seed Act (7 U.S.C. 1551 et seq.) and
the labeling regulations issued under that Act by the Department of
Agriculture.
(6) This section does not apply to: (i) Any hazardous waste as such
term is defined by the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976, as amended (42
U.S.C. 6901 et seq.), when subject to regulations issued under that Act
by the Environmental Protection Agency;
(ii) Any hazardous substance as such term is defined by the
Comprehensive Environmental Response, Compensation and Liability
ACT (CERCLA) (42 U.S.C. 9601 et seq.) when the hazardous
substance is the focus of remedial or removal action being conducted
under CERCLA in accordance with Environmental Protection Agency
regulations;
(iii) Tobacco or tobacco products;
(iv) Wood or wood products, including lumber which will not be
processed, where the chemical manufacturer or importer can establish
that the only hazard they pose to employees is the potential for
flammability or combustibility (wood or wood products which have
been treated with a hazardous chemical covered by this standard, and
wood which may be subsequently sawed or cut, generating dust, are
not exempted);
(v) Articles (as that term is defined in paragraph (c) of this section);
(vi) Food or alcoholic beverages which are sold, used, or prepared in a
retail establishment (such as a grocery

 Page 250
store, restaurant, or drinking place), and foods intended for personal
consumption by employees while in the workplace;
(vii) Any drug, as that term is defined in the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 301 et seq.), when it is in solid, final form
for direct administration to the patient (e.g., tablets or pills); drugs
which are packaged by the chemical manufacturer for sale to
consumers in a retail establishment (e.g., over-the-counter drugs); and
drugs intended for personal consumption by employees while in the
workplace (e.g., first aid supplies);
(viii) Cosmetics which are packaged for sale to consumers in a retail
establishment, and cosmetics intended for personal consumption by
employees while in the workplace;
(ix) Any consumer product or hazardous substance, as those terms are
defined in the Consumer Product Safety Act (15 U.S.C. 2051 et seq.)
and Federal Hazardous Substances Act (15 U.S.C. 1261 et seq.)
respectively, where the employer can show that it is used in the
workplace for the purpose intended by the chemicai manufacturer or
importer of the product, and the use results in a duration and
frequency of exposure which is not greater than the range of
exposures that could reasonably be experienced by consumers when
used for the purpose intended;
(x) Nuisance particulates where the chemical manufacturer or
importer can establish that they do not pose any physical or health
hazard covered under this section;
(xi) Ionizing and nonionizing radiation; and,
(xii) Biological hazards.
(c) Definitions.
Article means a manufactured item other than a fluid or particle: (i)
which is formed to a specific shape or design during manufacture; (ii)
which has end use function(s) dependent in whole or in part upon its
shape or design during end use; and (iii) which under normal
conditions of use does not release more than very small quantities, e.g.
minute or trace amounts of a hazardous chemical (as determined
under paragraph (d) of this section). and does not pose a physical
hazard or health risk to employees.
Assistant Secretary means the Assistant Secretary of Labor for
Occupational Safety and Health, U.S. Department of Labor, or
designee.
Chemical means any element, chemical compound or mixture of
elements and/or compounds.
Chemical manufacturer means an employer with a workplace where
chemical(s) are produced for use or distribution.
Chemical name means the scientific designation of a chemical in
accordance with the nomenclature system developed by the
International Union of Pure and Applied Chemistry (IUPAC) or the
Chemical Abstracts Service (CAS) rules of nomenclature, or a name
which will clearly identify the chemical for the purpose of conducting
a hazard evaluation.
Combustible liquid means any liquid having a flashpoint at or above
100 °F (37.8 °C), but below 200 °F (93.3 °C), except any mixture
having components with flashpoints of 200 °F (93.3 °C), or higher.
the total volume of which make up 99 percent or more of the total
volume of the mixture.
Commercial account means an arrangement whereby a retail
distributor sells hazardous chemicals to an employer, generally in
large quantities over time and/or at costs that are below the regular
retail price.
Common name means any designation or identification such as code
name, code number. trade name, brand name or generic name used to
identify a chemical other than by its chemical name.
Compressed gas means:
(i) A gas or mixture of gases having, in a container, an absolute
pressure exceeding 40 psi at 70 °F (21.1 °C); or
(ii) A gas or mixture of gases having, in a container, an absolute
pressure exceeding 104 psi at 130 °F (54.4 °C) regardless of the
pressure at 70 °F (21.1 °C); or
(iii) A liquid having a vapor pressure exceeding 40 psi at 100 °F (372
°C) as determined by ASTM D-323-72.
Container means any bag, barrel, bottle, box, can, cylinder. drum,
reaction vessel, storage tank, or the like that contains a hazardous
chemical. For purposes of this section, pipes or piping systems, and
engines, fuel tanks, or other operating systems in a vehicle. are not
considered to be containers.
Designated representative means any individual or organization to
whom an employee gives written authorization to exercise such
employee's rights under this section. A recognized or cer-

 Page 251
tified collective bargaining agent shall be treated automatically as a
designated representative without regard to written employee
authorization.
Director means the Director, National Institute for Occupational
Safety and Health, U.S. Department of Health and Human Services, or
designee.
Distributor means a business, other than a chemical manufacturer or
importer, which supplies hazardous chemicals to other distributors or
to employers.
Employee means a worker who may be exposed to hazardous
chemicals under normal operating conditions or in foreseeable
emergencies. Workers such as office workers or bank tellers who
encounter hazardous chemicals only in non-routine, isolated instances
are not covered.
Employer means a person engaged in a business where chemicals are
either used. distributed, or are produced for use or distribution,
including a contractor or subcontractor.
Explosive means a chemical that causes a sudden, almost
instantaneous release of pressure, gas, and heat when subjected to
sudden shock, pressure, or high temperature.
Exposure or exposed means that an employee is subjected in the
course of employment to a chemical that is a physical or health
hazard, and includes potential (e.g. accidental or possible) exposure.
''Subjected" in terms of health hazards includes any route of entry
(e.g. inhalation, ingestion, skin contact or absorption.)
Flammable means a chemical that falls into one of the following
categories:
(i) Aerosol, flammable means an aerosol that, when tested by the
method described in 16 CFR 1500.45, yields a flame projection
exceeding 18 inches at full valve opening, or a flashback (a flame
extending back to the valve) at any degree of valve opening;
(ii) Gas, flammable means: (A) A gas that, at ambient temperature
and pressure, forms a flammable mixture with air at a concentration of
thirteen (13) percent by volume or less; or
(B) A gas that, at ambient temperature and pressure, forms a range of
flammable mixtures with air wider than twelve (12) percent by
volume. regardless of the lower limit;
(iii) Liquid, flammable means any liquid having a flashpoint below
100°F (37.8°C), except any mixture having components with
flashpoints of 100°F (37.8°C) or higher, the total of which make up
99 percent or more of the total volume of the mixture.
(iv) Solid, flammable means a solid, other than a blasting agent or
explosive as defined in §1910.109(a), that is liable to cause fire
through friction, absorption of moisture, spontaneous chemical
change, or retained heat from manufacturing or processing, or which
can be ignited readily and when ignited burns so vigorously and
persistently as to create a serious hazard. A chemical shall be
considered to be a flammable solid if, when tested by the method
described in 16 CFR 1500.44, it ignites and burns with a self-
sustained flame at a rate greater than one-tenth of an inch per second
along its major axis.
Flashpoint means the minimum temperature at which a liquid gives
off a vapor in sufficient concentration to ignite when tested as
follows:
(i) Tagliabue Closed Tester (See American National Standard Method
of Test for Flash Point by Tag Closed Tester, Zll.24-1979 (ASTM D
56-79)) for liquids with a viscosity of less than 45 Saybolt Universal
Seconds (SUS) at 100°F (37.8°C), that do not contain suspended
solids and do not have a tendency to form a surface film under test; or
(ii) Pensky-Martens Closed Tester (see American National Standard
Method of Test for Flash Point by Pensky-Martens Closed Tester,
Zll.7-1979 (ASTM D 93-79)) for liquids with a viscosity equal to or
greater than 45 SUS at 100°F (37.8°C). or that contain suspended
solids, or that have a tendency to form a surface film under test; or
(iii) Setaflash Closed Tester (see American National Standard Method
of Test for Flash Point by Setaflash Closed Tester (ASTM D 3278-
78)).
Organic peroxides, which undergo autoaccelerating thermal
decomposition, are excluded from any of the flashpoint determination
methods specified above.
Foreseeable emergency means any potential occurrence such as, but
not limited to, equipment failure, rupture of containers, or failure of
control equipment which could result in an uncontrolled release of a
hazardous chemical into the workplace.
Hazardous chemical means any chemi-

 Page 252
cal which is a physical hazard or a health hazard.
Hazard warning means any words. pictures, symbols, or combination
thereof appearing on a label or other appropriate fore of warning
which convey the specific physical and health hazard(s), including
target organ effects, of the chemical(s) in the container(s). (See the
definitions for "physical hazard" and "health hazard" to determine the
hazards which must be covered.)
Health hazard means a chemical for which there is statistically
significant evidence based on at least one study conducted in
accordance with established scientific principles that acute or chronic
health effects may occur in exposed employees. The term "health
hazard" includes chemicals which are carcinogens, toxic or highly
toxic agents, reproductive toxins, irritants, corrosives, sensitizers,
hepatotoxins, nephrotoxins, neurotoxins, agents which act on the
hematopoietic system, and agents which damage the lungs, skin, eyes,
or mucous membranes. Appendix A provides further definitions and
explanations of the scope of health hazards covered by this section,
and Appendix B describes the criteria to be used to determine whether
or not a chemical considered hazardous for purposes of this standard.
Identity means any chemical or common name which is indicated on
the material safety data sheet (MSDS) for the chemical. The identity
used shall permit cross-references to be made among the required list
of hazardous chemicals, the label and the MSDS.
Immediate use means that the hazardous chemical will be under the
control of and used only by the person who transfers it from a labeled
container and only within the work shift in which it is transferred.
Importer means the first business with employees witch the Customs
Territory of the United States which receives hazardous chemicals
produced in other countries for the purpose of supplying them to
distributors or employers within the United States.
Label means any written, printed, or graphic material displayed on or
affixed to containers of hazardous chemicals.
Material safety data sheet (MSDS) means written or printed material
concerning a hazardous chemical which is prepared in accordance
with paragraph (g) of this section.
Mixture means any combination of two or more chemicals if the
combination is not, in whole or in part, the result of a chemical
reaction.
Organic peroxide means an organic compound that contains the
bivalent -O-O-structure and which may be considered to be a
structural derivative of hydrogen peroxide where one or both of the
hydrogen atoms has been replaced by an organic radical.
Oxidizer means a chemical other than a blasting silent or explosive as
defined in §1910.109(a), that initiates or promotes combustion in
other materials, thereby causing fire either of itself or through the
release of oxygen or other gases.
Physical hazard means a chemical for which there is scientifically
valid evidence that it is a combustible liquid, a compressed gas,
explosive, flammable, an organic peroxide, an oxidizer, pyrophoric,
unstable (reactive) or water-reactive.
Produce means to manufacture, process, formulate, blend, extract,
generate, emit, or repackage.
Pyrophoric means a chemical that will ignite spontaneously in air at a
temperature of 130°F (54.4°C) or below.
Responsible party means someone who can provide additional
information on the hazardous chemical and appropriate emergency
procedures, if necessary.
Specific chemical identify means the chemical name, Chemical
Abstracts Service (AS) Registry Number, or any other information
that reveals the precise chemical designation of the substance.
Trade secret means any confidential formula, pattern, process, device,
information or compilation of information that is used in an
employer's business, and that Lives the employer an opportunity to
obtain an advantage over competitors who do not know or use it.
Appendix D sets out the criteria to be used in evaluating trade secrets.
Unstable (reactive) means a chemical which in the pure state, or as
produced or transported, will vigorously Polym-

 Page 253
erize, decompose, condense, or will become self-reactive under
conditions of shocks, pressure or temperature.
Use means to package, handle, react, emit. extract, generate as a
byproduct. or transfer.
Water-reactive means a chemical that reacts with water to release a
gas that is either flammable or presents a health hazard.
Work area means a room or defined space in a workplace where
hazardous chemicals are produced or used, and where employees are
present.
Workplace means an establishment, job site, or project, at one
geographical location containing one or more work areas.
(d) Hazard determination. (1) Chemical manufacturers and importers
shall evaluate chemicals produced in their workplaces or imported by
them to determine if they are hazardous. Employ-era are not required
to evaluate chemicals unless they choose not to rely on the evaluation
performed by the chemical manufacturer or importer for the chemical
to satisfy this requirement.
(2) Chemical manufacturers, import-era or employers evaluating
chemicals shall identify and consider the available scientific evidence
concerning such hazards. For health hazards, evidence which is
statistically significant and which is based on at least one positive
study conducted in accordance with established scientific principles is
considered to be sufficient to establish a hazardous effect if the results
of the study meet the definitions of health hazardous in this section.
Appendix A shall be consulted for the scope of health hazards
covered, and Appendix B shall be consulted for the criteria to be
followed with respect to the completeness of the evaluation, and the
data to be reported.
(3) The chemical manufacturer, importer or employer evaluating
chemicals shall treat the following sources as establishing that the
chemicals listed in them are hazardous:
(i) 29 FR part 1910, subpart Z, Toxic and Hazardous Substances,
Occupational Safety and Health Administration (OSIER); or,
(ii) Threshold Limit Values for chemical Substances and Physical
Agents in the Work Environment, American Conference of
Governmental Industrial Hygienists (AGCY.) (latest edition). The
chemical manufacturer, importer, or employer is still responsible for
evaluating the hazards associated with the chemicals in these source
lists in accordance with the requirements of this standard.
(4) Chemical manufacturers, import-era and employers evaluating
chemicals shall treat the following sources as establishing that a
chemical is a carcinogen or potential carcinogen for hazard
communication purposes:
(i) National Toxicology Program (NTP), Annual Report on
Carcinogens (latest edition);
(ii) International Agency for Research on Cancer (IAPC) Monographs
(latest editions); or
(iii) 29 CFR part 1910, subpart Z, Toxic and Hazardous Substances,
Occupational Safety and Health Administration.
NOTE: The Registry of Toxic Effects of Chemical Substances published
by the National Institute for Occupational Safety and Health indicates
whether a chemical has been found by NTP or IARC to be a potential
carcinogen.
(5) The chemical manufacturer, importer or employer shall determine
the hazards of mixtures of chemicals as follows:
(i) If a mixture has been tested as a whole to determine its hazards, the
re-suits of such testing shall be used to determine whether the mixture
is hazardous;
(ii) H a mixture has not been tested as a whole to determine whether
the mixture is a health hazard, the mixture shall be assumed to present
the same health hazards as do the components which comprise one
percent (by weight or volume) or greater of the mixture, except that
the mixture shall be assumed to present a carcinogenic hazard if it
contains a component in concentrations of 0.1 percent or greater
which is considered to be a carcinogen under paragraph (d)(4) of this
section;
(iii) If a mixture has not been tested as a whole to determine whether
the mixture is a physical hazard, the chemical manufacturer, importer,
or employer may use whatever scientifically valid data is available to
evaluate the physical hazard potential of the mixture; and,
(iv) If the chemical manufacturer, importer, or employer has evidence
to indicate that a component present in the mixture in concentrations
of less than one percent (or in the case of car-

