Registration and Financial Security Requirements for Brokers of Property and Freight Forwarders; Small Business in Transportation Coalition (SBTC) Exemption Application, 71538-71542 [2021-27220]
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Federal Register / Vol. 86, No. 239 / Thursday, December 16, 2021 / Notices
Washington, DC 20590–0001, between 9
a.m. and 5 p.m., ET, Monday through
Friday, except Federal holidays. To be
sure someone is there to help you,
please call (202) 366–9317 or (202) 366–
9826 before visiting Dockets Operations.
C. Privacy Act
In accordance with 5 U.S.C. 553(c),
DOT solicits comments from the public
to better inform its regulatory process.
DOT posts these comments, without
edit, including any personal information
the commenter provides, to
www.regulations.gov, as described in
the system of records notice (DOT/ALL–
14 FDMS), which can be reviewed at
www.transportation.gov/privacy.
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II. Background
Under 49 U.S.C. 31136(e) and 31315,
FMCSA may grant an exemption from
the FMCSRs for a 5-year period if it
finds such exemption would likely
achieve a level of safety that is
equivalent to, or greater than, the level
that would be achieved absent such
exemption. The statute also allows the
Agency to renew exemptions at the end
of the five-year period. FMCSA grants
exemptions from the FMCSRs for a 2year period to align with the maximum
duration of a driver’s medical
certification.
The individual listed in this notice
has requested an exemption from 49
CFR 391.41(b)(8). Accordingly, the
Agency will evaluate the qualifications
of the applicant to determine whether
granting the exemption will achieve the
required level of safety mandated by
statute.
The physical qualification standard
for drivers found in § 391.41(b)(8) states
that a person is physically qualified to
drive a CMV if that person has no
established medical history or clinical
diagnosis of epilepsy or any other
condition which is likely to cause loss
of consciousness or any loss of ability to
control a commercial motor vehicle.
In addition to the regulations, FMCSA
has published advisory criteria 1 to
assist Medical Examiners (MEs) in
determining whether drivers with
certain medical conditions are qualified
to operate a CMV in interstate
commerce. [49 CFR part 391,
APPENDIX A TO PART 391—MEDICAL
ADVISORY CRITERIA, section H.
Epilepsy: § 391.41(b)(8), paragraphs 3, 4,
and 5.]
The advisory criteria states that if an
individual has had a sudden episode of
a non-epileptic seizure or loss of
consciousness of unknown cause that
did not require anti-seizure medication,
the decision whether that person’s
condition is likely to cause the loss of
consciousness or loss of ability to
control a CMV should be made on an
individual basis by the ME in
consultation with the treating physician.
The advisory criteria also state that a
variety of functional disorders can cause
drowsiness, dizziness, confusion,
weakness, or paralysis that may lead to
incoordination, inattention, loss of
functional control, and susceptibility to
accidents while driving.
In those individual cases where a
driver had a seizure or an episode of
loss of consciousness that resulted from
a known medical condition (e.g., drug
reaction, high temperature, acute
infectious disease, dehydration, or acute
metabolic disturbance), certification
should be deferred until the driver has
fully recovered from that condition, has
no existing residual complications, and
is not taking anti-seizure medication.
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Federal Motor Carrier Safety
Administration
[Docket No. FMCSA–2020–0130]
Registration and Financial Security
Requirements for Brokers of Property
and Freight Forwarders; Small
Business in Transportation Coalition
(SBTC) Exemption Application
Federal Motor Carrier Safety
Administration (FMCSA), DOT.
ACTION: Notice of final disposition;
denial of application for exemption.
AGENCY:
Ms. Bennett is a CMV driver in
Tennessee. Ms. Bennett self-reports that
she was diagnosed with narcolepsy in
early 2005, and started a treatment plan
immediately. A letter dated October 12,
2021, from Ms. Bennett’s sleep medicine
provider reports that she is under care
for treatment of narcolepsy with
stimulants, and that she reports her
daytime sleepiness is well-controlled on
current medication.
FMCSA denies an application
from the Small Business in
Transportation Coalition (SBTC) seeking
reconsideration of the Agency’s March
31, 2015 denial of the Association of
Independent Property Brokers and
Agents’ (AIPBA) application for an
exemption from the $75,000 bond
requirement for all property brokers and
freight forwarders. FMCSA treats the
SBTC request as a new exemption
application. After reviewing SBTC’s
application and the public comments,
the Agency has concluded that the
exemption request should be denied
because it does not meet the statutory
factors for an exemption.
DATES: FMCSA denies this application
for exemption effective December 16,
2021.
FOR FURTHER INFORMATION CONTACT: Mr.
Larry W. Minor, Associate
Administrator for Policy, FMCSA;
Telephone: (202) 366–4012; Email:
MCPSD@dot.gov. If you have questions
on viewing or submitting material to the
docket, contact Dockets Operations,
telephone (202) 366–9826.
SUPPLEMENTARY INFORMATION:
IV. Request for Comments
I. Public Participation
In accordance with 49 U.S.C. 31136(e)
and 31315, FMCSA requests public
comment from all interested persons on
the exemption petition described in this
notice. We will consider all comments
received before the close of business on
the closing date indicated in the DATES
section of the notice.
Viewing Comments and Documents
To view comments, go to
www.regulations.gov, insert the docket
number ‘‘FMCSA–2020–0130’’ in the
keyword box, and click ‘‘Search.’’ Next,
sort the results by ‘‘Posted (NewerOlder),’’ choose the first notice listed,
click ‘‘Browse Comments.’’
To view documents mentioned in this
notice as being available in the docket,
go to www.regulations.gov, insert the
docket number ‘‘FMCSA–2020–0130’’ in
the keyword box, click ‘‘Search,’’ and
choose the document to review.
If you do not have access to the
internet, you may view the docket
online by visiting Dockets Operations in
Room W12–140 on the ground floor of
the DOT West Building, 1200 New
Jersey Avenue SE, Washington, DC
III. Qualifications of Applicant
Sheila Bennett
Larry W. Minor,
Associate Administrator for Policy.
[FR Doc. 2021–27222 Filed 12–15–21; 8:45 am]
BILLING CODE 4910–EX–P
1 See https://www.ecfr.gov/cgi-bin/text-idx?SID=
e47b48a9ea42dd67d999246e23d97970&mc=
true&node=pt49.5.391&rgn=div5#ap49.5.391_171.a
and https://www.gpo.gov/fdsys/pkg/CFR-2015title49-vol5/pdf/CFR-2015-title49-vol5-part391appA.pdf.
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DEPARTMENT OF TRANSPORTATION
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SUMMARY:
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20590, between 9 a.m. and 5 p.m., ET,
Monday through Friday, except Federal
holidays. To be sure someone is there to
help you, please call (202) 366–9317 or
(202) 366–9826 before visiting Dockets
Operations.
II. Legal Basis
Under 49 U.S.C. 13541(a), the
Secretary of Transportation (Secretary)
‘‘shall exempt a person, class of persons,
or a transaction or service from the
application, in whole or in part, of a
provision of [49 U.S.C. subtitle IV, part
B (chapters 131–149)], or use this
exemption authority to modify the
application of a provision of [49 U.S.C.
subtitle IV, part B (chapters 131–149)] as
it applies to such person, class,
transaction, or service, when the
Secretary . . . finds that the application
of that provision—
(1) is not necessary to carry out the
transportation policy of [49 U.S.C.]
section 13101;
(2) is not needed to protect shippers
from the abuse of market power or that
the transaction or service is of limited
scope; and
(3) is in the public interest.’’
The Secretary may begin a section
13541 exemption proceeding on the
application of an interested party or on
the Secretary’s own initiative. The
Secretary may ‘‘specify the period of
time during which an exemption’’ is
effective and may revoke the exemption
‘‘to the extent specified, on finding that
application of a provision of [49 U.S.C.
chapters 131–149] to the person, class,
or transportation is necessary to carry
out the transportation policy of [49
U.S.C.] section 13101.’’ 49 U.S.C.
13541(c), (d). In addition, the exemption
authority provided by section 13541
‘‘may not be used to relieve a person
from the application of, and compliance
with, any law, rule, regulation,
standard, or order pertaining to cargo
loss and damage [or] insurance. . . .’’
