Freight Refused? How an On-Hand Agreement Keeps a Failed Delivery From Becoming the Carrier's Unpaid Problem

When a receiver refuses freight, a carrier should not become an unpaid warehouse. A two-layer on-hand process creates the record, charges and authority needed to respond.

The terminology matters: There is no universal FMCSA form officially titled an 'On-Hand Agreement.' Industry tariffs and contracts more often use 'on-hand freight,' a 'Notice of Refused or On-Hand Freight,' or an 'On-Hand Notice.' The strongest carrier practice combines standing contract terms with a shipment-specific notice and a signed disposition and charge authorization.

A driver arrives on time, checks in and is ready to unload. The receiver says the purchase order is wrong, the appointment is missing, the product is allegedly damaged, the temperature record is disputed or the warehouse simply has no room. The broker says, 'Hold tight while we contact the customer.' Hours pass. The driver loses the next load, the reefer keeps running and the carrier remains responsible for freight that no one will accept.

That is the moment a routine delivery problem becomes an on-hand freight event. Without a written process, the motor carrier can be forced into the worst possible position: acting as an unpaid warehouse, absorbing detention and layover costs, and carrying cargo exposure while the broker, shipper and receiver debate who should act.

This is not a theoretical cost. A 2018 U.S. Department of Transportation Office of Inspector General analysis, using historical operating data, estimated that detention was associated with annual net-income reductions of $250.6 million to $302.9 million for truckload motor carriers. The same report noted that smaller carriers reported receiving compensation less often and that facility representatives did not always sign arrival and departure times. The dollar estimates are historical, but the control problem remains current: if the carrier cannot prove tender, time, notice and agreed charges, collecting the loss becomes much harder.

First, Understand What an On-Hand Agreement Is - and Is Not

An on-hand agreement is best understood as a carrier-created risk-control system, not a single government form. It addresses freight that remains in the carrier's custody after delivery has been properly tendered but cannot be completed for reasons such as refusal, rejection, closure, an appointment or paperwork problem, partial acceptance, reconsignment, a customs or governmental hold, or a dispute over condition.

In practice, the system should have three connected documents:

1. Standing on-hand terms. The broker-carrier agreement, shipper-carrier contract, rate confirmation or incorporated carrier tariff defines the trigger, notice method, free time, charges, storage authority and disposition process before a problem occurs.

2. Shipment-specific notice. A Notice of Refused or On-Hand Freight records what happened on the load, proves the carrier tendered delivery and demands written instructions by a stated deadline.

3. Disposition and charge authorization. The party with authority selects return, redelivery, reconsignment, storage, transload or another lawful option and identifies who guarantees the added charges.

   
   

A notice can be effective evidence even if a warehouse refuses to sign it, especially when the governing contract already defines the notice process. A countersigned authorization is stronger because it turns the next step and its price into a written agreement. The two should not be confused.

Why the Written Process Changes the Balance of Power

When a delivery fails, every party has a different incentive. The receiver wants the truck off its property. The broker wants time to reach the customer. The shipper wants to avoid a rejected-load loss. The carrier needs to protect the freight, the driver, the equipment and the next dispatch. A written on-hand process forces the parties to answer five questions immediately:

1. Was delivery properly tendered, and why was it not completed?

2. Who currently has authority to direct the cargo?

3. What care must the carrier continue to provide?

4. Which charges are accruing, when did they begin and who will pay them?

5. What happens if no lawful instructions arrive by the deadline?

The need for clarity is not limited to anecdotal disputes. In its property-broker transparency rulemaking, FMCSA summarized comments describing chargebacks and situations in which brokers allegedly billed shippers for detention under one set of terms but paid carriers under less favorable terms. FMCSA called those reported practices concerning. An on-hand agreement does not solve every payment dispute, but it makes the carrier's service, time and responsible payor much harder to blur later.

Do Not Treat Every Cost as 'Detention'

A common drafting mistake is to use one vague detention rate for every consequence of a failed delivery. The contract should separate the services because each has a different trigger and cost structure.