 Page 254
cinogens, less than 0.1 percent) could be released in concentrations
which would exceed an established OSHA permissible exposure limit
or ACGIH Threshold Limit Value, or could present a health risk to
employees in those concentrations, the mixture shall be assumed to
present the came hazard.
(6) Chemical manufacturers, importers, or employers evaluating
chemicals shall describe in writing the procedures they use to
determine the hazards of the chemical they evaluate. The writ. ten
procedures are to be made available, upon request, to employees, their
designated representatives, the Assist. ant Secretary and the Director.
The written description may be incorporated into the written hazard
communication program required under paragraph (e) of this section.
(e) Written hazard communication program. (1) Employers shall
develop, implement. and maintain at each workplace. a written hazard
communication program which at least describes how the criteria
specified in paragraphs (f), (g), and (h) of this section for labels and
other forms of warning, material safety data sheets, and employee
information and training will be met, and which also includes the
following:
(i) A list of the hazardous chemicals known to be present using an
identity that is referenced on the appropriate material safety data sheet
(the list may be compiled for the workplace as a whole or for
individual work areas); and.
(ii) The methods the employer will use to inform employees of the
hazards of non-routine tasks (for example. the cleaning of reactor
vessels), and the hazards associated with chemicals contained in
unlabeled pipes in their work areas.
(2) Mufti-employer workplaces. Employers who produce. use, or store
hazardous chemicals at a workplace in such a way that the employees
of other employer(s) may be exposed (for example. employees of a
construction contractor working on-site) shall additionally ensure that
the hazard communication programs developed and implemented
under this paragraph (e) include the following:
(i) The methods the employer will use to provide the other
employer(s) on-site access to material safety data sheets for each
hazardous chemical the other employer(s)' employees may be exposed
to while working;
(ii) The methods the employer will use to inform the other
employer(s) of any precautionary measures that need to be taken to
protect employees during the workplace's normal operating conditions
and in foreseeable emergencies; and,
(iii) The methods the employer will use to inform the other
employer(s) of the labeling system used in the workplace.
(3) The employer may rely on an existing hazard communication
program to comply with these requirements, provided that it meets the
criteria established in this paragraph (e).
(4) The employer shall make the written hazard communication
program available, upon request, to employees, their designated
representatives, the Assistant Secretary and the Director, in
accordance with the requirements of 29 CFR 1910.20 (e).
(5) Where employees must travel between workplaces during a
workshift, i.e., their work is carried out at more than one geographical
location, the written hazard communication program may be kept at
the primary workplace facility.
(f) Labels and other forms of warning. (1) The chemical
manufacturer, importer, or distributor shall ensure that each container
of hazardous chemicals leaving the workplace is labeled, tagged or
marked with the following information:
(i) Identity of the hazardous chemical(s);
(ii) Appropriate hazard warnings; and
(iii) Name and address of the chemical manufacturer, importer. or
other responsible party.
(2)(i) For solid metal (such as a steel beam or a metal casting). solid
wood, or plastic items that are not exempted as articles due to their
downstream use, or shipments of whole grain. the required label may
be transmitted to the customer at the time of the initial shipment, and
need not be included with subsequent shipments to the same employer
unless the information on the label changes;
(ii) The label may be transmitted with the initial shipment itself, or
with the material safety data sheet that is to be provided prior to or at
the time of the first shipment; and.
(iii) This exception to requiring la-

 Page 255
bels on every container of hazardous chemicals is only for the solid
material itself, and does not apply to hazardous chemicals used in
conjunction with, or known to be present with. the material and to
which employees handling the items in transit may be exposed (for
example, cutting fluids or pesticides in grains).
(3) Chemical manufacturers. importers, or distributors shall ensure
that each container of hazardous chemicals leaving the workplace is
labeled, tagged, or marked in accordance with this section in a manner
which does not conflict with the requirements of the Hazardous
Materials Transportation Act (49 U.S.C. 1801 et seq.) and regulations
issued under that Act by the Department of Transportation.
(4) If the hazardous chemical is regulated by OSHA in a substance-
specific health standard, the chemical manufacturer, importer,
distributor or employer shall ensure that the labels or other forms of
warning used are in accordance with the requirements of that
standard.
(5) Except as provided in paragraphs (f)(6) and (f)(7) of this section,
the employer shall ensure that each container of hazardous chemicals
in the workplace is labeled, tagged or marked with the following
information:
(i) Identity of the hazardous chemical(s) contained therein; and,
(ii) Appropriate hazard warnings. or alternatively, words. pictures,
symbols, or combination thereof. which provide at least general
information regarding the hazards of the chemicals, and which. in
conjunction with the other Information immediately available to
employees under the hazard communication program, will provide
employees with the specific information regarding the physical and
health hazards of the hazardous chemical.
(6) The employer may use signs, placards, process sheets. batch
tickets, operating procedures, or other such written materials in lieu of
affixing labels to individual stationary process containers, as long as
the alternative method identifies the containers to which it is
applicable and conveys the information required by paragraph (f)(5)
of this section to be on a label. The written materials shall be readily
accessible to the employees in their work area throughout each work
shift.
(7) The employer is not required to label portable containers into
which hazardous chemicals are transferred from labeled containers,
and which are intended only for the immediate use of the employee
who performs the transfer. For purposes of this section, drugs which
are dispensed by a pharmacy to a health care provider for direct
administration to a patient are exempted from labeling.
(8) The employer shall not remove or deface existing labels on
incoming containers of hazardous chemicals, unless the container is
immediately marked with the required information.
(9) The employer shall ensure that labels or other forms of warning
are legible, in English, and prominently displayed on the container, or
readily available in the work area throughout each work shift.
Employers having employees who speak other languages may add the
information in their language to the material presented, as long as the
information is presented in English as well.
(10) The chemical manufacturer, importer, distributor or employer
need not affix new labels to comply with this section if existing labels
already convey the required information.
(11) Chemical manufacturers. importers, distributors, or employers
who become newly aware of any significant information regarding the
hazards of a chemical shall revise the labels for the chemical within
three months of becoming aware of the new information. Labels on
containers of hazardous chemicals shipped after that time shall
contain the new information. If the chemical is not currently produced
or imported, the chemical manufacturer, importers, distributor, or
employer shall add the information to the label before the chemical is
shipped or introduced into the workplace again.
(g) Material safety data sheets. (1) Chemical manufacturers and
importers shall obtain or develop a material safety data sheet for each
hazardous chemical they produce or import. Employers shall have a
material safety data sheet in the workplace for each hazardous
chemical which they use.
(2) Each material safety data sheet shall be in English (although the
employer may maintain copies in other languages as well). and shall
contain at least the following information:
(i) The identity used on the label. and, except as provided for in para-

 Page 256
graph (i) of this section on trade secrets:
(A) If the hazardous chemical is a single substance, its chemical and
common name(s);
(B) If the hazardous chemical is a mixture which has been tested as a
whole to determine its hazards, the chemical and common name(s) of
the ingredients which contribute to these known hazards, and the
common name(s) of the mixture itself; or,
(C) If the hazardous chemical is a mixture which has not been tested
as a whole:
(1) The chemical and common name(s) of all ingredients which have
been determined to be health hazards, and which comprise 1% or
greater of the composition, except that chemicals identified as
carcinogens under paragraph (d) of this section shall be listed if the
concentrations are 0.1% or greater; and,
(2) The chemical and common name(s) of all ingredients which have
been determined to be health hazards, and which comprise less than
1% (0.1% for carcinogens) of the mixture, if there is evidence that the
ingredient(s) could be released from the mixture in concentrations
which would exceed an established OSHA permissible exposure limit
or ACGIH Threshold Limit Value, or could present a health risk to
employees; and,
(3) The chemical and common name(s) of all ingredients which have
been determined to present a physical hazard when present in the
mixture;
(ii) Physical and chemical characteristics of the hazardous chemical
(such as vapor pressure. flash point);
(iii) The physical hazards of the hazardous chemical. including the
potential for fire. explosion. and reactivity;
(iv) The health hazards of the hazardous chemical, including signs
and symptoms of exposure. and any medical conditions which are
generally recognized as being aggravated by exposure to the
chemical;
(v) The primary route(s) of entry;
(vi) The OSHA permissible exposure limit. ACGIH Threshold Limit
Value. and any other exposure limit used or recommended by the
chemical manufacturer. importer. or employer preparing the material
safety data sheet, where available;
(vii) Whether the hazardous chemical is listed in the National
Toxicology Program (NTP) Annual Report on Carcinogens (latest
edition) or has been found to be a potential carcinogen in the
International Agency for Research on Cancer (IARC) Monographs
(latest editions), or by OSHA;
(viii) Any generally applicable precautions for safe handling and use
which are known to the chemical manufacturer, importer or employer
preparing the material safety data sheet, including appropriate
hygienic practices. protective measures during repair and maintenance
of contaminated equipment, and procedures for clean-up of spills and
leaks;
(ix) Any generally applicable control measures which are known to
the chemical manufacturer. importer or employer preparing the
material safety data sheet, such as appropriate engineering controls.
work practices, or personal protective equipment;
(x) Emergency and first aid procedures;
(xi) The date of preparation of the material safety data sheet or the last
change to it; and,
(xii) The name, address and telephone number of the chemical
manufacturer, importer, employer or other responsible party preparing
or distributing the material safety data sheet, who can provide
additional information on the hazardous chemical and appropriate
emergency procedures, if necessary.
(3) If no relevant information is found for any given category on the
material safety data sheet, the chemical manufacturer, importer or
employer preparing the material safety data sheet shall mark it to
indicate that no applicable information was found.
(4) Where complex mixtures have similar hazards and contents (i.e.
the chemical ingredients are essentially the same, but the specific
composition varies from mixture to mixture), the chemical
manufacturer, importer or employer may prepare one material safety
data sheet to apply to all of these similar mixtures.
(5) The chemical manufacturer, importer or employer preparing the
material safety data sheet shall ensure that the information recorded
accurately reflects the scientific evidence used in making the hazard
determination. If the chemical manufacturer, importer or employer
preparing the material

 Page 257
safety data sheet, becomes newly aware of any significant,
information regarding the hazards of a chemical, or ways to protect
against the hazards, this new information shall be added to the
material safety data sheet within three months. If the chemical is not
currently being produced or imported the chemical manufacturer or
importer shall add the information to the material safety data sheet
before the chemical is introduced into the workplace again.
(6)
(i) Chemical manufacturers or importers shall ensure that distributors
and employers are provided an appropriate material safety data sheet
with their initial shipment, and with the first shipment after a material
safety data sheet is updated;
(ii) The chemical manufacturer or importer shall either provide
material safety data sheets with the shipped containers or send them to
the distributor or employer prior to or at the time of the shipment;
(iii) If the material safety data sheet is not provided with a shipment
that has been labeled as a hazardous chemical, the distributor or
employer shall obtain one from the chemical manufacturer or
importer as soon as possible; and,
(iv) The chemical manufacturer or importer shall also provide
distributors or employers with a material safety data sheet upon
request.
(7)
(i) Distributors shall ensure that material safety data sheets, and
updated information, are provided to other distributors and employers
with their initial shipment and with the first shipment after a material
safety data sheet is updated;
(ii) The distributor shall either provide material safety data sheets with
the shipped containers, or send them to the other distributor or
employer prior to or at the time of the shipment:
(iii) Retail distributors selling hazardous chemicals to employers
having a commercial account shall provide a material safety data
sheet to such employers upon request, and shall post a sign or
otherwise inform them that a material safety data sheet is available;
(iv) Wholesale distributors selling hazardous chemicals to employers
over-the-counter may also provide material safety data sheets upon
the request of the employer at the time of the over-the-counter
purchase, and shall post a sign or otherwise inform such employers
that a material safety data sheet is available;
(v) If an employer without a commercial account purchases a
hazardous chemical from a retail distributor not required to have
material safety data sheets on file (i.e., the retail distributor does not
have commercial accounts and does not use the materials), the retail
distributor shall provide the employer, upon request, with the name,
address, and telephone number of the chemical manufacturer,
importer, or distributor from which a material safety data sheet can be
obtained;
(vi) Wholesale distributors shall also provide material safety data
sheets to employers or other distributors upon request; and,
(vii) Chemical manufacturers, importers, and distributors need not
provide material safety data sheets to retail distributors that have
informed them that the retail distributor does not sell the product to
commercial accounts or open the sealed container to use it in their
own workplaces.
(8) The employer shall maintain in the workplace copies of the
required material safety data sheets for each hazardous chemical, and
shall ensure that they are readily accessible during each work shift to
employees when they are in their work area(s). (Electronic access,
microfiche, and other alternatives to maintaining paper copies of the
material safety data sheets are permitted as long as no barriers to
immediate employee access in each workplace are created by such
options.)
(9) Where employees must travel between workplaces during a
workshift, i.e., their work is carried out at more than one geographical
location, the material safety data sheets may be kept at the primary
workplace facility. In this situation, the employer shall ensure that
employees can immediately obtain the required information in an
emergency.
(10) Material safety data sheets may be kept in any form, including
operating procedures, and may be designed to cover groups of
hazardous chemicals in a work area where it may be more appropriate
to address the hazards of a process rather than individual hazardous
chemicals. However, the employer shall ensure that in all cases the
required information is provided for each

