MAP-21 requires motor carriers, brokers and freight forwarders (“providers”) to provide service in a particular manner. Because of the new laws many providers are required to substantially change their current method of operation. First, multiple types of authorities with distinct numbers may need to be obtained, which may be best accomplished in different entities. Second, providers must specifically state in writing to the customer before providing service the specific authority type and number under which they are providing authority. Third, in order to obtain broker or freight forwarder authority a $75,000 surety bond will be required. Fourth, failure to provide broker service in the manner required can result in $10,000 penalties for each violation and, in addition, civil liability to any person injured for damages incurred without limitation; and, the penalties and liability can be imposed against the business and its individual officers, directors, and principals.
A window of opportunity currently exists to make any necessary changes to your operation before the FMCSA fully implements the new requirements and procedures and before the flood of applications that will result on the eve of the new requirements and procedures taking effect and thereafter.
MAP-21: The New Law. Map-21 refers to the “Moving Ahead for Progress in the 21st Century Act,” which was signed into law by President Obama on July 6, 2012. Small but critical provisions applicable to providers are contained in the Act and are located in different sections of USC Title 49.
General Registration Requirements–49 USC 13901. In order to lawfully operate as a motor carrier, broker or freight forwarder, a provider must now hold specific authority to provide that service. That is, if Company A wants to operate as a motor carrier, it must hold a motor carrier authority; and if it also wants to operate as a broker, it must also hold broker authority; and, further, if it also wants to operate as a freight forwarder, it must hold freight forwarder authority. A provider must be specifically authorized for each type of service it provides. Further, each type of authority will be issued “a distinctive registration number.” Most important, the provider must specify in writing the specific authority under which it is providing service. This latter requirement of specifying the authority number for the type of service provided applies to “each agreement to provide transportation or service for which registration is required . . .” Thus, it is our opinion that the specific authority number for the type of service to be provided must appear on each load confirmation, bill of lading, transportation contract, or other document pursuant to which service is provided.
Heightened Standards to Obtain Authority–49 USC 13902, 13903 & 13904. The “check the box” and pay $300 era of obtaining FMCSA authority is being eliminated. Applicants for motor carrier authority must now establish that they know and will comply with the safety requirements, disclose any relationship between them and other providers and, eventually, pass a written proficiency examination. Additional requirements apply to HHG carriers, passenger carriers, and Mexican and Canadian domiciled applicants. Applicants for broker and freight forwarder authority must now establish their experience and have at least one officer that has 3 years of experience or provides sufficient information to establish that he/she knows the rules, regulations, and industry practices.
Renewal Required–49 USC 13905. Brokers and freight forwarders are required to renew their registrations within 4 years after the enactment date of the Commercial Motor Vehicle Safety Enhancement Act of 2012 and every 5 years thereafter.
Penalties & Civil Liability for Unlawful Brokering–49 USC 14916. “Any person who knowingly authorizes, consents to, or permits, directly or indirectly, either alone or in conjunction with any other person” brokerage service without holding broker authority and having the required $75,000 surety bond is liable (i) to the government for a penalty of up to $10,000 for each violation and (ii) “to the injured party for all valid claims” without limitation. Moreover, liability is imposed, jointly and severally, on the provider and its individual officers, directors, and principals.
Motor Carrier Registration Requirements–49 USC 13902(a) (6) & (i). By far the most dramatic change contained in MAP-21 is the requirement that a motor carrier obtain broker authority to continue doing what it now may routinely do in its day-to-day operations. A motor carrier cannot provide broker services unless it has registered as a broker. Further, a motor carrier provides motor carrier service only if it provides transportation with–
(A) self-propelled motor vehicles owned or leased by it; or
(B) interchanges under the FMCSA regulations if it–
(i) physically transports the cargo at some point; and
(ii) retains liability for the cargo and for payment of interchanged carriers.
As a result of this new statute the common practice of some motor carriers to accept shipments and to immediately “broker,” “sub-contract,” “interline” or otherwise arrange for another motor carrier to transport the shipments is illegal. In these instances, only if the motor carrier both “physically transports” the cargo and retains liability for the cargo and for payment to the other carrier will the motor carrier be providing legal motor carrier service. It should be noted that it appears the word “interchanges” was used in error and “interlines” is the correct word that should have been used. The two words have different meanings and are not synonymous. That “interchanges” is an incorrect term is confirmed by the FMCSA’s subsequent reference to “interlining” in discussing this requirement, as discussed below.
It appears that the “physically transports” requirement negates the broad spectrum of services that are encompassed by the definition of “transportation” set forth at 49 USC 13102(23) (B). Under 13102(23)(B) “transportation” is defined as including, in part, “receipt,” “refrigeration,” “ventilation,” “storage,” “handling,” “packing,” “unpacking” and “interchange.” However, none of these transportation services generally involves physically transporting the cargo in self-propelled vehicles, that is, a truck or tractor-trailer. The FMCSA has issued “guidance” in the form of frequently asked questions (FAQ) that do not rebut this conclusion. Indeed, the example given in response to the question “What is freight interlining?” refers to Carrier A transporting a shipment from Washington, DC to San Antonio where it turns it to Carrier B for transportation to Los Angeles.
Broker & Freight Forwarder Surety Bond–$75,000–49 USC 13906(b) & (c)
MAP-21 provides that the required broker and freight forwarder surety bond amount increases to $75,000 on July 6, 2013. However, the FMCSA has indicated that this requirement is not effective until October 1, 2013.
Take Action Now. As indicated above, there is a current window of opportunity to make the changes required by MAP-21 before all of the requirements are implemented. The changes to your operations may be minor or major, but there are changes that need to be made. If you wish to discuss your specific situation further, please do not hesitate to contact either of us.