Q&A: Intermediaries' Regulatory Overload

Q: Why does Washington seem to be targeting transportation third parties so hard?

The so-called MAP-21 law raises the bond requirement for domestic motor carrier brokers from $10,000 to $75,000. That’s a whopping increase, I’m sure you'll agree, and it’s going to hurt a lot of smaller brokers and third-party logistics providers.

The Federal Maritime Commission, meanwhile, seems to be taking a dead bead on international forwarders and non-vessel-operating common carriers. It’s proposing to raise the bond/surety minima for both, wants to make them re-register every two years, says it’s going to crack down on unregistered operators and plans some additional stumbling blocks for foreign NVOCCs.

Why? I mean, the story seems to be all about the “bad apples” in the industry, and I agree there are some, but why is Washington involved? There are also bad real estate agents, bad insurance salespeople, bad lots of third-party activities going on, and Washington doesn’t mess with them. What’s so special about transportation?

 

A: What’s mainly “so special” is that it gives the political folks something to do that they have high hopes they can sell to the American voters as valuable.

The transportation deregulation that occurred in the 1980s and 1990s didn’t come without its negatives as well as its positives. On the plus side, freight transportation costs have fallen a lot, and even the most anti-deregulator can’t dispute that much of the reduction is due to a removal of regulatory oversight. And service didn’t fall apart; some argue that it even improved, at least here and there.

The other side of the coin, however, is that it opened the door to a lot more, um, irregularities — you know, shady operators, scam artists, outright thieves even. In days of yore, the FMC, the old Interstate Commerce Commission and the Civil Aeronautics Board used to exercise such rigid control that they discouraged the “bad guys” greatly. Crooks tended to look for greener pastures elsewhere.

Well, the world’s been living with real estate, insurance and other types of cheats for a long time, but the same scams translated to transportation are a new experience for most. Don’t think Washington hasn’t noticed.

You see, members of Congress have to go back every two or six years to the voters and ask for re-election. What those voters want to know is, “Hey, Jack, what’ve you done for me?” Mostly, they haven’t really done diddly, but they need something to tell all those questioning voters so they’d like to say they voted for this, that or the other bill that will help “protect the public.” Reigning in not-very-honest folks who make the news by initiating a new and publicized form of crime helps make a good tale for them to tell.

As for the FMC, deregulation has transformed it from an agency that actually did things to more of an administrative inconvenience for shippers and carriers alike. The FMC is actually at some risk of being legislated out of existence, which some think is overdue. I doubt Congress is prepared to go that far now, but the FMC’s budget keeps getting cut — which in Washington is like cutting your kids out of the will.

So the FMC needs to be seen as a “do-something” agency. It needs to get out in front and take action. There have been complaints (mainly from household goods shippers, a pretty tiny segment) that third parties have been ripping them off. Therefore, why not take a whack at that sector?

In other words, transportation third parties, whose prominence in the industry has been enhanced hugely by deregulatory statutes, are a target of opportunity these days. That’s why they’re in the bull’s-eye.

Will the changes, enacted and proposed, make a real difference? Will they, in short, help thwart dishonesty? In my opinion, not much, if at all. Oh, they’ll be annoying, and it’s always a good day when you use it to annoy a thief. But they’ll annoy the good folks, too, and in terms of real deterrence they’re of minimal value, at best.

Don’t they look good to the public, though? Congress has hit rock bottom in terms of public opinion, and its members need positive stuff to talk about. The FMC is sick of budget cuts and leery about its own future, so it, too, needs “accomplishments” to which it can point.

And that, in a nutshell, is “how come.”

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843- 559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010. 

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