 Page 258
hazardous chemical, and is readily accessible during each work
shift to employees when they are in in their work area(s).
(11) Material safety data sheets shall also be made readily available,
upon request, to designated representatives and to the Assistant
Secretary, in accordance with the requirements of 29 CFR 1910.20(e).
The Director shall also be given access to material safety data sheets
in the same manner.
(h) Employee information and training. (1) Employers shall provide
employees with effective information and training on hazardous
chemicals in their work area at the time of their initial assignment, and
whenever a new physical or health hazard the employees have not
previously been trained about is introduced into their work area.
Information and training may be designed to cover categories of
hazards (e.g., flammability, carcinogenicity) or specific chemicals.
Chemical-specific information must always be available through
labels and material safety data sheets.
(2) Information. Employees shall be informed of:
(i) The requirements of this section;
(ii) Any operations in their work area where hazardous chemicals are
present; arid,
(iii) The location and availability of the written hazard
communication program, including the required list(s) of hazardous
chemicals, and material safety data sheets required by this section.
(3) Training. Employee training shall include at least:
(i) Methods and observations that may be used to detect the presence
or release of a hazardous chemical in the work area (such as
monitoring conducted by the employer, continuous monitoring
devices, visual appearance or odor of hazardous chemicals when
being released, etc.);
(ii) The physical and health hazards of the chemicals in the work area;
(iii) The measures employees can take to protect themselves from
these hazards, including specific procedures the employer has
implemented to protect employees from exposure to hazardous
chemicals, such as appropriate work practices, emergency procedures,
and personal protective equipment to be used; and,
(iv) The details of the hazard communication program developed by
the employer, including an explanation of the labeling system and the
material safety data sheet, and how employees can obtain and use the
appropriate hazard information.
(i) Trade secrets. (1) The chemical manufacturer, importer. or
employer may withhold the specific chemical identity, including the
chemical name and other specific identification of a hazardous
chemical, from the material safety data sheet, provided that:
(i) The claim that the information withheld is a trade secret can be
supported;
(ii) Information contained in the material safety data sheet concerning
the properties and effects of the hazardous chemical is disclosed;
(iii) The material safety data sheet indicates that the specific chemical
identity is being withheld as a trade secret; and,
(iv) The specific chemical identity is made available to health
professionals, employees, and designated representatives in
accordance with the applicable provisions of this paragraph.
(2) Where a treating physician or nurse determines that a medical
emergency exists and the specific chemical identity of a hazardous
chemical is necessary for emergency or first-aid treatment, the
chemical manufacturer, importer, or employer shall immediately
disclose the specific chemical identity of a trade secret chemical. to
that treating physician or nurse, regardless of the existence of a
written statement of need or a confidentiality agreement. The
chemical manufacturer, importer, or employer may require a written
statement of need and confidentiality agreement, in accordance with
the provisions of paragraphs (i) (3) and (4) of this section, as soon as
circumstances permit.
(3) In non-emergency situations, a chemical manufacturer, importer,
or employer shall, upon request, disclose a specific chemical identity,
otherwise permitted to be withheld under paragraph (i)(l) of this
section, to a health professional (i.e. physician, industrial hygienist,
toxicologist, epidemiologist, or occupational health nurse) providing
medical or other occupational health services to exposed employee(s),
and to employees or designated representatives, if:
(i) The request is in writing;

 Page 259
(ii) The request describes with reasonable detail one or more of the
following occupational health needs for the information:
(A) To assess the hazards of the chemicals to which. employees will
be exposed;
(B) To conduct or assess sampling of the workplace atmosphere to
determine employee exposure levels;
(C) To conduct pre-assignment or periodic medical surveillance of
exposed employees;
(D) To provide medical treatment to exposed employees;
(E) To select or assess appropriate personal protective equipment for
exposed employees;
(F) To design or assess engineering controls or other protective
measures for exposed employees; and,
(G) To conduct studies to determine the health effects of exposure.
(iii) The request explains in detail why the disclosure of the specific
chemical identity is essential and that. in lieu thereof, the disclosure of
the following information to the health professional, employee, or
designated representative, would not satisfy the purposes described in
paragraph (i)(3)(ii) of this section:
(A) The properties and effects of the chemical;
(B) Measures for controlling workers' exposure to the chemical;
(C) Methods of monitoring and analyzing worker exposure to the
chemical; and,
(D) Methods of diagnosing and treating harmful exposures to the
chemical;
(iv) The request includes a description of the procedures to be used to
maintain the confidentiality of the disclosed information; and,
(v) The health professional, and the employer or contractor of the
services of the health professional (i.e. downstream employer, labor
organization, or individual employee), employee, or designated
representative, agree in a written confidentiality agreement that the
health professional, employee, or designated representative. will not
use the trade secret information for any purpose other than the health
need(s) asserted and agree not to release the information under any
circumstances other than to OSHA, as provided in paragraph (i)(6) of
this section, except as authorized by the terms of the agreement or by
the chemical manufacturer, importer, or employer.
(4) The confidentiality agreement authorized by paragraph (i)(3)(iv)
of this section:
(i) May restrict the use of the information to the health purposes
indicated in the written statement of need;
(ii) May provide for appropriate legal remedies in the event of a
breach of the agreement, including stipulation of a reasonable pre-
estimate of likely damages; and,
(iii) May not include requirements for the posting of a penalty bond.
(5) Nothing in this standard is meant to preclude the parties from
pursuing non-contractual remedies to the extent permitted by law.
(6) If the health professional, employee, or designated representative
receiving the trade secret information decides that there is a need to
disclose it to OSHA, the chemical manufacturer, importer, or
employer who provided the information shall be informed by the
health professional, employee, or designated representative prior to. or
at the same time as, such disclosure.
(7) If the chemical manufacturer, importer, or employer denies a
written request for disclosure of a specific chemical identity, the
denial must:
(i) Be provided to the health professional, employee, or designated
representative, within thirty days of the request;
(ii) Be in writing;
(iii) Include evidence to support the claim that the specific chemical
identity is a trade secret;
(iv) State the specific reasons why the request is being denied; and,
(v) Explain in detail how alternative information may satisfy the
specific medical or occupational health need without revealing the
specific chemical identity.
(8) The health professional, employee, or designated representative
whose request for information is denied under paragraph (i)(3) of this
section may refer the request and the written denial of the request to
OSHA for consideration.
(9) When a health professional, employee, or designated
representative refers the denial to OSHA under paragraph (i)(8) of this
section, OSHA shall consider the evidence to determine if:
(i) The chemical manufacturer, im-

 Page 260
porter, or employer has supported the claim that the specific chemical
identity is a trade secret;
(ii) The health professional, employee, or designated representative
has supported the claim that there is a medical or occupational health
need for the information; and,
(iii) The health professional, employee or designated representative
has demonstrated adequate means to protect the confidentiality.
(10)(i) If OSHA determines that the specific chemical identity
requested under paragraph (i)(3) of this section is not a bona fide trade
secret, or that it is a trade secret, but the requesting health
professional, employee, or designated representative has a legitimate
medical or occupational health need for the information, has executed
a written confidentiality agreement, and has shown adequate means to
protect the confidentiality of the information, the chemical
manufacturer, importer, or employer will be subject to citation by
OSHA.
(ii) H a chemical manufacturer, importer. or employer demonstrates to
OSHA that the execution of a confidentiality agreement would not
provide sufficient protection against the potential harm from the
unauthorized disclosure of a trade secret specific chemical identity,
the Assistant Secretary may issue such orders or impose such
additional limitations or conditions upon the disclosure of the
requested chemical information as may be appropriate to assure that
the occupational health services are provided without an undue risk of
harm to the chemical manufacturer, importer, or employer.
(11) If a citation for a failure to release specific chemical identity
information is contested by the chemical manufacturer, importer, or
employer, the matter will be adjudicated before the Occupational
Safety and Health Review Commission in accordance with the Act's
enforcement scheme and the applicable Commission rules of
procedure. In accordance with the Commission rules, when a
chemical manufacturer, importer, or employer continues to withhold
the information during the contest, the Administrative Law Judge may
review the citation and supporting documentation in camera or issue
appropriate orders to protect the confidentiality of such matters.
(12) Notwithstanding the existence of a trade secret claim, a chemical
manufacturer, importer, or employer shall, upon request, disclose to
the Assistant Secretary any information which this section requires the
chemical manufacturer, importer, or employer to make available.
Where there is a trade secret claim, such claim shall be made no later
than at the time the information is provided to the Assistant Secretary
so that suitable determinations of trade secret status can be made and
the necessary protections can be implemented.
(13) Nothing in this paragraph shall be construed as requiring the
disclosure under any circumstances of process or percentage of
mixture information which is a trade secret.
(j) Effects dates. Chemical manufacturers, importers, distributors, and
employers shall be in compliance with all provisions of this section by
March 11, 1994.
NOTE: The effective date of the clarification that the exemption of
wood and wood products from the Hazard Communication standard in
paragraph (b)(6)(iv) only applies to wood and wood products
including lumber which will not be processed. where the manufacturer
or importer can establish that the only hazard they pose to employees
is the potential for flammability or combustibility. and that the
exemption does not apply to wood or wood products which have been
treated with a hazardous chemical covered by this standard. and wood
which may be subsequently sawed or cut generating dust has been
stayed from March 11. 1994 to August 11, 1994.
Appendix A to § 1910.1200Health Hazard Definitions (Mandatory)
Although safety hazards related to the physical characteristics of a
chemical can be objectively defined in terms of testing requirements
(e.g. flammability), health hazard definitions are less precise and more
subjective. Health hazards may cause measurable changes in the
bodysuch as decreased pulmonary function. These changes are
generally indicated by the occurrence of signs and symptoms in the
exposed employees such as shortness of breath, a non-measurable,
subjective feeling. Employees exposed to such hazards must be
apprised of both the change in body function and the signs and
symptoms that may occur to signal that change.
The determination of occupational health hazards is complicated by
the fact that many of the effects or signs and symptoms occur
commonly In non-occupationally exposed populations. so that effects
of exposure are

 Page 261
difficult to separate from normally occurring illnesses. Occasionally. ·
substance causes an effect that is rarely seen in the population at large.
such as snglosarcomas caused by vinyl chloride exposure, thus
making it easier to ascertain that the occupational exposure was the
primary causative factor. More often, however, the effects are
common, such as lung cancer. The situation is further complicated by
the fact that most chemicals have not been adequately tested to
determine their health hazard potential, and data do not exist to
substantiate these effects.
There have been many attempts to categorize effects and to define
them in various ways. Generally, the terms ''acute" and "chronic" are
used to delineate between effects on the basis of severity or duration.
"Acute" effects usually occur rapidly as a result of short. term
exposures. and are of short duration. "Chronic" effects generally occur
as · result of lone-term exposure, and are of lone duration.
The acute effects referred to most frequently are those defined by the
American National Standards Institute (ANSI) standard for
Precautionary Labeling of Hazardous Industrial Chemicals (Z129.1-
1988)irritation. corrosivity. sensitization and lethal dose. Although
them are important health effects, they do not adequately cover the
considerable range of scuts effects which may occur as a result of
occupational exposure, such as, for example, narcosis.
Similarly, the term chronic effect is often used to cover only
carcinogenicity, teratogenicity. and mutagenicity. These effects are
obviously a concern in the workplace, but again, do not adequately
cover the area of chronic effects, excluding. for example, Mood
dyscrasias (such as anemia), chronic bronchitis and liver atrophy.
The real of defining precisely, in measurable terms, every possible
health effect that may occur in the workplace as a result of chemical
exposures cannot realistically be accomplished. This does not negate
the need for employees to be informed of such effects and protected
from them. Appendix B, which is also mandatory, outlines the
principles and procedures of hazard assessment.
For purposes of this section, any chemicals which meet any of the
following definitions, as determined by the criteria set forth in
Appendix B are health hazards. However, this is not intended to be an
exclusive categorization scheme. If there are available scientific data
that involve other animal species or test methods, they must also be
evaluated to determine the applicability of the HCS.7
1. Carcinogen: A chemical is considered to be a carcinogen if:
(a) It has been evaluated by the International Agency for Research on
Cancer (IARC), and found to be a carcinogen or potential carcinogen;
or
(b) It is listed as a carcinogen or potential carcinogen in the Annual
Report on Carcinogens published by the National Toxicology
Program (NTP) (latest edition); or,
(c) It Is regulated by OSHA as a carcinogen.
2. Corrosive: A chemical that causes visible destruction of, or
irreversible alterations in, living tissue by chemical action at the site
of contact. For example. a chemical is considered to be corrosive if.
when tested on the intact skin of albino rabbits by the method
described by the U.S. Department of Transportation in appendix A to
49 CFR part 173, it destroys or changes irreversibly the structure of
the tissue at the site of contact following an exposure period of four
hours. This term shall not refer to action on inanimate surfaces.
3. Highly toxic: A chemical falling within any of the following
categories:
(a) A chemical that has a median lethal dose (LD30) of 50 milligrams
or less per kilogram of body weight when administered orally to
albino rats weighing between 200 and 300 grams each.
(b) A chemical that has · median lethal dose (LD30) of 200 milligrams
or less per kilogram of body weight when administered by continuous
contact for 24 hours (or less if death occurs within 24 hours) with the
bare skin of albino rabbits weighing between two and three kilograms
each.
(c) A chemical that has · median lethal concentration (LC30) in air of
300 parts per million by volume or less of Was or vapor, or 2
milligrams per liter OF less of mist, fume, or dust, when administered
by continuous inhalation for one hour (or less if death occurs within
one hour) to albino rats weighing between 200 and 300 frame each.
4. Irritant: A chemical, which Is not corrosive, but which causes ·
reversible inflammatory effect on living tissue by chemical action at
the Bite of contact. A chemical is a skin irritant if, when tested on the
intact skin of albino rabbits by the methods of 16 CFR 1500.41 for
four hours exposure or by other appropriate techniques, it results in an
empirical score of five or more. A chemical is an eye irritant if so
determined under the procedure listed in 16 CFR 1500.42 or ocher
appropriate techniques.
5. Sensitlzer: A chemical that causes a substantial proportion of
exposed people or animals to develop an allergic ruction in normal
tissue after repeated exposure to the chemical.
6. Toxic. A chemical fallings within any of the following categories:
(a) A chemical that has · median lethal dose (LD30) of more than 50
milligrams per kilogram but not more than 500 milligrams per
kilogram of body weight when administered orally to albino rats
weighing between 200 and 300 grams each.
(b) A chemical that has · median lethal dose (LD30) of more than 200
milligrams per kilogram but not more than 1.000 milligrams per
kilogram of body weight when administered by continuous contact for
24 hours (or