Charge	Operational trigger	What the governing terms should define
Detention	Driver and equipment are waiting while the original delivery remains active.	Free time, clock start, hourly increment, proof of arrival and maximum or no maximum.
Layover	The delay consumes a dispatch day, required rest period or next scheduled load.	When detention converts to layover and whether both may apply without duplication.
On-hand / storage	Delivery has failed and the carrier continues holding the freight.	Daily truck or trailer charge, secure-location costs, monitoring and start time.
Redelivery	A second tender is required at the same location.	Flat charge or mileage/time formula, appointment terms and unloading responsibility.
Reconsignment / return	The destination changes or freight must return to origin.	New rate, miles, tolls, fuel, transit time and a new or amended bill of lading.
Protective services	Reefer fuel, temperature monitoring, secure parking or other cargo care continues.	Actual cost, markup if any, reporting interval and authorization for emergency expense.
Third-party handling	Transload, lumper, warehouse, inspection, salvage or disposal service is required.	Advance approval, reimbursement, documentation and who bears third-party risk.

How to Build an On-Hand Freight Agreement

The carrier should create the standing language with transportation counsel and then build a short incident form that dispatch can issue from a phone or transportation management system. At minimum, the documents should address the following provisions.

1. Identity of the parties. Use legal names, addresses and MC/USDOT numbers for the broker, shipper, consignee and known cargo owner. Do not assume the broker owns the goods or that a warehouse can bind the shipper.

2. Shipment identifiers. Include load, bill-of-lading and purchase-order numbers; locations; commodity; piece count; weight; seal; temperature; and equipment.

3. The trigger event. Record the appointment, gate-in and tender times, reason given, partial unloading, and any condition or temperature dispute. Record facts, not conclusions.

4. Notice and response deadline. Identify recipients, the delivery method and the exact deadline for written instructions. Include a second and final notice when appropriate.

5. Free time and charges. State the agreed free period, each rate, billing increment, clock start, minimum charge and required proof. Do not rely on retroactive fees.

6. Authorized disposition options. Provide selections for redelivery, return, reconsignment, storage, transload, inspection or another lawful action. Require a new rate for added transportation.

7. Payment guarantee. The signer should identify the payor and accept the listed charges. A warehouse acknowledgment proves an event; it does not automatically promise payment.

8. Authority representation. The signer should confirm authority to direct the cargo and bind the named payor. Do not take an irreversible step on an unsupported instruction.

9. Cargo care and risk allocation. Define care, temperature monitoring, security, inspection, transloading and storage without assuming the form creates coverage.

10. Lien, sale and disposal language. Reserve only rights available under the contract and law. Require proper notice and commercially reasonable procedures; never claim ownership.

11. Priority and reservation of rights. State how the form interacts with the agreement, bill of lading, rate confirmation and tariff, and avoid accidental waivers.

12. Signatures and audit trail. Capture name, title, company, date, time, signature, delivery record and attachments so the load file shows who knew what and when.

The Driver and Dispatch Response: Eight Steps

A good form fails if the fleet does not have an operating procedure. Drivers should be trained to gather facts and protect the cargo; dispatch should control contractual notice and authorization.

1. Prove tender. Preserve the appointment, arrival and gate records, ELD or geofence timestamps, photos, seal condition, temperature data, bills of lading and the names of facility personnel.

2. Ask the facility to document the event. Request a signed or stamped notation showing refusal, partial acceptance or inability to unload. If the facility declines, record the refusal and rely on independent evidence.

3. Notify all relevant parties at once. Send the written on-hand notice to the broker and, when known and contractually appropriate, the shipper, consignor, consignee and cargo owner. A phone call should be followed by email.

4. State the deadline and existing terms. Identify the exact time written instructions are due and quote the controlling contract, rate-confirmation or tariff provision. Do not overstate rights or create retroactive charges.

5. Obtain a signed disposition and charge guarantee. Do not accept a vague message such as 'take it somewhere safe.' Confirm the location, service, rate, payor, cargo-care requirements and signer's authority.

6. Protect the freight and the evidence. Maintain security, temperature and seal controls; document every inspection or transfer; and avoid admitting cargo fault before the facts are investigated.

