The Senate is considering truck safety legislation that would buttress a number of regulatory reforms under way at the Department of Transportation, such as an electronic onboard recorder ("EOBR") mandate and mandatory 65-mph speed limiters, and give the agency more authority in a number of areas.
The draft safety title of pending legislation to reauthorize the federal highway program lays out a broad agenda for the Federal Motor Carrier Safety Administration ("FMCSA"). Many of the dozens of provisions already are in development, but the draft does give the agency additional authority in a number of areas.
It would strengthen FMCSA's ability to revoke the registration of a carrier, forwarder or broker that has reincarnated itself under a different identity after having been sanctioned for safety violations. Carriers and managers found to have repeatedly avoid compliance requirements also would be subject to sanctions.
It would toughen barriers to entry by requiring potential carriers to submit a comprehensive safety management plan and pass a written exam covering safety regulations. And it would require the agency to conduct a safety review of a new entrant within a year of registration.
The draft also calls for a study of how detention time affects hours of service violations and driver fatigue. The study would be conducted by the Motor Carrier Safety Advisory Committee, the enforcement community and labor and safety advocacy groups to which the agency turns for feedback and ideas on industry issues., a panel of officials from the industry.
The Motor Carrier Protection Act of 2010 (Senate Bill S. 3483) was introduced and referred to the Senate Committee on Commerce, Science and Transportation on June 14, 2010. If passed, Part 139 of Title 49 of the United States Code would be amended to add more regulation and oversight of transportation brokers and freight forwarders, with the purported goal of protecting smaller carriers from fraudulent or abusive brokers.
The bill imposes a number of new requirements on carriers, brokers and forwarders. Among other things, the bill:
- Increases the broker bond from $10,000 to $100,000 and applies the bonding requirement to freight forwarders;
- Clarifies that trucking companies must have broker authority or freight forwarder authority in addition to their motor carrier authority to arrange freight through another carrier for compensation; and
- Creates an annual operating authority renewal requirement for brokers and freight forwarders; and requires the FMCSA to revoke operating authority that is not renewed annually.
The full text of the bill can be viewed at: http://www.govtrack.us/congress/billtext.xpd?bill=s111-3483.
In the current economy, as more and more shippers and/or logistics companies with broker authority file bankruptcy, the firm has seen a marked increase in the number of preference claims filed against transportation service providers. Preference claims seek to avoid payments made by the bankrupt entity in the 90 days prior to its bankruptcy filing. When the bankrupt company is a shipper, logistics company, or property broker, the resulting preference claims can affect common carriers, contract carriers, and transportation brokers. Recently, in the Quebecor bankruptcy the trustee filed over 1,700 preference claims -- approximately 300 of which are against transportation service providers. Defenses to preference claims include that the payments received were made in the ordinary course of business and that additional unpaid services were provided to the debtor after the allegedly preferential payment(s). In addition, in some cases the freight broker regulations or a critical vendor order approving payments to certain transportation service providers may provide additional defenses. Quick analysis of historical data and the assertion of both traditional and transportation specific defenses can potentially limit exposure to preference claims.
Trucking (common carrier ) groups have recently pushed Congress to impose tougher financial rules on transportation brokers. In order to appease groups like the Owner-Operator Independent Drivers Association who want to require brokers open their financial records to scrutiny so that companies using the brokers can determine their financial health, the Transportation Intermediaries Association (“TIA”) is proposing that the freight broker regulations increase the bond requirement from $10,000 to $100,000. In addition, TIA seeks tougher overall regulations for bonding companies, including the way they collect/pay out claims. TIA has taken its plan to Rep. Peter DeFazio, D-Ore., chairman of the House Highways and Transit Subcommittee, along with a request that the bonding process be more tightly regulated, - from the way funds are posted through bonding companies to the way payments are actually made. They also want the regulations to clarify that motor carriers cannot broker freight to other carriers without themselves posting the $100,000 bond.
When litigation arises, motor carriers, brokers, freight forwarders, and other transportation companies are often faced with the issue of whether to remove a state court case to federal court. Removal is permitted if the amount in controversy exceeds $75,000 and "complete diversity" among all parties exists, i.e. no party to the litigation has the same citizenship as any party on the other side. What affect does a motor carrier's status as an LLC have on diversity of citizenship? Quite a bit. While the citizenship of a corporation is determined by the place of incorporation, the citizenship of LLCs is that of their members. Consequently, an Ohio logistics company formed as a limited liability company whose members are citizens of three different states takes on the citizenship of all three states, regardless of whether work is done in those other states. Taking it one step further, if the Ohio LLC's members are LLCs too, citizenship is traced through multiple levels, meaning each LLCs' members must be accounted for in determining diversity, which ultimately could immunize an LLC from being hauled into federal court. Whether you are the suing party or the one being sued, understanding the nuisances of federal procedure will reduce costs associated with either filing the Complaint or seeking removal.
Recent developments illustrate a number of existing and developing theories of law whereby a shipper may be held liable for damages caused by a carrier it selects to transport its freight. Because a property broker may in many situations have similar factual attributes to that of an actual shipper (e.g., control of carrier selection, pick-up and delivery time specifications, cargo loading and securement specifications, etc.), a property broker should be conscious of these developing theories of liability and implement processes and procedures to safeguard against a finding of negligence on its part with respect to any given movement of cargo.
Possible safeguards include (i) separation of property brokerage operations in an entity separate from any motor carrier or other transportation operations; (ii)development of responsible carrier selection guidelines to govern and document the broker’s carrier qualification procedures; and (iii) clear delineation within contracts between both the broker and the shipper, and the broker and the carrier of responsibilities of the aspects of a cargo move and the insurance and indemnification responsibilities of the parties.
Pursuant to legislation adopted in 2008, the Defense Department in late July published an immediately effective interim amendment to the Defense Federal Acquisition Regulation, mandating a fuel surcharge pass-through clause in Defense Department transportation contracts and solicitations. Under the interim rule, this clause is to be inserted in “solicitations and contracts for carriage in which a motor carrier, broker, or freight forwarder will provide or arrange truck transportation services that provide for a fuel-related adjustment.” The rule includes a “flow-down” requirement, thus applying to carriers serving Defense Department contractors and subcontractors–including brokers and forwarders, who are required to pass fuel surcharges on to the motor carrier.
The Surface Deployment and Distribution Command has already included the pass-through requirement in its international and domestic household goods moving solicitations for the next rate cycles beginning October 1 and November 1, 2009, respectively. Other carriers should carefully review further announcements and solicitations from the defense agencies on the subject. Carriers, brokers, and forwarders should begin review and revision of their agreements with contractors and other motor carriers, forwarders, and brokers as necessary to ensure compliance. Those who pay flat per-mile or “adjusted” or “imputed” fuel surcharges, or who pass through less than 100% of the surcharge as shown on the government invoice, should pay special attention to these requirements.
Comments on the interim rule will be accepted until September 28, 2009. These new requirements relate only to Defense Department shipments, though legislative efforts to expand pass-through requirements are not unexpected.
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