49 U.S.C. 13541(e)(1).
The Administrator of FMCSA has
been delegated authority under 49 CFR
1.87 to carry out the functions vested in
the Secretary by 49 U.S.C. 13541.
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III. Current Legal Requirements
Under 49 U.S.C. 13906(b) and (c), as
amended by section 32918 of the
Moving Ahead for Progress in the 21st
Century Act, Public Law 112–141, 126
Stat. 405 (MAP–21), all brokers and
freight forwarders subject to FMCSA’s
jurisdiction must maintain $75,000 in
financial security. The financial security
must be in the form of a surety bond or
trust fund in accordance with 49 CFR
387.307(a), 387.403T(c).
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IV. Background
On December 26, 2013, FMCSA
requested public comment on AIPBA’s
August 14, 2013 application for an
exemption for all property brokers and
freight forwarders from the requirement
for a $75,000 surety bond or trust fund.
78 FR 78472. Specifically, FMCSA
requested comments on whether the
Agency should grant or deny AIPBA’s
application, in whole or in part. The
Agency also requested comments on
how it should apply 49 U.S.C.
13541(a)(1)–(3) to AIPBA’s request. Id.
at 78473.1
On March 31, 2015, FMCSA
published a Federal Register notice
denying AIPBA’s request. 80 FR 17142.
The Agency concluded that the
exemption should be denied on the
basis that 49 U.S.C. 13541 does not give
FMCSA the authority essentially to
nullify a statutory provision by
exempting the entire class of persons
subject to the provision. Id. at 17145.
Furthermore, even if the Agency had the
authority to issue such a blanket
exemption, FMCSA found that the
$75,000 bond requirement was
‘‘necessary to carry out the
transportation policy of section 13101,’’
was ‘‘needed to protect shippers from
the abuse of market power,’’ and that an
exemption was not in the public
interest. Id. AIPBA did not appeal
FMCSA’s decision to federal court
within the 60-day limitations period of
28 U.S.C. 2344.
V. Applicant’s Request
In its application,2 SBTC seeks a 5year exemption from the $75,000
financial security requirements of 49
1 In 2013, AIPBA also sought judicial review in
the U.S. Court of Appeals for the Eleventh Circuit
of the FMCSA final rule that implemented MAP–
21’s $75,000 bond requirement. AIPBA alleged that
FMCSA had improperly promulgated the rule
without notice and comment. The court dismissed
the petition, holding that AIPBA lacked standing.
Ass’n of Indep. Prop. Brokers and Agents v. Sec’y,
U.S. Dep’t of Transp., et al. (11th Cir. Mar. 18,
2016).
2 As noted in FMCSA’s Federal Register
publication, SBTC styled its request as a
resubmission of an exemption request pursuant to
49 U.S.C. 31315(b)(3) and 49 CFR 381.317. As
SBTC’s request did not fall within those provisions,
FMCSA had no jurisdiction to entertain SBTC’s
request under that authority. 85 FR 20334, 20335
n.2. Rather than dismissing SBTC’s request, the
Agency treated SBTC’s request as a new request for
exemption under Section 13541, the provision
under which AIPBA’s request was filed and which
SBTC’s should have been filed as well. SBTC has
had ample opportunity to contest FMCSA’s
decision to treat its request as a new exemption
application and it has not done so. SBTC’s
application, which applies to a more limited set of
brokers and freight forwarders and a more limited
time period than AIPBA’s did, is a new request for
exemption, rather than a resubmission, and will be
assessed on that basis.
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U.S.C. 13906(b) and (c), specifically for
brokers and freight forwarders with
annual revenues below $15.010
million.3 SBTC believes granting the
exemption ‘‘is in the public interest’’ as
it will ‘‘ensure an uninterrupted supply
chain.’’ 4 Moreover, SBTC indicates that
the current bond level impedes small
motor carriers from adding brokerage
operations to their business.5 Further,
SBTC states that ‘‘FMCSA needs to
address the fact that 10,000 small
business intermediaries, including
members of the minority brokerage
community, were revoked in the first
two weeks of December 2013 and there
are 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 in
2013.’’ 6 Finally, SBTC argues that its
exemption request should be granted
‘‘to give FMCSA more time to develop
its ‘comprehensive enforcement
program’ 7 to enforce the licensing and
bonding requirement.’’ 8
During the public comment period on
this request, SBTC submitted a
comment in response to a comment
filed by the Transportation
Intermediaries Association (TIA). SBTC
indicated that the increase in the
number of FMCSA-registered
transportation intermediaries since
December 2013 is attributable to a
separate MAP–21 requirement
mandating motor carriers to obtain
brokerage licenses before performing
brokerage services, rather than to broker
licenses being issued to ‘‘new mom and
pop small business brokers. . . .’’ 9
Moreover, SBTC indicated that the
factoring industry alleviates concerns
pertaining to ‘‘underfunded’’ brokers.
SBTC asserts that ‘‘[m]ost factors
actually pay the carriers directly before
paying their broker clients making a
bond not needed for the smallest of
brokers.’’ 10
3 SBTC
4 Id.
Application at 10.
at 5.
5 Id.
6 Id.
at 14.
a 2013 Federal Register Notice, FMCSA
indicated it would ‘‘phase in its enforcement of the
broker registration requirements for motor carriers
that also broker loads.’’ 78 FR 54720, 54722 (Sept.
5, 2013). MAP–21 required motor carriers to obtain
broker authority for their brokerage operations. Id.
at 54720.
8 SBTC Application, at 4.
9 SBTC May 29 comments, at 3.
10 Id. at 4. SBTC also sought leave to late file a
comment dated June 5, 2020 to respond to
comments filed by the Motor Carrier Regulatory
Reform Coalition. FMCSA accepts the late-filed
comment for consideration but does not believe its
contents, which pertain to ‘‘dispatch services,’’ are
relevant to this proceeding. MCRR late filed a June
10, 2020 response to SBTC’s letter and FMCSA will
accept that letter in the docket as well.
7 In
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VI. Public Comments
On April 10, 2020, FMCSA requested
public comment on SBTC’s exemption
application. 85 FR 20334.11 Specifically,
FMCSA requested comments on
whether the Agency should grant or
deny the application, in whole or in
part. The Agency also requested
comments on how it should apply 49
U.S.C. 13541(a)(1)–(3) to SBTC’s
request. 85 FR at 20335. In addition to
SBTC’s comments, which are discussed
above, the Agency received 22
comments in response to the Federal
Register notices. Seventeen commenters
opposed the request for exemption. Five
commenters did not directly address the
request, with two of those commenters
expressing general opposition to the
broker bond. The commenters are: Amy
Bourne, James Anonymous, Stephen
Oatley, Navpreet Khaira, Jas Pannu,
Amandeep Ghuman, Brian Klink, Don
Juan, Rajdeep Singh, Patricia Newkirk,
Melissa Carbonell, Jim Asad, Lisa
Schmitt, Small Business in
Transportation Coalition (SBTC), JW
Surety Bonds, Motor Carrier Regulatory
Reform (MCCR Coalition),12 OwnerOperator Independent Drivers
Association (OOIDA), American
Trucking Associations (ATA), The
Surety & Fidelity Association of
America (SFAA), Transportation and
Logistics Council, Inc. (TL Council),
TIA, and two anonymous commenters.
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Specific Comments by Opponents of
SBTC’s Application
FMCSA provides a sampling of
comments provided by opponents of
SBTC’s application below.
ATA indicated that granting SBTC’s
request would deprive motor carriers of
the bond protection where it is most
needed—in dealings ‘‘with brokers who
turn out to be financially precarious.’’ 13
ATA also indicated that if FMCSA had
the authority to decide this exemption,
which it questions due to Separation of
Powers concerns, SBTC’s request does
not meet the standard pursuant to 49
U.S.C. 13541.14
11 On May 4, 2020, FMCSA corrected the public
docket number referenced in its April 10 notice and
extended the public comment period until June 3,
2020. 85 FR 26516.
12 MCRR Coalition is composed of Air &
Expedited Motor Carrier Association (AEMCA),
Alliance for Safe, Efficient and Competitive Truck
Transportation (ASECTT), American Home
Furnishings Alliance (AHFA)/Specialized Furniture
Carriers, Apex Capital Corp., Auto Haulers
Association of America (AHAA), National
Association of Small Trucking Companies
(NASTC), The Expedite Alliance of North America
(TEANA) and the Transportation Loss Prevention &
Security Association (TLP&SA).
