(Ernst F

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

Contents
List of Exhibits
Preface
Acknowledgments
Abbreviations and Acronyms
1. Inventories: Their Importance

Inventory Is Money and Costs
Inventory Is Everywhere
Stockrooms
Consumer-Direct Distribution
Transportation Costs
2. Warehouses, Leasing, and Stor

Private Warehousing
Public Warehousing
Contract Warehousing
Leased Warehousing
Warehousing Costs
3. Logistics Services and Outsour
Expanded Services and New P

Outsourcing Options
Third-Party Services: Analysis

4. Selecting a Third-Party Service
5. Warehouse Operations: Delive

The Cycle of Activities
Depositor Responsibilities
Transport Carrier Responsibili

Warehouse Responsibilities
6. Other Warehouse Operations
Cross-Docking
Order Picking
Packaging
Loading and Shipping
Inventory Control
7. The Compliance Manual
Daily Activity Report
Receipts: Inbound
Carrier Deliveries and Inspecti

Returns From Customers
Discrepancies
Handling and Disposition of D

Withdrawals From Storage
Shipping Orders
Stock Transfers
Labeling and Marking
Shipping Documents
Export Shipments
Shipping Control Record
Routing Instructions
Unsuitable Transportation Equ
Demurrage and Detention Con

Spills, Leaks, Breakage
Invoicing
Annual Physical Inventory
8. Performance Standards and Au

Performance Standards
Performance Measurement
9. Pricing of Warehouse Services

Contracts
Pricing Factors
Activity-Based Costing
Industry-Wide Cost Standards
Customer Activity Profile
Warehouse Quotation and Con
10. Bar Coding and Electronic Da
The Universal Product Code

Electronic Data Interchange
11. Packaging: Containers and M

Specification Packaging
Performance-Oriented Packagi
Package Testing
12. Liability, Claims, and Insuran

Warehouse Liability
Liability of Carriers
Appendixes: Warehousing Docum
A Uniform Commercial Code (

6
B Cargo Security Advisory Sta
C Standard Terms and Conditi

Contract Warehouse Operators
D Contract Warehouse Agreem

E Lease Agreement
F Bill of Lading (Domestic): Te
G Hazardous Materials Commu
Suggested Readings and Sources

Chapter References
Trade Organizations and Semin

Index

List of Exhibits
Exhibit 1-1. Inventory value and
Exhibit 2-1. Negotiation schedule
Exhibit 2-2. Comparison of ware

costs, expenses, risks).
Exhibit 3-1. From warehouse to t
Exhibit 3-2. Worksheet for collec
Exhibit 4-1. Selection process che
Exhibit 4-2. Request for proposal
Exhibit 4-3. Public and contract w

list general outline).
Exhibit 4-4. Customer logistics bu
Exhibit 4-5. Customer data sheet.
Exhibit 5-1. Incoming tally sheet.

Exhibit 5-2. Warehouse receipt.
Exhibit 5-3. Over, short, and dam

Exhibit 5-4. Receiving checklist.
Exhibit 6-1. Cross-docking check
Exhibit 6-2. Customer order pick
Exhibit 6-3. Instructions for mark
Exhibit 6-4. Pictorial precautiona

Exhibit 6-5. Shipping checklist.
Exhibit 6-6. Inventory report.
Exhibit 6-7. Cycle count workshe

Exhibit 7-1. Daily activity report.
Exhibit 7-2. Straight bill of lading
Exhibit 7-3. Materials safety data

Exhibit 7-4. Carrier points list.
Exhibit 7-5. Warehouse invoice (b

not shown).

Exhibit 8-1. Audit form and ratin
Exhibit 9-1. Customer activity pro
Exhibit 9-2. Warehouse quotation
Exhibit 10-1. Electronic data inter
Exhibit 11-1. Specifications for fi
Exhibit 11-2. Performance testing
Exhibit 12-1. Freight (cargo) claim

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.

Abbreviations and Acronyms
ABC
ADC
Automated Data Collec
AGVS Automated Guided Veh
AIS
Automatic Identificatio
ASN
Advanced Shipping No
AS/RS Automated Storage and
AUTO.IDAutomated Identificatio
B/L
Bill of Lading
C/A
Certificate of Analysis
C/A
CFR
COPL
CRP
DAR
DOT
DRP
DSD
ECI
ECR
EDI
FIFO
FTZ
HFS
Code of Federal Regula
Customer Order Pick L
Continuous Replenishm
Department of Transpo
Distribution Requireme
Direct Store Delivery
Efficient Channel Integ
Efficient Consumer Res
Electronic Data Interch
First-In, First-Out Inve
Free Trade Zone
Hands-Free Scanners
ICCTA
ILM
ISO
ISTA
JIT
LIFO

Interstate Commerce C
Act of 1995
Integrated Logistics Ma
International Standards
International Safe Tran
Just In Time
Last-In, First-Out Inven
Less Than Truckload

LTL
MES Manufacturing Execution
MRP Materials Requirement Pl
MSDS Material Safety Data Shee
NMFC National Motor Freight C
NMFTANational Motor Freight T
POS Point of Sale
QR
Quick Response
RFID Radio Frequency Identifi
ROA Return on Asset
ROC Return on Capital
ROI
SKU
Return on Investment
Stock Keeping Unit
Trucking Industry Regula
TIRRA
1994
TMU Time Measurement Unit
TQM Total Quality Managemen
UCC Uniform Commercial Co
UPC Uniform Product Code
WINS Warehouse Information N
WMS Warehouse Management

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?
Exhibit 1-1. Inventory value and

Inventory value at the end of o p
of product value (P) plus the inte
storage period (t) plus the storage
for loss and damage, shrinkage, a
Inventory Is Everywhere
Sand and road salt in silos; buildi

lumber yards; petroleum, oil, and
refineries, bulk terminals, and ga
elevators; cars in new and used c
inventory. Also considered inven
descriptions in public and private
distribution centers; those in supe
department stores; and goods in-t
railcars, containers, barges, and o
You keep inventory as fuel in the

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 onsite warehouse locations.
Finished goods are readyto-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
consumerdirect
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 consumerdirect 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 clearcut. On the one hand, more
frequent and smaller shipments
to more customer-direct
destinations increases the
transportation cost on a perunit-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 perunit 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 onsite, 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 spaceefficient operation of materialshandling equipment; and putaway, 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 fulltime 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 cubicfoot 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, airconditioning, 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

Type of Vendor
Warehouse
Carrier
Name/Address of Vendor: _____
__________________________
Name of Vendor Contact:______
Purpose of
Negotiations:________________
__________________________
Date:______________Prepared
__________________________
1 .Compile information and data

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/bi

7. Audit selected vendor
7. Audit selected vendor
8. User to review contract/agreem
9. Legal review contract/agreeme

10 Meeting with selected vendor
contract draft

Exhibit 2-2. Comparison of ware

expenses, risks).
Public War
Private
(Company)
Warehouse
Capital Cost
Building cost
"Pure" Publ
Capital Cost
Building cost
(depreciation)
(Not applicabl
Facilities and
equipment
Materials-handling
equipment
(Un)loading
docks/rail sidings
Expenses
Expenses
Per-unit cost i
Safety equipment associated wit
custody, and c
Insurance, taxes,
permits
Maintenance/repair
Utilities
Site security
Salaries/wages
Employee benefits
Rates/Fees
Rates/Fees
Not applicable
Time-based:
Storage charge
Transaction-b
Handling chan
Risks
All risks are
assumed by the
company.
Handling chan
special handlin
documentation
services, repo
other costs/fee
Risks
Risks are defin
assumed in ac
the standard te
conditions of
as needed) wo
agreement.
analyzed, and the type and degree
to be reflected in a mutually acce

agreement. The increasing use of
rapidly expanding functions of w
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. 2240.

Exhibit 3-1. From warehouse to t

Stage A
1960s-1970s
Stage B
1980s-early 1
Traditional
Warehousing
Services
Expande
Warehousi
Services
Bonding
Bonding
Bonding
Bonding
Receiving
Receiving
Storage
Cross-dockin
Storage
Order processing Order process

Reporting
EDI reporting
Picking
Picking
Order assembly
Order assemb
(Re) packaging
(Re)packagin
Stretch- shrin
wrapping
Palletizing/unitizingPalletizing/un
Label/mark/stencil Label/mark/st
Shipping
Shipping
Documentation
Documentatio
Outbound
transportation
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-ofthe-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 costefficient?
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 costefficient?
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
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?
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!

