Transportation Management Focus: You Move It, We Write About It  
 
 

- June 22 , 2010 -

Logistics News: Is New Bill Regulating Freight Brokers and Freight Forwarders Really Good for Independent Truckers?

Motor Carrier Protection Act May Offer Some Protections, but also Reduce Competition, Some Truckers Say; Putting the Small Broker Out of Business, More Fees Coming to Owner-Operators?

 
 


SCDigest Editorial Staff  

SCDigest Says:
SCDigest believes the bill is well-intentioned, but that as always the industry, especially small brokers and carriers, need to be aware of the law of unintended consequences.

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Last week, Senate Bill S. 3483, the so-called Motor Carrier Protection Act of 2010 was introduced by Senators Olympia Snow (R-Maine) and Amy Klouchbar (D-Minnesota). S. 3483 would amend section 139 of title 49, United States Code, to add more regulation and oversight of freight brokers and freight forwarders – as the name implies with the goal of protecting smaller carriers from fraudulent or abusive brokers.

 

Will it really achieve those aims?

 

The bill puts a number of new requirements on brokers and forwarders. Currently, there are some 16,000 registered freight brokers in the US, with little barrier to entry. The new law attacks that status quo.

 

The bill would Increase the required broker bond from $10,000 to $100,000 and expand that bond requirement to freight forwarders. Typically, brokers do not pay the full bond, but rather put up 10% or so to a bonding service that remits the majority of the fee.

 

The bill also would clarify that trucking companies must have a broker or freight forwarder license and an appropriate bond in addition to their motor carrier operating authority to arrange freight for another carrier for compensation. This would in essence mean that motor carriers could not broker freight without a broker’s license, and also that brokers could not haul freight without obtaining carriage authority from the Dept. of Transportation (DOT).

 

The legislation also creates a new requirement for brokers and freight forwarders to renew their operating authority and pay a fee annually, and requires the Federal Motor Carrier Safety Administration (FMCSA) to revoke operating authority that is not renewed annually (versus the one-time registration process currently in practice today).

 

“If passed, this law would put a stop to a system that allows rogue brokers and scam artists to operate unchecked,” said Todd Spencer, Executive Vice President of the Owner-Operator Independent Drivers Association (OOIDA), in a statement. OOIDA says it worked with both the Senators and the Transportation Intermediaries Association (which represents brokers) to develop this legislation.

 

“Too often, we’ve seen bad brokers get away with collecting payment from shippers but leaving truckers holding the bag,” Spencer said.

 

The full bill – which is quite short by Washington standards - can be found here: Motor Carrier Protection Act.

 

But some say the law if passed would simply put small brokers out of business, and thereby reduce competition among brokers, giving more clout to the largest players.  

 

The trucking message boards have had some interesting commentary in this regard.

 

The administrator of the owner-operators forum on ClassADrivers.com recently posted that “Hopefully, this bill will not pass. There is no reason to bump the bond up 10 fold. All carriers need to do is run a credit check on anyone whom they plan on doing business. As far as I am concerned they could do away with the bond altogether. It reduces or greatly eliminates competition.”

 

 

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“GMAN” added that “There are some good brokers who only have one or two people in the office. This type of legislation could put many of them out of business. Over the years some of the best brokers whom I have done business are small brokers.”

“The biggest issue with this is the bond fee,” added Tim Brady, consultant and FleetOwner magazine columnist.  “For many smaller brokers, that $100,000 bond translates into about a third of their annual earnings,” said Brady. “So implementing it would force brokers to raise their fees, thus further lowering the monies paid to truckers for hauling the freight or even pushing smaller brokers and forwarder out of business altogether.”

 

Others question whether the annual registration and fee processes is really more about revenue generation than protecting small carriers – and that the new requirement might eventually be expanded to carriers as well.

 

“One troublesome aspect of this legislation is that the brokers must renew their authority and pay a fee each year,” another forum poster on ClassADrivers.com wrote. “My concern is that if this passes for brokers there is a great likelihood that they will also include carriers.”

Robert Voltmann, President & CEO of the Transportation Intermediaries Association, disagrees with the worries.

"First, this bill is not about regulating anyone; it is about fighting fraud in the trucking industry," Voltmann told SCDigest.

"The bill is needed for a number of reasons," Voltmann says. "The first is that the industry is plagued with fraudulent bond companies, carriers re-brokering freight without knowledge or permission, and people that jump in and out of the market to rip off legitimate brokers and carriers. Following defeat of the TRUCC Act, which would have devastated the brokerage industry, TIA and OOIDA sat down to see if we could find common ground. We found that the issues affecting the segments of the industry were very similar."

He adds that "Of course, we don't see any unintended consequences, but I'm sure as the ideas are debated, some will come to light."

Added Jim Butts, Senior Vice President of Transportation for CH Robinson, which is a major provider of brokerage services: "The broker bond specifically has been an issue for quite some time, and we are supportive of this piece of legislation as a step in the right direction. We also see it as an significant positive development that two important industry associations, OOIDA and the TIA, addressed this issue together, and are in agreement with their support of the bill."

SCDigest believes the bill is well-intentioned, but that as always the industry, especially small brokers and carriers, need to be on the lookout for potential unintended consequences as the debate begins.

 

 

What’s your opinion on the Motor Carrier Protection Act? Needed or not needed? What do you see as potential unintended consequences? Let us know your thoughts at the Feedback button below.

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