FMCSA (Federal Motor Carrier Safety Administration) Now Has Authority to Shut Down Noncompliant Carriers

Beginning February 21, 2014, the FMCSA (Federal Motor Carrier Safety Administration) will have the power to shut down any carrier with a demonstrated pattern of egregious noncompliance with federal safety rules.

Under the new rule, the FMCSA may suspend or revoke the operating authority of carriers who repeatedly violate safety regulations. It is also designed to better facilitate identification of chameleon or reincarnated carriers, who operate multiple entities in order to hide a failure to comply with federal safety regulations.

Notice of the proposed rule was first published in November 2012, and FMCSA welcomed public comment for 60 days. Many in the industry voiced concern that the pattern of noncompliance was not clearly defined. FMCSA responded that each organization called into question would be considered on a case-by-case basis. Furthermore, enforcement of the new rule was best performed with room for discussion and discretion.

The agency best defines "egregious" acts of noncompliance as more than simple negligence. Instead, the full text reads: "a willful, and possibly repeated, attempt to avoid compliance or shield noncompliance."

If a carrier is found to be in habitual noncompliance, the FMCSA will give notice to the carrier of potential consequences. The carrier then has the opportunity to respond and rectify the situation. 

The intention of the new rule, as the agency explains, is to target high-risk carriers and better insure the safety of travelers. 

The new rules comply with the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) and the Moving Ahead for Progress in the 21st Century Act (MAP-21). 

For the full text of the rule and to read industry comments and agency responses, visit the Federal Register: Patterns of Safety Violations by Motor Carrier Management.

Disagreement Over The New $75,000 Broker Bond

Reports of the impact of the recently enforced $75,000 broker bond on property brokers is mixed. In effect October 1, 2013, brokers were given a 60-day grace period to comply with the increased surety bond requirements. The grace period ended December 1, and the Federal Motor Carrier Safety Administration's (FMCSA's) database has seen a reduction of over 8,000 brokers out of roughly 21,500.

The increased requirement has seen its share of controversy. Backed by the Transportation Intermediary Association (TIA), American Trucking Associations, and the Owner-Operator Independent Drivers Association (OOIDA), it was considered better protection for freight carriers. Supporters argued the $10,000 bond had been in place for 30 years and was no longer adequate to cover losses suffered by carriers jilted by fraudulent brokers. The new and higher bond was touted as proper course to ensure professionalism and legitimacy in the industry.

Others felt it was an unfair hardship inflicted upon small brokers who do not do enough annual business to afford the increased bond. The Association of Independent Property Brokers & Agents (AIPBA) has been the most vocal opponent of the change. In previous negotiations, the AIPBA had agreed to a $25,000 bond that would cover inflation, but argued $75,000 was excessive, overly punitive to small business, and a means for mega-corporations to monopolize the industry.

Estimates of revoked brokerage licenses has varied. Discrepancies in the numbers of affected brokers may be due to whether or not reported statistics include warning notices sent in November, inclusion of those who voluntarily surrendered their licenses, and inactive brokers who were simply cleaned out of the database after December 1. AIPBA maintains that over 8,000 valid and active brokers were shut down. The organization's petition to the U.S. Court of Appeals remains pending.

In the meantime, brokers who have had their licenses revoked may be eligible for reinstatement if they meet the higher bonding requirements.

Pirate's Moving West

The recent attack by Somali-based extremists at a mall in Kenya has renewed discussion about Somali pirate attacks along key shipping routes.

The International Maritime Organization (IMO) initiated a long-term anti-piracy project in 1998, and it continues today. Through regional seminars and workshops for government officials from piracy-riddled areas and using evaluations and assessment missions, IMO has worked toward regional agreements for anti-piracy measures.

Although IMO's work has largely been toward creating a network of consistent and collaborative anti-piracy measures, their emphasis continues to be on self-protection. The best defense is a well-protected merchant ship.

There has been success in recent years, which has largely been attributed to $3 billion in annual spending on shipboard security and navy patrols. Thanks to increased shipboard defense spending, attacks off the Horn of Africa have fallen 70% since 2011. At a time when company and state budgets are seeing massive cuts, there is worry that reduced spending on shipboard defense measures will lead to a rise in Somali hijackings.

The conditions favoring Somali piracy have not changed. Poverty and instability in the region feed extremist movements. Merchant ships passing through the Gulf of Aden between Yemen and Somalia continue to be at risk.