Exhibit 3-2. Worksheet for collec

Shipments
Number
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?
_ Vend
_ Rece
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

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 thirdparty 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.

Exhibit 4-2. Request for proposal

Name/Address of Service
Provider:___________________
Services Provided by Service
Provider
_ 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 44 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?

Exhibit 4-3. Public and contract

warehouse profile (partial listgen
outline).
Name/Address of Service Provid

__________________________
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"; s

and P.O. box; "ship-to"; zip code,
code
Hours of operation
Customer service/office
Warehouse receiving and ship
Communication access numbers2

hours
Emergency response (acciden

hazardous materials, fire)
Office phones; cellular phone
Fax; EDI access codes; e-mail
Contact personnel names, pho

beepers for: customer service,
operations, safety, shipping,
transportation
Warehouse management system
capabilities
Order fulfillment methods and

procedures
Technology and equipment us

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, dutydelayed
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 bu
BROOK
Company:
__________________________
Address: ___________________
__________________________
__________________________
Phone: ____________________
Facsimile: __________________
Prepared by: ________________
Title: _____________________
Date: _____________________
Reproduced with permission of B

Bridgewater, N.J. 08807.

1. PRODUCT AND INVENTORY

A. Provide a list of products to b
classification. See attached sugge
Percentage of hazards ________
Is your material described as haz
40CFR/EPA ____ 49CFR/DOT _
Are you able to provide Proper S
under:
DOT ____ IATA/Air Transport _
Do your product labels list the CA
B. Freight class for each product:
__________________________
C. Type of package for each prod
__________________________
D. Pallet size(s): Length _______
E. Average cases per pellet (if app
__________________________
F. Average weight per case (if app
__________________________
G. Total SKUs in inventory:
__________________________
H. Estimated storage configuratio
I. Bulk/floor stacking limits: ____
J. Temperature control requireme
Ambient ________% Protect fro
K. Rotation requirements: FIFO _

L. Annualized inventory tumover
times
M. Inventory levels:
Minimum KLB ________ Averag
N. Physical inventory frequency:
__________________________
2. INBOUND MERCHANDISE/R
If available, please enclose any re
A. Inbound merchandise received
Truck/LTL ________% Truck/Tr
Ocean container ________% Oth
(describe) _________________
B. Received on: Pallets ________
B. Received on: Pallets ________

Stretch-wrapped Y/N
Exhibit 4-4. (continued)

2. INBOUND MERCHANDISE/R
(continued)
C. Average size of receipt:
Pieces
Number of
_________________pallets____
Number of line items
Weight____
_____________
D. Inbound frequency:
Number per
Month_
week________________
E. Inbound(s) received from (loc

__________________________
__________________________
F. Full pallet quantities received:
G. What is your policy with regar
__________________________
H. Recoupeage policy: ________
3. OUYBOUND/SHIPMENT INF
If available, please enclose any re
A. Outbound merchandise shippe
Truck/LTL
Tru
______________%
Ocean container
Rai
__________%
UPS
___________________%
B. Shipped on:
Oth
(des
Pallets ____________% Slipshee

____________%
C. Average size of shipment: Num

No. pallets:
________________________
Weight
__________________________
D. Shipment frequency:
Number per week
Mon
___________________
____
E. Order selection:
Full cases/bags/drums/etc. _____
Full-pallet quantities _________
Less-than-case quantities (pick-n
4. CUSTOMER SERVICE/ADMI
A. Order transmission: Fax ____
________
B. Do you reconcile your invento
5. TRANSPORTATION
If available, please enclose any ac
information for both in-bound an
A. Who routes and pays for inbo
B. Who mutes and pays for outbo
C. Customer pickup/will call ___
What carriers are you presently u
Short haul
Long
__________________________
Pier work (if any)
Trail
________________
load_
D. Special services: Reefer _____

Temperature required ________
Other
__________________________
E. Would you like pricing from C
Brook's customers receive a spec
LTL, container drayage, and spec
6. VALUE-ADDED SERYICES
Brook Warehousing Systems can
Regulatory interpretation and mo
DOT OSHA, EPA, ICAO/IATA, I
programs
Environmental/safety audits
Logistics management consulting

Label design assistance
Carrier qualification and review
MSDS preparation and publicatio
Representation at industry or regu

Site selection
Facility design/layout
Brook W
Regulatory Requ
The following information is nee
storing customers' products that o
govemments. All information sho
material to their facility.
Material Safety Data Sheets (MS
An MSDS for each product antic
Brook prior to acceptance of mat
The Environmental Affairs Mana
The Environmental Affairs Mana

warehouse.
Spill/Damage Procedure
A documented spill procedure inc
Do you use your own group or d
contractor?)
The name of a specific person in
spill.
Spill Compensation and Control
Which of your products are cove
Control Act?
Is there a contact within your org
copy of our public warehouse inf
Specific Labeling Requirements
OSHA
USDOT
N.J. Right-to-Know Canadian W
We need the name of a contact w
missing on the products coming i
All products must have a caution
If regulated by USDOT, then they
Products said within or used with
Know label.
Any Canadian shipments of haza
Brook Ware
Regulatory Requirem
SARA Title III Reporting
SARA Title III information conc
stored at Brook. Daily averages a
calendar year for each of the prod
Hazardous Waste Requirements
Brook does not handle hazardous
the disposition of any hazardous
products regardless of how it is g
Emergency Response Information
The method you plan to use to co

for providing emergency respons
your 24-hour emergency contact.
Environmental Contract
The names, addresses, and teleph
who perform your environmenta
CUSTOMER LOGIST
PRODUCT INVE
Product
Name

DOT
Hazard
Class
Freight Pa
Class
Exhibit 4-5. Customer data sheet.
BROOK W
Account name ______________
Contact name/title ___________
Address ___________________
__________________________
Phone ____________________
PRODUCT DATA
Description: (name, commodity,
applicable)
__________________________
__________________________
__________________________
Hazardous? Yes ______No ____
Package: Type ______________
Weight ____ Palletized? Yes ____
Pallet size: L ________ W _____
VOLUME (in tonnage)
Flow through: ________ Storage
INCOMING FREIGHT
Size of shipment: ____________
Mode of transportation:
__________________________
Suppliers locations:
__________________________
__________________________
__________________________
Handling equipment:
__________________________
Damage handling instructions:
__________________________
Reject to carrier? ________ Yes _
STORAGE REQUIREMENT
Bulk stacking? Yes ______ No__
Rack needed? Yes ________ No
Fragile? Yes ________ No _____
Temperature: Summer ________
Special storage requirements?
__________________________
__________________________
__________________________
Reproduced with permission of B

OUTBOUND SHIPMENT
Avg. order size (in pieces and we
Min. weight: ________ Avg. wt.:
Full pallet? Yes ________ No __
Pick & pack: Inner carton? Yes _
Loose goods? Yes ________ No
How packed? _______________
Handling equipment: _________
Palletized? Yes ________ No ___
Pallet exchange? Yes ________ N
Shrink-wrapping? Yes ________

Transportation:
Freight class: _______________
LTL ________ TL ________ Pre
How routed: ________________
__________________________
Special instructions: __________
__________________________
__________________________
Hazardous placards/labels require
RETURNS
Authorization program? Yes ____
Original package? Yes ________
OFFICE SUPPORT
Order transmission: Fax _______

_________
Orders released by:
__________________________
Lot/batch control: ____________
Broken case shipping & repackin
Any other special services you re
__________________________
Reports required?
__________________________
Brook prepares: (written confirm
Bills of lading:
Y
Packing list:
Y
Labels:
Y
Labels:
Y
UPS manifest:
Y
Invoice to consignee:
Y
QUOTATION DETAILS
How should the rates be quoted?
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, shrinkand 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.
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, sameday, 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.
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 leanand-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 smallparcel 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. Powerassisted 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 maintenanceintensive because of weather

exposure and drainage.
During the warehouse selection
process, depositors should
ascertain the design, maximum
allowable grade, and loadbearing 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, temperaturecontrolled 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.
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 CDROM 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