13 Comments of the American Trucking
Associations (ATA), at 2.
14 Id. at 2–3.
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TL Council, whose members include
approximately 300 shippers, carriers,
transportation intermediaries and other
transportation service providers,
described concerns over ‘‘unfit or illegal
operators’’ and stated that ‘‘the
Exemption Application should be
denied.’’ 15
JW Surety Bonds (JW Surety) stated,
‘‘The SBTC seeks a frictionless
environment for freight brokers to
transact business without the need of
financial security in the $75,000 bond
without taking into consideration the
consequences if such an exception was
granted. The surety bond industry
which issues the BMC–84 product has
paid more than $3 [m]illion in claims to
carriers and shippers which licensed
freight brokers had defaulted upon their
obligations for payment. Most recently
during the COVID crisis, we have only
seen claim occurrences increase. Our
estimates for 2020, are that the surety
industry will pay out $3.2–$3.5
[m]illion in carrier claims on freight
brokers.’’ 16 JW Surety also indicated
that surety bonds are not a barrier to
entry for legitimate brokers and that
surety premiums are consistently low.
According to JW Surety, ‘‘exemption of
the bond requirement would be of
greatest benefit to repeat offenders that
are regularly in breach of their payment
commitments harming carriers.’’ 17
OOIDA stated, ‘‘FMCSA must deny
any exemptions that would weaken
current broker bond standards and
further defraud professional truck
drivers and motor carriers from their
rightful compensation.’’ 18
SFAA explained, ‘‘The bonds
required under 49 U.S.C. 13906 are
intended to ensure that commercial
entities, such as motor carriers and
shippers, are protected if the freight
forwarder fails to pay freight charges
under its contracts, agreements or
arrangements for transportation. The
protections for shippers and carriers,
who may also be small businesses
themselves, should not be sacrificed in
the interest of the Small Business [in]
Transportation Coalition. The loss
experience from this type of bond
demonstrates it is serving its intended
purpose, which Congress believed was
necessary when it raised the bond
requirement to $75,000.’’ 19 SFAA
further indicated that the increased
bond amount has not had an impact on
the availability of surety bonds ‘‘for
small businesses operating as
forwarders or brokers.’’ 20
TIA indicated that ‘‘the requested
exemption would frustrate Congress’s
intent to protect payments to motor
carriers and prevent unauthorized
brokering.’’ 21
MCRR Coalition included statements
from its member associations in
opposition to SBTC’s request. Tom
Ogrodowski, of the Auto Haulers
Association of America, stated that the
increased bond requirement has not
hindered the growth of brokers in the
auto hauler sector.22 In an affidavit,
David Gee, President of the Alliance for
Safe, Efficient and Competitive Truck
Transportation (ASECTT), indicated
that the price of a broker bond ‘‘has
crashed’’ since 2013 where ‘‘with a
personal guarantee by the owner, a
yearly bond cost of approximately
$2,000 or less is involved.’’ 23 And, in an
affidavit, David Owen, the President of
the National Association of Small
Trucking Companies (NASTC), a 12,000
member organization ‘‘the vast majority
of which are small motor carriers
operating less than 20 trucks,’’ indicated
that ‘‘[o]ur initial fear that the bonding
amount would be cost prohibitive for
small brokers and have an anticompetitive effect on the industry did
not come to pass. Our experience in
helping new members shows that bonds
from reputable sureties are available and
commercially reasonable.’’ 24
Melissa Carbonell wrote, ‘‘We are a
broker and have been since 2006. We
were also a carrier for a few years so we
know both sides of this story. We have
watched brokers get licenses, get cheap
bonds, rack up large carrier bills and
then go out of business and the carriers
never get paid. The broker will restart
another license and cheap bond and do
it all over again! $10,000 is not enough
to cover sometimes 3 freight bills. The
bond needs to stay $75,000. We have
$10,000 in a trust account and only pay
$2,500 a year for our broker bond. Any
broker doing more than $1 Million a
year in business should be able to afford
this amount! If they can’t afford the
bond then they are not solvent enough
to be getting hundreds of thousands of
dollars in credit on the backs of carriers.
Please keep the broker bond the same!
Please do not lower the broker bond!’’
20 Id.
15 Comments
of the Transportation and Logistics
Council, Inc. at 2.
16 Comments of JW Surety Bonds, at 1.
17 Id.
18 Comments of the Owner-Operator Independent
Drivers Association, at 3.
19 Comments of the Surety & Fidelity Association
of America, at 1.
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at 3.
21 Comments
of the Transportation Intermediaries
Association, at 4.
22 Comments of the Motor Carrier Regulatory
Reform Coalition, Statement of Tom Ogrodowski.
23 Comments of the Motor Carrier Regulatory
Reform Coalition, Affidavit of David Gee, at 1.
24 Comments of the Motor Carrier Regulatory
Reform Coalition, Affidavit of David Owen, at 1.
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Brian Klink stated: ‘‘Having worked in
the industry when the bond requirement
was only $10,000, there was rampant
abuse of the system that had an adverse
[e]ffect primarily on small, non-fleet
trucking companies. The MAP–21
protections which required among other
things the bond face amount be
increased to $75,000 was a positive step
in limiting the ‘here today, gone
tomorrow’ freight broker market. There
are adequate resources available online
to determine the financial stability of
Property Brokers and Freight
Forwarders which is yet another step in
the right direction. Enforcement of the
current regulations against those
scamming the system needs to be
enhanced rather than opening the door
leaving little or no protection for the
trucking industry as is being proposed
here.’’
Patricia Newkirk said, ‘‘We are
STRONGLY AGAINST ANY exemptions
from the Broker Surety Bond. As a small
carrier and a small broker we
understand the importance of having a
fail safe against disreputable brokers
failing to pay. Our premium for our
bond is $1,600 per year. When you
calculate that on a daily cost of
operation, 261 working days per
calendar year, its $6.13 per day. It is not
an unreasonable burden[ ] when you
look at the cost to small carriers when
brokers open, double broker and close
the doors in a few months. We have
filed against broker bonds 3 times in the
past 10 years, once declined because it
was inTRAstate commerce, once paid by
bond and finally paid by the broker at
140 days past due AFTER we contacted
their bonding agent. If any changes are
brought to the Surety bond, an increase
would actually be more fitting.’’
Stephen Oatley commented, ‘‘As far
as the mention of dispatchers, I agree
there is a need for enforcement of these
‘truck dispatchers’ as many are working
as illegal brokers, under the mask of
being load finders for trucking. With
that said, removing the bonding
requirement for a freight broker
authority will do very little to help the
industry. Saying that the bonding
requirement is a ‘barrier to entry’ is
correct and it should be. If an aspiring
broker can not afford the $1,200–$5,000
yearly cost of the bond, they really have
no business being a broker. A broker has
a fiduciary duty to pay their carriers,
and it is not cheap.’’
Opposition to the Bond
An anonymous commenter wrote,
‘‘The trucking industry has become
more complex than it really needs to be
which in turn adds wasted funds. Bonds
such as this force small, honest brokers
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to close doors whose hearts are typically
[sic] after seeing the truck make
adequate revenue and providing good
service to their customer.’’
Don Juan commented, ‘‘Prior to the
75K requirement that dollar figure
would be $5,000 to $7,500 in valid
claims to trigger a cancellation. Now
with the 75K requirement, that valid
claim amount rises to $35,000 to nearly
$60,000 BEFORE a cancellation is made.
By increasing the financial requirement
to 75K, in essence crooked brokers can
now rack up almost $40,000 in claims
BEFORE their authority is even
jeopardized! Then, when a cancellation
IS made on the bond or trust, they still
are LEGALLY allowed to operate for
another 30 days before they have their
broker authority revoked. MAP–21
stipulated insurance limits to be
reviewed every 5 years[.] [Seven] years
later it has yet to be reviewed. In the
meantime, dispatch services continue to
operate illegally and crooks post loads
for $8 a mile with no intention of paying
the carrier. The shipper is ultimately
responsible for freight charges. [L]et
them post the financial requirement!’’
