Legal Definitions - backhaul allowance

A backhaul allowance refers to a payment or credit provided to a transportation carrier (such as a trucking company, shipping line, or railway) or, less commonly, to a shipper. This allowance is typically given for undertaking a return journey, known as a "backhaul," that would otherwise be empty or underutilized after delivering its primary load.

The purpose of a backhaul allowance is to incentivize the efficient use of transportation resources, reduce empty mileage, and lower overall logistics costs. It can be structured as a direct payment, a discount on shipping rates, or a contractual credit.

• Example 1: Incentive for a Trucking Company

  A furniture manufacturer in North Carolina contracts a trucking company to deliver a full truckload of sofas to a retail store in Florida. After unloading the sofas, the truck would typically return to North Carolina empty. However, a produce distributor in Florida needs to ship a load of oranges back to a processing plant in North Carolina. To encourage the trucking company to take on this return load, the produce distributor offers a backhaul allowance, making the return trip more profitable for the trucking company than driving back empty. This allowance helps cover the additional handling and fuel costs for the return journey.

• Example 2: Discount for a Shipper

  A large electronics retailer regularly ships products from its central warehouse to various regional distribution centers. The trucks often return empty to the central warehouse. The retailer discovers that one of its suppliers for packaging materials has a factory located near a distribution center and needs to ship materials back to the central warehouse's vicinity. The packaging supplier offers the electronics retailer a backhaul allowance, effectively a discount on the shipping cost, for utilizing the retailer's otherwise empty return trucks to transport the packaging materials. This benefits both parties by reducing shipping costs and optimizing truck usage.

• Example 3: Contractual Agreement in Logistics

  A major grocery chain enters into a long-term logistics contract with a freight carrier. The contract specifies that after delivering groceries to a store, if the carrier can secure a suitable backhaul load (e.g., picking up recyclable materials or returning empty pallets from the store to a central depot), the grocery chain will provide a predetermined backhaul allowance per mile for the portion of the return trip that is utilized. This contractual allowance encourages the carrier to actively seek out and manage backhaul opportunities, contributing to the grocery chain's sustainability goals and cost efficiency by minimizing wasted fuel and mileage.