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 dam

BROOK WAREHOUSING SYST
P.O. BOX 6068
BRIDGEWATER, NJ 08807
908-725-4343
OVER-SHORT-DAM
CONSIGNEE:
__________________________
__________________________
__________________________
ARRIVAL INFORMATION
SHIPPERCARRIERFWAYBILL#
THE FOLLOWING MERCHAND

OVER: ____________________
__________________________
SHORT: ___________________
__________________________
__________________________
DAMAGED: ________________
__________________________
__________________________
COMMENTS: ______________
__________________________
BROOK WAREHOUSING SYST
BY _______________________
M.I.S. Department
Reprinted with permission of Bro
P.O. Box 6068, Bridgewater,N.J. 0

Exhibit 5-4. Receiving checklist.
Receiving Ch
(Must be completed before si

Receipt)
Item
Advance notice
Action Status
Received
Delivery Driver On time _ _____

Consignee
Verified a
Verified a
Seal numbers
Verified a
notice
Verified a
Were app
goods
Verified a
Seals
Intact
C.O.D. cheek
Given to
driver
MSDS
Accompa
Delivery receipt
Vehicle number
Labsis/placards
C. of A.
Shipping
Samples
Received
Vehicle opened
Photogra
Condition of load
Acceptab
Unloading
Driver as
Cought/weight
OS&D
Agrees w
receipt
Noted on
Describe
Inspection
Requeste
L&D claim
Initiated
Returns
Approve
Delivery receipt signed
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 costscrossdocking 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 crossdocking 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 shortterm space must be assigned in
the staging area for crossdocking 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 crossdocking 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 crossdocking 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 materialshandling 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 breakbulk 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 crossdocking).
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 powerlift 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
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
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.

Exhibit 6-3. Instructions for mark
RULE
ITEM 580
MARKING OR TAG
Sec. 1. Freight must be stenciled
the following, except as provided
otherwise provided in this Classif
Federal Regulations (CFR), Title
hazardous material. If these requi
with, freight will not be accepted
Sec. 2. Except as otherwise provi
Sec. 2. Except as otherwise provi

bundle or loose piece of freight in
stenciled or otherwise marked (se
shipper, showing name and addre
consignee, at one address at one t
which destined. Packages or piec
pallets, platforms or skids for lift
marked, provided each palletized
and number of packages or piece
or skids is shown on bill of ladin
When consigned to a point of wh
the same name in the same state,
shown.
When consigned 'To Order' or 'C
so marked, and further marked w

number, which must be shown o
lading.
When consigned for 'Export' the
and port of export, or the name e
at port of export must also be sho
Packages catalog fragile articles o
earthenware must be marked 'FR
CARE,' or with similar precaution
Markings must be clear and legib
are both waterproof and capable
transportation abrasion Marking i
provide a defines contrast to the c
marked.
marked.
Consignee markings may be type
lettered. When typed or printed, l
height than capital letters of nine
lettered, characters and figures m
in height. Where space does not p
may be proportionately smaller in
Boxes printed with advertising or
clear area of not less than 10 squa
Area mull be defined and capable
which must be located therein. Sh
shown within border defining cle
on box, an indirect label property
square inches of such color to co
background may be used.

Note 1Labels must be securely att
good adhesive or metal staples.
Note 2Tags mull be made of cloth
Tagboard tags must consist of 100
pulp, thickness .0145 inches weig
pounds per ream 22 28 inch
have patch reinforcement.
Tags attached to bags, bales, bund
securely fastened with strong cor
pointed wire tag fasteners.
Tags used to mark wood or wood
fastened at all corners and center
fasteners or metal staples; or mus
when the freight would be injure

staples.
Sec. 3. A shipment that fully occu
vehicle or that weighs 6,000 poun
less than 6,000 pounds, is declare
6,000 pounds and so charged for
from one place in or on one vehi
shipper for delivery to one consig
not be marked if every piece is of
belonging to such shipment witho
confused with other freight.
Sec. 4. Marks must compare with
lading, and corrections, if necessa
signed.
signed.
Sec. 5. Old consignment marks m
Sec. 6. When Height is billed to a
other freight, the destination of th
consolidating point must be show
beyond the consolidating point m
two destinations are shown on th
form and wording:
FROM
(Name of S
(Point of O
TO
(Name of consignee at
(Name of consignee at
(Street ad
(Destina
FOR
(Name of consignee beyo
(Street ad
(Destination beyond c
Reproduced with permission of t
Traffic Association, Inc., Agent, 2
Va. 22314.

RULE
ITEM 580Concluded
Sec. 7. Unless specifically provid
Classification address must be loc
below; location(s) shown indicate
the case may be. Where more tha
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

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.
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:

(continues)

Page 74

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 lossprevention 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.

Exhibit 6-5. Shipping checklist.
Shipping Ch
(Must be completed before veh

sealed, and bill of la
Item
Directions
Act
Delivery stree
Yes _ No _
Given to the d
Routing
Carrier loaded
Address
Shipment/load
Labels/tags
Counted and v
Short-shipped
__
Applied to pac
Packing list
Attached to pa
HazMat labels
Applied to pac
Placards
Given to drive
MSDS
Given to drive
C. of A.
Given to drive
Samples
Given to drive
Dunnage
Applied
Blocking/bracing Applied
Seals
Applied and n
Exceptions
Special
instructions
Bill of lading
Driver on time
Noted on B/L
Noted on B/L,
Signed by driv
Yes _ How ma
Date
__________________________
__________________________

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 dataentry 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: _________
____________________
Location: Building, Aisle, Tier, R
$
Beginning book inventory
Receipts
( + ) Plus: (inbound
____
( + ) Plus:
(inbound
shipments)
including
Stock
__
replenishments
Retums from
__
customers
Purchased items __
Stock transfers
from
other locations __
Customer
(-) Less:
shipments
__
(outbound)
Returns to
__
depositor
Stock transfers to
customer
__
accounts
Stock transfers to
other
depositor
locations
__
( +/-)
Loss and damage __
Adjustments:
Adjustments:
Mysterious
disappearance __
Known theft and
__
pilferage
Errors, overages,
__
and shortages
Reconciliation
__
write-offs
(=) Ending
inventory

__
Exhibit 6-7. Cycle count workshe

WHS C_CC2 CYCLE COUNT
ON
BINITEM
RVLOT HANDCO
# #
QTY
BS115507 109959
1.00 1
032
Description: NTA,@A0,000,DI,35
43307 109959 BS1155-033
43307 109959 BS1155-034 1.0
43307 109959 BS1155-035 1.0
43307 109959 BS1155-036 1.0
43307 109959 BS1155-037 1.0
43307 109959 BS1155-038 1.0
43307 109959 BS1155-039 1.0
43307 109959 BS1155-040 1.0
43307 109959 BS1155-041 1.0
43307 109959 BS1155-041 1.0

43307 109959 BS1155-042 1.0
43307 109959 BS1155-043 1.0
43307 109959 BS1155-044 1.0
43307 109959 BS1155-045 1.0
43307 109959 BS1155-046 1.0
43307 109959 BS1155-047 1.0
43307 109959 BS1155-048 1.0
43307 109959 BS1155-049 1.0
43307 109959 BS1155-050 1.0
43307 109959 BS1155-051 1.0
43307 109959 BS1155-052 1
43307 109959 BS1155-053 1.0
43307 109959 BS1155-054 1.0
43307 109959 BS1155-055 1.0
43307 109959 BS1155-056 1.0
43307 109959 BS1155-057 1.0
Reprinted with permission of Bro
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
(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 realtime 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

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
Warehouse Location
Activity Period Covered: From _
Doc
Product Sellers
Code
Date Re
DescriptionNumber
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 100V. 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 fourdigit 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 customerowned 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 thirdparty 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
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]hemicalspecific 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) 2198151.
IMPORTANT: Readers must
familiarize themselves with

these rules and 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.

