CPIM Practice Exam

What is the key feature of a contract carrier?

1. It serves the general public

2. It offers shipping services to one or a few specific clients under contract

3. It operates exclusively as a freight forwarder

4. It prioritizes short-term shipping needs over contracts

The correct answer is: It offers shipping services to one or a few specific clients under contract

A contract carrier is characterized by its specific business model, which involves providing transportation services under a contract to one or a limited number of customers. This arrangement allows the carrier to tailor its services to meet the unique needs of these clients, often ensuring dedicated resources and often more flexibility in service offerings compared to common carriers, which serve the general public indiscriminately. In this case, the essence of a contract carrier lies in its commitment to serving selected clients under agreed terms. This relationship fosters a deeper understanding of those clients' shipping needs and can lead to improved service levels and operational efficiencies. Contract carriers typically engage in negotiations that define pricing, service levels, and other conditions that are exclusive to their clients. Other options do not accurately reflect what defines a contract carrier. For example, a carrier that serves the general public is considered a common carrier, which operates under different regulatory obligations and service standards. The idea of solely operating as a freight forwarder does not apply, as freight forwarders act as intermediaries in logistics rather than direct carriers. Finally, the notion of prioritizing short-term needs over contracts does not align with the typical structure of a contract carrier, which thrives on stable agreements rather than transient or fluctuating demands.