At the end of September, the Federal Motor Carrier Safety Administration (FMCSA) posted an "advance notice of proposed rulemaking" (ANPR) regarding the financial responsibility of freight forwarders and brokers.
With the new rules it eventually proposes, the FMCSA's will seek to implement stricter financial responsibility requirements. Such requirements may include the agency's right to revoke brokers' and forwarders' operating authority whenever their federally required surety bonds fall beneath the $75,000 minimum.
Along with this, the agency is also seeking to implement statutes in several other areas of the Moving Ahead for Progress in the 21st Century Act (“MAP-21”) which was passed by Congress in 2012. Prior to devising and adopting any rules, the FMCSA has invited comments and public feedback on these issues until November 27.
What FMCSA's proposed rulemaking contains
On Sept. 27, 2018, the FMCSA posted their advance notice of proposed rulemaking regarding the "broker and freight forwarder financial responsibility." This is the second time the FMCSA has initiated a rulemaking initiative pertaining to MAP-21.
The advance notice delineates eight areas of inquiry in which new rules are being considered by the agency. These areas are:
- The nature of group surety bonds and group trust funds
- Assets readily available in a trust fund
- The immediate suspension of broker/freight forwarder operating authority in instances of insufficient financial security
- The responsibilities of sureties or trusts in cases of broker/freight forwarder financial failure or insolvency
- The enforcement authority of the FMCSA over non-compliant surety providers
- Criteria for entities to be eligible to provide trust funds for BMC-85 filings
- Recommended changes and revisions to the BMC-84 and BMC-85 forms
- Financial responsibility requirements for brokers of household goods (HHG) and current payment models in the HHG industry
In all of these areas, the FMCSA has posed specific questions it wishes to receive feedback on as well as stated its intent to achieve greater regulatory integrity. So what might the FMCSA's suggestions mean for freight brokers and forwarders?
Will the FMCSA be suspending licenses?
Rules in any of the above areas will be intended to increase enforcement by the FMCSA, set stricter requirements for brokers and forwarders, and reduce losses for carriers. For that reason, the FMCSA is seeking feedback by industry stakeholders to determine the proper degree and severity of the rules it seeks to implement.
FMCSA's ability to suspend brokers' and forwarders' licenses is possibly the most important issue in this notice. In MAP-21 Congress determined that the FMCSA should “immediately suspend” brokers and forwarders whose financial responsibility fell beneath the $75,000 federally required minimum.
The agency envisions two possible scenarios in which it may act to suspend a license — (1) if a party's bond or fund is below $75,000 or (2) if a broker or forwarder does not respond to their bond/fund provider when a legitimate claim has been filed. Moreover, the agency considers the possibility of "financial failure" or "insolvency" by a broker as a possible cause in either of these cases.
To further clarify the question of when and how to suspend licenses, the agency is also seeking comments on “the appropriate cushion time” it should give to brokers when a claim is filed as well as how to define the terms financial failure and insolvency.
So, while the FMCSA has not clearly stated when and how it will suspend licenses, it is evident that the agency is moving in the direction of enforcing the MAP-21 requirements on this issue.
What freight brokers and forwarders can do
In determining whether and what kind of rules to create in any of the above areas, the FMCSA has asked the public to provide comments until Nov. 27.
It is crucial for brokers and forwarders who wish to be heard to participate in this process and offer their comments. In doing so, they will assist the FMCSA in devising rules that are fair and both enhance guarantees for other industry parties yet do not make it unnecessarily hard to conduct business as a broker.
What do you think about the rules the FMCSA is seeking to implement? Will they help the industry and create a better image for brokers or will they create difficulties?