The Federal Motor Carrier Safety Administration has denied a request by the Association of Independent Property Brokers and Agents that all property brokers and freight forwarders be exempted from the agency’s $75,000 bond provision.
The increase in the minimum bond requirement from $10,000 was a provision in the 2012 transportation law known as MAP-21. FMCSA made the $75,000 surety bond or trust fund minimum a regulatory requirement in October 2013.
“After reviewing the public comments, the agency has concluded that the exemption should be denied on the basis that [MAP-21] does not give FMCSA the authority to essentially nullify a statutory provision by exempting the entire class of persons subject to the provision,” the agency said in an announcement set to be published in the Federal Register on March 31.
“There has been no showing that the $75,000 requirement is not needed to protect shippers from the ‘abuse of market power,’ and the requested exemption is not in the public interest,” FMCSA said.
AIPBA said in a statement that it was “very disappointed” with the agency’s exemption denial.
“We disagree with the long-awaited conclusion rendered and find it totally devoid of sensitivity toward the nearly 10,000 small-business intermediaries, especially members of the minority brokerage community, that were revoked in the first two weeks of December 2013 and the anti-competitive obstacles to entry currently in place due to a bond obviously set too high for over 40% of the brokerage industry to handle,” the broker trade association said.
AIPBA challenged the bond requirement in a November 2013 lawsuit filed in federal district court, but it voluntarily dismissed the case and filed a petition for review in the 11th U.S. Circuit Court of Appeals alleging that the agency’s final rule was improperly issued without notice and comment.
The case has been stayed by the appeals court, pending FMCSA’s decision on the petition for exemption.
FMCSA said that many of the commenters who wrote in support of AIPBA’s exemption application believed the increased bond requirement has resulted in a significant decrease in the number of freight forwarders and brokers with operating authority.
Other supporters argued that the increased bond requirement has resulted in the loss of jobs and an adverse impact on consumer prices. A number of the broker commenters argued that the new requirement was intended to reduce competition by eliminating small businesses rather than to reduce fraud, FMCSA said.
Those in favor of the increased bond requirement included American Trucking Associations, the Transportation Intermediaries Association and the Owner-Operator Independent Drivers Association.
ATA cited a study it conducted indicated that only 13% of carriers’ claims against brokers were satisfied by the $10,000 bond.
By Eric Miler