by Alpha Distribution Solutions
When choosing a third party logistics provider, the facility's physical location is of great importance. The location may provide significant savings on freight in an unexpected way.
3PLs provide their clients with savings due to their expertise, assets, and effective and efficient distribution processes. 3PLs utilize automation, warehouse management systems, and locations with lower real estate and employment wages to provide the best value to their clients.
Another way 3PLs are able to provide savings is through the commercial zone. If a wholesaler's 3PL is located outside of the New York Commercial Zone, the wholesaler will most likely not be responsible for paying the freight from the 3PL to the retailer. The retailer within the New York Commercial Zone is typically responsible for paying the freight from the 3PL to their stores.
After the civil war, railroad companies, across the U.S. held a monopoly over the destinations they serviced. Due to public pressure, the government passed the Interstate Commerce Act of 1887 to lower prices, increase competition, and decrease corruption in the railroad industry. The Act created the Interstate Commerce Commission (ICC). In 1935, Congress passed the Motor Carrier Act, which enabled the ICC to regulate the trucking industry. The agency was eventually abolished in 1995 and responsibilities were transferred to the U.S. Department of Transportation.
Before they were disbanded, the ICC defined commercial zones that were exempt from provisions of the Motor Carrier Act, creating an area free from federal regulation. Commercial zones, with exceptions, were determined through a general population mileage formula still used today. There are currently 18 commercial zones across the U.S.
New York Commercial Zone Defined
New York, NY Commercial Zone1
According to the Code of Federal Regulations
The zone adjacent to, and commercially a part of, New York, NY, within which transportation by motor vehicle, in interstate or foreign commerce, not under common control, management, or arrangement for shipment to or from points beyond such zone is partially exempt from regulation under 49 U.S.C. 13506(b)(1), includes and is comprised of all points as follows:
(a) The municipality of New York, NY, itself
(b) All points within a line drawn 20 miles beyond the municipal limits of New York, NY
(c) All points in Morris County, NJ
(d) All of any municipality any part of which is within the limits of the combined areas defined in paragraphs (b) and (c)
(e) All of any municipality wholly surrounded, or so surrounded except by a water boundary, by the municipality of New York or by any other municipality included under the terms of paragraph (d) of this section.
About Commercial Zones
If a wholesaler's 3PL is within the New York Commercial Zone, the wholesaler is usually responsible for paying the freight from the 3PL to the retailer. If a wholesaler's 3PL is outside the New York Commercial Zone, in most cases, the retailer pays the freight from the 3PL to their stores.
To determine overall savings, the initial cost of freight from the port to the 3PL must be considered. Wholesalers who partner with distribution centers outside of the New York Commercial Zone will most likely have higher initial freight costs, transporting their goods from the port to their 3PL, but ultimately save more by not paying freight costs from the 3PL to the retailers.
 EXEMPTIONS, COMMERCIAL ZONES, AND TERMINAL AREAS. (n.d.). Retrieved June 16, 2014, from Federal Motor Carrier Safety Administration: http://www.fmcsa.dot.gov/regulations/title49/sectio/372.235
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Alpha Distribution Solutions offers a comprehensive list of logistic services for your business needs as they relate to warehousing, packaging, distribution, order processing, fulfillment, shipping, back office outsourcing, or stand alone refinishing projects. Visit www.alphadistsol.com for more information.
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