VII. Agency Decision
The Agency has thoroughly reviewed
SBTC’s request as well as the public
comments. The Agency is denying
SBTC’s request as it does not meet the
three-part test for issuance of an
exemption pursuant to 49 U.S.C. 13541.
In its request, SBTC does not present
a clear argument as to why its 2019
request for a 5- year exemption for
brokers and freight forwarders with
annual revenues below $15.01 million
should be granted pursuant to section
13541. Instead, its argument appears to
be limited to indicating that FMCSA, in
its 2015 decision denying AIPBA’s
request for an exemption, did ‘‘not offer
any rationale or explanation’’ besides
conclusory statements as to why the
granting of an exemption was not
appropriate under section 13541.25
SBTC’s argument is factually incorrect.
In its 2015 decision, FMCSA provided
extensive analysis showing (1) why
AIPBA’s application was not in the
public interest, (2) that AIPBA did not
show that regulation was not necessary
to protect shippers from the abuse of
market power, and (3) that regulation
was necessary to implement the
National Transportation Policy (NTP) of
49 U.S.C. 13101. 80 FR at 17146–17147.
Moreover, even if FMCSA had not
carefully analyzed the statutory factors
in 2015, SBTC’s arguments related to
AIPBA’s 2013 exemption request are
time barred. As noted above, AIPBA did
25 SBTC
PO 00000
not appeal FMCSA’s 2015 decision in a
timely manner, nor did it seek any
administrative reconsideration of the
Agency’s decision for over 4 years.
Instead, SBTC sought an exemption for
a more limited group of entities. SBTC’s
application fails to address the section
13541 requirements for granting an
exemption, which on its own is grounds
for denying the application. FMCSA
nevertheless provides a merit analysis of
SBTC’s request and concludes that,
while the Agency has authority to grant
SBTC’s request, unlike in 2015 when
AIPBA sought an exemption for all
brokers and freight forwarders from the
bond requirement, the Agency
nevertheless will deny the request, for
the reasons discussed below.26
First, in order for FMCSA to grant
SBTC’s exemption request, it would
need to find that, for the next 5 years,
the $75,000 bond requirement, as
applied to brokers and freight
forwarders with annual revenues under
$15.01 million, ‘‘is not necessary to
carry out the transportation policy of
section 13101.’’ 49 U.S.C. 13541(a)(1).
As noted above, aside from unsupported
arguments challenging FMCSA’s 2015
treatment of this issue, SBTC makes no
current arguments why regulation is not
necessary to advance the NTP.
To the contrary, and as evidenced by
the comments opposing SBTC’s request,
the bond is necessary to implement the
NTP. The NTP states that, in overseeing
the motor carrier industry, it is the
policy of the federal government to
‘‘meet the needs of shippers’’ and to
‘‘enable efficient and well-managed
carriers to earn adequate profits [and]
attract adequate capital. . . .’’ 49 U.S.C.
13101 (a)(2)(C),(F). By providing
financial recovery for motor carriers
(and shippers) in the event of broker or
freight forwarder non-payment, the
$75,000 bond serves to strengthen the
finances of motor carriers and shippers.
An exemption, even a temporary one,
from the bond requirement for a wide
swath of the broker and freight
forwarder industry, as SBTC requests,
would harm congressional goals.
Moreover, as described above,
numerous public comments in the
docket support FMCSA’s determination
that the $75,000 bond benefits motor
carriers.27
26 In its 2015 Decision, FMCSA indicated that it
did ‘‘not have the authority to effectively nullify a
statute by exempting the entire class of persons
subject to the bond requirement.’’ 80 FR at 17145.
While ATA questions the Agency’s authority to
entertain this request, ATA Comments at 2, ‘‘TIA
believes the Agency is authorized to consider
SBTC’s exemption request.’’ TIA comments, at 3.
27 Comments of the Transportation Intermediaries
Association, at 4–5; comments of the Surety &
Application, at 12.
Frm 00125
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E:\FR\FM\16DEN1.SGM
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Federal Register / Vol. 86, No. 239 / Thursday, December 16, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
Next, for FMCSA to grant an
exemption, FMCSA would have to
conclude that the $75,000 bond
requirement ‘‘is not needed to protect
shippers from the abuse of market
power’’ or that the requested exemption
is of ‘‘limited scope.’’ 49 U.S.C.
13541(a)(2). SBTC, like AIPBA before
it,28 did not address the ‘‘limited scope’’
provision.29 SBTC fails to argue why in
2019 the broker bond was ‘‘not needed
to protect shippers from the abuse of
market power.’’ Instead, SBTC states
that in 2015 FMCSA did not provide
adequate support for its determination
that AIPBA did not make an adequate
showing that the broker bond is not
necessary to protect shippers from the
abuse of market power.30 SBTC has the
burden of showing that regulation is not
necessary; it is not FMCSA’s burden to
show why regulation is necessary.31
Such a standard would turn the
exemption statute on its head and
undermine the Administrative
Procedure Act.
Finally, in order to grant SBTC’s
request, FMCSA would need to
determine that its proposed exemption
is in the public interest. As the
overwhelming majority of public
comments attest,32 SBTC has failed to
show that the proposed exemption is in
the public interest. Aside from
unsupported statements addressed
below, SBTC does not attempt to show
why exempting a large swath of the
brokerage and freight forwarder
industries from the $75,000 bond
requirement for 5 years is in the public
interest. Instead, SBTC critiques FMCSA
for purportedly not showing how
AIPBA’s proposed exemption was not in
the public interest.33 As noted above,
FMCSA provided extensive reasoning as
to why AIPBA’s request was not in the
public interest in 2015. 80 FR at 17146.
SBTC claims, without offering
support, that granting the exemption ‘‘is
in the public interest to ensure an
Fidelity Association of America, at 1; comments of
JW Surety Bonds, at 1; comments of the OwnerOperator Independent Drivers Association, at 1–2.
28 80 FR at 17145 n.2.
29 While FMCSA need not resolve the issue in
today’s decision, the Agency questions whether, in
an industry dominated by small businesses, a 5-year
exemption for brokers and freight forwarders with
annual revenues below $15.01 million could fairly
be considered one ‘‘of limited scope.’’
30 SBTC Application, at 12.
31 ATA also noted this burden in its comments.
Comments of the American Trucking Associations,
at 3 (‘‘the burden of course is not on the Agency
to demonstrate that the requirement is necessary,
but on SBTC to establish that it is unnecessary.’’).
32 FMCSA notes that the unanimity among
multiple associations representing multiple
industries in opposition to SBTC’s request is
striking.
33 SBTC Application, at 12.
VerDate Sep<11>2014
16:54 Dec 15, 2021
Jkt 256001
uninterrupted supply chain.’’ 34 In
reality, as explained above, granting
SBTC’s request would harm the finances
of motor carriers and therefore interfere
with the supply chain.35 Having the
bond available benefits motor carriers in
the event of broker or freight forwarder
non-payment.36 In addition, SBTC’s
contentions that (1) the $75,000 bond
impedes small carriers’ ability to add
brokerage operations,37 and (2) ‘‘the
current broker census’’ (as of September
2019), which featured an increase in the
number of brokers since an initial
decline following the bond increase in
2013, ‘‘cannot be fairly attributed to a
return of these small business brokers
that were utterly decimated in
December 2013’’ 38 are unsupported. In
fact, commenters point out how the
bond requirement has not harmed small
businesses. The MCRR Coalition, an
organization that includes associations
with over 15,000 small regulated motor
carriers,39 indicated that the argument
that the increased bond amount
prejudices small businesses is meritless.
The annual surety bond premium is less
than $2,000 on average, according to the
MCRR Coalition.40 David Owen, the
President of the National Association of
Small Trucking Companies (NASTC), in
an affidavit attached to the MCRR
Coalition’s comments, stated that the
fear that the increased bond amount
would be cost prohibitive for small
brokers and have an anti-competitive
effect did not materialize.41
As noted above, SBTC argues that the
factoring industry’s direct payment of
motor carriers obviates the need for the
‘‘smallest of brokers’’ to have a broker
bond.42 SBTC’s argument is
unsupported by any evidence, however,
and therefore FMCSA has no basis for
a finding that the presence of factors in
motor carrier transportation means the
public interest will be served by
granting the requested exemption. SBTC
also argues that a 5-year exemption is
warranted to give FMCSA time to
implement its ‘‘comprehensive
34 Id.
at 5.
supply chain is a critical issue that the
Department of Transportation is addressing in
response to disruptions caused by the COVID–19
pandemic.
