On Thursday, the Federal Motor Carrier Safety Administration (FMCSA) introduced a rule proposal designed to protect motor carriers by increasing financial responsibility requirements on freight brokers and freight forwarders.
The Notice of Proposed Rule Making (NPRM) published in the Federal Register on January 5 attempts to toughen up financial security rules to protect truckers from brokers who fail to pay.
“FMCSA proposes the implementation of certain requirements under the Moving Ahead for Progress in the 21st Century Act (MAP-21). Previously, FMCSA implemented the MAP-21 requirement to increase the financial security amount for brokers from $25,000 to $75,000 for household brokers and from $10,000 to $75,000 for all other property brokers and, for the first time, established financial security requirements for freight forwarders,” the agency said.
The FMCSA notes that it is “aware that some brokers improperly choose to withhold payment to motor carriers for services rendered” and estimates that approximately 1.3 percent of brokers (approximately 440 in 2022) would experience a drawdown on their surety bond or trust fund within a given year.
“FMCSA believes that most brokers operate with integrity and uphold the contracts made with motor carriers and shippers. However, a minority of brokers with unscrupulous business practices can create unnecessary financial hardship for unsuspecting motor carriers,” the agency stated.
Specifically, the FMCSA is considering changes in the following five areas:
- Assets readily available — The NPRM proposes allowing brokers or freight forwarders to meet the MAP-21 requirement to have “assets readily available” by maintaining trusts that meet certain criteria, including that the assets can be liquidated within 7 calendar days of the event that triggers a payment from the trust, and that do not contain certain assets as specified in this NPRM.
- Immediate suspension of broker/freight forwarder operating authority — The NPRM proposes that “available financial security” falls below $75,000 when there is a drawdown on the broker or freight forwarder’s surety bond or trust fund. This would happen when a broker or freight forwarder consents to a drawdown, or if the broker or freight forwarder does not respond to a valid notice of claim from the surety or trust provider, causing the provider to pay the claim, or if the claim against the broker or freight forwarder is converted to a judgment and the surety or trust provider pays the claim. FMCSA also proposes that, if a broker or freight forwarder does not replenish funds within 7 business days after notice by FMCSA, the agency will issue a notification of suspension of operating authority to the broker or freight forwarder.
- Surety or trust responsibilities in cases of broker/freight forwarder financial failure or insolvency — FMCSA proposes to define “financial failure or insolvency” as bankruptcy filing or State insolvency filing. This proposal also requires that if the surety/trustee is notified of any insolvency of the broker or freight forwarder, it must notify FMCSA and initiate cancelation of the financial responsibility. In addition, FMCSA proposes to publish a notice of failure in the FMCSA Register immediately.
- Enforcement authority — FMCSA proposes that to implement MAP-21’s requirement for suspension of a surety provider’s authority, the agency would first provide notice of the suspension to the surety/trust fund provider, followed by 30 calendar days for the surety or trust fund provider to respond before a final Agency decision is issued. The agency also proposes to add penalties in 49 CFR part 386, appendix B, for violations of the new requirements.
- Entities eligible to provide trust funds for form BMC-85 trust fund filings — FMCSA proposes to remove the rule allowing loan and finance companies to serve as BMC-85 trustees.
The FMCSA will accept public comment for 60 days following the publication of the NPRM in the Federal Register. You can click here to leave a comment.