The new transportation broker Law-Map 21,

Many motor carrier accidents involve a dispatch by a transportation broker. The broker’s usual position in the event of an accident is “to run away” from responsibility, thinking incorrectly, that they are not liable. However; If any of the broker’s actions in the act of transportation, are normally, actions reserved, in common practice, to a motor carrier, the Broker may be held to strict liability, in that transportation event.

According to DOT Legal Counsel, each broker and the actions of that broker are to be judged on a case-by-case basis. If the non-liable broker undertakes a transportation action that is normally the purview motor carrier, then that broker has assumed motor carrier liability and responsibility.

The United States Government has taken steps to define transportation brokers role in an act of transportation. July 2012, The President signed into Law, Public Law 112-141, commonly referred to as “Map 21”, which in distillation, limits transportation brokering, to those who are licensed under [Regulation 49 CFR 371.2]. Motor carriers are barred from “brokering” freight they are in possession of and legally bound to pick and deliver on their own equipment. The new Laws provide “ broker penalties” for those who break Map 21 rules.

Consequently almost 40% of trucking accidents involve a broker as well as the trucker, some are authorized, or licensed and some are not. More importantly, brokers who act or hold themselves out to public, “as a motor carrier” while brokering, are as liable as the motor carrier in any loss, during the act of transportation. Double brokering is actually forbidden by Map 21, and the shipper primarily ends up in a short shrift, when their cargo is lost, as neither broker(s) or motor carrier will accept and pay for that loss. In many cases shippers may end up paying twice for one act of transportation.

There are ways to distinguish one broker type from another. There are two types of surface transportation. The old fashion “truck “broker” type, that is now outlawed by Map 21, commonly called “truck broker”. This type is defined as one motor carrier “hiring” another motor carrier on a load-by-load basis. Both carriers insure and are responsible for the cargo and the public safety.

The only broker type that is allowed under Map 21 is the licensed and bonded broker, aka property broker, aka, “pure broker” and is in each load arrangement for a commission compensation.

Logistics companies who assume more than one transportation position in supply chain steps and have a real problem separating their services on individual loads. Map 21 requires all forwarders to obtain a “brokers” License [as defined 49 CFR 371.2] in order to arrange [broker] freight.

The one stop logistics shop usually ends with motor carrier liability, without knowing the liability implications. Obviously, the problem is exacerbated in “taking multiple commissions” from their owned subsidiaries, with that one act of transportation. Map 21 requires owned entities to “separate their owned business” in practice, representation to the public and actual operations. Most Logistics companies seek the efficiency of running all types of transportation modes in one operation, much to their consternation.

Forwarders have a beneficial interest in a cargo, and assume all cargo liability from points A to B, buying various modes transportation, such as motor carrier truck, train, then back to a truck. They generally are not publically liable for the actions of modes of transportation purchased, eg truck, train, truck. Most forwarders then can be loosely defined as super brokers with some liability.

Over the last thirty years, the FMCSA Federal Motor Carrier Safety Administration has wrestled with the obvious problem of what distinguishes licensed and bonded property brokers, [49 CFR 371.2] from a motor carrier truck broker.

In common practice, everyone in transportation thinks in error that brokering and trucking are the same thing. In 1992, DOT Legal counsel published an opinion that brokers may broker freight without liability to be determined by their actions. The government thinks that trucking and brokering should be separate functions. Toward that end, 20 years later, the FMCSA received from Congress, Map 21, which completely separates brokering from motor carriage.

Everyone think that the trucker works for the broker as a result of a “hiring”, because that what “truck brokering” was all about. As a result of Map 21, the exact opposite market positions prevail. The licensed and bonded property broker, works for the interests of the motor carrier, and indeed is the fiduciary of the motor carrier funds. This position separate truck brokering from licensed and bonded property brokering.

Analogy: brokering as a motor carrier does not rid that carrier of liability, whereas, a licensed and bonded property broker who acts like a “travel agent” escape motor carrier liability in a plane crash, by limiting their liability to issuing the ticket.

There is the crux, does a broker hire a motor carrier, or does the broker “arrange” transportation on an authorized and insured motor carrier, as required in statute?

It is possible to broker transportation without motor carrier liability, according to a DOT legal Opinion published in 1992. The latest iteration of this FMCSA wrestling job is made manifest by Congress passing “Map 21”, in 2012. The players in the marketplace are loath to change their brokering practices, and consequently most brokers are unable to distinguish their brokering actions from those of a motor carrier and its liability. The trend in the transportation marketplace by Regulation, is separation of brokering from motor carriage.

The FMCSA has yet to implement and enforce most Map 21 provisions, based on their own admission of inadequate staff and budget, however; The last leader of the FMCSA Secretary Ferro, has published in August 2013, the FMCSA will advocate in the event of an exercise of a right to private action with respect to Map 21 provisions. If you are taking legal action, consult with DOT Legal Counsel for advice and direction on issues of broker penalties and liability. The FMCSA may be a friend, in your legal action.

The last 3 years brokering experience has proven how ineffective the passage of Map 21 for America. This time period is markedly one of a collapse of “financial responsibility” called for in the Law. Double, triple, and quadruple load brokering has swept the marketplace. Lawyers have seen the uptick in truck/car accidents where there is more than one broker, and more than one motor carrier, involved in the transportation loss at question.

