FMCSA proposing new broker, freight forwarder financial responsibility regs

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Updated Jan 5, 2023

The Federal Motor Carrier Safety Administration on Thursday will publish a proposal for the implementation of several Congressionally-required regulations for brokers and freight forwarders that will help protect motor carriers in the event of non-payment, including the immediate suspension of a broker's authority.

In a Notice of Proposed Rulemaking (NPRM) set for publication Thursday, FMCSA is proposing to implement regulations in five separate areas related to brokers' financial responsibility: 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; and entities eligible to provide trust funds for form BMC-85 trust fund filings. 

An Advance Notice of Proposed Rulemaking (ANPRM) seeking industry feedback on a potential proposal was published in 2018. The regulations are requirements under the Moving Ahead for Progress in the 21st Century Act (MAP-21) transportation bill signed into law in 2012. The Transportation Intermediaries Association, American Trucking Associations, and the Owner-Operator Independent Driver’s Association in the ANPRM each voiced their general support for FMCSA’s plan to implement a rulemaking on broker and freight forwarder financial responsibility. 

FMCSA will accept comments on its new NPRM for 60 days beginning Thursday. Comments can be filed here through March 6.

The agency said its proposal would result in benefits to motor carriers, adding that it is aware that some brokers choose to withhold payment to carriers for services rendered. In the event of non-payment, carriers can file against a broker’s bond to attempt to receive payment. If, however, claims against an individual broker exceed $75,000, the financial responsibility provider will often submit the claims to a court in an interpleader action to determine how to allocate the broker bond or trust fund.

“The interpleader process can be costly and time consuming for motor carriers, and generally results in motor carrier claims being paid pro rata, depending on the number of claims against the broker bond or trust fund,” FMCSA added.

Based on available data, FMCSA estimates that approximately 1.3% of brokers (approximately 440 in 2022) would experience a drawdown on their surety bond or trust fund within a given year, with average claim amounts of approximately $1,700 per claim submitted. Of these brokers, 17% may receive total claims in excess of $75,000, FMCSA said, potentially leading to interpleader proceedings.

OOIDA Director of Federal Relations Jay Grimes said that after more than a decade since MAP-21 was enacted, this NPRM "might actually implement many of those principles. Unfortunately, the MAP-21 broker bond provisions have not really been enforced, and motor carriers are still being denied rightful claims or in many cases only getting a small percentage of what they’re owed. Today’s proposal attempts to mitigate the need for interpleader proceedings and alleviate broker nonpayment of claims, and OOIDA is reviewing the NPRM to ensure that it does. We will continue advocating for any necessary reforms as FMCSA finalizes this long overdue rulemaking."

[Related: How to file on a broker’s surety bond]

The breakdown of the proposal’s new regulations is as follows:

Assets readily available

FMCSA proposes allowing brokers or freight forwarders to meet the MAP-21 requirement to have “assets readily available” by maintaining trusts that meet certain criteria, including that the assets can be liquidated within seven calendar days of the event that triggers a payment from the trust.

Immediate suspension of broker/freight forwarder operating authority

The NPRM proposes that “available financial security” falls below $75,000 when there is a drawdown on the broker or freight forwarder’s surety bond or trust fund. This would happen when a broker or freight forwarder consents to a drawdown, or if the broker or freight forwarder does not respond to a valid notice of claim from the surety or trust provider, causing the provider to pay the claim, or if the claim against the broker or freight forwarder is converted to a judgment and the surety or trust provider pays the claim. FMCSA also proposes that, if a broker or freight forwarder does not replenish funds within seven business days after notice by FMCSA, the agency will issue a notification of suspension of operating authority to the broker or freight forwarder.

Surety or trust responsibilities in cases of broker/freight forwarder financial failure or insolvency

FMCSA proposes to define “financial failure or insolvency” as bankruptcy filing or state insolvency filing. This proposal also requires that if the surety/trustee is notified of any insolvency of the broker or freight forwarder, it must notify FMCSA and initiate cancelation of the financial responsibility. In addition, FMCSA proposes to publish a notice of failure in the FMCSA Register immediately.

Enforcement authority

FMCSA said that in order to implement MAP-21’s requirement for suspension of a surety provider’s authority, the agency would first provide notice of the suspension to the surety/trust fund provider, followed by 30 calendar days for the surety or trust fund provider to respond before a final agency decision is issued. The agency also proposes to add penalties in 49 CFR part 386, appendix B, for violations of the new requirements.

Entities eligible to provide trust funds for BMC-85 filings

FMCSA proposes to remove the rule allowing loan and finance companies to serve as BMC-85 trustees.

[Related: Critics say trust fund surety fails to protect truckers in claims against brokers]