 Page 262
less if death occurs within 24 hours) with the bare skin of albino
rabbits weighing between two and three kilograms each.
(c) A chemical that has a median lethal concentration (LC30) in air of
more than 200 parts per million but not more than 2,000 parts per
million by volume of gas or vapor, or more than two milligrams per
liter but not more than 20 mill rams per liter of mist, fume, or duet,
when administered by continuous inhalation for one hour (or less if
death occurs within one hour) to albino rats weighing between 200
and 300 grams each.
7. Target organ effects.
The following is a target organ categorization of effects which may
occur, including examples of signs and symptoms and chemicals
which have been found to cause such effects. These examples are
presented to illustrate the range and diversity of effects and hazards
found in the workplace, and the broad scope employers must consider
in this area. but are not intended to be all-inclusive.
a. Hepatotoxins: Chemicals which produce liver damages
Signs & Symptoms: Jaundice; liver enlargement
Chemicals: Carbon tetrachloride; nitrosamines
b. Nephrotoxins: Chemicals which produce kidney damage
Signs & Symptoms: Edema; proteinuria
Chemicals: Halogenated hydrocarbons; uranium
c. Neurotoxins: Chemicals which produce their primary toxic effects
on the nervous system
Signs & Symptoms: Narcosis; behavioral changes; decrease in motor
functions
Chemicals: Mercury; carbon disulfide
d. Agents which act on the blood or hematopoletic system: Decrease
hemoglobin function; deprive the body tissues of oxygen
Signs & Symptoms: Cyanosis; loss of consciousness
Chemicals: Carbon monoxide; cyanides
e. Agents which damage the lung: Chemicals which irritate or damage
pulmonary tissue
Signs & Symptoms: Cough; tightness in chest; shortness of breath
Chemicals: Silica; asbestos
f. Reproductive toxins: Chemicals which affect the reproductive
capabilities including chromosomal damage (mutations) and effects
on fetuses (teratogenesis)
Signs & Symptoms: Birth defects; sterility
Chemicals: Lead; DBCP
g. Cutaneous hazards: Chemicals which affect the dermal layer of the
body
Signs & Symptoms: Defatting of the skin; rashes; irritation
Chemicals: Ketones; chlorinated compounds
h. Eye hazards: Chemicals which affect the eye or visual capacity
Signs & Symptoms: Conjunctivitis; corneal damage
Chemicals: Organic solvents; acids
Appendix B to § 1910.1200Hazard Determination (Mandatory)
The quality of a hazard communication program is largely dependent
upon the adequacy and accuracy of the hazard determination. The
hazard determination requirement of this standard is performance-
oriented. Chemical manufacturers. importers. and employers
evaluating chemicals are not required to follow any specific methods
for determining hazards, but they must be able to demonstrate that
they have adequately ascertained the hazards of the chemicals
produced or imported in accordance with the criteria set forth in this
Appendix.
Hazard evaluation is a process which relies heavily on the
professional Judgment of the evaluator, particularly in the area of
chronic hazards. The performance-orientation of the hazard
determination does not diminish the duty of the chemical
manufacturer, importer or employer to conduct a thorough evaluation.
examining all relevant data and producing a scientifically defensible
evaluation. For purposes of this standard, the following criteria shall
be used in making hazard determinations that meet the requirements
of this standard.
1. Carcinogenicity: As described in paragraph (d)(4) of this section
and Appendix A of this section, a determination by the National
Toxicology program, the International Agency for Research on
Cancer, or OSHA that a chemical is a carcinogen or potential
carcinogen will be considered conclusive evidence for purposes of
this section. In addition, however, all available scientific data on
carcinogenicity must be evaluated in accordance with the provisions
of this Appendix and the requirements of the rule.
2. Human data: Where available, epidemiological studies and case
reports of adverse health effects shall be considered in the evaluation.
3. Animal data: Human evidence of health effects in exposed
populations is generally not available for the majority of chemicals
produced or used in the workplace. Therefore, the available results of
toxicological testing in animal populations shall be used to predict the
health effects that may be experienced by exposed workers. In
particular, the definitions of certain acute hazards refer to specific
animal testing results (see Appendix A).
4. Adequacy and redwing of data. The results of any studies which are
designed and conducted according to established scientific principles,
and which report statistically significant conclusions regarding the
health effects of a chemical, shall be a sufficient basis for a hazard
determination and reported on any material safety data sheet. In vitro
studies alone generally do not form the Basle for a definitive finding
of hazard under the HAS since they have · positive or negative result
rather than a statistically significant finding.
The chemical manufacturer, importer, or

 Page 263
employer may also report the results of ocher scientifically valid
studies which tend to /refute the findings of hazard.
Appendix C to § 1910.1200Information Sources (Advisory)
The following is a list of available data sources which the chemical
manufacturer, importer, distributor, or employer may wish to consult
to evaluate the hazards of chemicals they produce or import:
Any information in their own company files, such as toxicity testing
results or illness experience of company employees.
Any information obtained from the supplier of the chemical, such as
ma-aerial safety data sheets or product. safety bulletins.
Any pertinent information obtained from the following source list
(latest editions should be used):
Condensed Chemical Dictionary
Van Nostrand Reinhold Co., 135 West 50th Street, New York, NY
10020.
The Merck Index: An Encyclopedia of Chemicals and Drugs
Merck and Company, Inc., 126 E. Lincoln Ave., Rahway, NJ 07065.
IARC Monographs on the Evaluation of the Carcinogenic Risk of
Chemicals to Man
Geneva: World Health Organization, International Agency for
Research on Cancer, 1972-Present. (Multivolume work). Summaries
are available in supplement volumes. 49 Sheridan Street, Albany, NY
12210.
Industrial Hygiene and Toxicology, by F.A. Patty
John Wiley & Sons, Inc., New York, NY (Multivolume work).
Clinical Toxicology of Commercial Products
Gleason, Goseelin, and Rodge.
Casarett and Doull's Toxicology; The Basic Science of Poisons
Doull, Klaassen, and Amdur, Macmillan Publishing Co., Inc., New
York, NY.
Industrial Toxicology, by Alice Hamilton and Harriet L. Hardy
Publishing Sciences Group, Inc., Acton, MA.
Toxicology of the Eye, by W. Morton Grant
Charles C. Thongs, 301-327 East Lawrence Avenue, Springfield, IL.
Recognition of Health Hazards in Industry
William A. Burgess. John Wiley and Sons, 605 Third Avenue, New
York, NY 10158.
Chemical Hazards of the Workplace
Nick H. Proctor and James P. Hughes, J.P. Lipincott Company. 6
Winchester Terrace, New York, NY 10022.
Handbook of Chemistry and Physics
Chemical Rubber Company, 18901 Cranwood Parkway, Cleveland,
OH 44128.
Threshold Limit Values for Chemical Substances and Physical Agents
in the Work Environment and Biological Exposure Indices with
Intended Changes
American Conference of Governmental Industrial Hygienists
(ACGIH), 6500 Glenway Avenue, Bldg. D-5, Cincinnati, OH 45211.
Information on the physical hazards of chemicals may be found in
publications of the National Fire Protection Association, Boston, MA.
NOTE: The following documents may be purchased from the
Superintendent of Documents, U.S. Government Printing Office
Washington, DC 20402.
Occupational Health Guidelines
NIOSH/OSHA (NIOSH Pub. No. 81-123).
NIOSH Pocket Guide to Chemical Hazards
NIOSH Pub. No. 90-117.
Registry of Toxic Effects of Chemical Substances
(Latest edition)
Miscellaneous Documents published by the National Institute for
Occupational Safety and Health:
Criteria documents.
Special Hazard Reviews.
Occupational Hazard Assessments.
Current Intelligence Bulletins.
OSHA's General Industry Standards (29 CFR Part 1910)
NTP Annual Pert on Carcinogens and Summary of the Annual Report
on Carcinogens.
National Technical Information Service (NTIS). 5285 Port Royal
Road, Springfield. VA 22161; (703) 487-4650.
Appendix D to § 1910.1200Definition of "Trade Secret" (Mandatory)
The following is a reprint of the Restatement of Torts section 757,
comment b (1939):
b. Definition of trade secret. A trade secret may consist of any
formula, pattern, devise or compilation of information which is used
in one's business, and which rives him an op-

 Page 264
Bibliographic data bases services provider File name
Bibliographic Retrieval Services (BRS), Biosis Previews
1200 Route 7, Latham, NY 12110.
CA Search
Mediars
NTIS
Hazardlins
American Chemical
Society
Journal
Excerpts Medica
IRCS Medical
Science Journal
Pre-Med
Inti Pharmaceutical
Abstracts
Paper Chem
Lockheed-DIALOG Information Service, Biosis Prev. Files
Inc., 3460 Hillview Avenue, Palo Atto,
CA 94304.
CA Search Files
CAB Abstracts
Chemical Exposure
Chemname
Chemsis Files
Chemzero
Embase Files
Environmental
Bibliographic
Enviroline
Federal Research in
 Progress
IRL Life Science
Collection
NTIS
Occupational Safety
and Health
Paper Chem
SDC-ORBIT, SDC Information Service, CAS Files
2500 Colorado Avenue, Santa Monica,
CA 90405
Chemdex, 2, 3
NTIS
National Library of Medicine____ Hazardous
Substances Data
Bank (NSDB)
Department of Health and Human Medline Files
Services, Public Health Service National
Institutes of Health, Bethescda, MD
20209.
Toxline Files
Cancerfit
RTECS
Chemline
Pargamon international information Leboratory Bulletin
Corp., 1340 Old Chain Bridge Rd.,
McLean, VA 22101.
Quested, Inc., 1625 Eye Street, NW, Suite CIS/ILO
818, Washington, DC 20006.
Cancernal
Chemical Information System ICI (ICtS). Structure and
Bureau of National Altars. 1133 15th Nomenclature
Street, NW, Suite 300, Washington, DC Search System
20005. (SANSS)
 Acute Toxicity
(RTECS)
Clincial Toxicology
of Commercial
Technical Products
Oil and Harardous
Materials Technical
Assistance Data
System
CCRIS
CESARS
Occupational Health Services, 400 Pleza MSDS
Drive, Secaucus, NJ 07094.
Hazardline

portunlty to obtain an advantage over competitors who do not know or

use it. It may be a formula for a chemical compound, a process of
manufacturing, treating or preserving materials, a pattern for a
machine or other device, or a list of customers. It differs from other
secret information In a business (see s759 of the Restatement of Torts
which is not Included in this Appendix) in that it is not simply
information as to single or ephemeral events in the conduct of the
business, as, for example, the amount or other terms of a secret bid for
a contract or the salary of certain employees, or the security
investments made or contemplated, or the date fixed for the
announcement of a new policy or for bringing out a new model or the
like. A trade secret is a process or device for continuous use in the
operations of the business. Generally it relates to the production of
goods, as, for example, a machine or formula for the production of an
article. It may, however, relate to the sale of roods or to other
operations in the business, such as a code for determining discounts,
rebates or ocher concessions in a price list or catalogue, or a list of
specialized customers, or a method of bookkeeping or other office
management.
Secrecy. The subject matter of a trade secret must be secret. Matters of
public knowl-

