This letter appear in the March 6 print edition of Transport Topics. Click here to subscribe today.
TIA Responds to OpEd About Broker Bond
Dear Mr. Kelley,
Welcome to the debate seven years too late. The issue of whether there should be a broker/forwarder bond, or how much it should be, has long been debated. The academic exercise of your editorial fails to recognize the negotiation and compromises between industry leaders that led to current law.
Let’s look at how we got to a $75,000 bond. Three associations — Transportation Intermediaries Association, Owner-Operator Independent Drivers Association and American Trucking Associations — compromised at $100,000, and Congress lowered it.
All parties found escrow accounts to be an unacceptable solution. Waiting for a shipper to deposit their payment in escrow would delay a carrier receiving their due payment for days and sometimes weeks. Congress picked $75,000 to match the Federal Maritime Commission’s bond requirement.
No bond protects brokers and forwarders from shippers that go bankrupt. Brokers and forwarders do credit checks, buy accounts receivable insurance or eat the loss. Some companies fail as a result of the loss. This failure, of course, can create a cascading effect.
TIA successfully fought off unnecessary and unreasonable bond and other regulatory measures in 2008 during the 110th Congress. Shippers began demanding individual bonds to earn their business. Eventually, with OOIDA and ATA pushing for a bond of $500,000, a senior member of the House Transportation & Infrastructure Committee looked me in the eye in 2010 and said, “Either you fix this, or I will.”
So we sat down and fixed it. TIA and OOIDA worked through the issues and suggestions laid out in your editorial: high bonds, escrow, etc. Both TIA and OOIDA knew that our members depended on each other and recognized the need for both sides to compromise. TIA had to support an increase in the bond. OOIDA had to accept a smaller increase.
We both recognized that the Federal Motor Carrier Safety Administration was not enforcing any regulations with regard to brokers, forwarders and motor carriers brokering without authority. We developed the Fighting Fraud in Trucking language that became part of MAP-21, allowing a direct right of action to enforce the law.
TIA worked with ATA and made more compromises. Eventually, the three leading industry associations went to Congress together with a solution. That is how the process is supposed to work: Industry leaders bringing a solution to Congress, which can then provide a forum for further debate. The result of that debate, including the current $75,000 bond and the important Fighting Fraud in Transportation provisions, became law.
While not perfect, the $75,000 bond offers more protection to carriers. It doesn’t offer blanket protection, but it meets carriers’ needs in a majority of failures. All businesses still have a level of risk and require due diligence. Healthy cash flow is imperative to all industry partners, and TIA members execute payment as swiftly as possible. Don’t let outliers sway the perception of ethical brokerages and their $75,000 bond.
Robert A. Voltmann
President & CEO
Transportation Intermediaries Association