Exhibit 7-3. Materials safety data
Informa
Manufacturer/Importer/Shipper (
Part 1. Product Identification and
Product Number/Code
Product (Trade) Name
Description
Chemical Name (if Single Substa
Common or Chemical Name of C
Formula
Chemical Family
Product Appearance
Emergency Telephone Numbers:
CHEMTREC 1-800-424-9300
Manufacturer/importer/Shipper
Part 2. Hazardous Components o
Components/Ingredients (%)
CAS No.
ACGIH Threshold Limit Value (T
Part 3. Health Information
First Aid and Nature of Hazard
Carcinogen (NTP, IARC, or OSH
Effects of Overexposure
Mitigating Procedures in Case of
Eye contact
Eye contact
Inhalation
Skin Contact
Ingestion
Occupational Exposure Limit
Toxicological Test Data
Personal Protection
Respiratory protection
Eye protection
Protective clothing and gear
Ventilation
(Exhibit continued from previous page
Part 4. Physical and Chemical Pro

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
Flash Point
Flammability Limits in Air
Autoignition Temperature
Extinguishing Medium
Firefighting Procedures
Hazardous Fire and Explosion Ha
Hazardous Combustion Products
Part 6. Reactivity Data
Stability
Conditions to Avoid Instability
Chemical Incompatibility
Hazardous Polymerization
Hazardous Decomposition Produ
Corrosivity to Metal
Corrosivity to Metal
Part 7. Environmental and Spill C
Reportable Quantity (RQ)
Environmental Toxicity
Hazardous Waste (40 CFR 261) Y
Hazardous Waste Number
Hazardous Substance Superfund
Land Spill/Leak Control and Miti
Water Spill/Leak Control and Mit
Waste Disposal Method for Produ
Container/Packaging Material Dis
(continued)
Exhibit 7-3. (Continued)

Part 8. Storage and Transport Co
OSHA Storage Equipment and Fa
Electrostatic Accumulation Hazar
Storage/Transport Temperature
Storage/Transport Pressure
Loading and Unloading Procedur
Viscosity: Temperature Required
Part 9. Shipping Data (49 CFR 17
DOT/UN Proper Shipping Name
DOT/UN Hazard Classification (P
Poison Constituent
DOT/UN Labels/Placards Require
Bill of Lading (Shipping Paper) D
DOT/UN Containers/Packaging S
DOT/UN Transportation Equipm
Hazardous Substance (49 CFR CE
Reportable Quantity (RQ)
Part 10. Label With Product Infor
SAMPLE O
which must be af
DESCRIPT
FIRST AID, STORAGE
EMERGENCY RESP
WASTE AND C
TECHN
Prepared by ________________
__________________________
Date prepared _______________
(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.,
temperaturecontrolled
trailers, rail-
cars, or
containers
are often
used for food
and meat
shipments.
Warehouse
personnel
must ensure
that such
equipment
has been
steamcleaned 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.
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 steeltipped 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.
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 materialshandling 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
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-tomonthbudget 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.

Exhibit 8-1. Audit form and ratin
Items to Be
Rating
R
Covered
Maximum
SUMMARY
Conditions of
50
____
buildings/grounds
Facility safety and
150
____
security
Sanitation and
100
____
housekeeping
Customer service 175
____
Warehouse
personnel
Handling of goods
Loss and damage
Inventory
Annual physical
inventory
Documentation
accuracy
50
____
100
75
100
____
____
____
100
____
100
____
1,000
Total(max.) ____
Performance
OutstandingSuperior in all catego
OutstandingSuperior in all catego

Excellent
Minor deficiencies
Acceptable Deficiencies not critic

Fair
Poor
Critical
Complaints, failing p
Customer svce., hous

inventory problems
Use of warehouse un
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
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
satisfactory
Total 1
(max
(continued)

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,
equipment safe
Truck driver waiting area
clean
Public phone
Receiving/shipping/crossdock area
unobstructed/organized
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 10

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
____
____
____
____
____
____
____
____
____
____
____
____
Depositor billing
# incorrect
Customers billing
# incorrect
Freight bills
# incorrect
Debit/Credit MemosTotal
____
____
____
____
____
____
____
Total 175 (max.)____
(continued)


Warehouse Personnel
Yes_
Is management on-site? No
_
Yes_
Union
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
____

Loss and Damage

Transportation
Receipts
# Claims
$ Value
Type of damage
____________
Shipments, outbound
# Claims
$ Value
____
____
____
____
$ Value
____
Type of damage
____________
Warehouse
Type of damage
____________
# Items
____
$ Value
____
# items recoupered
____
Cost
____
# items disposed
____
Cost
____
Mysterious disappearance (theft,
# items
____________
Cost
____________
Concealed damage
# occurrences
___________
Cost
___________
Total 75 (max.)___________
(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
____
____
____
____



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
____
____
____
____
____
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.
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

Exhibit 9-1. Customer activity pro

Customer name and address:
__________________________
__________________________
__________________________
1. Communications
Remote printer _
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, cr
Dimensions per unit
Weight per unit (U/M = unit of m
4. Storage Space Needed
Total volume (U/M per day, week
Number of SKUs
Num
Inventory level (average) Turn
Stacking limits (one, two, three, f
Storage configuration
5. Handling
Pallets
Rotation
% slip sheets %
LIFO _
FIFO
lot no
_
Received on
on slip sheets
pallets _
Special handling equipmenttype
6. Inbound Receiving
Truckload
Frequency
LTL %
/day
interm
/week
Quantity,
pallets; pieces
number of
Pallet return: Yes _
Dunnage r
No _
Waste
Yes _ No
removal
_
7. Outbound Shipments
Truckload % LTL % intermoda

Small
Small
parcels:
Frequency
UPS % FedEx %
/day
/week
Average shipment size
on pallets
on slip
_
Carrier assists in
Yes _ No
loading
_
8. Transportation
consignorwarehouse
Routing:
_
_
Freight
prepaid (consignee)
Loaded
Freight
prepaid (consignee)
payment: _
Preferred carriers:
Truckload
Less-than truckload
Temperature-controlled equipmen
9. Inventory Reporting
Daily activity reports
Cycle counting
Annual physical inventory
10. Other Services
Bonding
Freight claim h
Subassembly
Repackaging
Labeling
Marking
Shrink-wrapping Stretch-wrapp
Hazardous materials control
MSDS preparation
Safety and environmental audits
Training and compliance program

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,
weatherrelated
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) 4353870. 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-tocomputer 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 laserbased ink, thermal, impact, and
other techniques, to mark and
label goods
Radio frequency
(RFID)
Electronic data interchange
between compatible computer

systems and software
For a brief description of the
availability and application of
this technology, see Exhibit 101. 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]

Page 137
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)

NAME:____________________
TITLE:____________________
COMPANY:________________
PHONE #:__________________
#1: Are you currently utilizing

____ yes ____ no
#2. If so, what standards do you

__________________________
#3. If communicating through a 3

__________________________
#4. Which of the following EDI T

Please list Standard and Version (
204 Motor Carrier Shipment Info
__________________________
210 Motor Carrier Freight Details
__________________________
214 Motor Carrier Shipment Statu
__________________________
846 Inventory Inquiry/Advice

__________________________
888 Item Maintenance
__________________________
940 Warehouse Shipping Order
__________________________
943 Warehouse Stock Transfer Sh
__________________________
944 Warehouse Stock Transfer R
__________________________
945 Warehouse Shipping Advice
__________________________
947 Warehouse Inventory Adjust
__________________________
Others
__________________________
#5. Are you interested in becomin
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 materialshandling 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.