7. Notify the insurer when the risk changes. Extended storage, transloading, an unattended trailer, a temperature dispute, contamination, salvage or threatened disposal may trigger policy conditions or exclusions. Prompt notice matters.

8. Escalate before any irreversible action. If instructions do not arrive, issue the required final notice and consult transportation counsel before withholding, selling, destroying, donating or abandoning freight.

A Practical Shipment-Specific Framework

The incident form should be short enough to issue immediately. The following language illustrates the structure, but it must be adapted to the carrier's contracts, tariff, cargo types, operating states and insurance program.

ILLUSTRATIVE FRAMEWORK - NOT A READY-TO-SIGN CONTRACT

Subject: Notice of Refused or On-Hand Freight - Load [number] / BOL [number]

Tender record: Carrier arrived at [facility] on [date/time] for the confirmed appointment and tendered delivery. The facility stated that delivery could not be completed because [quote factual reason]. [All / part] of the shipment remains in Carrier's custody. This notice is not an admission of cargo damage, delay or liability.

Demand for instructions: Provide written disposition by [date/time/time zone]. Instructions must identify the authorized destination or storage location, required cargo-care conditions and the party responsible for all resulting charges.

Accruing charges: Under [agreement / rate confirmation / tariff item], the following charges apply beginning [date/time]: [detention], [layover], [on-hand storage], [reefer or protective service] and any authorized third-party expense. Redelivery, return or reconsignment requires a separate written rate authorization.

Acknowledgment: The undersigned represents that he or she is authorized to direct disposition of the shipment and bind [named payor], selects [disposition option], and accepts responsibility for the stated charges. All rights and defenses are reserved.

The Legal Backbone - and the Limits of the Form

An on-hand clause does not erase Carmack liability

For interstate freight, the Carmack Amendment generally makes a receiving or delivering motor carrier liable for actual loss or injury to the property caused during the covered transportation. Federal law defines 'transportation' broadly enough to include services related to movement such as delivery, refrigeration, storage and handling. That is why a form should not promise that cargo liability automatically ends the moment the carrier emails an on-hand notice.

Many carrier tariffs state that liability changes to that of a warehouseman after refusal, notice or expiration of free time. That language may be important, but its effect depends on the governing bill of lading, written contracts, incorporated tariff, state law and the facts. It also does not force a cargo insurer to cover warehouse legal liability or extended storage.

Written contracts can define services and conditions

Under 49 U.S.C. Section 14101(b), a shipper and motor carrier may enter a written contract for specified transportation services under specified rates and conditions, and may expressly waive certain statutory rights and remedies. That makes careful drafting valuable - and makes broad, boilerplate waivers dangerous. The on-hand provision should be reviewed together with the full transportation agreement, not pasted into a rate confirmation in isolation.

A carrier's lien is real, but self-help has rules

Model UCC Section 7-307 recognizes a carrier's possessory lien for qualifying transportation, storage, demurrage, terminal and preservation expenses. It also states that the carrier loses the lien if it voluntarily delivers the goods or unjustifiably refuses delivery. Section 7-308 permits enforcement by a commercially reasonable sale after required notice to known interested persons - and warns that noncompliance can create damages and, for a willful violation, conversion liability.

Do not turn a protection tool into a conversion claim: The UCC is enacted state by state and versions can differ. Cargo ownership, secured interests, perishability, hazardous materials rules, food-safety requirements and contract terms can alter the analysis. No carrier should sell, destroy, donate or intentionally withhold freight based only on a generic internet form.

The Broker and the Warehouse Are Not Interchangeable

The warehouse employee at the dock may be the best witness to what happened, but the warehouse may not be a party to the broker-carrier agreement, may not own the freight and may have no authority to promise payment. Ask the facility to confirm arrival, tender, rejection, condition and departure. Treat that signature as evidence unless the facility separately and expressly accepts payment responsibility.

The broker may have contracted with the carrier and may agree to pay accessorial charges, but the broker may not have authority to order destruction or sale of someone else's cargo. The signed disposition document should therefore separate two representations: authority to direct the goods and responsibility to pay the carrier. If either answer is unclear, notify every known interested party and escalate rather than guessing.

