Depending on whom you talk to, the new Motor Carrier Protection Act is either an example of true compromise and collaboration — or a significant threat to all small brokers.

Background

On June 14, Senators Olympia Snowe, R-ME and Amy Klobuchar, D-MN introduced Senate Bill S. 3483, which is new legislation aimed at reducing broker and freight forwarder fraud. The Motor Carrier Protection Act of 2010 has received great support from two unlikely partners: the Owner-Operator Independent Drivers Association (OOIDA) and Transportation Intermediaries Association (TIA).

After disagreeing on the TRUCC Act, legislation that would have fundamentally changed fuel-charge pass through and margin disclosure in 2008, OOIDA and TIA sat down in search of common ground. What they both identified is that their members — drivers and brokers, respectively — were being harmed by industry fraud. According to an open letter from TIA’s President and Chairman of the Board of Directors, “Both organizations had to compromise, and in doing so, we recognized that it would be better to work together than to argue on Capitol Hill and risk having a solution dictated by Congress that would not be in the best interest of either group.”   

Proposed Changes

If passed, Senate Bill S. 3483 includes many changes in the brokering industry, including:

1. Broker bond will increase from $10,000 to $100,000.
2. Freight forwarders will have to comply with bond requirements.
3. Broker bond and trust companies will be publicly regulated.
4. Each brokerage must have one experienced, qualified principle tied to the authority.
5. Brokering will be defined as putting one company’s freight on another unrelated company’s truck.
6. All companies, including carriers, must have an authority to broker freight.
7. If an agent brokers or forwards freight without the necessary bond or licensure, they would be open to unlimited liability for freight charges.
8. On each shipment, companies will have to declare the authority they are operating under (carrier, broker, shipper) — and this declaration would remain throughout the transaction, preventing double brokering.
9. All brokers and freight forwarders would be required to renew their operating authority each year or risk immediate revocation of their authority by the Department of Transportation (DOT).

Broker Bond: Lines in the Sand

Since it was first announced, most of the Motor Carrier Protection Act’s substantial controversy has resulted from the tenfold increase in broker bond. Although the bond requirements have not been increased or adjusted for three decades, many people worry a $100,000 bond would put many small brokers out of business, while discouraging new brokerage companies from opening.

TIA acknowledges that the $100,000 bond was not ideal, but this increase was “determined to be a reasonable compromise to prevent escrow accounts and the public disclosure of broker margins.” A Q&A document available on their website also discusses the TIA Performance Certified program, which provides $100,000 bond to all TIA members who meet proprietary underwriter point scoring. Although they refuse to give away the “secret sauce formula,” reasonable guidance for improving eligibility is provided. Getloaded users should be familiar with this bonding qualification, since we include the TIA Performance Certified shield logo and bonding information for members free of charge.

In an open disagreement with TIA, the newly formed Association of Independent Property Brokers & Agents (AIPBA) is skeptical of the $100,000 bond and believes this requirement will create “an oligopoly for big brokerages under the guise of fighting fraud.” Led by James Lamb, head of DOTAuthority.com and a former DOT Investigator, AIPBA believes this new bill could “have a devastating impact on the Industry — the size caused by the meteor that wiped out the dinosaurs.”

Why are they so worried about the legislation?

Lamb and the AIPBA are concerned that Senate Bill S. 3483 will drive small and new brokers out of the business by making bonds unaffordable. Rather than blanket bond requirements, they recommend a tiered approach that ties revenue with bond requirements. A “Help Defeat $100k Bond” tab details this information on their website, with a form letter brokers can send to their Senator expressing dissatisfaction with this proposed increase.

Beyond Bond

Ultimately, the Motor Carrier Protection Act is about much more than increased bond — as shown by the nine fundamental changes listed above. And despite industry chatter and continuing controversy, this bill may never even reach the Senate floor (remember the TRUCC Act?).

If passed, this bill will likely affect the costs of doing business, whether you are a broker, driver, carrier or other industry professional. But in what ways, no one yet knows.

How much will increased regulation actually decrease fraud?

What will happen to smaller brokers?

Are there unforeseen costs or consequences the industry and government have not anticipated?

What is best for the industry is yet to be decided, but we will be here to ensure you understand all sides of the story. In the mean time, we encourage you to stay abreast of the proposal and look beyond bond when deciding your opinion of the Motor Carrier Protection Act.