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NEW FEDERAL LEGISLATION AFFECTS MOTOR CARRIERS, PROPERTY & FREIGHT BROKERS
BrightALERT -- MAP-21
On June 29th, Congress reached agreement on a short term highway reauthorization bill,
“Moving Ahead for Progress in the 21st Century”, otherwise known as MAP-21. It was signed into law by the President on July 6th. As with most highway bills, it contains a number of provisions that won’t affect your day to day business. However there are some provisions that indeed will affect your daily operations.
The transportation law firm that most of you are familiar with, Scopelitis, Garvin, Light, Hanson & Feary, has compiled a summation of the key points of the bill (those most likely to affect you). It is available for a flat fee of $75. We strongly urge you to request a copy of the summation. The contact is Allison Smith at firstname.lastname@example.org or 317-637-1777.
We do however want to immediately draw your attention to one of the provisions that we believe to be particularly relevant to many or most of you in the courier industry, i.e. brokering freight interstate (section 32915). Brokering refers to your use of other motor carriers where your customers’ cargo moves either entirely or partially under their DOT authority (utilizing independent owner-operators who lack their own motor carrier authority would not be considered brokering either currently or under MAP-21).
Under the MAP-21 legislation (section 32915), a motor carrier will not be allowed to broker freight unless it is a registered property/freight broker. You must register as a broker or freight forwarder unless you are transporting property in vehicles you own or operate or interchanging with another carrier, in which case you must physically transport the cargo at some point AND retain liability for the cargo and for payment of interchanged carriers.
Currently if you are just assuming responsibility for the shipment (via your shipping receipt/BOL), but not physically transporting any leg of the shipment, broker authority is not required. Going forward that will change and broker authority will be needed. Please understand if you do engage in brokering, once the FMCSA actually adopts the regulations specified under the MAP-21 legislation, (this likely won’t be until late in 2013), that there are increased penalties per section 32505 for evasion of regulations. Currently these are “$200 but not more than $500”, but they’ll go to “$2,000 but not to exceed $5,000” for the first violation and from “$250 but not more than $2,000” to “$2,500 but not more than $7,500” for subsequent violations. Obviously a pretty dramatic difference.
You may be aware that in order to obtain broker authority currently, you are required to obtain a property broker surety bond in the amount of $10,000 (form BMC-84) as proof of financial security. Alternatively, you can utilize a $10,000 “trust fund” (form BMC-85) which you must fully collateralize with cash or CD. Under the new regulations, the amount of the bond increases to $75,000. The problem is that even now, the $10,000 bond is difficult to obtain from most surety underwriters. The premiums are very low and underwriters fairly routinely have paid out on these bonds, hence the reluctance to write them. Certainly with the amount going to $75,000, underwriters will be even more reluctant to write the bonds. You can go with the trust, but once MAP-21 becomes effective, you’ll be putting up $75,000.
If there’s any question as to whether you are indeed brokering now or will be under the new regulations and you do not have broker authority, please contact us for consultation. Again, we also strongly urge you to contact Allison Smith at Scopelitis, Garvin, Light, Hanson & Feary for a copy of the summation of MAP-21.