36 See footnote 21 above.
37 SBTC Application, at 5.
38 Id. at 14. See also May 29, 2020 comments of
the Small Business in Transportation Coalition, at
3.
39 Comments of the Motor Carrier Regulatory
Reform Coalition, at 2.
40 Id. at 8. JW Surety Bonds also indicates that
surety premiums are consistently low. Comments of
JW Surety Bonds, at 1.
41 Comments of the Motor Carrier Regulatory
Reform Coalition, Affidavit of David Owen, at 1.
42 SBTC May 29 comments, at 4.
35 The
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
enforcement program’’ to enforce the
broker bonding and licensing
requirement.43 But SBTC’s argument on
this point falls short as well. SBTC fails
to show how exempting a large segment
of the broker industry from the bond
requirement would be in the public
interest merely because some entities
are currently not complying. The core
public interest implicated in Congress’s
imposition of the $75,000 financial
security requirement is that motor
carriers (and shippers) be paid in the
event of broker or freight forwarder nonpayment. SBTC’s exemption request, if
granted, would undermine that goal.
FMCSA therefore does not find that
the $75,000 financial responsibility
requirement for brokers/freight
forwarders is ‘‘not necessary to carry out
the transportation policy of section
13101.’’ 49 U.S.C. 13541(a)(1). Nor does
FMCSA find that continued regulation
under section 13906(b) and (c) ‘‘is not
needed to protect shippers from the
abuse of market power.’’ 49 U.S.C.
13541(a)(2). Finally, granting the
exemption requested by SBTC is not in
the public interest. 49 U.S.C.
13541(a)(3). Accordingly, SBTC’s
request is denied.
Meera Joshi,
Deputy Administrator.
[FR Doc. 2021–27220 Filed 12–15–21; 8:45 am]
BILLING CODE 4910–EX–P
DEPARTMENT OF TRANSPORTATION
Federal Motor Carrier Safety
Administration
[Docket No. FMCSA–2018–0278]
Agency Information Collection
Activities; Emergency Approval of a
Revision to a Currently-Approved
Collection Request: Crime Prevention
for Truckers
Federal Motor Carrier Safety
Administration (FMCSA), Department
of Transportation (DOT).
ACTION: Notice of request for emergency
OMB approval.
AGENCY:
In compliance with the
Paperwork Reduction Act (PRA) of
1995, this notice announces that a
revision to the Information Collection
Request (ICR) discussed below has been
forwarded to the Office of Management
and Budget (OMB) for review and
emergency approval. FMCSA will no
longer be offering a $25 incentive for
those who complete the survey. FMCSA
is also making non-substantive changes
SUMMARY:
43 SBTC
E:\FR\FM\16DEN1.SGM
Application, at 4.
16DEN1
Agencies
[Federal Register Volume 86, Number 239 (Thursday, December 16, 2021)]
[Notices]
[Pages 71538-71542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27220]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Motor Carrier Safety Administration
[Docket No. FMCSA-2020-0130]
Registration and Financial Security Requirements for Brokers of
Property and Freight Forwarders; Small Business in Transportation
Coalition (SBTC) Exemption Application
AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.
ACTION: Notice of final disposition; denial of application for
exemption.
-----------------------------------------------------------------------
SUMMARY: FMCSA denies an application from the Small Business in
Transportation Coalition (SBTC) seeking reconsideration of the Agency's
March 31, 2015 denial of the Association of Independent Property
Brokers and Agents' (AIPBA) application for an exemption from the
$75,000 bond requirement for all property brokers and freight
forwarders. FMCSA treats the SBTC request as a new exemption
application. After reviewing SBTC's application and the public
comments, the Agency has concluded that the exemption request should be
denied because it does not meet the statutory factors for an exemption.
DATES: FMCSA denies this application for exemption effective December
16, 2021.
FOR FURTHER INFORMATION CONTACT: Mr. Larry W. Minor, Associate
Administrator for Policy, FMCSA; Telephone: (202) 366-4012; Email:
[email protected]. If you have questions on viewing or submitting material
to the docket, contact Dockets Operations, telephone (202) 366-9826.
SUPPLEMENTARY INFORMATION:
I. Public Participation
Viewing Comments and Documents
To view comments, go to www.regulations.gov, insert the docket
number ``FMCSA-2020-0130'' in the keyword box, and click ``Search.''
Next, sort the results by ``Posted (Newer-Older),'' choose the first
notice listed, click ``Browse Comments.''
To view documents mentioned in this notice as being available in
the docket, go to www.regulations.gov, insert the docket number
``FMCSA-2020-0130'' in the keyword box, click ``Search,'' and choose
the document to review.
If you do not have access to the internet, you may view the docket
online by visiting Dockets Operations in Room W12-140 on the ground
floor of the DOT West Building, 1200 New Jersey Avenue SE, Washington,
DC
[[Page 71539]]
20590, between 9 a.m. and 5 p.m., ET, Monday through Friday, except
Federal holidays. To be sure someone is there to help you, please call
(202) 366-9317 or (202) 366-9826 before visiting Dockets Operations.
II. Legal Basis
Under 49 U.S.C. 13541(a), the Secretary of Transportation
(Secretary) ``shall exempt a person, class of persons, or a transaction
or service from the application, in whole or in part, of a provision of
[49 U.S.C. subtitle IV, part B (chapters 131-149)], or use this
exemption authority to modify the application of a provision of [49
U.S.C. subtitle IV, part B (chapters 131-149)] as it applies to such
person, class, transaction, or service, when the Secretary . . . finds
that the application of that provision--
(1) is not necessary to carry out the transportation policy of [49
U.S.C.] section 13101;
(2) is not needed to protect shippers from the abuse of market
power or that the transaction or service is of limited scope; and
(3) is in the public interest.''
The Secretary may begin a section 13541 exemption proceeding on the
application of an interested party or on the Secretary's own
initiative. The Secretary may ``specify the period of time during which
an exemption'' is effective and may revoke the exemption ``to the
extent specified, on finding that application of a provision of [49
U.S.C. chapters 131-149] to the person, class, or transportation is
necessary to carry out the transportation policy of [49 U.S.C.] section
13101.'' 49 U.S.C. 13541(c), (d). In addition, the exemption authority
provided by section 13541 ``may not be used to relieve a person from
the application of, and compliance with, any law, rule, regulation,
standard, or order pertaining to cargo loss and damage [or] insurance.
. . .'' 49 U.S.C. 13541(e)(1).
The Administrator of FMCSA has been delegated authority under 49
CFR 1.87 to carry out the functions vested in the Secretary by 49
U.S.C. 13541.
III. Current Legal Requirements
Under 49 U.S.C. 13906(b) and (c), as amended by section 32918 of
the Moving Ahead for Progress in the 21st Century Act, Public Law 112-
141, 126 Stat. 405 (MAP-21), all brokers and freight forwarders subject
to FMCSA's jurisdiction must maintain $75,000 in financial security.
The financial security must be in the form of a surety bond or trust
fund in accordance with 49 CFR 387.307(a), 387.403T(c).
IV. Background
On December 26, 2013, FMCSA requested public comment on AIPBA's
August 14, 2013 application for an exemption for all property brokers
and freight forwarders from the requirement for a $75,000 surety bond
or trust fund. 78 FR 78472. Specifically, FMCSA requested comments on
whether the Agency should grant or deny AIPBA's application, in whole
or in part. The Agency also requested comments on how it should apply
49 U.S.C. 13541(a)(1)-(3) to AIPBA's request. Id. at 78473.\1\
---------------------------------------------------------------------------
\1\ In 2013, AIPBA also sought judicial review in the U.S. Court
of Appeals for the Eleventh Circuit of the FMCSA final rule that
implemented MAP-21's $75,000 bond requirement. AIPBA alleged that
FMCSA had improperly promulgated the rule without notice and
comment. The court dismissed the petition, holding that AIPBA lacked
standing. Ass'n of Indep. Prop. Brokers and Agents v. Sec'y, U.S.
Dep't of Transp., et al. (11th Cir. Mar. 18, 2016).
