Opinion: A New ‘Tax’ on Carriers

By David Dwinell

Owner

LoadTraining.com

This Opinion piece appears in the March. 18 print edition of Transport Topics. Click here to subscribe today.

On Oct. 1, an estimated 150,000 motor carriers currently engaging in unlicensed brokerage will find themselves subject to what amounts to an enormous new tax, courtesy of the latest transportation funding law — Moving Ahead for Progress in the 21st Century, or MAP-21.

The new law’s brokerage provisions appear to be aimed primarily at professionals in that field. But a closer look reveals that compliance will be even more onerous for carriers in the habit of hiring other carriers to carry loads for them — in effect, acting as unlicensed brokers.

Today, more than 300,000 motor carriers have interstate authorities to operate and about 22,000 broker licenses have been issued. A large number of those carrying broker licenses — perhaps as many as 90% —also are holders of motor carrier authorities. However, the opposite is not the case: the majority of those with motor carrier authorities are not also licensed brokers.

Most freight today — worth an estimated $300 billion a year — is brokered not only when a shipper enters an agreement with a licensed broker but also when one authorized motor carrier “hires” another authorized motor carrier to haul cargo in its place. Many, if not most, of the motor carriers engaging in unlicensed brokerage are private carriers, snack-food makers (for example) or manufacturers of various types of goods. These private carriers rely to an extent on for-hire carriers to get their products to market.

If you are now engaged in one of these unlicensed brokering arrangements, you need to be aware that after Oct. 1, the practice will be illegal — let me repeat, ILLEGAL — and could result in a fine of $10,000 per load, unless you become a licensed property broker and post a $75,000 surety bond before licensing and loading occurs.

Oddly enough, despite the large number of trucking companies engaged in brokering loads to other trucking concerns as a major part of their business, no huge increase in the number of carriers applying to be licensed brokers has been noted so far.

Perhaps everyone is simply waiting until the last minute, or perhaps they aren’t aware that the guillotine is poised to fall. But they’d better get busy because the new highway funding law requires them to prove their qualifications before the necessary licensing and bonding can occur.

Professional property brokers already licensed will need to come up with only $7,000 a year for a new $75,000 bond (formerly $10,000). But the true costs of MAP-21 to authorized motor carriers were never assessed by those crafting and passing the new law.

In my opinion, MAP-21 will cost the trucking industry $2 billion a year.

For starters, existing motor carriers wanting to become licensed brokers must prove skill in brokering or take training to gain that skill. What’s more, according to the Federal Motor Carrier Safety Administration’s website, trucking firms intending to continue hiring other motor carriers will have to start an entirely new company to be licensed in order to successfully divorce themselves from their carrier liability by “arranging” transportation.

To do this, the newly minted brokering firm must completely separate its brokering payroll from its trucking side — not only by procuring a separate federal employer identification number (FEIN) but, in fact, getting separate everything — address, phone number, e-mail, website, you name it.

So here’s the math: 150,000 newly licensed brokers times $7,000 annual cost for the larger bond, plus another $7,000 in startup costs for the new company equals $2 billion dollars and change — a whole lot of change.

If you are thinking of hiring an agent as an escape from all this — don’t. One or both of you still must be licensed as a broker to go ahead with working with another carrier.

There is pretty much universal agreement that regulation is an expensive business in general, but MAP-21’s costs to the average motor carrier that hires another are a sleeper tax that requires every broker to “reapply” every five years to continue in business.

Ironically, the costs of enforcing the new law will be enormous for the government as well. But the relief for the government is to seize trucks — both the load and the equipment — until the fines are paid. And the really scary part is that FMCSA probably will turn its enforcement over to state-operated scale houses — in effect, 50 other taxing bodies.

As a former trucking company owner, I never would have supported legislation causing the loss of my sacred right to achieve my dispatch using any method I could attain without having a license.

But today, for many truckers to continue doing business as usual, the only recourse is to become licensed brokers. We now know the price for ridding the world of double brokers and crooks was truckers’ virtual enslavement to a brokering license.

It is true that you have to be an authorized motor carrier to

double-broker a load — i.e., the carrier tells the broker he will haul the freight, presents authority and insurance and then brokers the load again. So the largest wrong to be righted by this new law was among the truckers themselves and involved very few brokers as the victims of the pernicious double-brokering practice. That perhaps is the reasoning behind its passage.

But I’m still puzzled by the apparent inactivity of those most influenced by the new law.

LoadTraining.com, Phoenix, is a school for freight brokering and transportation education.