Fighting Fraud in Transportation Act of 2011
Fighting Fraud In Transportation
As we reported to membership in June, Congressmen Carnahan and Guinta introduced H.R. 2357, “Fighting Fraud in Transportation Act of 2011” specifically to address the issue of the broker bond, which may be increased if this bill becomes law.
This will cause the broker bond to be increased to $100,000, not the $500,000 that some in the industry were hoping for. This legislation will more importantly, require DOT to establish processes and procedures to screen its list of registered motor carriers, brokers and freight forwarders annually and requires the FMCSA Administrator to ensure that the list accurately reflects only those entities with currently active operating authority. It also clarifies that motor carriers need separate broker or forwarder authority and bond to broker freight. Clarifies that a motor carrier may provide transportation of property with self-propelled motor vehicles owned or leased by the motor carrier or through interchanges as permitted under regulation issued by the Secretary, provided that the originating carrier must physically transport the cargo at some point, and retains liability for the cargo and payment of interchanged carriers.
Phase-In Provision of the Guinta-Carnahan legislation
U.S. Representative Frank Guinta's Bill Strengthens & Protects Trucking Industry
Nothing will happen overnight if the proposed legislation becomes law. Change will be gradual and it is not without precedent. If the legislation passes, current companies will have at least four years, to come into compliance. It is likely that new companies will have to start under the new rules, but they will know that before they begin.
You may recall that last year Senators Klobuchar and Snowe introduced similar language S. 3483 which died with the last Congressional Session. Since that time TIA, OOIDA and now the American Trucking Associations (ATA) reached an agreement on compromise legislation aimed at protecting brokers and carriers from fraud in our marketplace. The TIA Board of Directors – comprised of small, medium, and large brokers – voted unanimously for the compromise of raising the broker bond requirement, because the Board believes the bond increase is offset with changes that protect the professional brokerage industry from fly by night scam artists, carriers that re-broker freight, and poor broker trust companies that hurt carriers and give you a bad name.
Licensed brokers were at risk of being forced by Congress, into disclosing their margins to their customers and carriers. TIA killed that legislation for all brokers. Licensed brokers were also at risk of having pricing regulated by Congress, related to fuel surcharges, which would have opened your businesses up to endless and costly litigation.
The carrier community has long sought to increase the broker bond. In January of 2004, OOIDA petitioned FMCSA to open a rulemaking to increase the surety bond or trust fund amount to at least $300,000 and as high as $500,000. In April of 2005, ATA weighed in supporting the OOIDA petition. In April 2009, ATA once again wrote FMCSA seeking the agency to move on a bond rulemaking. In the 2009 letter, ATA cited a study they conducted indicating that only 13 percent of carriers’ claims against brokers were satisfied by the $10,000 bond.
Shippers too have called for an increase in the broker bond to at least $100,000. Many shippers have imposed shipper specific $100,000 bonds on their brokers. While this has been a slowly developing trend, it doesn’t take too many shippers doing this before a broker may have to post $500,000 to $1 million in shipper bonds. TIA has been successful in working with members to have their shippers accept TIA’s Performance Certified $100,000 bond in lieu of a shipper specific bond.
In a 2005 notice of proposed rulemaking regarding household goods brokers, FMCSA proposed raising the bond for household goods brokers to $25,000 as an inflation adjustment (1986), but stated, “FMCSA does not have adequate data to determine the appropriate amount of increase necessary for the protection of carriers or shippers … FMCSA will consider proposing [a] higher limit in a future rulemaking or supplemental proposal.”
As you can see, pressure has been building for some time to raise the broker bond. TIA has been successful in beating back these initiatives over the years, but your Board decided that the political winds were blowing against us in a perfect storm, and instead of waiting for FMCSA to open a rulemaking on the bond that could have been like opening Pandora’s box, or having Congress impose one-sided new laws, we compromised to better control the outcome. And, while we compromised, we did so with a ready solution for our members. We already knew that TIA members could qualify for an affordable $100,000 bond, because we were offering it through the TIA Performance Certified Program. We also have plans drawn up to make the bonding of our members even easier and more affordable should everyone have to increase their bond. So, while we compromised, we did so, like we do everything else, with you in mind.
Ocean transportation intermediaries, companies very much like you in size, income, and market structure, are already required to obtain bonds of $50,000 (forwarder), $75,000 (NVOCC), or $125,000 (if they have both authorities as many do) plus $10,000 per office.
Brokerage is a serious business. You know how hard it is. You know what happens when a carrier re-brokers your freight and causes you to lose a customer. You know what it is like to face a cargo claim. You know what it is like to face a law suit. This is a serious, professional industry. Our critics are right when they say that TIA members are raising the bar for the industry; we always have!
Of course, we would have preferred to avoid raising the bond. We still believe that the best public policy would either be for everyone to have a bond or no one have one, but that argument does not warrant any interest on Capitol Hill.