Strict Liability comes into play based upon which State the accident occurred. A distinction needs to be drawn when multiple transportation parties infest your legal action. Simply name all of the parties in your legal action, or get counseling about the nature of each transportation provider involved in the one act of transportation. Legal action quickly sorts out who is involved in the financial transaction. Follow the money, follow the insurance trail which memorializes those accepting risk.

Common practice in the transportation industry still includes truck brokering, more commonly trucking companies who own no trucks of their own, but broker freight they take possession of from confused shippers still offering tenders for transport. Many of these illegal operations are require by the new Law to apply and register as a “licensed and bonded property brokers” post a surety bond. The Law requirement has been universally ignored by truck brokers, as there is no enforcement by the FMCSA or States’ scale houses. Shippers still don’t understand the differences in transportation brokers.

Unfortunately, shippers require brokers to obtain transportation insurance, in order to be considered for load tenders. The question then if a broker is not liable, does obtaining insurance for shippers make that broker liable in the process. Brokers then are insuring a risk that the shipper is forcing upon them, in order for the broker to have business, to broker. Brokers work to avoid liability, and insuring a transportation risk they are not assuming, is problematical. The common issue can be resolved based on the individual broker’s public representations to the shipping client.

Should America’s State Scale house find out about the penalty fines available under Map 21, and begin to levy fines against carriers whose Bills of Lading have a different name written in as “Carrier” than the motor carrier name appearing on the door of the truck. The confusion is the order of the day. Transportation will change in character. Keep in mind, no reasonable or prudent person would undertake the risky business of transportation, if there is a legal opportunity they will not be paid. Extra fines make trucking unprofitable, same result; less commerce to regulate.

Motor carriers will stop accepting excess freight from shippers when they do NOT have equipment available to haul. American shippers’ search for motor carriage, will multiply in complexity, and the final impact, equipment supply is obscured. There is no “airline reservation system” equivalence in surface trucking, no way to find tomorrows truck today. There is a new cloud technology available but has yet to be deployed – “Fetchdesk.com”.

A new Map 21 provision that is widely overlooked is the provision that those parties arranging or trucking transportation are required to give “written notice” to the shipper, of the motor carrier registration number, actually in possession of and responsible for shippers cargo, before a consignment may occur [49 USC 13901(c)]. This provision has yet to be tested, but the intent of Congress is quite clear; provide for the public financial responsibility in every transportation transaction.

Shippers virtually to a man/woman, complain that they are almost never in the full knowledge of who is responsible in the event of loss. This is exacerbated by brokers who “run away”, in the event of transportation loss, hence the new “written notice” requirement in the Map 21 Law.

Standard of Care in motor carrier selection for shippers and brokers are different. This big issue plays a prominent role in most in which cases I have been involved.

In truck brokering, since the public and cargo liability is known and shared by both motor carriers, vetting is deeper into available safety information examination. A safety inspection of the agent vehicle, (used to be required), by the principal motor carrier can be accomplished by examining and judging risk from government online credentials and posted safety records. A principal/agent relation is established in “truck brokering”.

In licensed and bonded property brokering, (the other kind of brokering), there is no principal/agent relationship established if that brokers limits their liability by their transportation actions. This broker does not take or declare a “beneficial interest” in the Cargo [see 49 USC 80101 et al], nor insures the risk with insurance, nor in action, takes possession of the cargo.

These brokers have a “non-delegable duty” to provide for the public safety, by vetting to “fitness only” judgment of the arranged motor carrier actually hauling the load. They cannot judge “motor carrier safety “as they are not qualified safety evaluators to examine and judge another motor carrier safety record. This kind of broker is limiting their liability to issuing the “ticket” as a travel agent would. This brokers’ duty to the shipper is one of “reporting” arranged motor carrier’s FMCSA safety rating, Satisfactory, Conditional, Unsatisfactory, to the shipper of record, in that “written notice” described earlier in this dissertation.

Of course, the biggest changes wrought by Map 21, is the take away of a motor carriers ability to broker without a license freight they are in possession of. The motor carriers have to apply and receive a broker’s license after posting a Surety Bond.

Map 21 is a huge tax on motor carriers, by establishing that carrier, must go thru the expense of starting up another company and operating that company completely separate from the actual motor carrier operation. The law implies, that motor carriers may no longer bill shippers directly for the loads that carrier gives to it “owned” brokerage. Operating “separately” as required in MAP 21, means only the motor carriers’ “owned” licensed and bonded brokerage can still bill the shippers for brokered loads. The motor carrier is out of that brokered act of transportations’ revenue stream, all together. Remember this Law when initially proposed, was called the “Motor Carrier Protection Act of 2010”, and the effect of Map 21 passage is not what was intended, thanks to The ATA, OOIDA, and the TIA organizations lobbying.

Map 21 increase in the brokers Surety Bond from $10,000 to $75,000, is a minor cost increase to existing brokers.

This discussion covers a few of the biggest issues in truck car accidents if that happened after July 2012, the date of MAP 21 sign into Law. The separation of businesses, the required written notice and other broker life altering changes, have yet to be enforced by any governments. It is clear that trucking and brokering have no efficiencies in operating as the same company. Strict liability applies, is they were operated as one company. Who wants to take the risk for a 15% commission to accept 100% of the liability and responsibility for one act of transportation and .

Map 21 requires “broker training”, from the cases examined, it appears that this ignored requirement if fulfilled by the government would go a long way to alter todays brokering practices toward “financial responsibility”.

David G. Dwinell

Master Broker®

 

 

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 [6]). 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.