Exhibit 11-1. Specifications for fi

ITEM 222-1-C
CERTIFICATE OF BOX
(Applicable only in conn
(a) BOXES, COMPLYING WITH
(1) Size, Type and Wording: All f
conform to specifications of this
certificate of a box manufacturer
guaranteeing that boxes do so co
following form, size (3-inch diam
type and wording, as illustrated i
(see Notes 1, 2 and 3). City and s

manufacturing or corporate locat
(2) Certificates applicable to boxe
burst or puncture test and other r
[ 1 ]
Traffic Commission, Inc., Agent,
Va. 22314.
(continues)


ITEM 222-1-CContinued
(3) Certificates applicable to boxe
edge crush test and other requirem
Note 1Reduced Diameter for Sma

On boxes having a length of less
less than nine inches, the above c
size so that outside diameter is no
Note 2Boxes or Numbered Packa
Countries:
Fibreboard boxes complying with
or numbered Packages of this Cla
which are made in foreign countr
imported into the United States o
certificate, or certificate may be p
country in which the box or num
provided shipper certifies on bills
comply with Item 222 or the appr
[ 2 ]

ITEM 222-A-CContinued
Note 3Actual Test Above Require
The test stated in this certificate m
minimum required for the gross w
except as provided in Note 4 of I
weight of facings for required bu
minimum prescribed by Item 222
is in excess of the minimum test r
be stated below the certificate, bu
rules in this Classification as prov
minimum test will apply.
Note 4Nonconforming Boxes:

In the separate description of arti
to meet the requirements of Item
boxes are not required to be guar
may bear the circular certifcate on
Item 222 have been met. Such bo
stamp indicating the box manufac
fibreboard on a voluntary basis.
Note 5Boxes of Mixed Componen
For boxes having more than one
making up the outside shipping c
Manufacturers' Certificate must re
bursting test or edge crush test of
Note 6Fibreboard Master Pack:

The rates or classes for freight in
or special numbered packages wi
when the boses complying with I
complying with special numbered
outer fibreboard boxes, the fibreb
construction requirements of Item
numbered packages must reasona
without creating voids affecting t
Pack. Outer box must be securely
certificate is required on outer bo
Gross weight of Master Pack mus

allowable gross weight authorized
crush test of any component part

Gross weights exceeding this max
tendered on pallets of sound cons
(b) NUMBERED PACKAGES:
(1) Numbered Packages which co
boxes, containers, trays and comp
made of fibreboard complying w
test or edge crush test and other r
B of Section 3 of this rule, must b
box manufacturer on an outside s
inches 2 inches, plus or minus
illustrated in either subparagraph
be either that of the manufacturin
For triplewall box and doublewa

refer to puncture test units, subst
Units' for 'Bursting Test Lbs. per
below.
Where numbered Packages autho

fibreboard for bodies and caps, t
shown within certificate.
When numbered Package has a le

or a width of less than nine inche
in size, but outside dimensions m
inches.
(2) Certificate applicable to numb
provisions requiring compliance

test and other requirements of Ta
(3) Certificate applicable to numb

provisions requireing compliance
other requirements of table B:
[ 3 ]
(continues)


ITEM 222-1-CContinued
(c) CUBIC CAPACITY PRINTIN

FIBREBOARD SHIPPING BOXE
ITEM 256-A
SPECIFICATIONS FOR REMO

DR
Unless otherwise privded in sepa

the Code of Federal Regulations
of hazardous materials, when the
specifications are complied with,
commodities in polyethylene dru
commodities in barrels. Characte
that shipping container and comm
(a) Drum body and integral botto

construction, or body of extruded
joined to a bottom head by mean

or metal chime band. Full remov
molded polyethylene or steel, 24
body by means of a metal ring eq
OR closure may be of any metho
upon a successful diagonal drop
commodity or sand/sawdust mixt
concrete from a height of 30 inch
weakest part of closure without e
When top head is made of polyet

properties as determined by the A
Materials (ASTM) per methods d
performed on plastic with additiv
Property
Specification (See
A and D)
Melt Index
Density
1.2 Maximum
Range
0.941 - 0.965
Tensile
3.000 psi minim
Strength
75 percent minim
Percent
Elongation
(b) Capacity and material constru
Maximum Capacity (Gallons

15
20
30
55
(c) The following test is required

in removable head containers wh
bags.
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.
Exhibit 11-2. Performance testing

ITEM 180
This Rule provides an alternative
program (Item 689); other packag
relating to drums, pails and bags;
is recommended for solving chro
for providing an acceptable assur
articles of great value. In order to
methods of packaging under this
including palletized laods, must b
successfully pass the following p
requirements and meet the accept
For lack of a simulation test meth

use of this Rule for see-through,
full-shrink plastic film wrap-style
to meeting the following applicab
requirements, spans of open spac
clearance forms on vertical sidew
packaged articles must not exceed
when inner clearance between ou
inner article is not less than 1 inch
of film prior to stretching is not l
For clearances of not less than
must not exceed 12 inches (0.30 m
Shippers will be required to perfo

tests as often as necessary to main
performance level of the package
section). Multiple test specimens
available and all specimens tested
PERFORMANCE TEST REQUIR

shipping units must be tested as f
Section I. Compressi
Two alternate methods of testing
or (B). Either may be utilized, dep
product characteristics. Unless th

skid or pallet outside base, or is m
symbols, the container must be te
Method
Shipping units must be vibration
compressive load for one (1) hou
ASTM D4169 Element E, assuran
vibration.
Use a concentrated dead load (see
following formula) to simulate m

on top of a floor-stowed shipping
m) inside height, determining the
formula:
Where:
average density of LT
10 pcf = foot)
108 in = Inside height of traile
h = height of shipping un
l = length of shipping un
w=width of shipping un
In metric:
LOAD = (162 kg/m3) x

Where:
= average density of LT
162 kg/m3
2.7 m= Inside height of traile
h= height of shipping un
l= length of shipping un
w= width of shipping un
NOTE: The formula is reduced to

108 inches (2.7 m) for packages u
cubic feet (0.056 m3) or less in si
LOAD
The concentrated dead load shall
RSC style corrugated container(s
having a corrugated medium max
(15 kg); a plywood sheet with a m
(13mm) resting inside the contain
the bottom inner flaps of the con
plastic bag(s) evenly distributed o
the container to complete the requ
weighs approximately 110 lb/ft3;
container(s) must be larger than t
not overhang the specimen by mo
dead load container(s) must be fi

inside the perimeter of the test sp
test specimen should not be faste
should be allowed some lateral m
that it does not move from under
load.
[ 1 ]

Traffic Commission, Inc., Agent,
Va. 22314.

ITEM 180Continued
NOTE: When test units have larg
dimension exceeding 18 inches (0
be subdivided into smaller portio
exceeds 18 inches (0.46 m), the lo
(2) equal portions along the longe
dimensions exceed 18 inches (0.4
divided into four (4) equal portio
FIGURE #1 - EXAMPLE OF
LOAD ON TEST SPECIMEN F
TEST
TEST SPECIMEN SHOWN IN E

20" X 20", LARGER THAN 18
WIDTH, REQUIRING THAT
DIVIDED INTO 4 E
Method
Shipping units must be subjected
vibration in separate tests. A com
first and then the same shipping u
(1) Conduct a machine compress
the shipping unit, applying a forc
shipping axis as calculated from t
Where:
lbf= pounds force

10 pcf= average density of
108 in= inside height of tra
h= height of shipping
l= length of shipping
w= width of shipping
D.F.= Design Factor from
In metric:
FORCE (N) = (162 kg/m3) x (2

Where:
N
162 kg/m3
2.7 m
h
l
w
D.F.
9.8 m/s2
= Newtons
= average density of
= inside height of tra
= height of shipping
= length of shipping
= width of shipping
= Design Factor from
= metric conversion
Remove the force immediately

value
[ 2 ]
(continues)


ITEM 180Continued
NOTE: The formula is reduced to
108 inches (2.7 m) for packages u
cubic feet (0.956 m3) or less in si
DESIGN FA
Shipping Unit Construction
(a) A corrugated fibreboard or pl

may or may not have stress-beari
using these materials, and where

support any of the load. An exam
product in a corrugated box with
packing.
(b) A corrugated fibreboard or pl
has stress-bearing interior packag
such as wood. An example is an
corrugated box with wood-reinfo
(c) A container constructed of ma
fibreboard or plastic that are not
humidity sensitive or where the p
load directly. An example is a wo
(2) Using the same shipping unit,
total of 60 minutes. Any of the th

methods may be used: random, A
Level II; repetitive shock, ASTM
linear motion); repetitive shock, A
(rotary motion).
NOTE: For high or unstable ship
vertical-linear tests may be prefer
Section II. Impact

Following compression/vibration
units must be impact/handling tes
procedures:
Procedur
For packages having no external

skid and not in a palletized load,
test as follows:
(1) Under 200 pounds (91 kg) gro
fall drop test in accordance with A
following height and sequence:
For Shipping Weigh