The Insurance Review Motor Carriers Should Not Skip

An on-hand agreement is part of loss control, but it does not create coverage. Motor truck cargo policies vary significantly in how they address temporary storage, terminals, refrigeration, unattended vehicles, dishonesty, voluntary payments, salvage, debris removal, contamination and warehouse legal liability. A carrier that moves rejected freight to a public warehouse or leaves a loaded trailer in a secure lot may have changed the risk in a way the policy treats differently.

Refrigerated, food, pharmaceutical, high-value, bonded, intermodal and hazardous-material loads need cargo-specific procedures. The form should identify who monitors temperature, who pays for fuel and security, what happens if product condition changes, and when the insurer or adjuster must be contacted. Operational instructions should never require a driver to violate hours-of-service, hazardous-materials, food-safety or securement rules.

What Motor Carriers Should Put in Place Before the Next Refusal

1. Have transportation counsel draft or review a standing on-hand provision and make sure it is properly incorporated into the carrier's governing agreements or tariff.

   
   

2. Create a one-page Notice of Refused or On-Hand Freight and a separate disposition and charge authorization with electronic signature capability.

   
   

3. Publish a realistic schedule for detention, layover, storage, protective services, redelivery, reconsignment and third-party handling.

   
   

4. Train drivers to document tender and facts while dispatch controls notices, pricing, cargo instructions and escalation.

   
   

5. Build a distribution list that reaches the broker, shipper, consignee, cargo owner, claims contact, operations manager and insurer when applicable.

   
   

6. Review the process with the motor truck cargo insurer and insurance advisor, especially for reefer, high-value, hazmat, intermodal and temporary-storage exposures.

   
   

7. Store all documents, emails, ELD timestamps, photos, temperature records and signatures in the load file so billing and claims teams can reconstruct the event.

The goal is not to threaten brokers, punish warehouses or hold freight hostage. The goal is to replace ambiguity with a controlled, documented process. A professional on-hand system gives every party a clear path to resolve the shipment while making sure the carrier is not silently absorbing the cost and risk created by someone else's failed delivery.

Protection beyond the policy. TheTruckersInsurance.com helps motor carriers evaluate how contracts, cargo handling, temporary storage and accessorial procedures interact with the insurance program. Before the next refused load, speak with transportation counsel and your licensed insurance advisor about building a process that fits your operation.

Educational disclaimer: This article provides general risk-management information and is not legal advice, a contract form, a coverage opinion or a guarantee of payment. Laws, contracts, tariffs and insurance policies vary. TheTruckersInsurance.com and ASE Insurance Agency LLC are not law firms. Obtain advice from qualified transportation counsel and review the final process with the applicable insurer before use.

Sources and Authorities

U.S. Department of Transportation, Office of Inspector General. January 31, 2018. Estimates Show Commercial Driver Detention Increases Crash Risks and Costs, but Current Data Limit Further Analysis

Federal Motor Carrier Safety Administration. November 20, 2024 proposed rule and agency discussion. Transparency in Property Broker Transactions

U.S. House of Representatives, Office of the Law Revision Counsel. current United States Code. 49 U.S.C. Section 13102 - Definitions, including transportation-related storage and handling

U.S. House of Representatives, Office of the Law Revision Counsel. current United States Code. 49 U.S.C. Section 14101 - Written contracts with shippers

U.S. Government Publishing Office. current United States Code. 49 U.S.C. Section 14706 - Liability under receipts and bills of lading

Cornell Legal Information Institute. model Uniform Commercial Code. UCC Section 7-307 - Lien of Carrier

Cornell Legal Information Institute. model Uniform Commercial Code. UCC Section 7-308 - Enforcement of Carrier's Lien

FedEx Freight. rules tariff accessed August 1, 2026. FXF 100 Series Rules Tariff - storage and Notice of Refused or On-Hand Freight provisions

Specialized Freight Carriers. carrier tariff example. Item 1010 - On Hand and Storage

M.C. Carrier LLC. carrier tariff example accessed August 1, 2026. Item 250 - On-Hand Shipments