Tag Archives: trucking

FMCSA proposes tougher rules for truck broker financial backing

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.

John Gallagher·Wednesday, January 04, 2023

FMCSA proposes tougher rules for truck broker financial backing – FreightWaves

John Gallagher·Tuesday, December 20, 2022

Congress directs action on broker-related regulations – FreightWaves

Inventory is a ‘high risk’ for retailers: Morgan Stanley

A study by Morgan Stanley consultants indicates that there is way too much inventory in retail outlets. They believe it’s an overshoot of almost 20%. That means that inventory needs to be liquidated by these firms, and also that they will slow down reordering.

The implication for transportation is less demand for it. That’s consistent with the downturns on prices we see for goods movement in both ocean shipping and domestic trucking.

Too much inventory can be good for retailers like TJMaxx and Ross that can help liquidate inventory of more upscale retailers. They will have good supplies of products to move at a discount.

It is interesting to see how directly supply chain and logistics activity correlates with inventory levels. While it’s not always the case, right now the connection is direct.

Rachel Premack Tuesday, October 11, 2022

Inventory is a ‘high risk’ for retailers: Morgan Stanley – FreightWaves

New California law designed to rein in detention and demurrage charges

California again takes the lead in denying demurrage and detention charges by marine terminals and intrmodal equipment providers, such as chassis providers, when return is prevented by actions outside the control of the users. Such conditions might include gates being unavailable for return, a provider diverting the equipment from the original intrchange location, and when the carrier documents an unsuccessful attempt to return the item, or because a vessel’s booking date is changed.

All these changes will be good for the business. They will force carriers and equipment providers to pay attention to the effects of congestion, and work to reduce it.

Congratulations to California for this law. Now let’s see how it works.

John Kingston Wednesday, October 5, 2022

New California law designed to rein in detention and demurrage charges – FreightWaves