With increased piracy activity, merchants and freight forwarders would likely see steep rises in ocean freight insurance premiums. A 2008 report on Ocean Piracy and Its Impact on Insurance described a dramatic increase in insurance rates after a surge of piracy activity between 2007 and 2008. In 2007, it cost $900 to insure a container. After a rise in pirate hijacking, that cost rose to $9,000 in 2008.

Regardless, all warn against complacency. Declines in pirate attacks have come at a significant financial cost. As conditions in Somalia remain unchanged and as companies examine budgets, defense against piracy remains imperative. A well-protected ship and insured cargo are the best defense against attacks.

The $75,000 New Broker Bond and the 60 Day Phase in Period

As brokers and freight forwarders prepare for the $75,000 broker bond increase, the Federal Motor Carrier Safety Administration (FMCSA) has announced a 60-day phase-in period. The increased bond requirement deadline is October 1, 2013. Brokers and freight forwarders under FMCSA's jurisdiction must file BMC-84 or BMC-85 forms reflecting the new bond amount by this date. Notices will be sent to those not yet compliant on November 1, 2013. Then, the agency will begin revoking freight forwarder and broker operating authority registrations of those still not compliant on December 1, 2013.

The new $75,000 broker bond, part of MAP-21, still comes with its share of controversy. Although several organizations support the bond as a means  to guarantee brokers will pay freight bills as agreed and get rid of those who don't, others oppose it. The Association of Independent Property Brokers and Agents (AIPBA) filed suit against the FMCSA in July, asserting that the new bond will not accomplish what it intends (to weed out fraudulent brokers) and that it was established without regard for federal rulemaking procedures.

Small brokers worry of the bond's impact on their operations and capacity to remain competitive. While the increase may create only small ripples in large companies, it poses a significant hardship for smaller brokers. Some fear it will put small, reputable brokers out of business completely.

Although brokers are still required to have the new bond in place by October 1, the 60-day phase-in period may give those who need it a little extra time to prepare before losing licensure. Small brokers are urged to work with a good accountant and banker to strengthen the company's financial standing and secure credit.

AIPBA recommends small brokers seek legal counsel for what the bond and the additional phase-in time will mean for their companies. AIPBA is currently seeking clarification for what an October 1 canceled $10,000 bond will mean for a small broker. Will the broker be able to continue operations without a bond until December 1? Or will "patch bonds" be available through the transition period?

The FMCSA (Federal Motor Carrier Safety Administration) Rejects Sand and Water HOS Requests for Exemption & Considers Livestock and Military Requests

The Hours of Service (HOS) of Drivers Final Rule went into effect February 27, 2012. Compliance date for all provisions was July 1, 2013. New regulations include mandatory home terminal time, 30-minute rest breaks, waiting time, and new distinctions between off-duty and on-duty hours. Since its publication in the Federal Register, the FMCSA (Federal Motor Carrier Safety Administration) has fielded petitions and requests for elaboration and exception.

Sand and Water HOS Exemptions Rejected Specialty truckers at oil- and gas-drilling operations are exempt from on-duty waiting time. The hours spent waiting at well sites may be recorded as "off-duty," thereby pausing the 14-hour maximum drive time. However, per an August 12 notice, FMCSA rejected a request to extend the same exemption to truck drivers carrying sand and water.
Critics of this decision feel truck drivers in the oil and gas industry are unnecessarily limited by confusing regulations. Others feel it's a double standard. One suggestion, proposed by the American Trucking Association (ATA), is to base the off-duty exception on whether or not the driver had the opportunity to rest while waiting at the well site and not just based on what the driver was hauling.

Livestock and Military Rest Break Exemptions Being Considered
Federal regulators are still considering exemptions to the 30-minute rest break requirement for drivers carrying live animals or sensitive U.S. military cargo.
Pointing toward the potential for harm to animals, drivers hauling livestock would not be required to take breaks at all. The National Pork Producers Council (NPPC) was granted such an exemption in July. However, that exemption expires September 9, 2013.

Advocates of the U.S. military cargo exemption state that continuous surveillance of sensitive military shipments are required. If the petition is granted, drivers would be allowed to watch their loads during breaks if they are a part of a two-driver team.

In both cases, the FMCSA may grant 90-day waivers until carriers can establish levels of safety similar to the original regulations. Longer-term exemptions may last up to two years and are then up for renewal if petitioning groups request a new exemption.