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TRANSCRIPT
Webinar
MAP-21 Are you ready to be in compliance by October 1?
Kathy Schricker Regional Vice President Tel: (978) 740-5677 [email protected]
Mike Brown Executive Vice President Tel: (978) 740-5677 [email protected]
Background of MAP-21
• “Moving Ahead for Progress in the 21st Century Act”
• Signed into law July 6, 2012
• Provides two years for highway funding
• first L-T highway authorization enacted since 2005
Background of MAP-21
• Transportation bill addresses challenges facing the U.S. Transportation system
– Addresses many topics over almost 600 pages
– Improving safety
– Maintaining infrastructure condition
– Reducing traffic congestion
– Improving efficiency of freight movement
• How does this bill impact 3PLs and Motor Carriers?
Highlights -Registration Numbers
• Requires separate and distinct registration numbers for each authority
– Number will include an indicator specifying the service connected with the registration number
– Required to specify in writing the authority type in which the entity will be providing service
• Questions surrounding what constitutes notification in writing (one time contract for future performance or confirmation each load)
• Applies to “…each agreement to provide transportation or service…”
Highlights –Unified Registration System
• On 8/22/13 FMCSA Issued Final Rule on the Unified Registration System (URS) – amends the FMCSA’s regulations to require interstate MCs,
freight forwarders & property brokers (among others) to submit registration and biennial update details via a new electronic online URS.
– URS will streamline the registration process and act as a clearinghouse and depository of information
– This final rule requires all regulated entities to update registration information every 24 months.
– Beginning on November 1, 2013, the Agency will begin issuing warning letters 30 days in advance of the biennial update deadline
Highlights –Unified Registration System
– several provisions in MAP-21 impact the implementation of the URS. Many of these statutory provisions will require notice-and-comment rulemakings as they are not self-executing
– FMCSA will use the USDOT number as its sole unique identifier for MCs, brokers, and freight forwarders. The URS will discontinue issuance of MC, MX, and FF #s for entities registering with FMCSA.
– In 2015 the remaining provisions of the URS final rule are planned to take effect (If FMCSA has had enough time to launch the new URS website)
– Expect more news to be forthcoming
Highlights – Separation of authority
• Separate and distinct registration will lead to separation of authority
• Currently obstacles exist if authority (i.e. broker, carrier) is not separated
– Attorneys strongly suggest separation
• J.R. Simplot Co, Inc. v. H&H Transportation Inc.
– Insurers often will refuse to quote
– pushback from shippers who want to utilize “asset based” brokers
Impact on Motor Carriers
• Need for licensing
– Many currently accept loads not intended for movement on their own vehicles
• Will need to be licensed as Property Broker or Freight Forwarder to avoid penalties
• Will need to disclose they will be brokering freight and must have proper authority and bond
Impact on Motor Carriers
• Interlining exemption
– Interlining: transferring the load between two or more carriers before reaching destination
– Still allowed, but narrowly defined
– Must “physically transport the cargo at some point AND retain liability for the cargo and for payment of interchanged carriers”
Importance of Liability Considerations for 3PLs
• Cargo theft and damage a big concern
• According to FreightWatch International, 185 cargo thefts in US from May-July 2013 at an average value of $147,260
– See following slides for details
• Understanding liabilities associated with your activities allows you to effectively limit liability and protect your business
Cargo theft in US
Cargo theft in US
Cargo theft in US
Definitions – Property Broker
• Property Broker – individual or entity that sells, negotiates or arranges for the interstate transportation of goods with a licensed motor carrier for compensation
– A.K.A. Truck Broker, Transportation Broker, Freight Broker
– No statutory liability
– Does not physically handle goods
Definitions – Property Broker
– Prior to MAP-21, bonding requirement of $10,000 (brokers of HHG require $25,000)
– Currently Has MC# with FMCSA
Definitions – Domestic Freight Forwarder
• Domestic Freight Forwarder – individual or entity that holds itself out as providing transportation of goods in exchange for compensation – A.K.A. Surface Freight Forwarder
– Does assume liability
– Often handles and consolidates goods
– Prior to MAP-21, no bonding requirement
– Currently Has FF# with FMCSA
– Public liability filing necessary if have trucks
3PL Highlights – Bond Requirements on Oct. 1, 2013
• Financial Responsibility Requirements
– Bond or trust in place to pay potential claims arising from failure to pay freight charges
– BMC-84
• Bonds must be written by US Treasury approved surety (Circular 570)
– BMC-85
• Trust must be fully funded ($75K per principal). Assets readily available without resorting to personal guarantees or collection of pledged of receivables
3PL Highlights – Bond Requirements on Oct. 1, 2013
• Increases surety bond requirement for brokers on Oct. 1 from $10,000 to $75,000
• Now requires freight forwarders to obtain $75,000 surety bond
– FMCSA has amended BMC-84 bond form and BMC-85 trust form – awaiting OMB approval
– Expectation of release 9/1/2013
3PL Highlights – Bond Requirements on Oct. 1, 2013
– Once released, all existing bonds may need to be re-written to reflect revised wording
– FMCSA expected to update system with new bond amount /forwarder bond option after Oct. 1
– 30 day grace period may be offered for electronic evidence only – does not delay need to comply by Oct.1
3PL Highlights – Bond Requirements – ACT NOW
– Don’t wait for Oct. 1 to increase/apply for your bond – Act Now!
