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February 18, 2012 3:30 PM, EST
New Highway Law Restricts ‘Convenience Interlining’
By Daniel P. Bearth, Staff Writer

This story appears in the Feb. 18 print edition of Transport Topics. Click here to subscribe today.

The new highway funding law will curtail the ability of carriers to hand off freight to other carriers through certain types of interline arrangements, a veteran transportation attorney said.

Attorney John Bagileo of Glenwood, Md., said MAP-21, signed by President Obama in July, restricts the practice of “convenience interlining” in which one carrier hires another to transport freight and does not play any active role in the actual shipment.

Interlining was once commonplace in trucking because the federal government restricted carriers’ operating authority to specific areas and commodities. The Motor Carrier Act of 1980 removed most of those restrictions, but the use of interlining continued, primarily as a way for local and regional less-than-truckload freight carriers to handle longhaul shipments.

At a recent conference in Atlanta, Bagileo said provisions in MAP-21 will change the way in which some carriers exchange freight.

“MAP-21 limits convenience interlining by requiring motor carriers to have broker authority separate from its operating authority,” Bagileo said. “Additionally, the carrier will have to inform the customer if it is accepting transportation as a motor carrier, broker or forwarder.

“For all practical purposes, this rule eliminates interlining of freight between two or more carriers, unless the originating carrier physically participates in its transportation,” Bagileo said.

MAP-21 also imposes new bonding and registration requirements on freight brokerage firms and freight forwarders.

Beginning in July, brokers and forwarders must post a $75,000 surety bond or trust fund agreement to protect carriers and shippers against the nonpayment of freight charges. The previous bonding requirement was $10,000 for general freight carriers and $25,000 for household goods carriers.

The increase was supported by several industry groups, including the Transportation Intermediaries Association and American Trucking Associations, which argued the necessity of raising the level of professionalism in the industry and to curb fraud.

The new law also requires officers of brokerage firms and freight forwarders to have a minimum of three years of “relevant” experience or “provide the secretary [of Transportation] with satisfactory evidence of the individual’s knowledge of related rules, regulations and industry practices.”

Such requirements will be “very difficult” to meet, Bagileo said, because the government has not yet defined how it will test individuals or what would constitute adequate industry knowledge.

A Federal Motor Carrier Safety Administration spokesman said the process for testing knowledge will be further defined in a rulemaking.

FMCSA issued a clarification on Feb. 6 stating that the practice of interlining, or transferring a shipment between a carrier and other carriers, does not require separate brokerage authority.

The new requirements in MAP-21 also do not apply to pooling arrangements, Bagileo said. One such agreement was put in place in 2009 by a group of eight regional LTL carriers in the United States and Canada. Bagileo served as legal adviser to the group — The Reliance Network.

Under a pooling arrangement, carriers are allowed to cooperate in moving freight within a defined group of carriers.

Geoff Muessig, executive vice president of Pitt Ohio, in Pittsburgh, said MAP-21 “has no bearing” on The Reliance Network, partly because “member carriers assume joint liability for all shipments.”

“The TRNet is not an interline,” Muessig said.

Dan Acker, senior vice president of research and economic analysis for trucking industry association SMC3, said it’s possible that more carriers could adopt a pooling arrangement in place of traditional interlining, although he thinks few carriers will have difficulty meeting new bonding and registration requirements for brokers and forwarders.

“Brokering LTL freight is quite common today,” Acker said. “It is the choice of the motor carrier to accept freight that will be interlines by necessity or convenience. Our opinion is that since many of these services are already offered by motor carriers that they will abide by the new rules and continue to handle interline traffic as needed.”

The Reliance Network was the first such pooling arrangement to be approved by the Surface Transportation Board and Acker said he isn’t aware of any others.

Current parties in The Reliance Network include: Averitt Express, Lakeville Motor Express, Land Air Express of New England, Mountain Valley Express Co., Peninsula Truck Lines, Pitt Ohio LLC and Canadian Freightways.