It’s long been a problem for seafarers. Due to Covid restrictions on entering and leaving a country, they could not go home after their shift on the vessel nominally ended. They had to stay with the ship because of the covid restrictions.
In China, that’s ending now. The new rules allow seafarers to leave the ship and fly home. There won’t be a requirement for quarantine.
This is good news for seafarers.
Let’s hope continued progress can be made in working conditions for crews.
A few dishonest truck cargo brokers are making it necessary for the Federal Motor Carrier Safety Administration (FMCSA) to tighten rules for all brokers.
In the Consolidated Appropriations Act of 2023, passed just before the end of 2022, Congress directed the agency to make new rules making clear the distinction between legal truck brokers, bona fide agents, and dispatch services.
Truck brokers have to post a $75,000 bond with a surety company or trust fund, which is used to guarantee claims against the brokerage such as for accidents or mishandling of loads. Dispatch services have not needed to post this bond in the past; they claim they merely connect the shipper with a load to carry with a trucker; the contract for carriage is between shipper and carrier. Many dispatch services do not handle the funds, though somehow they get paid for their services; perhaps the trucker pays a subscription. Occasionally the dispatch service handles the payments; are they then functioning as a broker?
FMCSA recently released the draft of the new guidelines, which they have been working on. They focus on posting the bond and making sure it is paid up. I’m not sure this will address what Congress requested, but certainly the question of whether the bond is posted will go a long way toward making sure claims for accidents or losses or mistaken freight bills can be adjusted.
The guidelines don’t clarify whether a dispatch service is a broker or not. I’m not sure the FMCSA wants to open up that discussion. It’s not hard to register as a broker, but you do have to come up with the bond; that’s the biggest hurdle. The dispatch service does not want liability for financial damages associated with the load.
FMCSA believes about 1.3% of all registered brokers each year, based on 2022 data, are subject to drawdowns of the $75,000 bond they post to legally operate. The bond is supposed to be surety against incorrect charges to their customers. When customers fight the charges, the bond is ‘drawn down’, or pledged to repay the customers. It must be replenished by the broker when the claim is paid.
Of these brokers, about 17% receive total claims over $75,000 in 2022. Unless the bond is replenished, these brokers are violating the law, and also causing their customers a lot of extra work fighting for fair charges.
The bond is held by the surety agency or the trust fund provider. Both are legal entities to hold the bond for the broker. If the bond isn’t replenished, an ‘interpleader’ lawsuit is filed by the surety or trust company, and these legal proceedings against the broker take time and money. The new rules should reduce the number of these filings.
According to John Gallagher, the Transportation Intermediaries Association (TIA), a group representing brokers, believes that the problem often lies with fraudulent surety and trust entities. These companies can run out of funds to pay the claims against the trusts or bonds they hold, meaning that the carriers are unprotected. In other words, the brokers’ representative claims it’s not the brokers’ fault. The FMCSA rules have not focused on surety or trust fund viability in the past.
While both sides may have half a point, fraudulent brokering is not good for drivers or for the industry, though brokers have a vital role to play, especially helping owner-operators and small firms capture and service loads.
And the dispatching services? They want to stay out of the broker loop, preferring to operate in an unregulated fashion. They do provide ‘liquidity’ for truckers, allowing empty backhauls to be filled and reducing operating costs for independent truckers and small carriers. That’s a tremendous advantage for truckers and for the environment; preventing those empty miles is a major concern. It’s not clear whether the dispatchers should be folded under the broker category by the FMCSA.
The STB, struggling since inception in 1995 to develop a fast, affordable, and reasonable method that provides relief to rail shippers challenging unfair rates in “small” zero-sum disputes in which a single railroad dominates the market, will shortly employ Final Offer arbitration to make a binary choice between competing final proposals from railroad and shipper that make the case for what each considers the highest reasonable shipping rate.
Previous efforts by the STB to provide tools for addressing smaller disputes were rarely used by shippers.
The STB’s Final Offer rule is designed as a backup in the case of the failure of a companion STB rule that provides for speedy voluntary, affordable arbitration to resolve rate challenges by stakeholders of any size where the dispute is less than $4M within a two year period—if all Class I railroads agree to use it.
Final Offer theory, developed in the 1940s in the United States, has notably been used by Major League Baseball to resolve disputes as well as state and local governments dealing with unions that are not legally permitted to strike.
In a Final Offer situation, stakeholders do not know what maximum reasonable rate the other side will propose and are thus incentivized to submit proposals that are more rather than less reasonable, and, thus, more likely to be chosen by the arbitration entity. This is markedly different from traditional reasonableness disputes, in which arbitrators would typically split the difference between rate proposals, encouraging participants in the dispute—who knew how the system worked—not only not to be reasonable from the git-go, but specifically to start by proposing unreasonable rates, figuring that whatever they proposed—reasonable or not—was likely to be averaged away.
If—and only if—all seven Class One railroads agree to STB-specified voluntary arbitration proposed in the new rules, the STB’s voluntary arbitration rule will be implemented and the railroads will be exempt from the Final Offer Rate Resolution (FORR) rule for five years.
The FORR rule has been in the works since 2019, when the STB issued a notice of proposed FORR rulemaking and solicited public comment. Five of the Class One railroads filed a petition promising to submit to binding arbitration—a methodology they had refused to participate in for many years—in return for exemption from Final Offer procedures. In response, the STB explored the viability of voluntary arbitration as a practical alternative for smaller rate disputes, and in November 2021 advanced rulemakings for both FORR and voluntary arbitrations, and issued the rules in December 2022 for implementation in early 2023.
Under the voluntary arbitration rule procedure, Class I rail carriers must all commit to five years of arbitration under an expedited schedule. Under the FORR rule procedure, if the STB finds a rate being challenged is unreasonable, both sides submit their case in an “expedited procedural schedule that adheres to firm deadlines.” The voluntary arbitration rule becomes effective 30 days after being published in the Federal Register, the FORR rule after 60 days.
According to STB Chair Martin Oberman, most of the shipper community has expressed a preference for FORR and most of the railroads for voluntary arbitration, but, according to Oberman, both have much in common, including timeframes, flexibility, and monetary limits, and provide shippers with access to more meaningful rate relief than was previously available to them.
“I am optimistic,” Oberman states, “that this time the Board’s efforts will achieve this long-desired goal. I encourage the Class I railroads to accept the opportunity afforded by the new rule and sign up for the arbitration program they clearly prefer. However, if they do not, in my view, FORR also provides a strong rate relief mechanism, and its availability would also streamline rate review processes in small rate cases. To be clear, regardless of some differences of opinion about the most preferable way forward, all Board Members are committed to ensuring review of rate challenges are practical and affordable.”
Supply Chain and Logistics 