July 6, 2022 •Deyman Doolittle
Contract carrier companies are shipping carriers that work with customers to move goods or people between locations under the conditions of a contract agreed upon through a carrier contract negotiation. Typically, we see these with larger parcel and freight shipping companies. In this blog, we'll discuss the difference between contract, common, and private carrier companies and provide some examples of each.
What are common or contract carriers?
While contract carrier companies are those that perform shipping duties for specific clients under contract, common carriers perform the same duties without such limitations or directions. These contracts often detail types of goods or services, agreed upon prices or discounts, or specialized services. The other differentiator between the two types of carriers is insurance. Contract Carrier Insurance requires all contract carriers to file for liability ($1,000,000 minimum) and cargo ($100,000 minimum) insurance.
Common Carrier vs Contract Carrier
How do you choose? Well, often time it just depends on the service you need. If you are only shipping 10 items a month for a total cost of a couple of hundred dollars, you likely would not benefit from a contract carrier. However, if you are shipping specialty items, such as medical supplies or gases, you would be required to use a contract carrier. Another instance where a contract carrier would be recommended is for high-volume shippers.
What is a contract carrier example?
Contract carrier examples include DHL, U.S Xpress Enterprises, and XPO Logistics as well as other large shipping carriers.
Is FedEx a common or contract carrier?
FedEx is both a common carrier and a contract carrier. As a common carrier, they transfer both goods and services for anyone who is willing to pay the fee. As a contract carrier, they are working with specific companies to transfer specific goods or services at an agreed upon price or discount for a specific period of time.
Is UPS a common or contract carrier?
Unsurprisingly, they are also both. Both UPS and FedEx identify as contract carriers and common carriers as they provide similar services. They are not, however, private carriers.
What are private carriers?
Private carriers are not accessible to the regular consumer. They are companies that own the vehicle(s) they use to transport their own goods or services. They are not for hire.
What is a private carrier in transportation?
The most standard example we see of private carriers is car manufacturers. Characteristically, private carriers are used by large businesses or organizations that need to transport a large number of vehicles – think of a semi-truck hauling stacked cars as its load. This allows for better tracking, easier scheduling, and ensuring the vehicles make it from the production plant to the dealership without other cargo or stops. While semi-trailer trucks are the most common method of transportation for private carriers, aircrafts, railcars, or even ships could exist as part of their fleet.
A few Private Carrier Examples
- Coca-Cola
- Wal-Mart
- Frito-Lay
- Sysco
- Local plumbers & electricians
- Trash Companies
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Frequently Asked Questions About Contract Carrier Companies
How does insurance distinguish companies that ship under signed agreements from those that ship for anyone?
Companies shipping under signed agreements must file for liability insurance of at least $1,000,000 and cargo insurance of at least $100,000, while those that ship for the general public without contracts face no equivalent mandatory filing. This insurance requirement is one of the key structural differences between the two models.
What shipping volume or product type justifies moving from spot rates to a negotiated transportation agreement?
High-volume shippers and businesses transporting specialty items such as medical supplies or gases have the most to gain from a negotiated transportation agreement. A shipper sending only ten or so packages per month at a few hundred dollars total is unlikely to benefit from formalizing that arrangement.
Does FedEx ship for any business, or only for companies with negotiated agreements?
FedEx ships for any customer willing to pay the published rate, making it available to the general public as a common shipping provider. It also works with specific businesses under negotiated agreements that lock in pricing, discounts, or defined service terms for a set period.
Does UPS operate as a dedicated-fleet transporter that exclusively moves its own goods?
No. UPS accepts shipments from any business or individual willing to pay the standard rate, so it is not a dedicated-fleet transporter of its own goods. Both UPS and FedEx offer services to the general public as well as to businesses operating under negotiated shipping agreements.
Which large brands operate their own fleet to transport goods without outside customers?
Coca-Cola, Walmart, Frito-Lay, and Sysco are among the large organizations that run their own dedicated fleets to move their products. Trash collection companies and local trade service providers such as plumbers also fall into this category, as they transport their own materials and equipment rather than shipping for outside parties.