The Federal Motor Carrier Safety Administration has issued a proposed rule that establishes financial security requirements for freight forwarders, taking further action on legislation that stretches back more than a decade.
The rule defines freight forwarders as “primarily those entities that assume responsibility for the transportation from the place of receipt to the place of destination, or use any part of the transportation for a carrier.”
The proposal calls for the implementation of certain requirements under the Moving Ahead for Progress in the 21st Century Act signed into law in 2012. Previously, FMCSA implemented a 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. For the first time, financial security standards for freight forwarders also were established.
The agency said it has not decided whether to propose regulations dealing specifically with household goods brokerage or freight forwarding, stressing it is “most useful to continue to address moving fraud through other means.”
In the proposed rule, published in a Jan. 5 Federal Register announcement, the agency outlines regulations in five separate areas:
Assets readily available
Immediate suspension of broker/freight forwarder operating authority
Surety or trust responsibilities in cases of broker/freight forwarder financial failure or insolvency
Entities eligible to provide trust funds for form BMC-85 trust fund filings
The proposal said that the most workable standard for determining when available financial security has fallen below $75,000 is when an actual draw down has taken place.
“It would then be very clear to both brokers and freight forwarders that if they don’t quickly replenish their trust funds or surety bonds, that their operating authority registration will be suspended,” the proposal said. “Based on [this] proposal, FMCSA would suspend the operating authority registration of a broker or freight forwarder only in the event of a draw down on the bond or trust.”
FMCSA said it would give brokers or freight forwarders seven business days to contest any immediate suspension action before it took effect, in order to meet constitutional due process concerns.
The agency said its best estimate is that approximately 1.3% of brokers (approximately 440 in 2022) would experience a draw down on their surety bond or trust fund within a given year, with average claim amounts of approximately $1,700 per claim submitted.
FMCSA also proposed 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.
FMCSA in the proposal defined financial failure or insolvency as “bankruptcy filing or state insolvency filing.” The 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 cancellation of the financial responsibility.