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Registration and Financial Security Requirements for Brokers of Property and Freight Forwarders

American Government Special Collections Reference Desk

American Government Trucking

Registration and Financial Security Requirements for Brokers of Property and Freight Forwarders

Anne S. Ferro
Federal Motor Carrier Safety Administration
September 5, 2013


[Federal Register Volume 78, Number 172 (Thursday, September 5, 2013)]
[Notices]
[Pages 54720-54722]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-21539]


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DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration


Registration and Financial Security Requirements for Brokers of 
Property and Freight Forwarders

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.

ACTION: Notice.

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SUMMARY: FMCSA announces guidance concerning the implementation of 
certain provisions of the Moving Ahead for Progress in the 21st Century 
Act (MAP-21) concerning persons acting as a broker or a freight 
forwarder. Section 32915 of MAP-21 requires anyone acting as a broker 
or a freight forwarder and subject to FMCSA jurisdiction, including 
motor carriers, to register and obtain broker or freight forwarder 
authority from FMCSA. Section 32918 amended the financial security 
requirements applicable to property brokers and created new 
requirements for freight forwarders. FMCSA provides guidance for 
brokers and freight forwarders on how to comply with the new 
requirements and information regarding FMCSA's enforcement of these 
provisions.

DATES: This guidance is effective October 1, 2013.

FOR FURTHER INFORMATION CONTACT: Jeffrey Secrist or Gerald Folsom, 
Office of Registration and Safety Information, Federal Motor Carrier 
Safety Administration, 1200 New Jersey Ave. SE., Washington, DC 20590-
0001, (202) 385-2367/2405 regarding financial security requirements or 
Kenneth Rodgers, Office of Enforcement and Compliance, Federal Motor 
Carrier Safety Administration, 1200 New Jersey Ave. SE., Washington, DC 
20590-0001, (202) 385-2400 regarding enforcement.

SUPPLEMENTARY INFORMATION: On July 6, 2012, the President signed MAP-21 
(Pub. L. 112-141, 126 Stat. 405 (2012)) into law, which included a 
number of mandatory, non-discretionary changes to FMCSA programs. Some 
of these changes amended the financial security requirements applicable 
to property brokers and freight forwarders operating under FMCSA's 
jurisdiction. Others required motor carriers to register as brokers if 
they were also performing brokerage functions. The FMCSA provides 
guidance to ensure that all interested parties are aware of the self-
executing statutory provisions that take effect on October 1, 2013, and 
how those subject to the requirements can achieve compliance with the 
law.

A. General Broker/Freight Forwarder Information

    FMCSA has received a number of requests from motor carriers and 
other transportation companies requesting additional information about 
when registration as a broker or freight forwarder is required. The 
Agency has compiled a list of the most common questions and our 
responses and presents the information below in question-and-answer 
format.
    Question 1: What is a broker?
    Answer: A broker is a person or an entity that, for compensation, 
arranges, or offers to arrange, for the transportation of property by a 
motor carrier. A broker does not transport the property and does not 
assume responsibility for the property. Although MAP-21 left in place 
the previous statutory definition of ``broker,'' which expressly 
excludes motor carriers and their agents and employees (49 U.S.C. 
13102(2)), the new law separately prohibits motor carriers from 
brokering transportation services unless they are registered as a 
broker (49 U.S.C. 13902(a)(6)).
    Question 2: What is a freight forwarder?
    Answer: A freight forwarder is a person or entity that holds itself 
out to the general public as providing transportation of property for 
compensation, and in the ordinary course of its business:
     Assembles and consolidates, or provides for assembling and 
consolidating, shipments and performs or provides for break-bulk and 
distribution operations of the shipments;
     Assumes responsibility for the transportation from the 
place of receipt to the place of destination; and
     Uses for any part of the transportation a rail, motor or 
water carrier subject to the jurisdiction of either FMCSA or the 
Surface Transportation Board.
    Question 3: Are freight forwarders and brokers required to register 
with FMCSA?
    Answer: Yes. Freight forwarders and brokers that are involved in 
interstate commerce and subject to FMCSA jurisdiction are required to 
register with FMCSA. Freight forwarders that perform both freight 
forwarder services and motor carrier services (beyond the scope of 
their freight forwarding operations) must register both as freight 
forwarders and as motor carriers. Additionally, as noted in Q1 above, 
MAP-21 requires motor carriers that broker loads, even occasionally, to 
register both as motor carriers and as brokers.
    Question 4: How would a motor carrier that also brokers loads apply 
for broker authority?
    Answer: Anyone seeking broker authority must file a Form OP-1 and 
submit it to FMCSA. Companies with existing motor carrier authority 
should include their current USDOT Number on the OP-1 form but leave 
the MC Number field blank. FMCSA will issue a separate MC Number for 
the broker authority. While MAP-21 requires FMCSA to establish an 
indicator of the type of transportation or service for which the USDOT 
registration number is issued, including whether the

