The Impact of Billing Based on Block 18/19
January 23, 2012 
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Note: This article is part of a series on changes to the 2012 400NG and International Tender. (To view the entire series of articles, click here.) Please note that these articles are not intended to cover every change made, so TSPs still need to read the tariffs prior to filing rates. Also, these posts are based on our own interpretation of the tariffs, and we cannot guarantee that our interpretation will always be shared by SDDC, the PPSOs, or GSA.
Friday, we covered the change in the 2012 400NG that will base the origin and destination service fees on blocks 18/19 of the GBL instead of the actual pickup and delivery location. (To read that article, click here.) Today we are going to examine some of the implications of SDDC making this change.
Our assumption is that the reason for this change by SDDC is to make the tariff more consistent, by basing more and more charges on Block 18/19 of the GBL. Adding origin and destination service charges to storage and related charges as items based ob Block 18/19 certainly does add consistency.
However, there is a difference between the storage related charges and these items. Some of the rationale for the previous changes was to prevent TSPs from selecting a storage location that was favorable for billing purposes. If the TSP has to bill based on Block18/19, then there is no incentive to store the shipment in a warehouse that allows the TSP to collect long delivery charges. (How often this actually happened in the real world may be debatable, but it seems SDDC did not want to allow the possibility of it occurring.)
This change is different from those previous changes in that the billing is already being done based on something that is completely uncontrollable by the TSP, the original pickup and final delivery locations. There is no way for the TSP to manipulate these points for more favorable invoicing terms, so there is no potential problem there that SDDC needed to address. Therefore, the only goal in making this change that we can see is consistency.
While we applaud the goal of consistency within a tariff, we do see some challenges with the continued move to base more items on the requested pickup and delivery address, instead of the actual addresses. These changes continue to move the billing process towards the expected movement of a shipment, and away from the actual movement. We are approaching the point where we could accurately calculate the entire invoice for a shipment at the time the GBL is printed, even before the shipment has picked up.
The problem occurs when a shipment doesn’t always go as planned, and the change results in a diversion or a long delivery. In these scenarios, the destination service charge may be based on a completely different geographical area than the one where delivery services actually occur. In fact, the tariff language specifically states that in the case of diversion, the charges are still based on the originally requested delivery address:
On diverted shipments, the requested pickup address (block 19 of the PPGBL/BL) and/or the requested delivery address (block 18 of the PPGBL/BL) at the time the shipment is offered and accepted by the TSP (not the point of diversion) shall be the applicable points for the determination of charges under this item.
Of course, the TSP is going to be contracting with an agent for the actual delivery location, not the originally requested delivery location, and will likely be paying the agent based on a compensation schedule for that geographic area. This will create a situation where there will be a discrepancy between what the agent’s charges are based upon, and what the TSP is actually able to bill the government. It might work to the favor or the detriment of the TSP, depending on the shipment, but it will always add a layer of complexity and confusion to the transaction between agent and TSP.
Do you agree with the changes SDDC has made on the origin and destination service charges? Are there other consequences of this change? Please use the comments below to share your opinion:
Related Posts
- Tariff Changes: Delivery Out of SIT Mileage Based on Block 18 - January 13th, 2011
- Tariff Changes: Unpacking Rates to Be Based on Block 18 - February 11th, 2011
- SDDC Expands Block 18/19 Usage to Origin and Destination Service Fees - January 20th, 2012
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[...] there are still concerns with the growing reliance of SDDC’s usage of Block 18/19, we are pleased that at least they have clarified this important issue. The fundamental building [...]
[...] via water to Fairbanks, even though the OBL will show something different. While SDDC has become less concerned recently about billing based on actual shipment information, it does create some concerns and challenges down the road for the GSA post-audit [...]