0 through 40 (0
41 through 80 (1
81 through 100 (3
101 through 199 (
Drop in sequence on these packa

drops: top; two adjacent bottom e
opposite bottom corners. The fin
bottom from a drop height at 1.5
where the bottom is defined as th
package is most likely to rest dur
also define the bottom for transpo
NOTE: The package should be de
from the specified height from an
(2) For 200 pounds (91 kg) gross

an incline impact or a pendulum
ASTM D880, or a horizontal imp
short duration shock programme
Impact the top, two adjacent side
minimum velocity of 5.75 feet pe
Alternately, the impact test may b

drop height of 6.0 inches (0.15 m
sides and bottom.
Also conduct a rotational drop te

inch (0.15m) height on a bottom
radiating from the diagonally opp
[ 3 ]

ITEM 180Continued
Procedur
For individual packages with exte
pallets/skids, including crates, pe
tests as follows:
(1) Based on the gross weight of

Raised Edge Drop Test according
Weight
Up to 500 pounds (227 kg)
500 pounds (227 kg) and ove
With one bottom handling edge o

supported by the floor, raise the o
height and release it to fall flat on
lifting and dropping opposite bot
from same height.
(2) Impact Test - Perform an incl

pendulum impact test according t
horizontal impact on a test machi
programmer (ASTM D4003), imp
sides at the final minimum veloci
(1.75 m/sec).
Procedur
For palletized loads made up of a

containers or unitized loads of a b
both impact tests listed above in P
conduct a fork truck handling tes
Pick up shipping unit with lift tru

(0.9m) forks (for longer forks, pe
m)); transport around test course,
moves four (4) more times for a
test course should include at least
rigid flat surface representative o
warehouses. A nominal 2 x 4 boa
course in a position where both l
must pass over it during each han
second 2 x 4 shall be placed on th

turn in such a position that both l
opposite side must pass over it du
sequence. The speed of the truck
rounding the right angle turn shal
m/sec). Vertical alignment of pall
reasonable maintained throught th
Section III. Ambient

All specimens must be conditione
(12C) minimum and 50 percent
of 24 hours for paper-based pack
others. Testing should be conduc
atmosphere and conditions must
conducted. If testing cannot be co

atmosphere, conduct the tests as s
minimum atmosphere as practica
Section IV. Doc

Test methods, conditions, and res
following form and permanently
the article is subject to this Rule.
certificate (Section VI) shall be th
documentation. Changes in articl
subsequent testing and document
report should include the followi
including model number, size, we
features; (2) description of shippi
specifications of container and in

performed; (4) conditioning and
acceptance criteria; (6) condition
packaging) after testing; and (7) l
[ 4 ]
(continues)

[ 5 ]

ITEM 180Concluded
Section V. Accep
The shipping unit shall be deeme
performance testing if the follow
(a) The article is neither damaged

(b) The shipping unit has maintai
affords reasonable protection aga
transportation.
The acceptance criteria of article

must be predetermined before tes
report.
Section VI. C
(a) Packages tested in accordance
conspicuously bear the following
in width at top and 3 inches in h
meet the minimum performance r
marking is the responsibility of th
(International Safe Transit Assoc
party identified above the symbo
Testing may be conducted by the
competent test laboratory.
(b) In the event of a damage claim

retest at a third party laboratory (
shipping unit fail the retest, a seco
units may be conducted at the thi
shipping units must pass the retes
(c) All shipping unit configuratio

variations must be tested and new
of certification by this Rule (see N
or product change is made, the re
must be repeated.
When minor variations are made

sequence may be performed for c
variations have no effect on the d
required. Examples of minor vari
differences, electrical voltage/wir
NOTE 1: To qualify as a third par
must register with the National C

(NCC). A list of registered third p
made available upon request.
NOTE 2: When the shipping unit

or a unitized load, the packaged p
certified as individual shipping u
successfully tested as individual p
Such palletized or unitized loads
certificaiton symbol on an upper
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
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
(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 railroadowned 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-

Page 160
Exhibit 12-1. Freight (cargo)

claims form.
Reproduced with permission of the

Commission, Inc., Agent, 2200 Mill
Road, Alexandria, Va. 22314.

Page 161
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 reshipping. 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)

PRINCIPLES AND PRA

AND DISPOSIT
(Provisions names herein

foreign commerce for acc
ITEM "WATCAR" (except SEAU
participating interstate and
or as amended.)
TWO OR MORE CLAIM
When investigation of a cl
When investigation of a cl
carriers has been presente
shipment, the carrier inves
with each such other carri
300122into between or among the
claim or claims, will notify
conflicting or overlapping
substantiation, on the part
property involved or his r
REGULATIONS GO
FREIGHT BEFORE OR
AND
CLAIMS F
ITEM

foreign commerce for acc
"WATCAR" (except SEAU
participating interstate and
or as amended.)
Loss of or damage to cont

to exist at time of delivery
negligence in packing, han
300125containers, and is the subj
controversies. In order to
practices will be certain an
this character, the followin
When offering a shipment

bears any indication of ha
300130
contents must be made by
inventory so noted on carr
REPORTING
When damage to contents

by the consignee which co
of delivery it must be repo
carrier upon discovery and
carrier's representative ma
request for inspection may
request for inspection may

but in either event must be
than fifteen days pass betw
carrier and date of report o
300135inspection by consignee, i
offer reasonable evidence
inspection is made that los
consignee after delivery o
inspection by carrier, the c
container and its contents
when damage was discove
INSPEC
Inspection by carrier will
practicable after receipt or

be made within five norm
from consignee, excluding
day will be considered as
9 A.M., local time from th
inspection. Inspection of c
damaged merchandise, the
action necessary to establi
inspector will check conte
300140shipping container and co
investigation necessary to
either case inspection will
must cooperate with carrie
inspection. A written reco
least in duplicate. The orig

consignee for claim suppo
be incorporated in claim f
FAIL
In the event carrier does n

must make the inspection
his ability pertinent to the
300145
case, will be considered as
jeopardize any recovery th
contained in the report.
SALV
When visible or open dam
When visible or open dam

by notation having been g
damaged established by in
consignee to retain damag
until carrier desires to take
If record conclusively refl
possession of the damaged
in any event, within thirty
noted damaged on carrier
inspection report, if dama
take possession of the dam
prescribed above, consign
request removal of goods
days from the date of such
only when the carrier and

handle disposition of the s
300150affect the legal duty that th
value in the salvage, must
as to mitigate the carrier's
doubt of carrier liability, th
which event the consignee
liability of carrier is determ
mitigate the damage, and m
will remove the damaged
or advise consignee that c
damaged merchandise is t
carrier has completed inve
PRIOR
If a concealed damage ins

which has had prior transp
required to assist carrier in
300155
and inspected by shipper p
then assist carrier in every
prior transportation.

PRINCIPLES AND P
AND DISPO

ITEM commerce for account of
SEAU or TOTE) shown in
intrastate carriers of this C
These Rules are published

the Interstate Commerce C
Regulations, and Practices
Processing of Loss and Da

300100
(a) To obtain uniformity

treatment of all claiman
(b) To secure and prese

between carriers and th
(c) To effect and mainta

in connection with the i
(a) Claims in writing requ

baggage or for loss, dama
voluntarily paid by a carri
subparagraph (b) below, w

carrier issuing the bill of l
carrier on whose line the a
within the specified time l
be required by law, the ter
carriage, and all tariff prov
(b) Minimum filing requir

claimant, filed with a prop
the bill of lading or contra
containing facts sufficient
300105shipments) of property inv
damage, injury, or delay, a
specified or determinable
sufficient compliance with

the bill of lading or other
(c) Bad order reports, app

exceptions on freight bills
by carrier inspectors or in
requests do not comply w
DOCUMENTS RE
(a) A written demand for p

loss, damage, injury or de
the shipment or shipments
form, and will be required
(b) When claimant does n

be an interested party, carr
assignment or other proof
to receive any claim paym
(c) Claim must be support

photographic copy of the
extract therefrom, certified
representative to be true a
involved in the claim and
allowances, or deductions
not submitted, such docum
carrier representative upon
(d) When determined by t

investigation, the followin
1. The original freight bill

carriage. When claimant c
require suitable indemnity
300110
2. When the property invo

consignee or where invoic
property has not been sold
or where property has bee
documentation to establish
certification of the correct
3. In order to establish the
the original account of sal

realized on the damaged a
grade, brands, quality, var
deductions, allowances, an
correct over the signature
thereof.
4. When shipment has rec

from a distribution or war
examined and contents ve
certification thereof must
of such inspection and a s
certification.
5. When an asserted claim

shipment cannot be otherw
carrier will obtain from th
certified statement in writi
filed has not been received
CLAIMS FILE
Whenever a claim is prese

amount, such as "$100 mo
claim is filed will determin
the time of delivery by it,
300115as possible the extent, if an
responsible. It will not, ho
circumstances unless and

or determinable amount o
provisions of item 300105
ACKNOWLEDGM
Carrier will acknowledge

thereof, informing the clai
and will pay, refuse paym
120 days after receipt of c
of within this period, carri
succeeding 60 day period
inform the claimant in wri
300120
claim.
A separately numbered fil

accord with the provisions
correspondence pertaining
number.