---------------------------------------------------------------------------
On March 31, 2015, FMCSA published a Federal Register notice
denying AIPBA's request. 80 FR 17142. The Agency concluded that the
exemption should be denied on the basis that 49 U.S.C. 13541 does not
give FMCSA the authority essentially to nullify a statutory provision
by exempting the entire class of persons subject to the provision. Id.
at 17145. Furthermore, even if the Agency had the authority to issue
such a blanket exemption, FMCSA found that the $75,000 bond requirement
was ``necessary to carry out the transportation policy of section
13101,'' was ``needed to protect shippers from the abuse of market
power,'' and that an exemption was not in the public interest. Id.
AIPBA did not appeal FMCSA's decision to federal court within the 60-
day limitations period of 28 U.S.C. 2344.
V. Applicant's Request
In its application,\2\ SBTC seeks a 5-year exemption from the
$75,000 financial security requirements of 49 U.S.C. 13906(b) and (c),
specifically for brokers and freight forwarders with annual revenues
below $15.010 million.\3\ SBTC believes granting the exemption ``is in
the public interest'' as it will ``ensure an uninterrupted supply
chain.'' \4\ Moreover, SBTC indicates that the current bond level
impedes small motor carriers from adding brokerage operations to their
business.\5\ Further, SBTC states that ``FMCSA needs to address the
fact that 10,000 small business intermediaries, including members of
the minority brokerage community, were revoked in the first two weeks
of December 2013 and there are 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 in 2013.'' \6\ Finally, SBTC argues
that its exemption request should be granted ``to give FMCSA more time
to develop its `comprehensive enforcement program' \7\ to enforce the
licensing and bonding requirement.'' \8\
---------------------------------------------------------------------------
\2\ As noted in FMCSA's Federal Register publication, SBTC
styled its request as a resubmission of an exemption request
pursuant to 49 U.S.C. 31315(b)(3) and 49 CFR 381.317. As SBTC's
request did not fall within those provisions, FMCSA had no
jurisdiction to entertain SBTC's request under that authority. 85 FR
20334, 20335 n.2. Rather than dismissing SBTC's request, the Agency
treated SBTC's request as a new request for exemption under Section
13541, the provision under which AIPBA's request was filed and which
SBTC's should have been filed as well. SBTC has had ample
opportunity to contest FMCSA's decision to treat its request as a
new exemption application and it has not done so. SBTC's
application, which applies to a more limited set of brokers and
freight forwarders and a more limited time period than AIPBA's did,
is a new request for exemption, rather than a resubmission, and will
be assessed on that basis.
\3\ SBTC Application at 10.
\4\ Id. at 5.
\5\ Id.
\6\ Id. at 14.
\7\ In a 2013 Federal Register Notice, FMCSA indicated it would
``phase in its enforcement of the broker registration requirements
for motor carriers that also broker loads.'' 78 FR 54720, 54722
(Sept. 5, 2013). MAP-21 required motor carriers to obtain broker
authority for their brokerage operations. Id. at 54720.
\8\ SBTC Application, at 4.
---------------------------------------------------------------------------
During the public comment period on this request, SBTC submitted a
comment in response to a comment filed by the Transportation
Intermediaries Association (TIA). SBTC indicated that the increase in
the number of FMCSA-registered transportation intermediaries since
December 2013 is attributable to a separate MAP-21 requirement
mandating motor carriers to obtain brokerage licenses before performing
brokerage services, rather than to broker licenses being issued to
``new mom and pop small business brokers. . . .'' \9\ Moreover, SBTC
indicated that the factoring industry alleviates concerns pertaining to
``underfunded'' brokers. SBTC asserts that ``[m]ost factors actually
pay the carriers directly before paying their broker clients making a
bond not needed for the smallest of brokers.'' \10\
---------------------------------------------------------------------------
\9\ SBTC May 29 comments, at 3.
\10\ Id. at 4. SBTC also sought leave to late file a comment
dated June 5, 2020 to respond to comments filed by the Motor Carrier
Regulatory Reform Coalition. FMCSA accepts the late-filed comment
for consideration but does not believe its contents, which pertain
to ``dispatch services,'' are relevant to this proceeding. MCRR late
filed a June 10, 2020 response to SBTC's letter and FMCSA will
accept that letter in the docket as well.
---------------------------------------------------------------------------
[[Page 71540]]
VI. Public Comments
On April 10, 2020, FMCSA requested public comment on SBTC's
exemption application. 85 FR 20334.\11\ Specifically, FMCSA requested
comments on whether the Agency should grant or deny the application, in
whole or in part. The Agency also requested comments on how it should
apply 49 U.S.C. 13541(a)(1)-(3) to SBTC's request. 85 FR at 20335. In
addition to SBTC's comments, which are discussed above, the Agency
received 22 comments in response to the Federal Register notices.
Seventeen commenters opposed the request for exemption. Five commenters
did not directly address the request, with two of those commenters
expressing general opposition to the broker bond. The commenters are:
Amy Bourne, James Anonymous, Stephen Oatley, Navpreet Khaira, Jas
Pannu, Amandeep Ghuman, Brian Klink, Don Juan, Rajdeep Singh, Patricia
Newkirk, Melissa Carbonell, Jim Asad, Lisa Schmitt, Small Business in
Transportation Coalition (SBTC), JW Surety Bonds, Motor Carrier
Regulatory Reform (MCCR Coalition),\12\ Owner-Operator Independent
Drivers Association (OOIDA), American Trucking Associations (ATA), The
Surety & Fidelity Association of America (SFAA), Transportation and
Logistics Council, Inc. (TL Council), TIA, and two anonymous
commenters.
---------------------------------------------------------------------------
\11\ On May 4, 2020, FMCSA corrected the public docket number
referenced in its April 10 notice and extended the public comment
period until June 3, 2020. 85 FR 26516.
\12\ MCRR Coalition is composed of Air & Expedited Motor Carrier
Association (AEMCA), Alliance for Safe, Efficient and Competitive
Truck Transportation (ASECTT), American Home Furnishings Alliance
(AHFA)/Specialized Furniture Carriers, Apex Capital Corp., Auto
Haulers Association of America (AHAA), National Association of Small
Trucking Companies (NASTC), The Expedite Alliance of North America
(TEANA) and the Transportation Loss Prevention & Security
Association (TLP&SA).
---------------------------------------------------------------------------
Specific Comments by Opponents of SBTC's Application
FMCSA provides a sampling of comments provided by opponents of
SBTC's application below.
ATA indicated that granting SBTC's request would deprive motor
carriers of the bond protection where it is most needed--in dealings
``with brokers who turn out to be financially precarious.'' \13\ ATA
also indicated that if FMCSA had the authority to decide this
exemption, which it questions due to Separation of Powers concerns,
SBTC's request does not meet the standard pursuant to 49 U.S.C.
13541.\14\
---------------------------------------------------------------------------
\13\ Comments of the American Trucking Associations (ATA), at 2.
\14\ Id. at 2-3.
---------------------------------------------------------------------------
TL Council, whose members include approximately 300 shippers,
carriers, transportation intermediaries and other transportation
service providers, described concerns over ``unfit or illegal
operators'' and stated that ``the Exemption Application should be
denied.'' \15\
---------------------------------------------------------------------------
\15\ Comments of the Transportation and Logistics Council, Inc.
at 2.
---------------------------------------------------------------------------
JW Surety Bonds (JW Surety) stated, ``The SBTC seeks a frictionless
environment for freight brokers to transact business without the need
of financial security in the $75,000 bond without taking into
consideration the consequences if such an exception was granted. The
surety bond industry which issues the BMC-84 product has paid more than
$3 [m]illion in claims to carriers and shippers which licensed freight
brokers had defaulted upon their obligations for payment. Most recently
during the COVID crisis, we have only seen claim occurrences increase.
Our estimates for 2020, are that the surety industry will pay out $3.2-
$3.5 [m]illion in carrier claims on freight brokers.'' \16\ JW Surety
also indicated that surety bonds are not a barrier to entry for
legitimate brokers and that surety premiums are consistently low.
According to JW Surety, ``exemption of the bond requirement would be of
greatest benefit to repeat offenders that are regularly in breach of
their payment commitments harming carriers.'' \17\
---------------------------------------------------------------------------
\16\ Comments of JW Surety Bonds, at 1.