 Page 265
edge or of general knowledge in an industry cannot be appropriated
by one as his secret. Matters which are completely disclosed by the
woods which one markets cannot be his secret. Substantially, a trade
secret is known only in the particular business in which it is used. It is
not requisite that only the proprietor of the business know it. He may,
without losing his protection, communicate it to employees involved
in its use. He may likewise communicate it to others pledged to
secrecy. Others may also know of it independently, as, for example,
when they have discovered the process or formula by independent
invention and are keeping it secret. Nevertheless, a substantial
element of secrecy must exist, so that, except by the use of improper
means, there would be difficulty in acquiring the information. An
exact definition of a trade secret is not possible. Some factors to be
considered in determining whether given information is one's trade
secret are: (1) The extent to which the information is known outside of
his business; (2) the extent to which It is known by employees and
others involved in his business; (3) the extent of measures taken by
him to guard the secrecy of the information; (4) the value of the
information to him and his competitors; (5) the mount of effort or
money expended by him in developing the information; (6) the ease or
difficulty with which the information could be properly acquired or
duplicated by others.
Novelty and prior art. A trade secret may be a device or process
which is patentable; but it need not be that. It may be a device or
proem which is clearly anticipated in the prior art or one which is
merely a mechanical Improvement that a good mechanic can make.
Novelty and invention are not requisite for a trade secret us they are
for patentability. These requirements are essential to patentability
because a patent protects against unlicensed use of the patented device
or process even by one who discovers it properly through Independent
research. The patent monopoly is a reward to the inventor. But such is
not the case with a trade secret. Its protection is not based on a policy
of rewarding or otherwise encouraging the development of secret
processes or device. The protection is merely against breach of faith
and reprehensible means of learning another's secret. For this limited
protection it is not appropriate to require also the kind of novelty and
invention which is a requisite of patentability. The nature of the secret
is, however, an important factor in determining the kind of relief that
is appropriate against one who is subject to liability under the rule
stated in this Section. Thus, if the secret consists of a device or
process which Is a novel invention, one who acquires the secret
wrongfully is ordinarily enjoined from further use of it and is required
to account for the profits derived from his past use. If, on the other
hand, the secret consists of mechanical improvements that a good
mechanic can make without resort to the secret, the wrongdoer's
liability may be limited to damages, and an Injunction against future
use of the improvements made with the aid of the secret may be
inappropriate.
Appendix E to § 1910.1200(Advisory)Guidlines for Employer
Compliance
The Hazard Communication Standard (HCS) is based on a simple
conceptthat employees have both a need and a right to know the
hazards and Identities of the chemicals they are exposed to when
working. They also need to know what protective measures are
available to prevent adverse effects from occurring. The HCS is
designed to provide employees with the information they need.
Knowledge acquired under the HCS will help employers provide safer
workplaces for their employees. When employers have information
about the chemicals being used. they can take steps to reduce
exposures, substitute less hazardous materials, and establish proper
work practices. These efforts will help prevent the occurrence of
work-related illnesses and injuries caused by chemicals.
The HCS addresses the issues of evaluating and communicating
hazards to workers. Evaluation of chemical hazards involves a number
of technical concept, and is a process that requires the professional
Judgment of experienced expert. That's why the HCS is designed so
that employers who simply use chemicals, rather than produce or
import them, are not required to evaluate the hazards of those
chemicals. Hazard determination is the responsibility of the producers
and importers of the materials. Producers and importers of chemicals
are then required to provide the hazard Information to employers that
purchase them products.
Employers that don't produce or import chemicals need only focus on
those parts of the rule that deal with establishing a workplace program
and communicating information to their workers. This appendix is a
general guide for such employers to help them determine what's
required under the rule. It does not supplant or substitute for the
regulatory provisions, but rather provides a simplified outline of the
steps an average employer would follow to meet those requirements.
1. Becoming Familiar With The Rule.
OSHA has provided a simple summary of the HCS in a pamphlet
entitled "Chemical Hazard Communication." OSHA Publication
Number 3084. Some employers prefer to begin to become familiar
with the rule's requirements by reading this pamphlet. A copy may be
obtained from your local OSHA Area Of-tics, or by contacting the
OSHA Publications Office at (202) 523-9667.
The standard is long, and some parts of it are technical, but the basic
concepts are simple. In fact, the requirements reflect what many
employers have been doing for years. You may find that you are
already largely in compliance with many of the pro-

 Page 266
visions, and will simply have to modify your existing programs
somewhat. If you axe operating in an OSHA-approved Brats Plan
State, you must comply with the State's requirements, which may be
different than those of the Federal rule. Many of the State Plan States
had hazard communication or "right-to-know" laws prior to
promulgation of the Federal rule. Employers in State Plan States
should contact their State OSHA offices for more information
regarding applicable requirements.
The HCS requires information to be prepared and transmitted
regarding all hazardous chemicals. The HCS covers both physical
hazards (such as flammability), and health hazards (such as irritation,
lung damage, and cancer). Most chemicals used in the workplace have
some hazard potential, and thus will be covered by the rule.
One difference between this rule and many others adopted by OSHA
is that this one is performance-oriented. That means that you have the
flexibility to adapt the rule to the needs of your workplace, rather than
having to follow specific, rigid requirements. It also means that you
have to exercise more judgment to implement an appropriate and
effective program.
The standard's design is simple. Chemical manufacturers and
importers must evaluate the hazards of the chemicals they produce or
import. Using that information, they must then prepare labels for
containers, and more detailed technical bulletins called material safety
data sheets (MSDS).
Chemical manufacturers, importers, and distributors of hazardous
chemicals axe all required to provide the appropriate labels and
material safety data sheets to the employers to which they ship the
chemicals. The information is to be provided automatically. Every
container of hazardous chemicals you receive must be labeled, tagged,
or marked with the required information. Your suppliers must also
send you a properly completed material safety data sheet (MSDS) at
the time of the first shipment of the chemical, and with the next
shipment after the MSDS is updated with new and significant
information about the hazards.
You can rely on the information received from your suppliers. You
have no independent duty to analyze the chemical or evaluate the
hazards of it.
Employers that "use" hazardous chemicals must have a program to
ensure the information Is provided to exposed employees. "Use"
means to package, handle, react, or transfer. This is an intentionally
broad scope, and includes any situation where a chemical is present in
such a way that employees may be exposed under normal conditions
of use or in a foreseeable emergency.
The requirements of the rule that deal specifically with the hazard
communication program are found in this section in paragraphs (e),
written hazard communication program; (f), labels and other forms of
warning; (g), material safety data sheets; and (h), employee
information and training. The requirements of these paragraphs should
be the focus of your attention. Concentrate on becoming familiar with
them, using paragraphs (b), scope and application, and (c), definitions,
as references when needed to help explain the provisions.
There are two types of work operations where the coverage of the rule
is limited. These are laboratories and operations where chemicals are
only handled in sealed containers (e.g., a warehouse). The limited
provisions for these workplaces can be found in paragraph (b) of this
section, scope and application. Basically, employers having these
types of work operations need only keep labels on containers as they
are received; maintain material safety data sheets that are received,
and give employees access to them; and provide information and
training for employees. Employers do not have to have written hazard
communication programs and lists of chemicals for these types of
operations.
The limited coverage of laboratories and sealed container operations
addresses the obligation of an employer to the workers in the
operations involved, and does not affect the employer's duties as a
distributor of chemicals. For example, a distributor may have
warehouse operations where employees would be protected under the
limited sealed container provisions. In this situation, requirements for
obtaining and maintaining MSDSs are limited to providing access to
those received with containers while the substance is in the
workplace, and requesting MSDSs when employees request access for
those not received with the containers. However, as a distributor of
hazardous chemicals, that employer will still have responsibilities for
providing MSDSs to downstream customers at the time of the first
shipment and when the MSDS is updated. Therefore, although they
may not be required for the employees in the work operation, the
distributor may, nevertheless, have to have MSDSs to satisfy other
requirements of the rule.
2. Identify Responsible Staff
Hazard communication Is going to be a continuing program in your
facility. Compliance with the HCS is not a "one shot deal." In order to
have a successful program, it will be necessary to assign responsibility
for both the initial and ongoing activities that have to be undertaken to
comply with the rule. In some cases, these activities may already be
part of current job assignments. For example, site supervisors are
frequently responsible for on-the-job training sessions. Early
identification of the responsible employees, and involvement of them
in the development of your plan of action, will result in a more
effective program design. Evaluation of the effectiveness of your
program will also be enhanced by involvement of affected employees.
For any safety and health program, success depends on commitment
at every level of the organization. This is particularly true

 Page 267
for hazard communication. where success requires a change In
behavior. This will only occur If employers understand the program,
and are committed to its success, and if employees m motivated by the
people presenting the information to them.
3. Identify Hazardous Chemicals in the Workplace.
The standard requires a list of hazardous chemicals in the workplace
as part of the written hazard communication program. The list will
eventually serve as an inventory of everything for which an MSDS
must be maintained. At this point, however, preparing the list will
help you complete the rest of the program since it will give you some
idea of the scope of the program required for compliance in your
facility.
The best way to prepare a comprehensive list is to survey the
workplace. Purchasing records may also help, and certainly employers
should establish procedures to ensure that in the future purchasing
procedures re-suit In MSDSs being received before a material is used
in the workplace.
The broadest possible perspective should be taken when doing the
survey. Sometimes people think of "chemicals" as being only liquids
in containers. The HCS covers chemicals in all physical forms-liquids,
solids, gases, vapors, fumes. and mists-whether they are "contained"
or not. The hazardous nature of the chemical and the potential for
exposure are the factors which determine whether a chemical is
covered. If it's not hazardous, it's not covered. If there is no potential
for exposure (e.g., the chemical is inextricably bound and cannot be
released), the rule does not cover the chemical.
Look around. Identify chemicals in containers, including pipes, but
also think about chemicals generated in the work operations. For
example, welding fumes, dusts, and exhaust fumes are all sources of
chemical exposures. Read labels provided by suppliers for hazard
information. Make a list of all chemicals in the workplace that are
potentially hazardous. For your own Information and planning, you
may also want to note on the list the location(s) of the products within
the workplace, and an indication of the hazards as found on the label.
This will help you as you prepare the rest of your program.
Paragraph (b) of this section, scope and application, includes
exemptions for various chemicals or workplace situations. After
compiling the complete list of chemicals. you should review
paragraph (b) of this section to determine if any of the items can be
eliminated from the list because they are exempted materials. For
example, food, drugs, and coametics brought into the workplace for
employes consumption are exempt. So rubbing alcohol in the first aid
kit would not be covered.
Once you have compiled as complete a list as possible of the
potentially hazardous chemicals in the workplace, the next step is to
determine if you have received material safety data sheets for all of
them. Check your files against the inventory you have Just compiled.
If any are missing, contact your supplier and request one. It is a good
idea to document them requests, either by copy of a letter or a note
regarding telephone conversations. If you have MSDSs for chemicals
that are not on your list, figure out why. Maybe you don't use the
chemical anymore. Or maybe you missed it in your survey. Some
suppliers do provide MSDSs for products that are not hazardous.
These do not have to be maintained by you.
You should not allow employees to use any chemicals for which you
have not received an MSDS. The MSDS provides information you
need to ensure proper protective measures are implemented prior to
exposure.
4. Preparing and Implementing a Hazard Communication Program
All workplaces where employees are exposed to hazardous chemicals
must here a written plan which describes how the standard will be
Implemented in that facility. Preparation of a plan is not just a paper
exerciseall of the elements must be implemented in the workplace in
order to be In compliance with the rule. See paragraph (e) of this
section for the species requirements regarding written hazard
communication programs. The only work operations which do not
have to comply with the written plan requirements are laboratories
and work operations where employees only handle chemicals in
sealed containers. See paragraph (b) of this section, scope and
application, for the specific requirements for these two types of
workplaces.
The plan does not have to be lengthy or complicated. It is intended to
be a blueprint for implementation of your programan as-surface that
all aspects of the requirements have been addressed.
Many trade associations and other professional groups have provided
sample programs and other assistance materials to affected employers.
These have been very helpful to many employers since they tend to be
tailored to the particular Industry involved. You may wish to
investigate whether your industry trade groups have developed such
materials.
Although such general guidance may be helpful, you must remember
that the written program has to reflect what you are doing in your
workplace. Therefore, if you use a generic program it must be adapted
to address the facility it covers. For example, the written plan must list
the chemicals present at the site, indicate who is to be responsible for
the various aspects of the program in your facility. and indicate where
written materials will be made available to employees.
If OSHA inspects your workplace for compliance with the HCS. the
OSHA compliance officer will ask to see your written plan at the
outset of the inspection. In general, the following items will be
considered in evaluating your program.

