A Truly Bad Idea
By Henry E. Seaton
July 2003
Reprinted from etrucker.com

Q Is it true that the Department of Transportation proposes to eliminate statutes requiring registration of freight forwarders and property brokers?

A Yes. In Section 4007 of the DOT’s proposed highway/motor carrier program re-authorization act known as SAFETEA, DOT proposes to amend 49 U.S.C. Sec. 13903(b) so as to allow the Secretary, after rulemaking and comment, to rescind the registration requirements for non-household goods freight forwarders. Similarly, the DOT proposes to amend 49 U.S.C. Sec.13904(c) to allow the Secretary, after rulemaking and comment, to eliminate the registration of non-household goods brokers.

This is truly a bad idea, which I hope Congress will quickly reject. Does anyone really think the public does not benefit from registering freight forwarders and property brokers? Shippers who are threatened with being named as defendants in accident cases need a federal registry to ensure that they have entrusted their traffic function to licensed and qualified intermediaries.

Moreover, until Congress amends the applicable National Transportation Policy (49 U.S.C. Sec.13101), DOT’s mandate includes encouraging sound economic conditions among carriers, as well as enabling efficient and well-managed carriers to earn an adequate profit and attract capital. Does anyone really think that removing registration of freight forwarders or brokers would accomplish this? Lest one forget, the liability and cargo insurance requirements for freight forwarders were written back into the Act after total deregulation proved a fiasco. If you took a poll of the carriers subject to regulation, the issue about the broker’s bond would not be whether it should be eliminated, but whether it should be increased.

When the ICC considered eliminating the broker’s bond in the late 1980s, U.S. Sen. James Exon held hearings, and the agency was surprised to learn of the significance of the problem of broker insolvency because there was no one at the agency tracking the issue. More than 15 years later, the problem is no better. The transportation marketplace is still a fluid industry as thousands of freight forwarders and brokers begin and cease operations. Apparently, no one at DOT is familiar with the daily use which shippers and carriers alike make of its registration material.

The essential element of any credit check on a broker or freight forwarder is its status as a licensed and insured or bonded intermediary. One single credit service my firm represents reports that it receives 32,000 inquiries on brokers and freight forwarders per month and that the current status of their permit or license is the first question asked. The same service files more than 275 claims on brokers bonds per month.

The FMCSA is to be credited with putting up-to-date licensing, insurance and bonding information on the Web for the shipping and carrier public. Years ago, the FMCSA simplified its form and raised its registration fees to cover the cost of maintaining the system. No new entrant can be heard to complain that a $300 filing fee and a $10,000 surety bond or bank trust agreement is too dear a price to pay when a single new truck and trailer can easily cost $100,000.

Why in the world would anyone want to undo this system? Transportation is inherently an issue involving interstate commerce and no state or local corporate registry can provide the kind of information needed to qualify legitimate intermediaries in the motor carrier industry. When shippers or carriers must resort to legal action to resolve cargo claims and freight charge issues involving freight forwarders and brokers, the Form BOC-3 mandated by the statute and regulations affords the only practical way to identify an agent for service of process in a convenient forum.

As an attorney who is frequently involved in cargo claims disputes, I know the importance of the distinction between property brokers and freight forwarders, which like carriers, have Carmack liability for loss or damage. To even consider eliminating the registration requirements would blur this distinction and further heighten the chaos that already exists in this area.

It remains to be seen what constituency may exist for the DOT’s proposal. I cannot imagine responsible shipper or carrier groups supporting the idea. Even intermediaries, who are the greatest proponent of an unfettered free market will, I believe, realize that continued registration of freight forwarders and brokers is important.

In sum, the DOT’s provision to permit the elimination of the existing freight forwarder and broker regulations is a bad idea that the entire industry should oppose.