Letters: Broker Authority
These Letters to the Editor appear in the June 28 print edition of Transport Topics. Click here to subscribe today.
I continue to be perplexed by May 10’s “Opinion” writer, David Dwinell. (Click here for previous Opinion piece.) Call me old school, but I prefer my statements to be supported by facts. Some of his statistics and statements continue to be based on his own experience, from the gut and without regard to evidence — or examination of the facts.
Among other statements with which I disagree, in his May 31 response to this letter writer, Mr. Dwinell stated, “A motor carrier in possession can broker to another motor carrier without a license as a majority of all brokered transactions in the United States now occur.”
He is flat-out incorrect and his remark is unsubstantiated. Most of us in the business call brokering without authority — especially without the shipper’s or broker’s knowledge — breach of contract, fraudulent and inherently unsafe.
The facts are as follows:
The Federal Motor Carrier Safety Administration’s website has a “frequently asked questions” page for registration and licensing at www.fmcsa.dot.gov/about/other/faq/faqs.aspx. Question No. 9 asks, “Can a contract carrier broker loads?” The answer given by FMCSA is “No. A contract carrier cannot broker loads without first applying for and receiving a license to operate as a broker of freight.”
To further substantiate my statement, I asked a colleague and former FMCSA administrator, Annette Sandberg, to weigh in on this. When I asked her if a motor carrier may broker loads without broker authority, her answer, after she laughed, was an unequivocal, “Absolutely not.”
For good measure, at the recent National Industrial Transportation League Spring Policy Forum, I asked the current FMCSA administrator, Anne Ferro, the same question. She answered, “No.”
Furthermore, Ms. Ferro mentioned to me that she had met with the Transportation Intermediaries Association the previous week, where I later learned it was agreed that FMCSA would clarify FAQ No. 9 so that individuals would not somehow misinterpret it to mean a common carrier was in some way different. Congress has eliminated the distinction between common and contract carriage.
TIA and the Owner-Operator Independent Drivers Association agree on these points, too. The groups worked closely with each other for several months to help eliminate this and related fraud in the marketplace.
On June 15, U.S. Sen. Olympia Snowe (R-Maine) and Sen. Amy Klobuchar (D-Minn.) introduced legislation that would increase the broker bond to $100,000, place stricter rules on broker bonding companies and clarify that trucking companies must have a broker’s or freight forwarder’s license and an appropriate bond besides their motor carrier operating authority to arrange freight with another carrier, or risk significant penalties.
When carriers broker without authority, they are playing with fire in a swimming pool full of gasoline. Today, smart shippers and brokers evaluate carriers for safety and have written contracts prohibiting rebrokering loads by their carriers. When a carrier brokers freight to another carrier, it negates every ounce of due diligence conducted by the broker or shipper.
Since Schramm vs. Foster (2004), not only has the plaintiff’s bar aggressively and successfully sued brokers and shippers for negligence in hiring motor carriers for millions of dollars, but the insurance industry has aggressively pulled back many coverages. Many major insurers have stopped underwriting brokering activities because of the risk.
The “any auto” endorsement for insurance policies is almost impossible to obtain today, and the “scheduled autos” endorsement has been substituted, meaning, the motor carrier’s insurance only applies to those autos (trucks) that are scheduled with the insurance company at the time of the accident.
While Carmack or case law may provide some theoretical cargo coverage or injury/death coverage, today’s “asset based” carriers are heavily leveraged in debt and often have insurance policies that will not pay if the cargo was out of their physical possession. What’s a broker or shipper to do? Liquidate the carrier? Nobody needs that.
When it comes to brokering, let professional brokers do the job or obtain broker authority.
Chief Executive Officer
Tucker Company Worldwide
Cherry Hill, N.J.
Regarding the bill introduced by Sens. Snowe and Klobuchar, maybe if they knew more about reality of the trucking industry, they wouldn’t waste the taxpayers’ time and money (6-21, p. 4; click here for previous story).
The term “fly-by-night-brokers” used by Sen. Snowe should include truckers, as well.
More and more truckers broker their freight without a license and with no bond, operate on funds collected and then go out of business. What the Owner-Operator Independent Drivers Association needs to do, instead of crying on these senators’ shoulders, is to educate its members to do business only with licensed brokers with good credit and who are members of the Transportation Intermediaries Association.
Sen. Klobuchar said: “Many truckers are small, independent businesses that fraudulent freight forwarders and corrupt brokers too often easily prey upon.” But if the truckers did their due diligence by checking out with whom they’re doing business and hiring a reputable credit-checking company, they wouldn’t have been preyed on in the first place.
It also is noteworthy that the majority of “financial fraud” these senators refer to is committed by shippers who don’t pay their bills. How do the senators propose to protect the truckers from these predators? The obvious story here is that the truckers who got stiffed want somebody, i.e., big government, to do their job.
48 Express Inc.