– For those with current authority – verify contact information on file with FMCSA BEFORE the new bond is filed.
• Updating the information can take several days
• Surety cannot update this information on your behalf
• Advise your surety when the update has occurred – FMCSA will not!
3PL Highlights – Licensing requirements
• Effective Periods of Registration
– Registrations not permanent
– First renewal no later than four years after provisions take effect
– Subsequent renewals every five year period thereafter
– Renewal process to be promulgated
3PL Highlights – Licensing requirements
• Established Experience – Similar to FMC whereby OTIs have a QI on staff
– Entity must have “sufficient experience to qualify the person to act as FF/Broker for transportation”
– Officer must have at least 3 years of relevant experience; or
– Provides “satisfactory evidence of the individual’s knowledge of related rules, regulations and industry practices”
– Terms “relevant”, “knowledge” to be promulgated
3PL HIGHLIGHTS - EXEMPTIONS
• Law exempts NVOCCs, Customs Brokers and Indirect Air Carriers from broker/forwarder licensing requirements to the extent domestic transit is arranged as part of a greater international move
• Difference of opinions regarding scope of exemption
– Through B/L? Must goods move In-bond? Portion prior or subsequent to international transit?
3PL HIGHLIGHTS - EXEMPTIONS
• Do I need to obtain a license?
– Pick and pack
– Returns
– International moves placed in storage
– Purely domestic moves
3PL HIGHLIGHTS - EXEMPTIONS
• Rulemaking and possibly case law will clarify
• Irrespective of interpretation of exemptions scope, most 3PLs will engage in at least some licensable activity
• License can define role and limit liability
– Value in identifying yourself as entity that does not have liability for direct physical loss/damage to cargo
3PL HIGHLIGHTS – CLAIM EXAMPLE
• Example – Customs Broker is not licensed with FMCSA. Arranges transport of goods with a Motor Carrier for a domestic shipment. An accident ensues and goods are damaged. Claimant alleges broker acted as an unlicensed Domestic Freight Forwarder and seeks recovery for full value under Carmack.
3PL HIGHLIGHTS – CLAIM EXAMPLE
– MAP 21 Fine for non-compliance with licensing $10,000
– Potentially liable for full value of goods
– Vicarious liability possibilities for death/BI
– Insurance exclusions for non-scheduled, non-licensed activity
Penalties for Non-Compliance
• Penalties for Illegal Brokerage and Forwarding
– MAP-21 provides for significant penalties
– Civil penalties up to $10,000 per violation
– Private cause of action against any person who knowingly operates as an unlicensed broker
• Individual Officers, Directors and Principals
How to become licensed?
STEP 6
May only
operate after
receiving License
from FMCSA
STEP 1
Submit OP-1
OP-1(FF)
STEP 2
Receive Authority Number/
Grant Letter
STEP 3
10 Day Protest Period
STEP 4
Surety Files Form With
FMCSA
STEP 5
Applicant Or
Process Agent Files
BOC-3 With
FMCSA
How to become licensed?
• STEP 1: Submit OP-1 or OP-1 (FF) – Online filing reduces processing time by 2-3 weeks
– http://www.fmcsa.dot.gov/online-registration
– Get authority # immediately online, grant letter mailed
• STEP 2: Grant Letter and Authority Number – Although authority number assigned, does not represent
Operating Authority. Cannot operate until complete Step 6
• STEP 3: 10-day Protest Period – Published in FMCSA Register. Public may file protest
stating why entity should not be granted authority
How to become licensed? • STEP 4: Surety files form with FMCSA
– Must be done within 90 days from published date, BMC-84 or BMC-85. Don’t wait for Step 3.
