WASHINGTON — In a Notice of Proposed Rulemaking (NPRM) published on Jan. 5 in the Federal Register, the Federal Motor Carrier Safety Administration (FMCSA) has drafted new rules that it says would help financially protect truck drivers and carriers from unscrupulous freight brokers.
The rules fall under the Moving Ahead for Progress in the 21st Century Act (MAP-21), a funding and authorization bill passed by Congress in 2012 to govern United States federal surface transportation spending.
Previously, the 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.
The agency proposes regulations in five separate 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 seven 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.
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.
“This proposed rule would result in benefits to motor carriers,” according to the NPRM. “FMCSA is aware that some brokers improperly choose to withhold payment to motor carriers for services rendered. Motor carriers can then submit claims to the financial responsibility provider in an attempt to receive payment.”
If the financial responsibility provider has received claims against an individual broker that exceed $75,000, the financial responsibility provider will often submit the claims to a court to determine how to allocate the broker bond or trust fund.
“The interpleader process can be costly and time consuming for motor carriers, and generally results in motor carrier claims being paid pro rata, depending on the number of claims against the broker bond or trust fund,” the FMCSA notice states. “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.”
FMCSA is relying on available data from which to draw an estimated percentage of how many brokers fail to pay motor carriers.
The agency’s best estimate is that approximately 1.3% of brokers (approximately 440 in 2022) would experience a drawdown on their surety bond or trust fund within a given year, with average claim amounts of approximately $1,700 per claim submitted. Of these brokers, 17% may receive total claims in excess of $75,000, potentially leading to interpleader proceedings.
“Because this data is limited in scope, FMCSA cannot quantify benefits resulting from this proposal,” the rulemaking proposal states. “It is FMCSA’s intent that the provisions in this rule, if finalized, would mitigate the need to initiate interpleader proceedings and alleviate the concern of broker non-payment of claims.
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