DOT Finalizes New Rules for Motor Carrier Claims Against Freight Forwarders
The Transportation Department this week unveiled a final rule that will place new financial security requirements on forwarders and freight brokers that fail to pay for services provided by a motor carrier. The new measures, first released as a proposed rule in January by the agency’s Federal Motor Carrier Safety Administration, are meant to address freight brokers and forwarders that purposely default on payments, triggering what can be a “costly and time consuming” process in a claims court that “generally results in motor carrier claims being paid pro rata.”
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FMCSA said it believes “most brokers operate with integrity and uphold the contracts made with motor carriers and shippers. However, a minority of brokers with unscrupulous business practices can create unnecessary financial hardship for unsuspecting motor carriers.”
The rule makes several main revisions to the regulations governing forwarder and freight broker financial responsibilities, including one that allows the FMCSA to suspend the “operating authority registration” of a freight broker or forwarder when their available financial security falls below $75,000, the threshold that usually results in a submission of “claims to a court in an interpleader action,” the agency said. The rule also includes a definition for “assets readily available,” which covers the types of assets needed to be held by a freight broker or forwarder in a trust fund in order to pay a claim.
Another provision requires that a surety or trustee, if they become aware that a freight broker or forwarder is “experiencing financial failure or insolvency,” notify FMCSA and “initiate cancelation of the financial responsibility.” Other parts of the rule define “financial failure or insolvency”; outline the agency’s enforcement authorities under the rules, including potential penalties; and remove loan and finance companies from the list of providers eligible to provide certain trust funds for freight brokers and forwarders.
The rule takes effect Jan. 16, although FMCSA said some portions of its regulations don’t expire or are stayed until Jan. 16, 2025. Freight brokers, surety providers and financial institutions must comply with rules covering “immediate suspension, financial failure or insolvency, and enforcement authority” by Jan. 16, 2025, the agency said, and they must comply with the provisions “regarding assets readily available and entities eligible to provide trust funds for Form BMC-85 trust fund filings” by Jan. 16, 2026.