Registration and Financial Security Requirements for Brokers of Property and Freight Forwarders
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)]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-21539]
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.
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
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
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
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
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
registration number is issued for registration of a motor carrier,
freight forwarder, or broker, FMCSA will implement this provision at a
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
Question 6: Does FMCSA require an interline carrier to obtain
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
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 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,
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,
Answer: See ``Section C: FMCSA Implementation and Enforcement
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?
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
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,
[FR Doc. 2013-21539 Filed 9-4-13; 8:45 am]
BILLING CODE 4910-EX-P
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