• STEP 5: Process Agent – Each applicant must designate a Process Agent in every
state where they have an office or establish contracts
– Can act as own if maintain physical office in that State
– For a fee, companies offer blanket agents in every state http://www.fmcsa.dot.gov/process-agent
– Process Agent is a rep upon whom court papers may be served in any legal proceeding brought against them
– File form BOC-3 within 90 days of date of application
How to become licensed?
• STEP 6: Certificate, Permit or License of Operating Authority – After steps 1-5 are approved by FMCSA, Operating
Authority is granted via permit (for Freight Forwarders) or license (for Property Brokers)
– Only after this official record is received by mail may entity begin operations
Planning to obtain authority – Now what?
• What are my next steps in deciding which authority to apply for?
• What do I need to be aware of when making my decision?
• How do I protect the business once licensed?
How to protect your business when opting for DFF authority
• Carmack Amendment applies for interstate
• Held responsible for full value unless liability limited correctly
– Among other requirements, must maintain rules tariff, issue B/L reflecting agreement and give shipper reasonable opportunity to choose level of liability
– Work with an attorney to discuss implementation
How to protect your business when opting for DFF authority
• Insurance coverage options – Cargo Legal Liability: provides coverage for the liability
for loss or damage to cargo that you assume under your Domestic Bill of Lading
– E&O: provides coverage for financial loss suffered by your clients as a result of your negligence
– Contingent Auto Legal Liability: provides auto liability on a contingent basis for damages resulting from death/BI/PD while in custody of MC whom you have entrusted shipment (more on slides to come)
How to protect your business when opting for PB authority
• Property Broker not liable under Carmack
• No need to develop tariff, B/L like DFF
• Best to execute standard Shipper/Broker and Broker/Carrier contracts to outline roles
– Make sure these standard contracts are approved by insurer for ongoing use
How to protect your business when opting for PB authority
• Important to run special contracts past your insurer
– Determine if you are increasing your liability
– Make sure your limits are adequate
– Some policies may void coverage if contract not presented for review even if liability not increased
How to protect your business when opting for PB authority
• Potential for liability increased by:
– Allegations of negligent selection of MC
• Establish solid carrier qualification and vetting process, review periodically, train staff
• review SAFER (http://www.safersys.org) for accident history, safety rating, etc.
• Review insurance status
– Increased oversight and control of MC or drivers
• Do not request named drivers to your loads or plan routes. Don’t instruct driver to contact broker first if accident occurs
How to protect your business when opting for PB authority
– Website/Marketing
• Do not make “guarantees” or indicate “partnering” with carriers. Don’t assert “control over all aspects”
– Do not take on carrier liability via contract
• Do not allow the contract to be altered by simply crossing out and replacing select words – contract wording has essentially not changed (i.e. responsible for equipment maintenance, driver hiring process, etc)
• You may opt to agree to primary liability, but contract should still be written as a broker and must be sent to insurer for approval and pricing
How to protect your business when opting for PB authority
• Insurance coverage options
– E&O
– Contingent Cargo Legal Liability: Provides coverage on a contingent basis for physical loss/damage to cargo in transit & while in custody of licensed MC
• Non-following form
• Benefits of combined form
• Dishonest acts of motor carrier
• Deceptive pickup/Impersonation
How to protect your business when opting for PB authority
• Continuing claims for 3PLs – Negligent hiring and Vicarious liability for actions of motor carrier – Schramm v. Foster
– Sperl v. Henry et al
– Linhart v. Heyl
– Hoffman v. Crane
• Need for Contingent Auto Liability – Protects brokers when they are held liable for death/BI/PD
as a result of MC negligence
Summary - Plan of Action
• Don’t wait – if you need to become licensed – begin this process now.
• Verify accuracy of contact details with FMCSA
• Apply for/increase your bond immediately even if you wish for the effective date to be 10/1/13
• Talk with your insurance broker about necessary policy/coverage changes to include the new authority
Questions?
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Thank you for being with us today!
For more information please contact our presenters:
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Kathy Schricker Regional Vice President Tel: (978) 740-5677 [email protected]
Mike Brown Executive Vice President Tel: (978) 740-5677 [email protected]