\17\ Id.
---------------------------------------------------------------------------
OOIDA stated, ``FMCSA must deny any exemptions that would weaken
current broker bond standards and further defraud professional truck
drivers and motor carriers from their rightful compensation.'' \18\
---------------------------------------------------------------------------
\18\ Comments of the Owner-Operator Independent Drivers
Association, at 3.
---------------------------------------------------------------------------
SFAA explained, ``The bonds required under 49 U.S.C. 13906 are
intended to ensure that commercial entities, such as motor carriers and
shippers, are protected if the freight forwarder fails to pay freight
charges under its contracts, agreements or arrangements for
transportation. The protections for shippers and carriers, who may also
be small businesses themselves, should not be sacrificed in the
interest of the Small Business [in] Transportation Coalition. The loss
experience from this type of bond demonstrates it is serving its
intended purpose, which Congress believed was necessary when it raised
the bond requirement to $75,000.'' \19\ SFAA further indicated that the
increased bond amount has not had an impact on the availability of
surety bonds ``for small businesses operating as forwarders or
brokers.'' \20\
---------------------------------------------------------------------------
\19\ Comments of the Surety & Fidelity Association of America,
at 1.
\20\ Id. at 3.
---------------------------------------------------------------------------
TIA indicated that ``the requested exemption would frustrate
Congress's intent to protect payments to motor carriers and prevent
unauthorized brokering.'' \21\
---------------------------------------------------------------------------
\21\ Comments of the Transportation Intermediaries Association,
at 4.
---------------------------------------------------------------------------
MCRR Coalition included statements from its member associations in
opposition to SBTC's request. Tom Ogrodowski, of the Auto Haulers
Association of America, stated that the increased bond requirement has
not hindered the growth of brokers in the auto hauler sector.\22\ In an
affidavit, David Gee, President of the Alliance for Safe, Efficient and
Competitive Truck Transportation (ASECTT), indicated that the price of
a broker bond ``has crashed'' since 2013 where ``with a personal
guarantee by the owner, a yearly bond cost of approximately $2,000 or
less is involved.'' \23\ And, in an affidavit, David Owen, the
President of the National Association of Small Trucking Companies
(NASTC), a 12,000 member organization ``the vast majority of which are
small motor carriers operating less than 20 trucks,'' indicated that
``[o]ur initial fear that the bonding amount would be cost prohibitive
for small brokers and have an anti-competitive effect on the industry
did not come to pass. Our experience in helping new members shows that
bonds from reputable sureties are available and commercially
reasonable.'' \24\
---------------------------------------------------------------------------
\22\ Comments of the Motor Carrier Regulatory Reform Coalition,
Statement of Tom Ogrodowski.
\23\ Comments of the Motor Carrier Regulatory Reform Coalition,
Affidavit of David Gee, at 1.
\24\ Comments of the Motor Carrier Regulatory Reform Coalition,
Affidavit of David Owen, at 1.
---------------------------------------------------------------------------
Melissa Carbonell wrote, ``We are a broker and have been since
2006. We were also a carrier for a few years so we know both sides of
this story. We have watched brokers get licenses, get cheap bonds, rack
up large carrier bills and then go out of business and the carriers
never get paid. The broker will restart another license and cheap bond
and do it all over again! $10,000 is not enough to cover sometimes 3
freight bills. The bond needs to stay $75,000. We have $10,000 in a
trust account and only pay $2,500 a year for our broker bond. Any
broker doing more than $1 Million a year in business should be able to
afford this amount! If they can't afford the bond then they are not
solvent enough to be getting hundreds of thousands of dollars in credit
on the backs of carriers. Please keep the broker bond the same! Please
do not lower the broker bond!''
[[Page 71541]]
Brian Klink stated: ``Having worked in the industry when the bond
requirement was only $10,000, there was rampant abuse of the system
that had an adverse [e]ffect primarily on small, non-fleet trucking
companies. The MAP-21 protections which required among other things the
bond face amount be increased to $75,000 was a positive step in
limiting the `here today, gone tomorrow' freight broker market. There
are adequate resources available online to determine the financial
stability of Property Brokers and Freight Forwarders which is yet
another step in the right direction. Enforcement of the current
regulations against those scamming the system needs to be enhanced
rather than opening the door leaving little or no protection for the
trucking industry as is being proposed here.''
Patricia Newkirk said, ``We are STRONGLY AGAINST ANY exemptions
from the Broker Surety Bond. As a small carrier and a small broker we
understand the importance of having a fail safe against disreputable
brokers failing to pay. Our premium for our bond is $1,600 per year.
When you calculate that on a daily cost of operation, 261 working days
per calendar year, its $6.13 per day. It is not an unreasonable burden[
] when you look at the cost to small carriers when brokers open, double
broker and close the doors in a few months. We have filed against
broker bonds 3 times in the past 10 years, once declined because it was
inTRAstate commerce, once paid by bond and finally paid by the broker
at 140 days past due AFTER we contacted their bonding agent. If any
changes are brought to the Surety bond, an increase would actually be
more fitting.''
Stephen Oatley commented, ``As far as the mention of dispatchers, I
agree there is a need for enforcement of these `truck dispatchers' as
many are working as illegal brokers, under the mask of being load
finders for trucking. With that said, removing the bonding requirement
for a freight broker authority will do very little to help the
industry. Saying that the bonding requirement is a `barrier to entry'
is correct and it should be. If an aspiring broker can not afford the
$1,200-$5,000 yearly cost of the bond, they really have no business
being a broker. A broker has a fiduciary duty to pay their carriers,
and it is not cheap.''
Opposition to the Bond
An anonymous commenter wrote, ``The trucking industry has become
more complex than it really needs to be which in turn adds wasted
funds. Bonds such as this force small, honest brokers to close doors
whose hearts are typically [sic] after seeing the truck make adequate
revenue and providing good service to their customer.''
Don Juan commented, ``Prior to the 75K requirement that dollar
figure would be $5,000 to $7,500 in valid claims to trigger a
cancellation. Now with the 75K requirement, that valid claim amount
rises to $35,000 to nearly $60,000 BEFORE a cancellation is made. By
increasing the financial requirement to 75K, in essence crooked brokers
can now rack up almost $40,000 in claims BEFORE their authority is even
jeopardized! Then, when a cancellation IS made on the bond or trust,
they still are LEGALLY allowed to operate for another 30 days before
they have their broker authority revoked. MAP-21 stipulated insurance
limits to be reviewed every 5 years[.] [Seven] years later it has yet
to be reviewed. In the meantime, dispatch services continue to operate
illegally and crooks post loads for $8 a mile with no intention of
paying the carrier. The shipper is ultimately responsible for freight
charges. [L]et them post the financial requirement!''
VII. Agency Decision
The Agency has thoroughly reviewed SBTC's request as well as the
public comments. The Agency is denying SBTC's request as it does not
meet the three-part test for issuance of an exemption pursuant to 49
U.S.C. 13541.
In its request, SBTC does not present a clear argument as to why
its 2019 request for a 5- year exemption for brokers and freight
forwarders with annual revenues below $15.01 million should be granted
pursuant to section 13541. Instead, its argument appears to be limited
to indicating that FMCSA, in its 2015 decision denying AIPBA's request
for an exemption, did ``not offer any rationale or explanation''
besides conclusory statements as to why the granting of an exemption
was not appropriate under section 13541.\25\ SBTC's argument is
factually incorrect. In its 2015 decision, FMCSA provided extensive
analysis showing (1) why AIPBA's application was not in the public
interest, (2) that AIPBA did not show that regulation was not necessary
to protect shippers from the abuse of market power, and (3) that
regulation was necessary to implement the National Transportation
Policy (NTP) of 49 U.S.C. 13101. 80 FR at 17146-17147. Moreover, even
if FMCSA had not carefully analyzed the statutory factors in 2015,
SBTC's arguments related to AIPBA's 2013 exemption request are time
barred. As noted above, AIPBA did not appeal FMCSA's 2015 decision in a
timely manner, nor did it seek any administrative reconsideration of
the Agency's decision for over 4 years. Instead, SBTC sought an
exemption for a more limited group of entities. SBTC's application
fails to address the section 13541 requirements for granting an
exemption, which on its own is grounds for denying the application.
