SOME HISTORY
and REGULATION
(Excerpt by John H. Hill, Administrator
[Federal Register: August 24, 2006 (Volume 71, Number 164)]
[Notices]
[Page 50115-50117]
From the Federal Register Online via GPO Access
[wais.access.gpo.gov]
[DOCID:fr24au06-96]
DEPARTMENT OF TRANSPORTATION
Federal Motor Carrier Safety Administration
Registration of Brokers and Freight Forwarders of Non-Household
Goods
AGENCY: Federal Motor Carrier Safety Administration (FMCSA), United
States Department of Transportation (DOT).
ACTION: Notice of determination.
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SUMMARY: Section 4142 of the Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users (SAFETEA-LU), which
was
enacted into law August 10, 2005, authorizes the Secretary of
Transportation (Secretary) to register brokers and freight
forwarders of non-household goods (otherwise known as general
commodities brokers and freight forwarders) if the Secretary finds
that such registration is needed for the protection of shippers.
FMCSA, which has been
delegated authority to exercise the Secretary's functions and
activities regarding broker and freight forwarder registration, is
making a finding that registration of brokers and freight forwarders
of non-household goods is needed for the protection of shippers.
Accordingly, the Agency will continue to register all general
commodities brokers and freight forwarders subject to its
jurisdiction.
FOR FURTHER INFORMATION CONTACT: Mr. Michael J. Falk, Office of
Chief Counsel, 202-366-0834; Federal Motor Carrier Safety
Administration,
U.S. Department of Transportation, 400 Seventh Street, SW.,
Washington,
DC 20590-0001.
SUPPLEMENTARY INFORMATION:
Background
FMCSA's jurisdiction over interstate property brokers is
conferred by 49 U.S.C. 13501, which gives the Secretary jurisdiction
"over
transportation by motor carrier and the procurement of that
transportation'' to the extent the transportation is in interstate
or foreign commerce. FMCSA's jurisdiction over interstate freight
forwarders is conferred by 49 U.S.C. 13531, which gives the
Secretary jurisdiction "over service that a freight forwarder
undertakes to provide, or is authorized or required under [Part B of
subtitile IV of title 49, United States Code] to provide'' to the
extent the transportation involved is in interstate commerce.
Brokers and freight forwarders are transportation intermediaries who
procure the services of motor carriers to transport property.
Brokers generally do not handle the freight and do not assume legal
liability for cargo loss and damage. On behalf of shippers, they
arrange for motor carriers to transport individual shipments from
origin to destination. Freight forwarders assemble small shipments
into larger shipments, tender them to motor carriers and ensure that
the larger shipment is disassembled into smaller shipments upon
delivery. Freight forwarders may take physical possession of the
shipment in
carrying out these functions.\1\ Freight forwarders issue bills of
lading and assume liability for cargo loss and damage.
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\1\ The statutory definitions of broker and freight forwarder
are codified at 49 U.S.C. 13102(2) and 13102(8), respectively.
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Brokers arranging for transportation of property in
interstate commerce were first regulated by the Interstate Commerce
Commission (ICC) in 1935; interstate freight forwarders were
regulated beginning in 1942. These entities were required to obtain
operating authority from the ICC and
meet financial responsibility and other regulatory requirements. The
Surface Freight Forwarder Deregulation Act of 1986, Pub. L. 99-521,
deregulated general commodities freight forwarders by removing them
from ICC licensing jurisdiction. The 1986 Act was intended to enable
freight forwarders which deal with general commodities to compete
more effectively with other transportation services and to improve
the
financial health of the freight forwarding industry''.
\2\ The 1986 Act retained ICC jurisdiction over household goods
freight forwarders.
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\2\ S. Rep. 99-120, p. 2 (July 31, 1985).
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The ICC Termination Act (ICCTA) of 1995, Pub. L. 104-88,
reinstated Federal jurisdiction over general commodities freight
forwarders and
required all freight forwarders to register with DOT. The Senate
report accompanying the legislation noted that since the 1986 Act,
freight
forwarders of shipments other than household goods were not required
to obtain a license from the ICC, but were required to maintain a
minimum
level of cargo liability insurance. The Senate report also stated
that the insurance requirement has been difficult to monitor and
enforce without a Federal licensing requirement. By extending the
registration requirement to all freight forwarders, the bill would
"fill an inappropriate regulatory gap.''
\3\
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\3\ S. Rep. 104-176, p. 12 (Nov. 21, 1995).
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The ICCTA continued the licensing (registration) and bond
requirements for general commodities brokers, which, according to
the
Senate report, were needed to protect the public from unscrupulous
brokers.''
\4\ The Motor Carrier Safety Improvement Act of 1999 (MCSIA), Pub.
L. 106-159, created FMCSA and, among other things, conferred on it
jurisdiction over brokers and freight forwarders.
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\4\ Id.
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Prior to SAFETEA-LU, 49 U.S.C. 13903 and 13904 required FMCSA
to register all freight forwarders and brokers, provided the
prospective
registrant was fit, willing and able'' to provide service and comply
with applicable regulatory requirements. Section 4142 of SAFETEA-LU
continued this registration requirement for freight forwarders and
brokers of household goods. However, section 4142(b) amended Sec.
13903 by providing that the Secretary may register a person as a
freight forwarder of non-household goods to provide service subject
to
FMCSA jurisdiction if the Secretary finds that such registration is
needed for the protection of shippers and that the person is fit,
willing, and able to provide the service and to comply with
applicable regulations of the Secretary and Surface Transportation
Board. Section 4142(c) of SAFETEA-LU made a similar amendment to 49
U.S.C. 13904 by providing that the Secretary may register a person
to be a broker of non-household goods to provide service subject to
FMCSA
jurisdiction if the Secretary finds that such registration is needed
for the protection of shippers and that the person is fit, willing,
and
able to provide the service and to comply with applicable
regulations of the Secretary and Surface Transportation Board.
