MAP 21: The New Transportation Law Providing Penalties for Illegal Brokering
Effectively enforced since December 2013, MAP 21 outlaws motor carriers (MC) from brokering freights they are in possession of. The carrier must establish a licensed and bonded brokerage and “arrange” transportation as defined in 49 CFR 371.2. This definition completely excludes motor carriers as a defined licensed and bonded brokerage. If MAP 21 can be interpreted; the traditional act of a motor carrier taking possession of a cargo, taking a cut of the revenue, and then passing off that cargo to their own licensed and bonded brokerage; who then takes another cut of the revenue, before arranging the load on an authorized motor carrier, is effectively outlawed (double brokering) and an illegal act of brokering is subject to enforcement.
I have been involved in writing several opinions to attorneys, where MAP 21 has affected the nature of the opinion regarding the involvement of a broker in an act of transportation. For years, I have been training individuals and businesses on the correct broker conduct to avoid motor carrier liability. This training, offered since 1987, was about separating the businesses of motor carriage from the operation of licensed and bonded brokerage.
Here, it comes to pass that MAP 21 requires the complete and utter legal separation of the businesses trucking from brokering according to the FMCSA (49 USC 13902 ). Motor carriers can no longer broker as they always operated when accepting more freight than equipment to handle. Motor carriers simply “brokered” the overload to other motor carriers without a license.
Something that is completely new, “Specification of Authority” (49 USC 13901) requires written notice to buyers of transportation, specifying under which authority the future transportation services will occur. The only objective obtained in this separation cure in the law is to prevent double brokering, thus creating transparency in the chain of responsibility in the event of a loss. You might say that separating trucking from brokering protects the public safety, especially in the event of a public disturbance involving a motor vehicle. Traditionally, when a licensed and bonded property broker experienced loss or was in a conflict concerning a loss, the broker ran away from responsibility, citing some mythical reason where they were not liable. Under Chapter 149, penalties are now possible for illegal brokering. In some instances, attorney’s fees may be recoverable when a broker’s surety provider is involved. Transportation losses occurring after July 2012 may be affected by the passage of the MAP 21 law.
The secretary of the Federal Motor Carrier Safety Administration (FMCSA) has stated publicly in her published memo of August 2013, that there is not enough manpower at the FMCSA, but that they stand ready to support any right of private action under this new MAP 21 law. The federal government is serious about providing “transparency” in all licensed and bonded brokering activities, the only brokering type allowed by the new law. They are serious about completely separating motor carriage from brokering, as defined. Transparency is a traditional issue to the FMCSA, 49 CFR 370 et al., where licensed and bonded property brokers are required to reveal their commission to the parties in each transaction. This; however, to my knowledge is still virtually unknown to licensed brokers throughout America, because in common practice, brokers never reveal their commission except in cases of loss. The government is also serious about coercion of drivers in interstate commerce. Coercion has been prohibited since the Interstate Commerce Commission Termination Act (ICCTA) of 1995 (49 USC14103) and the new law now extends anti-coercion to motor carriers, brokers, any intermediary, as well as, traditionally named shippers and receivers.
Forwarders, intermediaries (logistics companies), customs brokers, and certain Non-Vessel Owned Commercial Carriers (NVOCC) are now required to open a new licensed and bonded brokering business, separate from other government authorized and/or bonded businesses they may hold, in order to effectively “arrange” transportation. Motor carriers and those who pose as a motor carrier in their desire and agreements to get freight from shippers are especially at risk. Licensed and bonded property brokerages cannot pose as a motor carrier, provide representations of insurance of the motor carrier’s insurance, and then broker any cargos to another carrier. This misrepresentation is how billions of dollars in cargo is moved yearly by those with broker’s licenses only. These broker types are especially vulnerable under MAP 21 prohibitions and penalties and will never have the government on their side in the issues of transportation loss.
Without the passage of MAP 21, the state of affairs between brokers and motor carriers would continue to deteriorate. MAP 21 was originally proposed as a “Motor Carrier Protection Act” in 2010. Before the Act, brokers took the position that they “hired” motor carriers as a “principal” transportation provider; the actual hauling carrier took the role of “agent.” Thus both would be liable in the event of a transportation loss.
