This proposed rule from the Federal Motor Carrier Safety Administration seeks to establish financial security requirements for freight forwarders and brokers, in order to better regulate the freight forwarding industry, which has been subject to legislation for over a decade. Freight forwarders are defined as those who assume responsibility for transportation from one place to another and/or use any part of the transportation service provided by a carrier.
The FMCSA already implemented a requirement in the past 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 goal is to try to eliminate or reduce the number of fraudulent providers from the industry. And hopefully block brokers that don’t pay motor carriers. Federal law requires brokers and freight forwarders to maintain financial security for circumstances where they don’t pay carriers.
The proposed rule requires all freight forwarders to have minimum levels of financial responsibility, and to make sure that those levels are enforced and monitored. This includes having in place a plan to satisfy those minimum levels, which can include obtaining surety bonds, insurance, letters of credit, or other forms of acceptable financial security.
The FMCSA requires brokers and freight forwarders to have a minimum of $75,000 in assets to maintain their operating authority. These assets are held to cover any potential claims from motor carriers for unpaid services. The assets can be held in either a surety bond or trust fund, as set forth by the MAP-21 law.
The proposed rule also aims to increase transparency and oversight of freight forwarders and brokers, by requiring them to submit financial security documents to the Federal Motor Carrier Safety Administration, to be reviewed and monitored. This oversight should help to reduce the occurrence of freight forwarders failing to meet their financial obligations, and ensure that all freight forwarders are operating in a safe and secure manner.
According to Transport Topics, the Jan. 5 proposed rule 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
- Enforcement authority
- Entities eligible to provide trust funds for form BMC-85 trust fund filings