Small-Business Group Seeks Limited Relief From Surety Bond Requirement
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Federal trucking regulators are seeking comments on a petition filed by the Small Business in Transportation Coalition asking for a five-year exemption from the $75,000 surety bond or trust fund requirement for small property brokers and freight forwarders — those with less than $15 million in annual revenues.
The request, announced by the Federal Motor Carrier Safety Administration on April 9, is seeking reconsideration of a 2013 request by the Association of Independent Property Brokers and Agents that the agency denied in 2015.
“With fears of yet another recession on the horizon, now is the time for FMCSA to grant this exemption as it is in the public interest to ensure an uninterrupted supply chain,” SBTC said in its September 2019 petition request.
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Robert Voltmann, president of the Transportation Intermediaries Association, a trade group representing more than 1,700 third-party logistics members, said his organization opposes the petition. Voltmann said TIA’s tracking data shows brokers paying carriers in less than 30 days while data indicates that shippers are paying brokers in 45 days.
“The broker bond/trust is a small price to pay to show that a brokerage company is prepared to meet these market-based realities,” Voltmann told Transport Topics. “We fail to see how a company that cannot afford a bond should be handling other people’s money. We also fail to see why this is a problem when data indicates that the same number of broker licenses are awarded today as before the bond/trust was increased to $75,000.”
FMCSA denied the independent property brokers’ 2013 petition, declaring that the exemption would not be in the public interest and noting that the petitioner had failed to show that the $75,000 requirement “is not needed to protect shippers from the abuse of market power.”
FMCSA also said in its 2015 petition denial that federal regulations do not give it the authority to “essentially nullify a statutory provision by exempting the entire class of persons subject to the provision.”
Prior legal challenges to the financial securing requirement ultimately have been dismissed by the federal courts.
But in its Sept. 10, 2019, exemption petition request, SBTC said FMCSA has skirted the fact that the 2012 MAP-21 law and subsequent regulation raising the financial bond requirement from $10,000 to $75,000 had “forced 40% of the industry out of business.”
“Since the broker bond was raised to $75,000 in December of 2013, formally licensed brokers have continued to operate unlawfully without a license and bond by simply calling themselves ‘dispatchers’ or ‘dispatch services’ with impunity,” the coalition said in its petition request letter. “SBTC believes this clarification is necessary before it can engage in private causes of action against unlicensed entities that are unlawfully arranging for motor carrier transportation, which are authorized by MAP-21.”
The letter added, “FMCSA promised to crack down on unlawful operations through a ‘comprehensive enforcement program’ on Sept. 5, 2013, six years ago as of last week but has failed to make good on this promise.
“We are therefore now asking for all small property brokers and freight forwarders as defined by the SBA for freight transportation arrangement with revenues under $15 million be made exempt for five years to give FMCSA more time to develop its ‘comprehensive enforcement program’ to enforce the licensing and bonding requirement.”
FMCSA is seeking comment on the petition for 30 days after it is published in the Federal Register, scheduled to be posted April 10.
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