FMCSA nevertheless provides a merit analysis of SBTC's request and
concludes that, while the Agency has authority to grant SBTC's request,
unlike in 2015 when AIPBA sought an exemption for all brokers and
freight forwarders from the bond requirement, the Agency nevertheless
will deny the request, for the reasons discussed below.\26\
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\25\ SBTC Application, at 12.
\26\ In its 2015 Decision, FMCSA indicated that it did ``not
have the authority to effectively nullify a statute by exempting the
entire class of persons subject to the bond requirement.'' 80 FR at
17145. While ATA questions the Agency's authority to entertain this
request, ATA Comments at 2, ``TIA believes the Agency is authorized
to consider SBTC's exemption request.'' TIA comments, at 3.
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First, in order for FMCSA to grant SBTC's exemption request, it
would need to find that, for the next 5 years, the $75,000 bond
requirement, as applied to brokers and freight forwarders with annual
revenues under $15.01 million, ``is not necessary to carry out the
transportation policy of section 13101.'' 49 U.S.C. 13541(a)(1). As
noted above, aside from unsupported arguments challenging FMCSA's 2015
treatment of this issue, SBTC makes no current arguments why regulation
is not necessary to advance the NTP.
To the contrary, and as evidenced by the comments opposing SBTC's
request, the bond is necessary to implement the NTP. The NTP states
that, in overseeing the motor carrier industry, it is the policy of the
federal government to ``meet the needs of shippers'' and to ``enable
efficient and well-managed carriers to earn adequate profits [and]
attract adequate capital. . . .'' 49 U.S.C. 13101 (a)(2)(C),(F). By
providing financial recovery for motor carriers (and shippers) in the
event of broker or freight forwarder non-payment, the $75,000 bond
serves to strengthen the finances of motor carriers and shippers. An
exemption, even a temporary one, from the bond requirement for a wide
swath of the broker and freight forwarder industry, as SBTC requests,
would harm congressional goals. Moreover, as described above, numerous
public comments in the docket support FMCSA's determination that the
$75,000 bond benefits motor carriers.\27\
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\27\ Comments of the Transportation Intermediaries Association,
at 4-5; comments of the Surety & Fidelity Association of America, at
1; comments of JW Surety Bonds, at 1; comments of the Owner-Operator
Independent Drivers Association, at 1-2.
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[[Page 71542]]
Next, for FMCSA to grant an exemption, FMCSA would have to conclude
that the $75,000 bond requirement ``is not needed to protect shippers
from the abuse of market power'' or that the requested exemption is of
``limited scope.'' 49 U.S.C. 13541(a)(2). SBTC, like AIPBA before
it,\28\ did not address the ``limited scope'' provision.\29\ SBTC fails
to argue why in 2019 the broker bond was ``not needed to protect
shippers from the abuse of market power.'' Instead, SBTC states that in
2015 FMCSA did not provide adequate support for its determination that
AIPBA did not make an adequate showing that the broker bond is not
necessary to protect shippers from the abuse of market power.\30\ SBTC
has the burden of showing that regulation is not necessary; it is not
FMCSA's burden to show why regulation is necessary.\31\ Such a standard
would turn the exemption statute on its head and undermine the
Administrative Procedure Act.
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\28\ 80 FR at 17145 n.2.
\29\ While FMCSA need not resolve the issue in today's decision,
the Agency questions whether, in an industry dominated by small
businesses, a 5-year exemption for brokers and freight forwarders
with annual revenues below $15.01 million could fairly be considered
one ``of limited scope.''
\30\ SBTC Application, at 12.
\31\ ATA also noted this burden in its comments. Comments of the
American Trucking Associations, at 3 (``the burden of course is not
on the Agency to demonstrate that the requirement is necessary, but
on SBTC to establish that it is unnecessary.'').
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Finally, in order to grant SBTC's request, FMCSA would need to
determine that its proposed exemption is in the public interest. As the
overwhelming majority of public comments attest,\32\ SBTC has failed to
show that the proposed exemption is in the public interest. Aside from
unsupported statements addressed below, SBTC does not attempt to show
why exempting a large swath of the brokerage and freight forwarder
industries from the $75,000 bond requirement for 5 years is in the
public interest. Instead, SBTC critiques FMCSA for purportedly not
showing how AIPBA's proposed exemption was not in the public
interest.\33\ As noted above, FMCSA provided extensive reasoning as to
why AIPBA's request was not in the public interest in 2015. 80 FR at
17146.
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\32\ FMCSA notes that the unanimity among multiple associations
representing multiple industries in opposition to SBTC's request is
striking.
\33\ SBTC Application, at 12.
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SBTC claims, without offering support, that granting the exemption
``is in the public interest to ensure an uninterrupted supply chain.''
\34\ In reality, as explained above, granting SBTC's request would harm
the finances of motor carriers and therefore interfere with the supply
chain.\35\ Having the bond available benefits motor carriers in the
event of broker or freight forwarder non-payment.\36\ In addition,
SBTC's contentions that (1) the $75,000 bond impedes small carriers'
ability to add brokerage operations,\37\ and (2) ``the current broker
census'' (as of September 2019), which featured an increase in the
number of brokers since an initial decline following the bond increase
in 2013, ``cannot be fairly attributed to a return of these small
business brokers that were utterly decimated in December 2013'' \38\
are unsupported. In fact, commenters point out how the bond requirement
has not harmed small businesses. The MCRR Coalition, an organization
that includes associations with over 15,000 small regulated motor
carriers,\39\ indicated that the argument that the increased bond
amount prejudices small businesses is meritless. The annual surety bond
premium is less than $2,000 on average, according to the MCRR
Coalition.\40\ David Owen, the President of the National Association of
Small Trucking Companies (NASTC), in an affidavit attached to the MCRR
Coalition's comments, stated that the fear that the increased bond
amount would be cost prohibitive for small brokers and have an anti-
competitive effect did not materialize.\41\
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\34\ Id. at 5.
\35\ The supply chain is a critical issue that the Department of
Transportation is addressing in response to disruptions caused by
the COVID-19 pandemic.
\36\ See footnote 21 above.
\37\ SBTC Application, at 5.
\38\ Id. at 14. See also May 29, 2020 comments of the Small
Business in Transportation Coalition, at 3.
\39\ Comments of the Motor Carrier Regulatory Reform Coalition,
at 2.
\40\ Id. at 8. JW Surety Bonds also indicates that surety
premiums are consistently low. Comments of JW Surety Bonds, at 1.
\41\ Comments of the Motor Carrier Regulatory Reform Coalition,
Affidavit of David Owen, at 1.
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As noted above, SBTC argues that the factoring industry's direct
payment of motor carriers obviates the need for the ``smallest of
brokers'' to have a broker bond.\42\ SBTC's argument is unsupported by
any evidence, however, and therefore FMCSA has no basis for a finding
that the presence of factors in motor carrier transportation means the
public interest will be served by granting the requested exemption.
SBTC also argues that a 5-year exemption is warranted to give FMCSA
time to implement its ``comprehensive enforcement program'' to enforce
the broker bonding and licensing requirement.\43\ But SBTC's argument
on this point falls short as well. SBTC fails to show how exempting a
large segment of the broker industry from the bond requirement would be
in the public interest merely because some entities are currently not
complying. The core public interest implicated in Congress's imposition
of the $75,000 financial security requirement is that motor carriers
(and shippers) be paid in the event of broker or freight forwarder non-
payment. SBTC's exemption request, if granted, would undermine that
goal.
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\42\ SBTC May 29 comments, at 4.
\43\ SBTC Application, at 4.
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FMCSA therefore does not find that the $75,000 financial
responsibility requirement for brokers/freight forwarders is ``not
necessary to carry out the transportation policy of section 13101.'' 49
U.S.C. 13541(a)(1). Nor does FMCSA find that continued regulation under
section 13906(b) and (c) ``is not needed to protect shippers from the
abuse of market power.'' 49 U.S.C. 13541(a)(2). Finally, granting the
exemption requested by SBTC is not in the public interest. 49 U.S.C.
13541(a)(3). Accordingly, SBTC's request is denied.
Meera Joshi,
Deputy Administrator.
[FR Doc. 2021-27220 Filed 12-15-21; 8:45 am]
BILLING CODE 4910-EX-P