FMCSA to Provide Brokers Additional Time To Prove They’ve Increased Bonds to $75,000
This story appears in the Sept. 16 print edition of Transport Topics.
The Federal Motor Carrier Safety Administration said it will provide additional time for freight brokers to supply proof they’ve increased their minimum surety bonds to $75,000 from $10,000.
FMCSA said in a Federal Register notice it was providing what it called “a 60-day phase-in period to allow the industry to complete all necessary filings” to comply with the law scheduled to take effect Oct. 1.
Bond companies that file the proof-of-purchase forms on behalf of brokers are not yet able to file paperwork because FMCSA’s online system is not yet able to process the information.
“The current filing system will be updated to accept the $75,000 requirement by Oct. 1,” FMCSA spokeswoman Marissa Padilla said in a statement.
Padilla also said brokers are still required to have the new bond minimum in place by Oct. 1.
FMCSA said that it will begin sending notifications Nov. 1 to brokers who have not met the deadline for the bond or supplied proof of purchase.
The agency said it would begin revoking freight forwarder and broker operating authority registrations 30 days after the notices are mailed out.
The higher bond amount was included in MAP-21, last year’s transportation reauthorization law.
Executives in the broker and surety bond industries said they were not surprised by FMCSA’s decision.
“They’re underfunded, and they’re given a whole new, big slice of legislation, and they’re given a date by which they’re supposed to enact it. I’m not sure anybody would be in a position to handle that in a timely fashion,” said Daniel Larson, president of Pacific Financial, which sells surety bonds.
“I agree that they had to have a window for filing,” said Robert Voltmann, president of Transportation Intermediaries Association.
James Lamb, president of the Association of Independent Property Brokers and Agents, said FMCSA had no choice but to provide a “phase-in” period.
“If they did enforce it, they would look ridiculous if they didn’t provide brokers with the means to comply,” Lamb said.
AIPBA on its website advised members to seek legal counsel about the filing dates and the extra time FMCSA was providing.
The $75,000 requirement was supported by TIA, American Trucking Associations and the Owner-Operator Independent Drivers Association as a way to drive out fraudulent brokers who don’t pay truckers.
However, AIPBA, which mainly represents small brokers, filed suit against FMCSA on July 16, arguing the bond requirement is “arbitrary and not reasonably related” to the effort to end fraudulence.
The lawsuit, which is pending, also said FMCSA denied brokers due process by ignoring federal rulemaking procedures.
Small brokers such as Terry Trease, owner of T-Arrow in Salt Lake City, said the $75,000 minimum will reduce competition.
“The big companies are taking all the business,” Trease said.
Several brokers said they can’t afford the $75,000 bond, while others said the cost will come directly off their slim profits.
“It’s going to cost an arm and a leg,” said Don Nickels, who with his son, Dan, owns Nickels Brokerage Inc. in Eldon, Mo. “I’m hoping we’ll be able to afford it. My son, that’s his source of income, and he’s worked long and hard . . . to build the business, and I’m going to turn [it] over to him.”
The new bond minimum is half the annual gross for Heartland Auto Transportation of New Mexico
in Los Lunas, owner Chari Kennaman said.
The new minimum means small brokers pay the same as brokers with $75,000 out in payables a month, “where, me, I probably don’t have even $5,000 a month out,” she said.
However, TIA’s Voltmann said brokers deal with small carriers.
“When a one-truck operator doesn’t get paid on a $3,500 load, what happens to him, what happens to his small business?” he said.
