Full explanation
A contract carrier transports goods for compensation under individual contracts with specific shippers, rather than offering services to the general public like a common carrier. Contract carriers can be selective about which customers they serve, what freight they haul, and what rates they charge — each agreement is individually negotiated. This allows for customized service levels, dedicated equipment, specialized handling procedures, and volume-based pricing that wouldn't be feasible under common carrier obligations. Contract carriers have lower liability exposure than common carriers because liability terms are defined within each contract rather than by common law presumptions. However, they still must maintain active FMCSA operating authority and meet all safety requirements. Many modern trucking companies hold both common and contract authority simultaneously, allowing them to serve dedicated customers under contract while also accepting spot-market loads as a common carrier.
Frequently asked questions
Do contract carriers need FMCSA authority?
Yes. Contract carriers must hold active FMCSA operating authority and meet the same safety, insurance, and registration requirements as common carriers.
What are the advantages of using a contract carrier?
Shippers benefit from negotiated rates, dedicated equipment, consistent service levels, customized handling procedures, and defined liability terms. Contract carriers benefit from guaranteed volume and predictable revenue.
Can a carrier be both common and contract?
Yes. Most modern carriers hold both common and contract authority, serving some customers under dedicated contracts while accepting general freight from the spot market.