 Page 268
The written program must describe how a the requirements for labels
and other forms of warning, material safety data sheets, and employee
information and training, are going to be met in your facility The
following discussion provides the type of information compliance
officers will be looking for to decide whether those elements of the
hazard communication program have been properly addressed:
A. Labels and Other Forms of Warning
In-plant containers of hazardous chemicals must be labeled, tagged, or
marked with the identity of the material and appropriate hazard
warnings. Chemical manufacturers, importers, and distributors are
require to ensure that every container of hazardous chemicals they
ship is appropriately labeled with such information and with the name
and address of the producer or other responsible party. Employers
purchasing chemicals can rely on the labels provided by their
suppliers. If the material is subsequently transferred by the employer
from a labeled container to another container, the employer will have
to label that container unless it is subject to the portable container
exemption. See paragraph (f) of tats section for specific labeling
requirements.
The primary information to be obtained from an OSHA-required label
Is an identity for the material, and appropriate hazard warnings. The
identity is any term which appears on the label. the MSDS, and the list
of chemicals, and thus links those three sources of information. The
identity used by the supplier may be a common or trade name ("Black
Maric Formula"), or a chemical name (1.1.1-trichloroethane). The
hazard warm nit is a brief statement of the hazard-cue effects of the
chemical ("flammable," "causes lung damage"). Labels frequently
contain other information, such as precautionary measures ("do not
use noir open flame''), but this information is provided voluntarily and
is not required by the rule. Labels must be legible, and prominently
displayed. There are no specific requirements for size or color, or any
specified text.
With these requirements in mind, the compliance officer will be
looking for the follow-ins types of information to ensure that labeling
will be properly implemented in your facility:
1. Designation of person(s) responsible for ensuring labeling of in-
plant containers:
2. Designation of person(s) responsible for ensuring labeling of any
shipped containers;
3. Description of labeling system(s) used;
4. Description of written alternatives to labeling of in-plant containers
(if used); and,
5. Procedures to review and update label information when necessary.
Employers that are purchasing and using hazardous chemicalsrather
than producing or distributing themwill primarily be concerned with
ensuring that every purchased container Is labeled. If materials are
transferred into other containers, the employer must ensure that these
are labeled as well, unless they fall under the portable container
exemption (paragraph (f)(7) of this section). In terms of labeling
systems, you can simply choose to use the labels provided by your
suppliers on the containers. These will generally be verbal text labels,
and do not usually include numerical rating systems or symbols that
require special training. The most important thing to remember is that
this is a continuing dutyall in-plant containers of hazardous chemicals
must always be labeled. Therefore, it is important to designate
someone to be responsible for ensuring that the labels are maintained
as required on the containers in your facility, and that newly
purchased materials are checked for labels prior to use.
B. Material Safety Dara Sheets
Chemical manufacturers and importers are required to obtain or
develop a material safety data sheet for each hazardous chemical they
produce or import. Distributors are responsible for ensuring that their
customer, are provided a copy of these MSDSs. Employers must have
an MSDS for each hazardous chemical which they use. Employers
may rely on the information received from their suppliers. The
specific requirements for material safety data sheets are in paragraph
(g) of this section.
There is no specified format for the MSDS under the rule, although
there are specific information requirements. OSHA has developed a
non-mandatory format. OSHA Form 174, which may be used by
chemical manufacturers and importer, to comply with the rule. The
MSDS must be in English. You are entitled to receive from your
supplier a data sheet which includes all of the Information required
under the rule. If you do not receive one automatically, you should
request one. If you receive one that is obviously inadequate, with, for
example, blank spaces that are not completed, you should request an
appropriately completed one. If your request for a data sheet or for a
corrected data sheet does not produce the information needed. you
should contact your local OSHA Area Office for assistance in
obtaining the MSDS.
The role of MSDSs under the rule is to provide detailed information
on each hazardous chemical, including its potential hazardous effects,
its physical and chemical characteristics, and recommendations for
appropriate protective measures. This information should be useful to
you as the employer responsible for designing protective programs, as
well as to the workers. If you are not familiar with material safety data
sheets and with chemical terminology, you may need to learn to use
them yourself. A glossary of MSDS terms may be helpful in this
regard. Generally speaking, most employers using hazardous
chemicals will primarily be concerned with MSDS information
regarding hazardous effects and recommended protective measures.
Focus on the sections of the MSDS that are applicable to your
situation.

 Page 269
MSDSs must be readily accessible to employees when they are in
their work areas during their workshifts. This may be accomplished in
many different ways. You must decide what is appropriate for your
particular workplace. Some employers keep the MSDSs in a binder in
a central location (e.g., in the pick-up truck on a construction site).
Others, particularly in workplaces with large numbers of chemicals,
computerise the information and provide access through terminals. As
long as employees can get the information when they need it, any
approach may be used. The employees must have access to the
MSDSs themselvessimply having a system where the information can
be read to them over the phone is only permitted under the mobile
worksite provision, paragraph (g)(9) of this section, when employees
must travel between worm during the shift. In this situation, they have
access to the MSDSs prior to leaving the primary work-site, and when
they return, so the telephone system is simply an emergency
arrangement.
In order to ensure that you have a current MSDS for each chemical in
the plant as required, and that employee access is provided, the
compliance officers will be looking for the following types of
information in your written program:
1. Designation of person(s) responsible for obtaining and maintaining
the MSDSs;
2. How such sheets are to be maintained in the workplace (e.g., in
notebooks in the work area(s) or in a computer with terminal access),
and how employees can obtain access to them when they are in their
work area during the work shift;
3. Procedures to follow when the MSDS is not received at the time of
the first shipment;
4. For producers, procedures to update the MSDS when new and
significant health information is found; and,
5. Description of alternatives to actual data sheets in the workplace, if
used.
For employers using hazardous chemicals, the most important aspect
of the written program in terms of MSDSs is to ensure that someone is
responsible for obtaining and maintaining the MSDSs for every
hazardous chemical in the workplace. The list of hazardous chemicals
required to be maintained as part of the written program will serve as
an Inventory. As new chemicals are purchased, the list should be
updated. Many companies have found it convenient to include on their
purchase orders the name and address of the person designated in their
company to receive MSDSs.
C. Employee Information and Training
Each employee who may be "exposed" to hazardous chemicals when
working must be provided information and trained prior to Initial
assignment to work with a hazardous chemical, and whenever the
hazard changes. "Exposure" or "exposed" under the rule means that
"an employee is subjected to a hazardous chemical in the course of
employment through any route of entry (inhalation, ingestion, skin
contact or absorption, etc.) and Includes potential (e.g., accidental or
possible) exposure." See paragraph (h) of this section for specific
requirements. Information and training may be done either by
Individual chemical, or by categories of hazards (such as flammability
or carcinogenicity). If there are only a few chemicals in the
workplace, then you may want to discuss each one Individually.
Where there are large numbers of chemicals, or the chemicals change
frequently, you will probably want to train generally based on the
hazard categories (e.g., flammable liquids, corrosive materials,
carcinogens). Employees will have access to the substance-specific
information on the labels and MSDSs.
Information and training is a critical part of the hazard communication
program. Information regarding hazards and protective measures are
provided to workers through written labels and material safety data
sheets. However, through effective information and training, workers
will learn to read and understand such information, determine how it
can be obtained and used in their own workplaces, and understand the
risks of exposure to the chemicals in their workplaces as well as the
ways to protect themselves. A properly conducted training program
will ensure comprehension and understanding. It Is not sufficient to
either Just read material to the workers, or simply hand them material
to read. You want to create a climate where workers feel free to ask
questions. This will help you to ensure that the information is
understood. You must always remember that the underlying purpose
of the HCS is to reduce the incidence of chemical source illnesses and
injuries. This will be accomplished by modifying behavior through the
provision of hazard information and information about protective
measure. If your program works, you and your workers will better
understand the chemical hazards within the workplace. The
procedures you establish regarding, for example, purchasing, storage.
and handling of these chemicals will improve, and thereby reduce the
risks posed to employees exposed to the chemical hazards involved.
Furthermore, your workers' comprehension will also be increased, and
proper work practices will be followed in your workplace.
If you are going to do the training yourself, you will have to
understand the material and be prepared to motivate the workers to
learn. This is not always an easy task, but the benefits are worth the
effort. More information regarding appropriate training can be found
in OSHA Publication No. 2254 which contains voluntary training
guidelines prepared by OSHA's Training Institute. A copy of this
document is available from OSHA's Publications Office at (202) 219-
4667.
In reviewing your written program with regard to information and
training, the following items need to be considered:

 Page 270
1. Designation of person(s) responsible for conducting training;
2. Format of the program to be used (audiovisuals, classroom
instruction, etc.);
3. Elements of the training program (should be consistent with the
elements in paragraph (h) of this section); and,
4. Procedure to train new employees at the time of their initial
assignment to work with a hazardous chemical, and to train
employees when a new hazard is introduced into the workplace.
The written program should provide enough details about the
employer's plans in this area to assess whether or not a good faith
effort is being made to train employees. OSHA does not expect that
every worker will be able to recite all of the information about each
chemical in the workplace. In general, the most important aspects of
training under the HCS are to ensure that employees are aware that
they are exposed to hazardous chemicals, that they know how to read
and use labels and material safety data sheets, and that, as a
consequence of learning this information, they are following the
appropriate protective measures established by the employer. OSHA
compliance officers will be talking to employees to determine if they
have received training, if they know they are exposed to hazardous
chemicals, and if they know where to obtain substance-specific
information on labels and MSDSs.
The rule does not require employers to maintain records of employee
training, but many employers choose to do so. This may help you
monltor your own program to ensure that all employees are
appropriately trained. If you already have a training program, you may
simply have to supplement it with whatever additional information is
required under the HCS. For example, construction employers that are
already in compliance with the construction training standard (29 CFR
1926.21) will have little extra training to do.
An employer can provide employees information and training through
whatever means are found appropriate and protective. Although there
would always have to be some training on-site (such as informing
employees of the location and availability of the written program and
MSDSs), employee training may be satisfied in part by general
training about the requirements of the HCS and about chemical
hazards on the job which is provided by, for example, trade
associations, unions, colleges, and professional schools. In addition,
previous training, education and experience of a worker may relieve
the employer of Mine of the burdens of informing and training that
worker. Regardless of the method relied upon, however, the employer
is always ultimately responsible for ensuring that employees are
adequately trained. If the compliance officer finds that the training is
deficient, the employer will be cited for the deficiency regardless of
who actually provided the training on behalf of the employer.
D. Other Requirements
In addition to these specific items, compliance officers will also be
asking the following questions in assessing the adequacy of the
program:
Does a list of the hazardous chemicals exist in each work area or at a
central location?
Are methods the employer will use to inform employees of the
hazards of non-routine tasks outlined?
Are employees informed of the hazards associated with chemicals
contained in unlabeled pipes In their work areas?
On multi-employer worksites, has the employer provided other
employers with information about labeling systems and precautionary
measures where the other employers have employees exposed to the
initial employer's chemicals?
Is the written program made available to employees and their
designated representatives?
If your program adequately addresses the means of communicating
information to employees in your workplace, and provides an-ewers
to the basic questions outlined above, it will be found to be in
compliance with the rule.
5. Checklist for Compliance
The following checklist will help to ensure you are in compliance
with the rule: Obtained a copy of the rule.____________
Read and understood the requirements.
____
Assigned responsibility for tasks.____
Prepared an inventory of chemicals.____
Ensured containers are labeled.____
Obtained MSDS for each chemical.____
Prepared written program.____
Made MSDSs available to workers.____
Conducted training of workers.____
Established procedures to maintain current program.____
Established procedures to evaluate effectiveness.____
6. Further Assistance
If you have a question regarding compliance with the HCS, you
should contact your local OSHA Area Office for assistance. In
addition, each OSHA Regional Office has a Hasard Communication
Coordinator who can an-ewer your questions. Free consultation
services are also available to assist employers, and information
regarding these services can be obtained through the Area and
Regional offices as well.
The telephone number for the OSHA office closest to you should be
listed in your local telephone directory. If you are not able to obtain
this information, you may contact OSHA's Office of Information and
Consumer Affairs at (202) 219-8151 for further assistance in
identifying the appropriate contacts.
[59 FR 6170, Feb. 9, 1994, as amended at 59 FR 17479, Apr. 13,
1994; 50 FR 65948, Dec. 22, 1994]

 Page 271
§1910.1201 Retention of DOT markings, placards and labels.
(a) Any employer who receives a package of hazardous material
which is required to be marked, labeled or placarded in accordance
with the U. S. Department of Transportation's Hazardous Materials
Regulations (49 CFR Parts 171 through 180) shall retain those
markings, labels and placards on the package until the packaging is
sufficiently cleaned of residue and purged of vapors to remove any
potential hazards.
(b) Any employer who receives a freight container, rail freight car,
motor vehicle, or transport vehicle that is required to be marked or
placarded in accordance with the Hazardous Materials Regulations
shall retain those markings and placards on the freight container, rail
freight car, motor vehicle or transport vehicle until the hazardous
materials which require the marking or placarding are sufficiently
removed to prevent any potential hazards.
(c) Marking, placards and labels shall be maintained in a manner that
ensures that they are readily visible.
(d) For non-bulk packages which will not be reshipped, the provisions
of this section are met if a label or other acceptable marking is affixed
in accordance with the Hazard Communication Standard (29 CFR
1910.1200).
(e) For the purposes of this section. the term "hazardous material" and
any other terms not defined in this section have the same definition as
in the Hazardous Materials Regulations (49 CFR Parts 171 through
180).
[59 FR 36700, July 19. 1994]

 Page 273

Suggested Readings and Sources

 Page 275

Chapter References
Chapter 2
Carlson, Roger. Real Estate Aspects of Public Warehouse
Management. Park Ridge, Ill.: American Warehouse Association,
1995.
Chapter 4
McBride, Jim. The Public Warehouse Selection Guide Book.
Warehouse Education and Research Council, 1100 Jorie Boulevard,
Suite 170, Oak Brook, Ill. 60521; phone (708) 990-0001.
For information on the T&D Contract Logistics Data Base listing
facilities providing outsourcing services, contact the following:
Transportation and Distribution magazine, Penton Education
Division, 1100 Superior Avenue, Cleveland, Ohio 44114-2543; phone
(800) 321-7003, fax (216) 696-4369.
Chapters 5 and 6
Cullinane, Thomas P, James A. Tompkins, and Jerry D. Smith. How
to Plan and Manage Warehouse Operations (Second Edition).
American Management Association, New York, N.Y., 1994.
Ward, Richard E. Fundamentals of Inventory Management and
Control (Second Edition). New York, N.Y.: American Management
Association, 1990.
Napolitano, Maida, and the staff of Gross Associates. The Time, Space
& Cost Guide to Better Warehouse Design. 1994. Distribution

 Page 276
Center Management, 215 Park Avenue South, Suite 1301, New York,
N.Y. 10003; phone (212) 228-0246.
Ackerman, Ken. Warehousing ProfitablyA Manager's Guide.
Columbus, Ohio: Ackerman Publications, 1994.
Allegri, T. H. Managing Warehouse and Distribution Operations.
Englewood Cliffs, N.J.: Prentice-Hall, 1994.
Plossl, George W. Production and Inventory Control: Principles and
Techniques. Englewood Cliffs, N.J.: Prentice-Hall, 1985.
Tompkins, James A., and Jerry D. Smith. The Warehouse
Management Handbook. New York: McGraw-Hill, Inc., 1988.
Chapter 7
Smith, Sue, Alfred H. McKinley, and William J. Augello. Freight
Claim Prevention in Plain English. Huntington, N.Y.: Transportation
Consumer Protection Council (formerly Transportation Claims and
Prevention Council), 1995.
Chapter 8
Articles and overviews of ISO 9000 standards and processes can be
found in a number of trade journals, among them:
Zuckerman, Amy. "ISO 9000: Present Benefits and Future
Challenges," Journal of Commerce. Special Report by Traffic World,
June 26, 1995, p. 3a.
Harrington, Lisa. "ISO 9000: Setting the Standard for Quality," In-
bound Logistics, October 1994.
"The New Look at Quality." Purchasing, January 1996, p. 49.
Conway, John. "ISO 9000 Certification: International Standards
Cover Quality Systems." CPI Purchasing, March 1992, p. 46.
Detailed information on ISO 9000 standards is available from:
American National Standards Institute (ANSI), 11 West 42nd Street,
New York, N.Y. 10036; phone (212) 642-4900.