Significance of Brokers and Freight Forwarders
General commodities brokers and freight forwarders offer
valuable services to the business community. They work with motor
carriers to
find less expensive transportation alternatives for commercial
shippers and provide additional services to assist shippers, such as
shipment
tracing, warehousing and storage (freight forwarders) and filing
loss and damage claims with the motor carrier responsible for the
transportation. Without these transportation intermediaries,
shippers would have to devote additional resources to locating and
negotiating
with motor carriers and would likely have to pay higher
transportation costs. Smaller businesses in particular would be
disadvantaged by not being able to rely on the services provided by
brokers and freight forwarders. Available statistics also indicate a
growing reliance on these entities in the shipment of goods.
Brokers
FMCSA's Motor Carrier Management Information System (MCMIS)
indicates that approximately 16,930 active general commodities
brokers
are registered with the Agency as of April 17, 2006. The number of
property broker applications filed annually with FMCSA has increased
by
30 percent since 2003.\5\ These figures indicate that property
brokers represent an expanding segment of the transportation
industry and are
being utilized to help meet the transportation needs of a large
number of commercial shippers.
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\5\ In calendar year 2005, 3,274 applications were filed, compared
to 2,518 in 2003 and 2,816 in 2004.
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Freight Forwarders
MCMIS indicates that approximately 1,040 active general
commodities freight forwarders are registered with FMCSA. The number
of freight
forwarder applications filed with FMCSA annually has increased by
approximately 80 percent since 2003.\6\ As with brokers, these
figures indicate that freight forwarders represent a growing segment
of the transportation industry whose services are relied upon by
many commercial shippers to meet their transportation needs.
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In calendar year 2005, 442 applications were filed, compared to 244 in
2003 and 205 in 2004.
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U.S. Census Bureau statistics indicate there were 15,782
establishments involved in the business of freight transportation
arrangement in 1997. This industry group includes freight
forwarders, marine shipping agents, and brokers. These businesses
generated revenues of over $16 billion and employed over 140,000
employees with a cumulative annual payroll of approximately $5
billion. While not all these entities provided services subject to
FMCSA jurisdiction, the
more current MCMIS data indicate that the number of general
commodities brokers and freight forwarders registered with FMCSA
exceeds the size of the entire freight transportation arrangement
industry reported in 1997. Although FMCSA does not have figures on
cumulative revenues and employment for regulated general commodities
freight forwarders and brokers, the Census data provide a rough
estimate of the potential impact on the regulated freight
transportation arrangement industry and the national economy if
general commodities freight forwarders and brokers are unable to be
relied upon by shippers due to lack of confidence in their
activities and financial responsibilities.
Registration of Non-Household Goods Brokers and Freight Forwarders
Is Needed for the Protection of Shippers Pursuant to section 4142 of
SAFETEA-LU, if the Agency determines that registration of
non-household goods brokers and freight forwarders
is needed for the protection of shippers, the Agency may require
these entities to register.
Under 49 U.S.C. 13906(b), brokers must maintain and file with
FMCSA a bond, insurance policy or other type of approved security to
ensure
that the transportation which the broker arranges is provided.
Currently, FMCSA regulations require general commodities brokers to
file a surety bond or trust fund in the amount of $10,000 (49 CFR
387.307(a)). This requirement is designed to protect shippers who
pay brokers who renege on their obligations to arrange for the
transportation or to pay the motor carrier. In the latter case, the
motor carrier may attempt to bill the shipper, who has already paid
the broker for the shipment. It is also designed to protect motor
carriers who are not paid for their services but are unwilling or
unable to seek payment from the shipper.
Section 13906(b) financial responsibility requirements are expressly
linked to broker registration by the statute. In other words,
without a registration requirement, FMCSA has no statutory authority
to impose a bonding requirement to protect shippers and carriers
against unscrupulous or financially irresponsible general
commodities brokers. As is the case with brokers, the financial
responsibility requirements applicable to freight forwarders are
expressly linked to the registration requirement. Under 49 U.S.C.
13906(c)(1), FMCSA may register a person as a freight forwarder only
if the person files with
the agency evidence of public liability insurance to cover negligent
operation, maintenance or use of motor vehicles by or under
direction and control of the freight forwarder when providing
transfer,
collection or delivery services. Section 13906(c)(2) permits FMCSA
to also require registered freight forwarders to file freight
forwarder
insurance to cover loss or damage to cargo for which the freight
forwarder provides service. There are no independent financial
responsibility requirements for the protection of shippers that
would apply if general commodities freight forwarders are no longer
being registered.
Based on the foregoing, FMCSA finds that continued
registration of non-household goods freight forwarders under 49
U.S.C. 13903 and non-household goods brokers under 49 U.S.C. 13904
is needed for the protection of shippers. We also note that brokers
and freight forwarders must register pursuant to 49 U.S.C. 13901 to
engage in interstate transportation. Finally, based on FMCSA's
determination above regarding the protection of shippers, any
registration appropriately filed between August 10, 2005 (the date
of enactment of SAFETEA-LU) and the date of this Notice shall be
effective on the date the registration was approved by FMCSA.
Issued on: August 16, 2006.
John H. Hill,
Administrator.
[FR Doc. E6-14064 Filed 8-23-06; 8:45 am]
BILLING CODE 4910-EX-P