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 damageprevention 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 NonReceipt 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
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
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 2106
"Overseas." Section 2-323

"Receipt of Goods." Section 2103
(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 nonnegotiable. 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 nonreceipt 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
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.
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.
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.
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
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 nonnegotiable 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 7403) 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 nonnegotiable, 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 nonnegotiable 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 nonnegotiable 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
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 nondelivery 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.
101-1.75 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 tailloaded 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.
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
purpose of this part is to set
observed in order to minimize
the risk of loss of high-value
cargo.

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 highvalue 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 highvalue 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 highvalue 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 highvalue 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.
Subpart BShipper Cargo
Accountability and Procedures
101-3.11 Purpose.
101-3.13 General.
Subpart CCarrier Cargo
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
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.

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.
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.
handled at a facility. which
cargo. because of its monetary,
value, utility. desirability, or
history of frequent theft,
handled at the facility.
Manifest means the document
describing a vessel's cargo or
the contents of a truck.

Sensitive cargo means cargo
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
SEC. 101-3.11 Purpose. The
purpose of this subpart is to set
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 nonuniform containers into singleload 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 theftproof 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
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-ondock. 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 offloaded 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
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.
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
observed in establishing a cargo
loss reporting system.
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.
because of its monetary value.
utility, desirability, or history of
frequent theft, requires greater
protection than other
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 breakbulk 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 followup 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.
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),
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

forth special transit procedures
designed to protect high-value
or sensitive cargo against theft
and pilferage.
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.
used in this part:

which because of its monetary
value, utility, desirability, or
history of frequent theft
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
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
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 highvalue 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
[2]

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
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
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
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

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
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]

of months, years) ("Renewal Term

be exercised by [____________]
[____________] sixty (60) days
the expiration of the Initial Term
Term. It is agreed that [________
cause, elect not to renew this Agr
the Initial Term or any renewal te
have the effect of terminating the
of the then existing term.
1.3 Renewal of Agreement on Re

wanting to renew the Agreement
conditions shall give the other pa

proposed Renewal Terms and con
(90) days prior to the end of the I
Renewal Term. Any proposed rat
by [____________] shall be acco
summary statement of the econom
request and adequate documentat
The parties agree to negotiate in g
agreement on renewal rates. If ag
new rates will take effect on the e
Renewal Term. If the parties ente
negotiations to renew upon differ
conditions and if such negotiation
extend beyond the expiration date
extend beyond the expiration date

[____________] agrees to accep
rates until such time (not to excee
expiration of the then existing ter
is able to relocate its facility.
2.0 DUTIES OF (WAREHOUSE)
2.1 Warehouse Space. [________

available up to [____________]
for use by [____________] at its
facility, Building (No.) Zones (No
will be released to [___________
increments and in accord with the
schedule:
Occupancy
Total
Target Date (squar
__________________
__________________
__________________
Increment
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 reship 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 () hour per occasion.
3.7 Security Alarm Charges. A
security Alarm system
acceptable to
[_____________________]
for the warehouse doors will be
installed by
[7]

[____________] at [__________
and expense. After installation, [_
shall pay the monthly service fees
system. [____________] will hav
responsibility for payment of mo
fees.
Warehouse Space Charges

[____________] shall pay [____
storage fee charges as follows:
3.8
Upon occupancy of
____________
____________
(List Buildings; areas)
[____________] shall pay applic

warehouse space charges on the f
month, commencing (Date).
(a) Except as otherwise provided

payments pursuant to Subsection
full charge for [____________]
occupancy of the warehouse faci
in lieu of any other charges, surc
or fees. Other than the charges se
Section, [____________] shall im
additional charges for utilities, cle

maintenance or other building se
4.0 OPERATION.
4.1 Personnel On Site. At all time

and overtime working hours [___
will have personnel on site includ
management and supervisory per
intent of [____________] to pro
following personnel:
(Number) Parts Redistribution C
"
Warehouse Operations
"
Clerical Personnel
"
Receiving Inspectors
4.2 Quality Control Inspection. [_

will perform a receiving inspectio
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,
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.
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]

amount of up-charge). [_______

cause, cancel all or any part of [_
packaging functions upon thirty (
notice.
10.0 GENERAL PROVISIONS.
10.1 Title. [____________] shall

[____________] Goods received
personnel and/or stored in the wa
[____________] shall retain its r
such Goods at any time upon rea
[____________] shall have no ri
[____________] shall have no ri

possession of [____________] G
notice from [____________]. No
pursuant to the provisions of Sub
Agreement.
10.2 Force Majeure. Neither party

deemed to be in default of any pr
Agreement, or for any failure in p
any damage resulting from acts o
reasonable control of such party.
Agreement, such acts shall includ
to acts of God, civil or military au
disturbance, war, strikes, fires, ot
other ''force majeure" events beyo
other ''force majeure" events beyo

reasonable control.
10.3 Notices. All notices required

given under this Agreement shall
and delivered personally or given
or mailed first-class, postage prep
certified mail, or mailed by expre
receipt requested, as follows:
(a) If to (Warehouse) (Complete N
(b) If to (Depositor) (Complete N
10.4 Assignment. [___________

assignment of its rights or obligat
assignment of its rights or obligat

Agreement without the prior writ
[____________]. Any attempted
consent shall be void. [________
fight to assign its rights under thi
related or affiliated entity provide
[____________] within thirty (3
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 NonDisclosure. [____________]
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]

10.10 Jurisdiction. This Agreeme

construed in accordance with the
10.11 Amendments. No provision

amended or modified in any man
in writing making specific referen
signed by the duly authorized rep
hereto.
10.12 Waiver. Any waiver by eith

covenant or condition maintained
only if in writing signed by the du
in making the waiver. The waiver
in making the waiver. The waiver

term, covenant or condition conta
deemed a waiver of any different
10.13 Whereas Clauses. The matt

"WHEREAS" clauses on page on
into and made part of this Agreem
10.14 Headings. The Section and

contained in this Agreement are f
only and are not intended to defin
Agreement or any term thereof.
10.15 Entire Agreement. This Agr

agreement between [__________
There are no promises, terms, co
There are no promises, terms, co

than those contained herein; and
previous communications, repres
whether oral or written, between
Witnessed by:
Signed by
[Title]
Title:
Witnessed by:
Signed by
[Title]
Title:
[14]
[14]

Page 231
Appendix E
Lease Agreement
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]

14. Lessee shall take good care of

premises and suffer no waste and
termination of this Lease shall su
to Lessor in the same condition a
commencement of term, ordinary
and damage by fire and other haz
under extended insurance and the
excepted.
15. The Lessor covenants that he

seized of the demised premises an
and lawful authority to enter this
term aforesaid and that Lessor wi

in actual possession of the demis
the beginning of the term aforesa
Lessee pays the rent herein provi
performs the covenants of this Le
be performed, Lessee shall be en
occupy and enjoy the demised pr
and quietly without any let, hindr
molestation by any person or per
whomsoever.
16. The terms "Lessor" and "Less

the successors and assigns of bot
17. Wherever in this Lease it shal

permitted that notice or demand t
served by either party to this Leas
other, such notice or demand sha
served and shall not be deemed t
served unless in writing and forw
addressed as follows:
Best Warehous
To the Lessor at: Main Street
Great Midwest,
Jones Distribut
To the Lessee at: Eastern Avenue
Great Midwest,
Such addresses may be changed f

by either party by serving notice
provided. Rental payments shall b
Lessor at the above address.
[6]

18. The Lessor agrees that it will

participate nor concur, by any me
instrument or legislative (state or
that would affect the zoning, exis
government jurisdiction, or taxin
consent of the Lessee.
IN WITNESS, WHEREOF, the pa

signed and sealed this instrument
set above set forth.
In the
presenceBEST WAREHOUSING,
of:
By_________________
Presid
[Corporat
In the
presenceJONES DISTRIBUTING
of:
By_________________
(Presid
[Corporat
[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

(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.
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 nonperishable 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
chemicals, shall obtain a
material safety data sheet as
soon as possible for sealed
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

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
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
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

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
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-thecounter 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 100F (37.8C), except
any mixture having
components with flashpoints of
100F (37.8C) 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 onetenth 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.241979 (ASTM D 56-79)) for
liquids with a viscosity of less
than 45 Saybolt Universal
Seconds (SUS) at 100F
(37.8C), 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 100F
(37.8C). 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
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 130F
(54.4C) 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.
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.
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
employer may use whatever
scientifically valid data is
available to evaluate the
physical hazard potential of the

mixture; and,
(iv) If the chemical
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.

