This article discusses the many ways in which truck freight is arranged in the US. The author makes the case that load boards are no longer that useful to truckers, and this is quite possibly due to the natural growth in the chase for users, and the users themselves gaming the system. It’s to be expected in our technical world.
Private freight marketplaces are attempts to fix the issues. They have their drawbacks. Another approach is a ‘centralized, reaggregated capacity marketplace’ optimized for integrity and carrier quality.
That’s what Newtrul founded in 2018, is offering. It appears they are offering their service to brokers rather than carriers. They address the carrier quality issue by only signing up carriers that have seven customers they’ve passed compliance checks with.
It’s not clear how Newtrul is doing the aggregation of capacity. Doubtless it is driven by an optimization or AI routine of some sort.
I think these approaches are interesting and useful. They induce some cooperation into a process that was distinctively siloed and labor-intensive previously. Markets will determine who will do cooperation the best.
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.
Changes in the Mexican government’s regulations for bills of materials and shipment documentation are poised to take effect January 1, 2023. The changes are substantial, and require much more data collection.
I interviewed Josefina Blanco, Legal and Compliance Lead at Nuvocargo, talking from Mexico City. She’s a lawyer, and an expert on Mexican trade regulations.
Nuvocargo is a full-service digital platform for US-Mexico trade, offering freight forwarding and brokerage services, customs broker services, cargo insurance, and supply chain financing for both shippers and carriers. They specialize in 53-foot truckload transport.
The genesis of the new regulations is the Miscellaneous Tax Resolution, passed in Mexico in June 2021. That act imposes new Bill of Lading requirements on anyone moving cargo within Mexico, as well as into and out of Mexico. The new requirements are captured in documents known as Complemento Carta Porte or CCP. They require more detailed information to accompany each shipment, verifying its origin and ownership. It’s an attempt to reduce contraband, an important problem for Mexican trade.
There are severe penalties for non-compliance, including loss of ability to operate, fines, and felony charges. Originally, the regulations were to have begun with spot checks in 2021, but fines were not to occur till January 1, 2022. The deadline for enforcement has slipped five times. Now authorities insist that January 1, 2023, will begin enforcement with sanctions.
Under the new rules, drivers must carry the CCP documentation with them, and it must be correctly filled in. There could be spot checks of cargo, leading to issues for drivers. In addition, the CCP is an electronic form. Nuvocargo has a lot of information about the CCP supplementary information in a FAQ on its website.
The Mexican authorities, according to Josefina, included design criteria that help make the CCP and bill of lading electronically compatible. However, the present result seems to contain a lot of redundant information in its over 200 fields. That means a computer system to prepare the forms is almost essential for efficiency, though it is legal to fill the CCP in by hand. Josefina Blanco indicated that about 20% of firms in Mexico are building software themselves to comply.
Now you would think that large firms would not oppose this regulation too much, because they would be in a good position to provide correct CCPs. However, the deadline slips were due to objections from larger companies, represented by industry organizations. Josefina says this was due to the considerable difficulty of programming computer systems to gather data and create the CCP documents correctly. System development takes time and cost, and collecting the information could add as much as 15% to the freight bill, according to Josefina. Many smaller carriers and businesses do not have what’s required to meet these new requirements, and have not started yet.
Brokers themselves are not required to file the CCP forms; according to Josefina, shippers and carriers are the ones in the spotlight. But freight brokers like Nuvocargo, who specialize in Mexican and US transport, can provide service which insures compliance for their loads. Nuvocargo, for instance, includes both shippers and carriers in their offering. Carriers they suggest are likely ready to meet the new rules. and Nuvocargo’s digital platform for managing a shipment collects the proper information and provides the proper CCP documentation, paper and electronic.
Josefina indicated that Nuvocargo specializes in international trade crossing the border at Laredo, TX, US/Nuevo Laredo, Tamaulipas, MX. This port of entry is one of the largest in the US. I was surprised to learn how much truck traffic crosses this border every day. Recently, congestion has grown so great that the US government is expanding several smaller border crossings in Texas to handle larger amounts of traffic. They may provide alternatives for avoiding the congestion at Laredo.
Nuvocargo has recently received major injections of new capital, showing that they are meeting a need perceived by investors as growing. One of their investors is Flexport, the San Francisco unicorn of user interface (UI) based freight brokerages. Other top investors include Tiger Global, one of the largest funders of entrepreneurial firms, and YCombinator, the MIT-related incubator of startups. This article from Techcrunch details the recent trajectory of the company from an entrepreneurial perspective.
Nuvocargo has offices in New York City, a major financial center and hotbed of entrepreneurial activity, and in Mexico City, MX.
Supply Chain and Logistics 