 Page 277
American Society for Quality Control (ASQC), Customer Service
Department, P.O. Box 3066, Milwaukee, Wisc. 53201; phone (800)
952-6587.
Chapter 9
Towle, William H. Contract Warehousing: Suggested Provisions for
Creating a Warehousing Agreement. Park Ridge, Ill.: American
Warehouse Association, 1992.
For examples of predetermined time elements for warehousing
operations, standard time values, and other cost allocation routines
refer to the following books and publications:
Cullinane, Thomas P., James A. Tompkins, and Jerry D. Smith. How
to Plan and Manage Warehouse Operations. New York: American
Management Association, 1994.
Gagnon, Eugene D. Using Work Measurement for Warehouse
Management. Oak Brook, Ill.: Warehouse Education and Research
Council, 1993.
Harrington, Lisa H., and John A. Bohm. How Public Warehouses
Price Their Services. Warehouse and Education Research Council,
1991.
Napolitano, Maida, and the staff of Gross Associates. The Time, Space
& Cost Guide to Better Warehouse Design. 1994. Distribution Center
Management, 215 Park Avenue South, Suite 1301, New York, N.Y.
10003; phone (212) 228-0246.
Chapter 10
Information on bar code usage is available from the following:
American Management Association, course #4102: How to Integrate
Bar Code Technology Into Manufacturing, Distribution and Retail
Operations. William E. Shultz, Vice President, Systems Applications,
Laserlight Systems, Inc. American Management Association, 1601
Broadway, New York, N.Y. 10019.
Description of Uniform Symbols and Other Data, available from
Automatic Identification Manufacturers (AIM), 1326 Freeport Road,
Pittsburgh, Penn. 15238.

 Page 278
American National Standards Institute/American Society of Technical
Engineers (ANSI/ASTE), United Engineering Center, 345 East Street,
New York, N.Y. 10017; phone (212) 705-7805.
U.S. Department of Defense Military Standards, LOGMARS.
Available from Darcom Packaging, Storage, and Containerization
Center, Tobyhanna, Penn. 18466.
Uniform Code Council (UPC/UPCC), P.O. Box 1244, Dayton, Ohio
45401-1244.
Emmelhainz, Margaret A., Ph.D. EDIA Total Management Guide.
New York: International Thomson Computer Press, 1992.
The following journals are available free of charge to qualified
subscribers:
Modern Materials Handling, the official publication of the Materials
Handling and Management Society, P.O. Box 7500, Highlands Ranch,
Colo. 80126-7500; Editorial Offices: 275 Washington Street, Newton,
Mass. 02158; phone (617) 964-3030. This periodical publishes an
annual suppliers' directory for all warehouse services and
requirements, including warehouse management systems and
information technology, with bar coding and all related software and
hardware.
Materials Handling Engineering, Penton Publishing, Penton
Education Division, 1100 Superior Avenue, Cleveland, Ohio 44114-
2543; phone (800) 321-7003, fax (216) 696-4369.
Warehousing Management, Chilton Publishing Company, Chilton
Way, Radnor, Penn. 19089; phone (610) 964-4000.
DistributionThe Transportation and Business Logistics Magazine,
Chilton Company, One Chilton Way, Radnor, Penn. 19089; phone
(610) 964-4386, fax (610) 964-4381. This periodical publishes an
Annual Warehousing Guide Issue listing warehousing and distribution
centers and service organizations including sales associations, contract
warehousing, general merchandise warehousing, and refrigerated
warehousing companies. In addition, Distribution publishes annual
buyers' guides for warehousing equipment and technologies.
Logistics Management, a publication of Traffic Management, Cahners
Publishing Company, 275 Washington Street, Newton, Mass. 02158-
1630; phone (617) 558-4473, fax (617) 558-4327. This periodical
pub-

 Page 279
lishes an annual American Public Warehouse Register, listing
warehouse companies in the U.S., Canada, and Mexico.
ID Systems, North American Publishing, 174 Concord Street,
Peterboro, N.H. 03458.
Chapter 12
Barrett, Colin. Manager's Guide to Freight Loss and Damage Claims.
Washington, D.C.: Thomson Press, 1989.
Towle, William H. Contract Warehousing: Suggested Provisions for
Creating a Warehousing Agreement. Park Ridge, Ill.: American
Warehouse Association, 1992.
Smith, Sue, Alfred McKinley, and William J. Augello. Freight Claim
Prevention in Plain English. Huntington, N.Y.: Transportation
Consumer Protection Council.
Recommended Reading
Readers interested in pursuing specific information are encouraged to
follow the special issues of major trade magazines and obtain catalogs
of publications, education and training seminars, and from industry
associations, including the following:
Journal of Business Logistics, CLM Publications, 2803 Butterfield
Road, Suite 380, Oak Brook, Ill. 60521-1156; phone (708) 630-0985.
Depositor-Warehouseman Agreements (including Recommended
Agreement Forms), 1991; American Warehouse Association, 1300
West Higgins Road, Suite 111, Park Ridge, Ill. 60068; phone (708)
292-1891, fax (708) 292-1896.
Among the many publications and papers generated by the Warehouse
Education and Research Council (WERC) are the following:
The Financial Evaluation of Warehousing Options: An Examination
and Appraisal of Contemporary Practices, WERC, 1988.
A Profit Center Approach to Warehousing, WERC, 1990.
Basic Economic Analysis for Warehouse Decisions, WERC, 1989.
Using Work Measurement for Warehouse Management, WERC,
1993.

 Page 280
The following texts are available through the American Warehouse
Association, Park Ridge, Ill.:
American Warehouse Association Resource Manual, AWA. This
manual includes a membership directory, sample legal forms,
approved forklift operating standards, guide to loss prevention,
information technology, and various industry articles.
Contract Warehousing: Suggested Provisions for Creating a Contract
Warehouse Agreement, AWA, 1992. Contract warehousing is one of
the fastest growing industry segments. This book provides assistance
on the elements, structure, and content of various forms of contract
warehouse agreements.
Trends and Practices in the Public/Contract Warehouse Industry,
AWA, 1994. This study examines evolving industry trends in
warehousing profitability, value-added services, and marketing.
The Distribution Management Handbook, James A. Tompkins and
Dale Harmeling, editors, 1994.
Every Manager's Guide to Information TechnologyA Glossary of Key
Terms and Concepts for Today's Business Leader, Peter G. W. Keen,
1991. This book describes the meaning of and concepts of
management and the everyday terms of information technology.
Hazard Communications Manual: Compliance Guide to the OSHA
Hazard Communication Standard, Small Business Legislative
Council. This manual assists warehouse operators in establishing and
implementing compliance programs.
The Technology Pays Off, Gerald M. Hoffman. This book shows how
to identify and define information requirements and design
information systems.
Warehouse Distribution and Operations Handbook, David A.
Mulcahy. This expert guide offers a step-by-step approach to creating
a totally integrated warehouse system.
Warehousing ProfitablyA Manager's Guide, Kenneth B. Ackerman,
1994. This book offers day-to-day operating hints, tips, and practical
recommendations for safe and efficient warehouse operation from a
leading expert in the field.
Total QualityAn Executive's Guide for the 1990s. Ernst & Young,
1990. This books provides the insights of a worldwide consulting firm
for top management; it addresses business education requirements,
cost management, systems requirements, and performance
measurement.

 Page 281

Trade Organizations and Seminars

American Society of Transportation & Logistics, 216 Church Street,
Lockhaven, Penn. 17745; phone (717) 748-8515, fax (717) 748-9118.
Regional chapters and roundtables.
American Trucking Associations, 2200 Mill Street, Alexandria, Va.
22314; phone (703) 838-1700, fax (703) 684-5720. This organization
publishes an extensive catalog listing books, videos, training tools,
forms, and regulatory publications.
American Warehouse Association, 1300 West Higgins Road, Suite
111, Park Ridge, Ill. 60068; phone (708) 292-1891, fax (708) 292-
1896. This organization publishes an annual education catalog, listing
association publications, reprints, audio and video cassettes,
marketing tools, books, and seminars.
Association of American Railroads, 50 F Street, N.W., Washington,
D.C. 20024; phone (202) 639-2100, fax (202) 639-5546.
Canadian Association of Warehousing and Distribution Services, 161
Holmcrest Trail, West Hill, ON M1C 1W2, Canada; phone (416) 282-
2757.
Council of Logistics Management, 2803 Butterfield Road, Suite 380,
Oak Brook, Ill. 60521; phone (708) 574-0985, fax (708) 574-8989.
Best known for its regional logistics roundtable meetings and its
comprehensive annual conferences and exhibitions with numerous
workshops in all logistics disciplines. The CLM publishes the Journal
of Business Logistics, a compendium of research papers and
monographs contributed by well-known experts, many of them from
leading U.S. universities in the fields of logistics, transportation,
distribution, and warehousing.

 Page 282
International Association of Refrigerated Warehouses, 7215
Wisconsin Ave., Suite 1200 N., Bethesda, Md. 20814; phone (301)
652-5674.
International Safe Transit Association, 1400 Abbott Road, Suite 310,
East Lansing, Mich. 48823-2900; phone (517) 333-3437.
Hazardous Materials Advisory Council, 1012 14th Street N.W.,
Washington, D.C. 20005; phone (202) 728-1460, fax (202) 728-1459.
National Association of Rail Shippers, 50 F Street, N.W.,
Washington, D.C. 20001, phone (202) 639-2560, fax (202) 639-2558.
National Bonded Warehouse Association, 444 Brickell Road, Miami,
Fla. 33131; phone (305) 374-1252.
National Freight Claims and Security Council, 2200 Mill Street,
Alexandria, Va. 22314; phone (703) 838-1700, fax (703) 684-5720.
National Motor Freight Traffic Association, 2200 Mill Street,
Alexandria, Va. 22314; phone (703) 838-1700, fax (703) 684-5720.
Occupational Safety and Health Administration (OSHA), Department
of Labor, Washington, D.C. Publishes the Code of Federal
Regulations, including Titles 29-Labor and 49-Transportation.
Transportation Consumer Protection Council, 120 Main Street,
Huntington, N.Y. 11743-6906; phone (516) 549-8984, fax (516) 549-
8962. Addresses legal considerations in transportation and
distribution. Legal publications and seminars.
Warehouse Education and Research Council, 1100 Jorie Blvd., Suite
170, Oak Brook, Ill. 60521-9754; phone (708) 990-0001, fax (708)
990-0256. Research papers and monographs, publications, and
seminars.
University of Wisconsin, Management Institute, 975 University
Avenue, Madison, Wisc. 53706-1323; phone (900) 292-8964. This is
one of the leading universities specializing in logistics.