[[Page 54721]]

registration number is issued for registration of a motor carrier, 
freight forwarder, or broker, FMCSA will implement this provision at a 
later time.
    Question 5: What is freight interlining?
    Answer: To interline a shipment is to transfer the property between 
two or more carriers for movement to its final destination. For 
example, where the point of origin of the shipment is Washington, DC, 
and the final destination is Los Angeles, CA, Motor Carrier ``A'' may 
transport the shipment from Washington, DC, and then interline with 
Motor Carrier ``B'' in San Antonio, TX. Motor Carrier ``B'' will then 
complete the transportation of the shipment from San Antonio to Los 
Angeles.
    Question 6: Does FMCSA require an interline carrier to obtain 
operating authority?
    Answer: FMCSA requires all non-exempt for-hire motor carriers to 
obtain operating authority to provide transportation in interstate 
commerce. However, a motor carrier that is performing part of a single 
continuous transportation movement as an interline operation can 
perform that service under either (1) its own operating authority or 
(2) the authority of the originating motor carrier.
    Question 7: Is a broker required to process loss and damage claims?
    Answer: No. A claim for cargo loss and damage must be filed with 
the appropriate motor carrier, which usually would be the originating 
carrier responsible for transporting and delivering the freight or the 
carrier causing the loss and/or damage to the freight. Brokers may, 
however, assist shippers in filing claims with the responsible motor 
carrier.
    Question 8: What is the civil penalty for a broker or freight 
forwarder who engages in interstate operations without the required 
operating authority (registration)?
    Answer: A broker or freight forwarder who knowingly engages in 
interstate brokerage or freight forwarding operations without the 
required operating authority is liable to the United States for a civil 
penalty not to exceed $10,000 and can be liable to any injured third 
party for all valid claims regardless of the amount (49 U.S.C. 
14916(c)). The penalties and liability to injured parties apply jointly 
and severally to all corporations or partnerships involved in the 
transportation and individually to all officers, directors, and 
principals of these business forms (49 U.S.C. 14916(d)). Under 49 
U.S.C. 14901(d)(3), a broker of household goods (HHG) who engages in 
interstate operations without the required operating authority is 
liable to the United States for a civil penalty of not less than 
$25,000 for each violation.

B. Financial Security Requirements

    FMCSA has received a number of requests from brokers, freight 
forwarders, bonding companies and other financial institutions 
requesting additional information about how to comply with these new 
requirements. The Agency has compiled a list of the most common 
questions and our responses and presents the information below in 
question-and-answer format.
    Question 1: What is the minimum level of financial security that a 
broker or freight forwarder must maintain on file with FMCSA?
    Answer: Beginning October 1, 2013, all FMCSA regulated brokers and 
freight forwarders must obtain and file with FMCSA a surety bond or 
trust fund agreement in the amount of $75,000.
    Question 2: May I use group surety bonds or trust funds to satisfy 
FMCSA's financial responsibility requirement?
    Answer: No. Although FMCSA is authorized, pursuant to 49 U.S.C. 
13906(b) and (c), to accept group financial security products to meet 
property broker and freight forwarder financial responsibility 
requirements on the condition that those products otherwise meet the 
requirements set forth in 49 U.S.C. 13906 and 49 CFR part 387, the 
Agency is not required to accept these group financial security 
products. At this time, FMCSA is considering the enforcement 
implications of group sureties as well as the effect on small entities 
and new entrants. FMCSA is committed to reexamining this issue as part 
of its enforcement phase-in plan described under section C, FMCSA 
Implementation and Enforcement Timelines, below.
    Question 3: If my surety bonding company or trustee previously 
filed Forms BMC-84 or BMC-85, do I need to file a new one reflecting 
the new $75,000 minimum financial security requirement?
    Answer: Yes. All brokers and freight forwarders subject to FMCSA 
jurisdiction must file new BMC-84 or BMC-85 forms reflecting the new 
minimum financial security amount of $75,000 as of October 1, 2013. 
FMCSA will develop new BMC forms for use by surety bonding companies 
and trust fund institutions in advance of the October 1, 2013, 
deadline.
    Question 4: My company has both broker and freight forwarder 
authority. Is one $75,000 bond or trust fund sufficient or do I need 2 
separate bonds/trust funds?
    Answer: One $75,000 bond or trust fund is sufficient as long as the 
legal entity holding the authorities is the same. Your company will 
need to file separate BMC-84/BMC-85 forms for the broker and freight 
forwarder operations. However, the underlying bond or trust fund can be 
the same for both operations. If your broker and freight forwarder 
operations are conducted under separate but affiliated companies, each 
entity must have a separate bond or trust fund.
    Question 5: What happens if my bonding company or trust fund 
institution does not file new BMC-84 or BMC-85 forms reflecting the new 
$75,000 minimum financial security requirement beginning October 1, 
2013?
    Answer: See ``Section C: FMCSA Implementation and Enforcement 
Timelines'' below.
    Question 6: MAP-21 says that I have to use a surety bond company 
that is approved by the U.S. Treasury Department. How do I know whether 
my surety bond company is approved by the Treasury Department?
    Answer: The Treasury Department's Financial Management Service 
maintains a list of certified surety bond companies at http://fms.treas.gov/c570/index.html. This and other information about 
certified surety bond companies can be obtained from the U.S. 
Department of the Treasury, Financial Management Service, Surety Bond 
Branch, 3700 East West Highway, Room 6F01, Hyattsville, MD 20782, 
Telephone (202) 874-6850 or Fax (202) 874-9978.
    Question 7: MAP-21 revised 49 U.S.C. 13906(c)(3)(C) to state that 
FMCSA may require freight forwarders to provide cargo insurance. How do 
I know if this applies to me?
    Answer: Existing regulations at 49 CFR 387.403 require household 
goods freight forwarders to obtain cargo insurance in the amount of 
$5,000 for loss of, or damage to, household goods carried on any one 
motor vehicle; and $10,000 for loss of, or damage to, or the aggregate 
of losses or damages of, or to, household goods occurring at any one 
time and place. Non-household goods freight forwarders are not required 
to obtain cargo insurance. FMCSA did not make any changes to these 
requirements as a result of MAP-21.
    Question 8: MAP-21 instituted a new requirement that surety bond 
and trust fund institutions ``provide electronic notification'' to 
FMCSA at least 30 days before a surety bond or trust fund is cancelled. 
How do these institutions provide this electronic notice?