MAP 21 establishes the fact that a broker merely “arranges” transportation on an authorized motor carrier, thus not in possession of, or in control of the driver’s action as a dispatcher. MAP 21 implies licensed and bonded property brokers may not declare an interest in a cargo or become a “holder” of an interest in a cargo (49 USC 80101 et al). Insurance for cargo, let alone general liability, auto liability or Workman’s Compensation become moot when the broker arranges transportation. Brokers do not “hire,” they merely arrange. Unfortunately, the gulf between understanding the regulations and law, and brokering practices are miles apart. Brokers, who by conduct act like motor carriers in their sales and operational practices, may be liable in the event of loss. The government is serious about reforming brokering as separate and distinct from motor carriage; the broker without liability established by broker’s conduct, the carrier accepting liability, and insuring the risk. Training, testing and certifications are now required for new carrier and broker authority applicants (49 USC 13906).
Previous experience in brokering and carrier ownership will be given an accord (whether verifiable or not is still unclear). But in general, all applicants will have to train, test, and be accepted by certification in order to qualify for license and bond. As of this writing, LoadTraining.com has the only proctored broker training test in America, offering training and testing since 1987. A Master Broker® certification is earned after 84 hours of training and testing. One wonders if the old best practices referred to in common practice as “truck brokering” experiences will hold as best practices under the new MAP 21 regime.
The government is currently holding hearings for public comments on the training and best practices issues created by the passage of MAP 21. After listening to these hearings, a general consensus is that it should be an online training. How processes and procedures will be accomplished is still up in the air.
MAP 21 raises the bar for new motor carrier and broker applicants and is especially harsh to those who were unsuccessfully in the business previously and want to get back into transportation. “Churners” is a term adopted and used in MAP 21 formation to raise the bar even farther on those types of applicants.
Financial responsibility for both motor carrier and broker and forwarder applicants has been increased. The broker’s required surety bond increased from $10,000 to $75,000. Surety bond providers now become, under specific circumstances, financially responsible. Certain attorney’s fees are recoverable in certain financial responsibility issues.
An enormous amount of brokering occurs in “convenience interlining” practices. MAP 21 considers the practice of a motor carrier sending another carrier to pick up a load at origin and haul it to destination, to be “brokering” and; therefore, regulated by MAP 21. Interlining is allowed but only if the first carrier provides a “ significant number of driven miles in the act of transportation. In other words; hands off of freight somewhere in between origin and destination, which for all practical purposes, makes interlining too costly to continue.
MAP 21 as a regulation, if enforced, opens the door to a new kind of “load finder” type of business. Since the only type of brokering that’s legal is “licensed and bonded property brokering” load finding by a “sales representative” for the motor carrier authority is becoming all the rage. Load finding by a sales representative that is not involved in the carrier authority cash flow is NOT licensed and bonded. The load finder merely contacts a load source, broker or shipper, represents MC of the authority to that source, credit checks on behalf of MC number, invoices that source in MC authority’s name, collects and deposits the funds in the MC authority bank account, then invoices the MC authority for about 7% of that cash flow. This business is exploding due to the extensive re-regulation that MAP 21 represents to the transportation industry.
The MAP 21 re-regulation exacerbates the existing biggest issue facing shippers and brokers: “availability” of equipment, finding tomorrow’s truck, today. Supply will get even tighter than it is now. The government is getting unsafe truckers and brokers off the highways and in their zeal to do so, transportation prices will skyrocket. Technology will go a long way to solving the “availability” issue and finding tomorrow’s trucks, today. New startups like LoadsHome.com can bring buyers and sellers of transportation together directly through the software as a service (SAAS) cloud environment.
MAP 21 will go a long way to ridding the highways of unsafe business practices by brokers and carriers – especially negligent hire issues – but the price America will pay will be high. This is the way of all market regulation; a balance between the good and evil must be assessed. MAP 21 is one of those regulations.
This article discusses issues of general interest and does not give any specific legal or business advice pertaining to any specific circumstances. Before acting upon any of its information, you should obtain appropriate advice from a lawyer or other qualified professional This article may not be duplicated, altered, distributed, saved, incorporated into another document or website, or otherwise modified without the permission of TASA.