DC Velocity - September 2013

vigilant in how they tender their goods for transport.

First off, there is the higher cost of brokering. Anyone seeking a broker’s license will have to post a $75,000 surety bond, which ensures a carrier will be paid if a broker fails to do so. The more than seven-fold jump in the bond’s original $10,000 ceiling has drawn the ire of smaller brokers, who argue it will drive many independents out of business and concentrate activity in the hands of larger brokers, a claim the main broker trade group, the Transportation Intermediaries Association (TIA), denies. The Association of Independent Property Brokers and Agents filed suit July 16 in federal district court in Ocala, Fla., to block the provision.

That may not cause a major problem, however. A survey released July 11 by The big changes come elsewhere in the law. As of Oct. 1, a trucker can no longer take possession of freight from another trucker or a broker, a long-held and fairly common practice known as “double-brokering.” A trucker cannot broker freight without a brokerage license, and that authority must be completely separate from the trucking operation. The trucker showing up at a shipper’s dock must be the same carrier whose name appears on the bill of lading. If not, a shipper must create a new bill with the new trucker’s name and identification number, and pay just the new carrier. Truckers can accept cargo only with their own equipment.

An exception to all of this is the so-called interline agree-
ment, where the origin trucker accepts the load, drives a
certain distance, and then tenders the goods to another
trucker. In practice, however, such operations are rare
because of the time and cost involved in transferring loads
and because carriers are reluctant to give up revenue.
Brokers, meanwhile, must ensure that the trucker with
which they have arranged the transaction is the carrier
appearing at the shipper’s dock. A broker cannot insure the
cargo, except as a contingency, meaning its coverage would
kick in if a carrier’s policy fails, a rare occurrence. A broker
cannot appear on the bill of lading as a carrier. In essence,
the law transforms a broker into a shipper and strips it of
any carrier-related functions.
As for shippers, they need to know that a trucker can no
longer accept their freight for brokering purposes, and that
a broker or a third-party logistics (3PL) company cannot
physically touch the goods. Neither party can be on the bill
of lading in the “carrier” section. A broker or 3PL can
appear on the bill’s section marked “3PL” and can receive
freight bills.

The penalties for violating the laws are not insignificant. The federal government can levy a maximum fine of $10,000 per load on the guilty party.

CHANGING ROLES

Experts said the law stops a trucker from holding itself out as the freight hauler, only to switch roles—unbeknownst to the shipper—into that of a broker. “If a carrier does not move the freight, it will have to disclose to the shipper that it is acting in another capacity ... No secrets can be kept,” said Robert Mucci, a commercial risk management specialist with Worcester, Mass.-based Wolpert Insurance Agency Inc. Mucci said the law would prevent a trucker who agreed to haul a load from claiming after the fact that it was not liable for a lost or damaged shipment because it was merely acting as a broker. Because the Federal Motor Carrier Safety Administration (FMCSA), a Department of Transportation sub-agency that oversees truck safety, will issue unique registration numbers to each party for their specific authority, “there will be a Berlin-type wall separating broker-arranged shipments from ‘subcontracted’ shipments,” he said.

David G. Dwinell, who took ownership of his first truck in 1958 and today instructs brokers on, among other things, how to avoid liability issues, called the law a “ get-out-of-jail-free card” for well-run brokers who operate their business without controlling drivers’ actions and who are not in possession of the cargo.