[[Page 54722]]

    Answer. Surety bond and trust fund institutions should send their 
electronic notification of cancellation through: http://li-public.fmcsa.dot.gov.
    Question 9: Will existing surety bonds be cancelled and replaced by 
the new surety bonds? Alternatively, will the existing surety bonds 
remain in place and be revised by rider or endorsement?
    Answer. Pursuant to 49 CFR 387.307(a), a surety bond ``for the full 
limits of liability prescribed'' must be in effect before FMCSA will 
issue property broker or household goods broker operating authority. 
Riders/endorsements are a permissible means of complying with the new 
$75,000 financial responsibility requirement, provided that a new BMC-
84 form for the full limits of liability is on file with FMCSA.

C. FMCSA Implementation and Enforcement Timelines

    Companies providing broker or freight forwarder services, including 
motor carriers, are required to obtain the appropriate operating 
authorities and, as of October 1, 2013, are required to meet the new 
minimum financial responsibility requirements. FMCSA will be providing 
a 60-day phase-in period beginning October 1, 2013, to allow the 
industry to complete all necessary filings. Beginning November 1, 2013, 
FMCSA will mail notifications to all brokers and freight forwarders 
that have not met the $75,000 minimum financial security requirement. 
FMCSA will provide 30 days advance notice before revoking the freight 
forwarder and broker operating authority registrations.
    FMCSA acknowledges there are motor carriers that occasionally 
broker loads that have not previously been required to obtain operating 
authority registration from FMCSA as brokers. However, FMCSA is unable 
to determine at this time how many motor carriers may be engaged in 
some brokering activities, making implementation of a comprehensive 
enforcement program difficult. Therefore, FMCSA will phase in its 
enforcement of the broker registration requirements for motor carriers 
that also broker loads. During the first phase-in period, FMCSA will 
accept complaints regarding unregistered brokerage activities of motor 
carriers through our National Consumer Complaint Database (see http://nccdb.fmcsa.dot.gov/). FMCSA will work with industry groups to use this 
complaint information and other data to ascertain the extent of the 
unlicensed broker population subset within the motor carrier industry. 
The agency will then work toward developing a comprehensive enforcement 
program.
    FMCSA strongly encourages all motor carriers not to accept loads 
from unregistered brokers or freight forwarders, as these entities 
might not have the financial security mandated by MAP-21. FMCSA also 
notes that motor carriers brokering loads without properly registering 
with FMCSA as brokers may be subject to private civil actions pursuant 
to 49 U.S.C. 14707.

    Issued on: August 29, 2013.
Anne S. Ferro,
Administrator.
[FR Doc. 2013-21539 Filed 9-4-13; 8:45 am]
BILLING CODE 4910-EX-P



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