 Page 283

Index
A
activities cycle in warehouse, 42-43
activity-based costing, 123-124
actual placement, 46
adjustable lease, 13-14
advance notice, of warehouse deliveries, 43-44, 46
advertisement of sale, by warehouseman, 178-179
American Society of Transportation & Logistics, 281
American Trucking Association, 77, 281
American Warehouse Association, 281
annual physical inventory, 80
ANSI/ASQC Q90-94 series, 111
appointments, for warehouse deliveries, 43-44, 46
assets, inventory as, 2
assignment, as contract or lease component, 131
Association of American Railroads, 77
attachment of goods, covered by negotiable documents, 187
audit trail, 44, 95
B
bailee, 170
banding, 65
bar code scanners, 51, 65, 132
batch picking, 61, 65
bill of lading, 44, 87, 90, 91-96, 241-246
contract terms and conditions, 244-246
distribution of forms, 95-96
general obligations, 180-182
hazardous material description on, 94
irregularities in issuance, 180
lost or missing, 187
negotiability, 171-172
negotiation and transfer, 182-186
preparation by depositor, 92
preparation by warehouse personnel, 92, 94 -95
terms and conditions summary, 242-243
warranties on negotiation or transfer, 186
blocking, 76-77
bonded warehouses, 8
contract terms and conditions, 213
bracing, 76-77
breakage, 104
bulk freight, 76
''burden of proof," 156
of truck carriers, 157-158
C
Canadian Association of Warehousing and Distribution Services, 281
capital, and private warehousing, 9-10
cargo security advisory standards, 189-206
Carmack amendment, to Interstate Commerce Act, 156
carrier points list, 102
carrier roster, 101
carriers
liability of, 155-164
releasing goods to customer pickup, 95
single-sourcing of, 77
carrying costs, 2-3
Center of Balance package marking, 73
certificate of analysis, 44, 96
Champy, James, Reengineering the Corporation, 20-21
Chemical Manufacturers Association, 67n.
chemicals, see hazardous materials
claims, 154, 157-164
conflicting, 188
 filing and disposition, 158-159
form for, 160-163
preventing, 164
supporting documents, 159
time limitations in, 159
value of, 157
Code of Federal Regulations, 97
cargo security advisory standards, 50, 189-206
on hazardous materials, 66
collecting bank, 186
common carriers, 42, 45, 77
liability of, 156
compliance manuals, 42, 84-109, 111
compression/vibration tests, for packaging, 146-148
conflicting claims, 188
consequential damages, 154
consignee, 170, 208
consignor, 170
constructive placement notice, 46

 Page 284
containers, performance testing of, 146-151
contract carriers, 42, 45, 77
liability of, 157
contracts, guidelines, 128, 130-131
contract warehousing, 11
agreement, 217-230
profile, 30-31
contributory negligence, 158
control of inventory, 10
cost accounting, 123
cost of facilities, as lease or contract component, 131
costs of warehousing, 14, 16
industry-wide standards, 125
logistics services and, 17
public vs. private warehouse, 16
reducing for cross-docking, 58
Council of Logistics Management, 281
cross-docking, 58-60
checklist, 59-60
performance measurement, 112
space use for, 59
customer activity profile, 125, 126-127
customer data worksheet, 39-40
customer logistics business profile, 32-38
customer order pick list, 62, 63
customer pickup carrier, releasing goods to, 95
customer pickup disclaimer, 241
customers, 42
marketing information about, 22
returns from, 87-88
customer service, personnel duties, 62
customers' warehouses, 8
cycle counting, 80
worksheet for, 82
D
daily activity report, 85, 86
damaged goods
handling and disposition, 89
holding area for, 54
damages
consequential, 154
inspecting goods for, 54
data collection, 84
delivering carriers, claims against, 158
delivery
appointments for, 43-44, 46
contract terms and conditions, 212
good faith, 182, 187
obligation of, 181
delivery order, 170
delivery receipt, 44
demurrage charges, 46
Department of Transportation (DOT), 49
depositor, 11n., 41
bill of lading preparation by, 92
compliance manual from, 84
loss and damage to goods, 153-154
preferred carrier list, 101,103
requirements and pricing; 122
responsibilities, 43-45
responsibilities for physical inventory, 107-108
truck shipments preloaded by, 94
detention charges, 46
discrepancies
documentation for, 88
 in shipments, 54
discrete picking, 61, 65
distribution network, marketing information about, 22
dock leveler, 49-50
dock plate, 49-50
docks management, delivery scheduling, 47
document, 170
documentation
certificate of analysis, 96
for claims, 159
cycle count worksheet, 82
daily activity report, 85, 86
for discrepancies, 88
incoming tally sheet, 52
inventory report, 81
invoicing, 104-107
labeling and marking, 90
lost, 187
material safety data sheets, 44, 96-97, 98-100
over, short, and damage report, 55
packing list, 96
photo of vehicle interior, 51
 receiving report, 54, 56
returns from customers, 87-88
routing instructions, 101
shipping checklist, 78
shipping control record, 101
shipping documents, 44, 91-97
shipping orders, 87, 89-90
see also bill of lading; warehouse receipts
document of title, 184
indorsement and liability, 185
dry-bulk storage terminals, 8
due negotiation, 182
rights acquired by, 183-184
rights acquired in absence of, 185
dunnage, 76
duplicate receipt or bill, 180
E
efficient consumer response (ECR) shipments, 58
electronic data interchange, 134-138
at Port Jersey, 135-137
questionnaire, 138
equipment, for order picking, 64
evergreen clause, 128
exception notation, 54
expenses
from inventory, 2
for leased warehouse, 12-13
export shipments, 97
F
fiberboard boxes, specifications, 141-144
finished goods, 4
first-in, first-out (FIFO) inventory method, 2

 Page 285
flat rental lease, 13
flexibility, and private warehousing, 10
food warehouses, 8
foreign trade zones, 8
forklift truck
package marking for, 74
weight of, 51
freight forwarders, 18
freight rates, dunnage and, 76
Fuller Brush, 6
fungible goods, 176
G
gatehouse security guards, 47-48
general merchandise warehouses, 8
good faith delivery, 187
and liability, 182
goods, 170
fungible, 176
separation of, 176
see also inventories
Goods in Transit (Sorkin), 155
government agencies, seals broken by, 50
graduated lease, 13-14
gross lease, 13
gross weight, dunnage and, 76
grounding cables, 49
H
Hammer, Michael, Reengineering the Corporation, 20-21
handling, 66
contract terms and conditions, 211
Hand Truck package marking, 72
Hazard Communication Manual, 97
hazardous materials
communication standards, 248-271
damage to, 54
description on bill of lading, 94
disposal, contract terms and conditions, 211
loading and unloading, 76
packaging, 66-67
placards for, 44
warehouses for, 8
Hazardous Materials Advisory Council, 282
highway shipments, 101
"hold-harmless" clauses, as lease or contract component, 131
holding area, for damaged goods, 54
Home Depot, 6
Home shopping networks, 6
I
impact/handling test, for packaging, 148-149
incoming tally sheet, 52
indorsement
of document of title, and liability, 185
right to compel, 186
industry-wide cost standards, 125
in-process goods, 4
inspection
of goods, 87
of received goods, 54
of transportation equipment, 103
inspection report, 88
insurance, 154-155
as lease or contract component, 130
interest, 2
International Association of Refrigerated Warehouses, 282
International Safe Transit Association, 145, 282
International Standards Organization, 111
Interstate Commerce Act, Carmack amendment, 156
Interstate Commerce Commission, 156n.
Interstate Commerce Commission Termination Act of 1995, 18n., 45,
156
inventories, 1-7
accuracy, 112
consumer-direct distribution, 5-6
control of, 10
marketing information about, 22
as money, 2
physical, 79, 107-109
responsibility for loss and damage, 83
returned goods added to, 88
stockrooms, 5
transportation costs and, 7
types of, 4-5
inventory control, 79-83
reconciling overages and shortages, 80, 83
inventory report, 81
invoicing, 104-107
issuer, 170
K
Keep Dry package marking, 71
L
labeling packages, 67, 90
for hazardous materials, 268
labor force, for private warehouse, 10
last-in, first-out (LIFO) inventory method, 2
leaks, 104
lease agreement, 232-239
guidelines, 128, 130-131
negotiation schedule and checklist, 15
types of, 13-14
leased warehousing, 12-14
legal possession, vs. physical, 44
lessee, 12n.
lessor, access by, 131
liability, 152-155
of carriers, 155-164
of carrier vs. operator, 155-156
contract terms and conditions, 214
and good faith delivery, 182
as lease or contract component, 130-131
for non-receipt or misdescription, 173
 and private warehousing, 10
lien of warehouseman, 176-177
enforcement, 177-179
lighting, at unloading dock, 51
liquid storage terminals, 8
loading, 44, 75-77
load shifts, 48
logistics industry, ix
logistics services, 17-25
development, 19
third-party, analysis and decision on, 21-24

 Page 286
loss and damage, measuring, 112
lost documents, 187
M
Magnetically Sensitive package marking, 73
mail-order, 6
maintenance, as lease or contract component, 130
management
of private warehouses, 10
of receiving-dock, 48-51, 54, 57
manufacturing process, marketing information about, 22
marketing information, developing, 21-24
marking packages, 67, 90
instructions, 68-69
precautionary indicators, 70-74
material safety data sheets, 44, 96-100, 268-269
"middle channel participants," 7
minimum charges, contract terms and conditions, 213
Missouri Pacific Railroad v. Elmore and Stahl, 156
modifications to warehouse, in lease or contract, 130
Motor Carrier Act of 1980, 45
N
National Association of Rail Shippers, 282
National Bonded Warehouse Association, 282
National Freight Claims and Security Council, 282
National Motor Freight Classification 100, 75, 76, 140
National Motor Freight Traffic Association, 282
negotiable documents, attachment of goods covered by, 187
net lease, 13
net-net-net lease, 13
"normal rigors," 139
No Step package marking, 73
notification, of storage termination, 175
O
obsolescence, 2
Occupational Safety and Health Administration, 49, 96-97, 282
standards on hazardous material communication, 248
off-site warehouses, 9
on-site warehouses, 9
order fulfillment, measuring, 112
order picking, 61-65
checking accuracy, 65
measuring, 112
paperless, 65
order processing, 62
orders, transmission to warehouse, 89
organizations, 281-282
outsourcing, 20-21
customer data worksheet, 39-40
customer logistics business profile, 32-38
public and contract warehouse profile, 30-31
request for proposal checklist, 28
selecting third-party provider, 26-40
selection process checklist, 27
worksheet for data collection, 25
overages, 153
reconciling, 80, 83
overissue, 180
overseas shipping containers, 46
over, short, and damage report, 55
ownership of goods
bill of lading and, 92
transfer of, 90
P
packaging, 66-74, 139-151
marking, tagging, and labeling, 67
 materials for, 4
performance-oriented, 140
pictorial precautionary markings, 70-74
specification, 140, 141-144
testing, 145-151
packing lists, 44, 96
paperless transactions, 134
order picking, 65
paperwork
for received goods, 57 see also documentation
paradigm shift, 5
partial deliveries, 181
percentage lease, 14
performance audit, 112-113
form, 114-121
performance measurement, 112-113
performance-oriented packaging, 140
performance standards, 110-111
performance testing, of shipping containers, 146-151
permits, and contract or lease, 128, 130
perpetual inventory, 80
physical inventory, 79, 107-109
physical possession, vs. legal, 44
pick-by-article, 61
pick-by-order, 61
pick list, for customer order, 62, 63
police inspectors, seals broken by, 50
possession, physical vs. legal, 44
prevention, of claims, 164
pricing
factors, 122-123
industry-wide cost standards, 125
private carriers, 42, 77
private warehousing, 9-10
vs. public, 16
problem shipments, 48
product inventory summary worksheet, 38
products, marketing information about, 22
Protect From Freezing package marking, 72
Protect From Heat package marking, 72
public warehousing
advantages, 11
profile, 30-31
vs. private, 16
Q
quick response (QR) shipments, 58
R
radio frequency identification and transmittal (RFID) technology, 65

 Page 287
rail deliveries, warehouse personnel responsibilities, 46-47
railroad shipments
liability for, 157
loading, 76
muting, 101
rates
public vs. private warehouse, 16
and responsibility for inventory loss or damage, 83
raw materials, 4
receiving, steps in, 51, 54
receiving-dock management, 48-51, 54, 57
receiving report, 54, 56
reefer, 103
Reengineering the Corporation (Hammer and Champy), 20-21
regulations, 49
compliance and contract or lease, 131
removal of goods, contract terms and conditions, 210
replacement parts, 4
responsibility, for inventory loss and damage, 83
Responsible Care, 67n.
responsiveness, and private warehousing, 9
restrictions, and contract or lease, 128, 130
return on asset (ROA), 10
return on capital (ROC), 10
return on investment (ROI), 10
returns from customers, 87-88
reverse-order picking, 59, 61
risk-benefit analysis, for insurance levels, 154
risks
and private warehousing, 10
public vs. private warehouse, 16
routing, 77
guides and instructions, 101
S
safety instructions, for physical inventory, 108
seal accountability procedure, 50
sealed container, 50
Sears & Roebuck, 6
security, 77, 79
security guards, gatehouse, 47-48
semifinished goods, 4
separation of goods, 176
shipments
 discrepancies in, 54
verifying count and weight, 51
shipper/carrier contract, 44
shipping
change in instructions, 185
checklist, 78
contract terms and conditions, 208-209
responsibilities, 77-79
shipping control record, 101
shipping documents, 44, 91-97
shipping orders, 44, 87, 89-90
shortages, 153
reconciling, 80, 83
shrinkage, 2, 153
allowance, 83
signatures, in lease or contract, 131
signs, as lease or contract component, 130
single-sourcing of carriers, 77
Sorkin, Saul, Goods in Transit, 155
space use, 112
for cross-docking, 59
spare parts, 4
specification packaging, 140, 141-144
spills, 104
Stack Height package marking, 74
stanchions, 49
standard bill of lading, 91
standard terms and conditions, 125, 128, 129
standard time values, 125
Staples, 6
steam-cleaning, 103
stock, 2
transfers of, 90
stockrooms, 5
storage
contract terms and conditions, 209
costs, 2
invoice for charges, 104
termination at warehouseman's option, 175-176
withdrawal from, 89
straight bill of lading, 93
supervisor, duties of, 64
suppliers, marketing information about, 22
supplies, 4
Surface Transportation Board, 156n.
T
T&D Contract Logistics Data Base, 26
tagging packages, 67
instructions for, 68-69
taxes, as lease or contract component, 130
technology, ix
temperature-controlled warehouses, 8
Temperature Limits package marking, 73
term, of contract or lease, 128
testing packaging, 145-151
time measurement units, 64
title, and warehouse receipt, 175
title to goods, 184
TOP HEAVY package marking, 71
total throughput, 112
trailers, opening doors of, 48
transfer facilities, 8-9
transfer of goods, contract terms and conditions, 210
transportation, 112
deregulation, 18
Transportation Consumer Protection Council, 282
transportation costs, and inventories, 7
Transportation and Distribution, 26
transportation equipment, inspection, 103
transport carriers, 18, 42
responsibilities, 45
truck carriers, burden of proof of, 157-158