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MAP-21 Surety Changes…

The Difference Between a Surface Freight Forwarder and a Property Broker. MAP-21 Surety Changes…. By: David Pasco, Senior Account Manager Roanoke Trade March 12, 2013 . Who Are You?. The difference between surface freight forwarders and property brokers is…. FMCSA Definitions .

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MAP-21 Surety Changes…

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  1. The Difference Between a Surface Freight Forwarder and a Property Broker MAP-21 Surety Changes… • By: David Pasco, Senior Account Manager • Roanoke TradeMarch 12, 2013

  2. Who Are You? The difference between surface freight forwarders and property brokers is…

  3. FMCSA Definitions The Basics • Carrier refers to a motor carrier, water carrier or freight forwarder

  4. Freight Forwarder Definition Freight Forwarder • A person who holds himself out to the general public to provide transportation of property for compensation and during the ordinary course of its business does the following…

  5. Freight Forwarder Definition • Assembles and consolidates or provides for assembling and consolidating shipments and provides for breakbulk and distribution of operations of the shipment • Assumes responsibility for transportation from origin of receipt to origin of destination • Uses for any part of the transportation a carrier subject to jurisdiction under this subtitle The term does not include a person using transportation of an air carrier subject to part A of subtitle VII.

  6. Confusing? Surface Freight Forwarding • Does not leave ground • Regulated Air Freight Forwarding (IACs) • Primary transportation is by air • Not regulated

  7. Property Broker Definition Broker • A person other than motor carrier or employee or an agent of motor carrier that as a principal or agent sells, offers for sale, negotiates for or holds itself out by solicitation, advertisement or otherwise as selling, providing or arranging for transportation by motor carrier for compensation.

  8. SHIPPER BROKER TRANSACTION Broker Transaction

  9. Forwarder Transaction

  10. MAP-21 • How does MAP-21 legislation affect me and how I do business? • What are new surety requirements? • Non-compliance?

  11. MAP-21 and Brokers/FFs In general – new registration requirements • All who broker motor freight or perform surface freight forwarding, including IACs and motor carriers, will have to register as brokers or freight forwarders with FMCSA. • Each category of authority will have a unique registration number assigned by FMCSA. • Those already with authority will need to register within four years. • Must renew registration every five years. • Brokers and FFs must hire a qualified officer (three years or more experience).

  12. MAP-21 and Brokers/FFs • Big Penalties • $10,000 per violation – can be imposed against officers, directors and principals when illegal brokerage occurs. • Effective Dates • Many provisions effective October 1, 2012. • Bonding provisions effective October 1, 2013. • All rulemaking must be complete by October 1, 2013.

  13. Now vs. New

  14. Carriers Brokering Freight(MAP-21, §32915) Effective October 1, 2012 • Carriers may not arrange transportation (by another carrier) without appropriate broker or freight forwarder authority.

  15. Illegal Brokerage (New Law)(MAP-21, §32919) Effective October 1, 2012 • Carriers (including IACs) who broker freight need broker authority (and a $10,000 bond/trust until the increase goes into effect). • Consequences: Civil penalties and private causes of action • Up to $10,000 penalty, and • Liable to injured party for valid claims incurred without regard to amount, and • Liability is joint and severe for the entity and its individual officers, directors and principals

  16. Illegal Brokerage (New Law)(MAP-21, §32919) • Exceptions to illegal brokerage regulation • NVOCC/Ocean FF performing specific and limited functions • Through ocean b/l covering inland movement • Customs brokers performing specific and limited functions • A transaction involving “customs business” • IACs performing specific and limited functions • Engaged in activities as an air carrier as defined in 49 U.S.C. §40102(2) or in activities defined in §40102(3)

  17. Broker / FF Bonds(MAP-21, §32919) • Bond available to pay claims arising from a failure to pay freight charges to the carrier • Amount rises to $75,000 • Provision for various ways to provide the $75,000 • Surety bond • Group surety bond • Trust fund • Other financial security

  18. Property Broker Bond: Surety’s View • Historically, sureties moved away from $10,000 bond, allowing trust funds to be favored • Higher bond limit may reverse that, but … • MAP-21 has formalized many claims handling practices – added new obligations on the surety (and trust provider)

  19. New Requirements • Sureties / trust providers: • Respond to claimants within 30 days. • If claim is to be denied, set forth in writing the grounds. • In a suit against surety/trust provider, loser pays attorney fees. • No deduction of costs before paying claims. • Use of assets readily available to pay claims without resort to personal guarantees or collection of pledged accounts receivables (applicable to trust or other financial security).

  20. New Requirements Here’s one that should have rulemaking clarification — 49 USC §13906(b)(6) (similar language for freight forwarder) (6) PAYMENT OF CLAIMS IN CASES OF FINANCIAL FAILURE OR INSOLVENCY. If a brokerregistered under this chapter experiences financial failure or insolvency, the surety provider of the broker shall • submit a notice to cancel the financial security to the Administrator in accordance with paragraph (4); • publicly advertise for claims for 60 days beginning on the date of publication by the Secretary of the notice to cancel the financial security; and • pay, not later than 30 days after the expiration of the 60-day period for submission of claims • all uncontested claims received during such period; or • a pro rata share of such claims if the total amount of such claims exceeds the financial security available ____________________________ Insolvency: (from Black’s Law Dictionary [http://thelawdictionary.org/insolvency/]) : …Inability to pay one’s debts; lack of means to pay one’s debts…

  21. New Requirements 49 USC §13906(b)(7) contains: (similar language for freight forwarder) • A provision for civil actions and penalties against bond/trust providers • Penalty not to exceed $10,000 • Lose eligibility to provide bonds/trusts for 3 years if found to have violated any law or regulation on handling claims

  22. New Requirements -continued FMCSA • Post notice of any termination of financial security. • Immediate suspension of registration if amount of security falls below minimum ($75,000).

  23. Questions

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