|Federal Broker Bond Reform|
|Monday, 13 August 2012 14:32|
Provision in federal highway bill stokes controversy
As hard as it might be to believe, many critics of the recently passed legislation in Washington to increases in both the bonding requirements on brokers and the oversight of the brokerage industry seem to think if you got scammed by a broker, it’s your own fault. They say you didn’t perform enough due diligence checking-out the people with whom you’re doing business. They say the bond will be unattainable for many small-business brokers thus putting them out of business and forcing everyone to use only the large brokers, excuse me – third party logistics providers (3PL’s) and those “big boy’s” will take a bigger cut of the pie. A lot of rhetoric is flying around by “self-appointed” industry representatives claiming Congress got hoodwinked and they’re going to get it all fixed (if you send them enough money).
Sure, and the Cubs are going to win the World Series this year.
All of this comes on the heels of CCTA’s successful legislation establishing a construction trucking broker bond requirement in California. That bill too had its critics. The critics might want to take note that the $15,000 bond requirement in California is a lot less than the newly approved $75,000 bond required at the federal level.
The changes in how brokers will be regulated came as a direct result of negotiations between the American Trucking Associations (ATA), Owner-Operator Independent Drivers Association (OOIDA), and the Transportation Intermediaries Association (TIA) at the behest of congressional leaders willing to advance a bill if all three parties would come up with a compromise.
Congress, whether Democrat or Republican won’t generally step into and referee economic disputes, but this was different because the regulated community (motor carriers) were able to convincingly show this issue is tied directly to highway safety.
It can be pretty tough for an owner-operator or motor carrier to properly maintain their equipment when they get hosed out of money to which they are entitled – and yes, after they did their due diligence.
Because of the new bonding amount, there is no question some brokers with a poor credit history may be unlikely to secure a bond because of stricter underwriting criteria. And that’s a problem why?
But before everyone who is supportive of these changes gets too euphoric, there is a big hurdle to jump. The Federal Motor Carrier Safety Administration will need to incorporate the congressional mandate into the Federal Motor Carrier Safety Regulations by amending existing rules and possibly creating new ones. That will take a rulemaking process which could mean the sun goes supernova before “change happens.” This is an election year and it’s highly unlikely we’ll see any major new rulemakings emerge before Election Day or even the remainder of the year.
Beyond Election Day there is also the problem of bureaucratic indifference to congressional mandates. Congress passes many new laws and depends on the relevant department to implement its will. There are many examples of congressional mandates that still have not been acted upon by agencies. One example is the 22-year-old Sanitary Food Transportation Act of 1990. US DOT was directed to prescribe regulations and establish rules governing the safe and sanitary transportation of food. This law was a direct outgrowth of congressional revulsion at a practice where truckers were hauling fresh food into New York City and back-hauling the city’s trash to landfills in the Midwest and then returning to NYC with fresh food in the same trailers (an early example of recycling).
There are still no regulations.
I’ve sat in meetings of brokers and broker “wanna be’s” and listened to hucksters encouraging their followers to bid on Department of Defense (DOD) loads as a “great way to cash-flow your upstart brokerage because DOD pays in 48 hours through their mandatory participation in US Bank’s PowerTrack payment system.” Next they tell their assembled lemmings, “… and you don’t have to pay the trucker for up to 60 days.” These are the same exact people opposed to this new law – go figure.
HIGHLIGHTS OF CHANGES FOR BROKERS/FREIGHT
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