Friday, October 11, 2013

Approximately 50 Days and Counting

If you are currently a broker or freight forwarder, or if you are a carrier which arranges for truckload transportation and need to obtain broker or freight forwarder authority, you have approximately 50 days left to comply before the agency begins enforcing the new rules.
A broker’s or freight forwarder’s bond can be obtained in less than 2 weeks and for a qualified applicant should cost less than $2,000 per annum.


No new forms are necessary to file for a broker or forwarder permit if you are a motor carrier and need to obtain a licensed or bonded entity to arrange for transportation in compliance with FFIT.  The following is an article discussing the advantages for motor carriers to obtain a forwarder’s permit rather than a broker’s license as a way to comply with the new regulations.  As a non-asset based transportation service provider, I believe operating as a companion forwarder will allow a carrier to more easily comply with the bond requirement while performing the services shippers demand from asset-based carriers for the reasons set forth herein.
In response to the many questions we have been asked and the confusion surrounding the new requirements, we are also attaching (1) answers to frequently asked questions; (2) a summary of the FMCSA’s September 5 Guidance; and (3) a copy of the agency’s publication. 
If you need help with an application or a bond, please do not hesitate to contact us at brokers@processagents.net or visit http://www.processagents.net/brokers.html.

Henry E. Seaton
** 

Time for Motor Carriers to Become Freight Forwarders
MAP-21 is the tipping point for motor carriers to set up an affiliated freight forwarder to comply with the new $75,000 bonding requirements. Clearly, motor carriers must continue to outsource truckload freight to other carriers in order to operate efficiently. Yet MAP-21 precludes carriers from directly arranging for truckload transportation to be provided by others, criminalizing past lawful convenience interlining in the name of fighting fraud.
Obtaining a broker’s license, whether in the motor carrier’s name or in an affiliate is not the answer for the following reasons:
        1.     Brokers cannot accept cargo liability or issue bills of lading.
        2.     Shippers already expect brokers to sign carrier/shipper contracts accepting liability and control over carriers which only exacerbate potential vicarious liability and uninsured cargo claims.
        3.     A carrier who previously accepted cargo liability under the interlining provisions of the Carmack Amendment cannot easily now tell its shipper it will be responsible for cargo losses on loads it handles on its own equipment, but that on loads it outsources to another as a broker, the shipper’s only recourse is to the carrier with potentially crummy insurance and no assets.
The answer to this predicament is clear. To satisfy shippers, preserve cargo liability, the right to issue bills of lading and to collect from shippers using a common SCAC, freight forwarding is the answer.
        1.     A freight forwarder, like a carrier, accepts cargo liability from origin to destination and issues a bill of lading.
        2.     Based upon established case law, a freight forwarder can clearly arrange for truckload transportation to be provided by a subcontracted motor carrier under the contracted carrier's license, insurance and safety program.  See CTI-Container Transport International, Inc. -- Freight Forwarder Application, 341 ICC 169, 190-91 (1972); Brinke Freight Forwarder Application, 326 ICC 322, 325 (1970); Compass Agencies, Inc., Nippon Yusen Kaisha Lines, Inc., and Transmarine Navigation Corporation — Investigation of Operations, 344 I.C.C. 246 (1973)
        3.     A freight forwarder, unlike a property broker, does not have to rely upon contract interpretation in order to have recourse to the carrier it hires under the Carmack Amendment for indemnity.
        4.     A freight forwarder, like a carrier, can publish website terms and conditions, issue its own bill of lading, and adjust cargo claims taking full advantage of federal law, and satisfy all of its shippers special contract requirements with out having to claim it is "merely an arranger" which cannot assume any direct responsibility or contractual duties.
        5.     Because a freight forwarder, like a property broker, is required to have a $75,000 bond, arranging for truckload services pursuant to a freight forwarder’s license will satisfy MAP-21.
        6.     Vicarious liability, negligent selection, freight charge payment issues, claims handling confusion, etc., are all simplified when the contracted party is a forwarder, the equivalent of a non asset-based carrier.
        7.     Contract negotiations with shippers become simpler when a carrier/forwarder is the "transportation service provider" - an awkward shipper inserted contract term which cannot be properly applied to a broker.
        8.     Importantly a freight forwarder, as the one who accepts primary liability for cargo loss or damage, and can obtain primary cargo insurance at reasonable rates. Property brokers which often face crippling setoffs for cargo claims when their retained carriers are unable or unwilling to pay, cannot obtain similar insurance.
In sum, a forwarder’s permit is no more difficult to obtain than a property broker’s license. Although a carrier is currently allowed by the FMCSA to obtain a broker’s license in the same name, there are good reasons for ultimately making the forwarder the parent of the motor carrier or at least an affiliate.
The soft landing on enforcement provided by the FMCSA gives motor carriers until December 1 to comply with MAP-21. The ability to outsource additional truckload freight is too important as an operational advantage to be needlessly surrendered. For most carriers it will be worth an inexpensive application and the posting of a bond for a cost of less than $2,000 per annum.


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