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

required under paragraph (e) of
this section.
(e) Written hazard
communication program. (1)
Employers shall develop,
implement. and maintain at
each workplace. a written
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
program may be kept at the
primary workplace facility.
(f) Labels and other forms of
warning. (1) The chemical
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
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
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

hazards of a chemical shall
revise the labels for the
chemical within three months
of becoming aware of the new
information. Labels on
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
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,
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,
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
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
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
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
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
importer or employer may
prepare one material safety data
sheet to apply to all of these
similar mixtures.
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

Page 257
safety data sheet, becomes

newly aware of any significant,
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

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
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

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
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
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
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,
representative receiving the
trade secret information decides
that there is a need to disclose it
to OSHA, the chemical
employer who provided the
information shall be informed
by the health professional,
representative prior to. or at the
same time as, such disclosure.
(7) If the chemical
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,
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,
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,
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
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
employer.
(11) If a citation for a failure to
release specific chemical
identity information is
contested by the chemical
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
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
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
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
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
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
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

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
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
Bibliographic data bases serv

provider
Bibliographic Retrieval Services (
1200 Route 7, Latham, NY 12110
Lockheed-DIALOG Information
Inc., 3460 Hillview Avenue, Palo
CA 94304.
SDC-ORBIT, SDC Information S

2500 Colorado Avenue, Santa Mo
CA 90405
National Library of Medicine___
Department of Health and Human

Services, Public Health Service N
Institutes of Health, Bethescda, M
20209.
Pargamon international informati

Corp., 1340 Old Chain Bridge Rd
McLean, VA 22101.
Quested, Inc., 1625 Eye Street, N
818, Washington, DC 20006.
Chemical Information System IC

Bureau of National Altars. 1133 1
Street, NW, Suite 300, Washingto
20005.
Occupational Health Services, 40

Drive, Secaucus, NJ 07094.
portunlty to obtain an advantage

know or use it. It may be a formu
a process of manufacturing, treat
pattern for a machine or other de
differs from other secret informa
of the Restatement of Torts which
Appendix) in that it is not simply
ephemeral events in the conduct
example, the amount or other term
contract or the salary of certain em
investments made or contemplate
announcement of a new policy or
model or the like. A trade secret i
continuous use in the operations

relates to the production of goods
or formula for the production of
relate to the sale of roods or to ot
business, such as a code for deter
ocher concessions in a price list o
specialized customers, or a metho
office management.
Secrecy. The subject matter of a t

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.
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
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
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
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 mistswhether 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
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,
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 OSHArequired 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 followins 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:
responsible for ensuring
labeling of any shipped
containers;
3. Description of labeling
system(s) used;
4. Description of written
alternatives to labeling of inplant 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
importers are required to obtain
or develop a material safety
data sheet for each hazardous
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 nonmandatory 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:
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
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
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 substancespecific 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) 2280246.
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) 9643030. 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) 3217003, 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) 9644381. 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.:
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
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) 7488515, fax (717) 748-9118.
Regional chapters and
roundtables.
American Trucking
Associations, 2200 Mill Street,

Alexandria, Va. 22314; phone
(703) 838-1700, fax (703) 6845720. This organization
publishes an extensive catalog
listing books, videos, training
tools, forms, and regulatory
publications.
American Warehouse
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) 6395546.
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) 5740985, 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.
Association, 1400 Abbott Road,
Suite 310, East Lansing, Mich.
48823-2900; phone (517) 3333437.
Hazardous Materials Advisory

Council, 1012 14th Street N.W.,
Washington, D.C. 20005; phone
(202) 728-1460, fax (202) 7281459.
National Association of Rail
Shippers, 50 F Street, N.W.,
Washington, D.C. 20001, phone
(202) 639-2560, fax (202) 6392558.
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.
Association, 2200 Mill Street,
Alexandria, Va. 22314; phone
(703) 838-1700, fax (703) 6845720.

Administration (OSHA),
Department of Labor,
Washington, D.C. Publishes the
Code of Federal Regulations,
including Titles 29-Labor and
49-Transportation.
Protection Council, 120 Main
Street, Huntington, N.Y. 117436906; phone (516) 549-8984,
fax (516) 549-8962. Addresses
legal considerations in
transportation and distribution.

Legal publications and
seminars.
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, 182186
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, 158159
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, 84109, 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, 130131
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
(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, 8788
routing instructions, 101

shipping checklist, 78
shipping control record, 101
shipping documents, 44, 9197
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, 4748
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
Association, 145, 282

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
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, 155156
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,
22
marketing information,
developing, 21-24
marking packages, 67, 90

instructions, 68-69
precautionary indicators, 7074
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
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
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, 3940
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
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, 4647
railroad shipments
liability for, 157
loading, 76
muting, 101
rates

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
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
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, 4748
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, 175176
withdrawal from, 89
straight bill of lading, 93
supervisor, duties of, 64
suppliers, marketing
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
transportation, 112
deregulation, 18
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

(Ernst F

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

(Ernst F

Hochgeladen von

Copyright:

Verfügbare Formate

Managing

Managing Time and Space

New York Atlanta Boston Chicago

This book is available at a

or by any means, electronic,

1. Inventories: Their Importance

2. Warehouses, Leasing, and Stor

3. Logistics Services and Outsour

Expanded Services and New P

Third-Party Services: Analysis

4. Selecting a Third-Party Service

5. Warehouse Operations: Delive

Transport Carrier Responsibili

Carrier Deliveries and Inspecti

Handling and Disposition of D

Unsuitable Transportation Equ

Demurrage and Detention Con

8. Performance Standards and Au

9. Pricing of Warehouse Services

Warehouse Quotation and Con

10. Bar Coding and Electronic Da

The Universal Product Code

11. Packaging: Containers and M

12. Liability, Claims, and Insuran

Appendixes: Warehousing Docum

A Uniform Commercial Code (

B Cargo Security Advisory Sta

C Standard Terms and Conditi

D Contract Warehouse Agreem

F Bill of Lading (Domestic): Te

G Hazardous Materials Commu

Suggested Readings and Sources

Trade Organizations and Semin

Exhibit 1-1. Inventory value and

Exhibit 2-1. Negotiation schedule

Exhibit 2-2. Comparison of ware

Exhibit 3-1. From warehouse to t

Exhibit 3-2. Worksheet for collec

Exhibit 4-1. Selection process che

Exhibit 4-2. Request for proposal

Exhibit 4-3. Public and contract w

Exhibit 4-4. Customer logistics bu

Exhibit 4-5. Customer data sheet.

Exhibit 5-1. Incoming tally sheet.

Exhibit 5-3. Over, short, and dam

Exhibit 6-1. Cross-docking check

Exhibit 6-2. Customer order pick

Exhibit 6-3. Instructions for mark

Exhibit 6-4. Pictorial precautiona

Exhibit 6-7. Cycle count workshe

Exhibit 7-2. Straight bill of lading

Exhibit 7-3. Materials safety data

Exhibit 7-5. Warehouse invoice (b

Exhibit 8-1. Audit form and ratin

Exhibit 9-1. Customer activity pro

Exhibit 9-2. Warehouse quotation

Exhibit 10-1. Electronic data inter

Exhibit 11-1. Specifications for fi

Exhibit 11-2. Performance testing

Exhibit 12-1. Freight (cargo) claim

time to let someone elsea third

the supply chain, thereby

While the basic concepts,