Bad Idea is One Step Closer
By Henry E. Seaton

September 2005
Reprinted from

Q Is it true that the new highway bill, which was signed into law in August, abolishes non-household goods freight forwarder and property broker registration requirements and with it the broker’s bond or bank trust agreement?

A Almost. The law gives the Department of Transportation discretion over whether to continue registration. The abolition of the broker registration requirement has been on the Federal Motor Carrier Safety Administration’s wish list for some time. In my July 2003 column, I wrote that DOT had proposed to change the regulation of brokers and non-household goods carriers from a congressional mandate to a program that the agency could terminate after rulemaking and comment.

As I argued in that column, DOT’s proposal to Congress was genuinely a bad idea that should have been dead on arrival when initially proposed as part of the highway programs reauthorization bill. All of the major constituencies – associations representing trucking, brokers and shippers – agreed that the regulation of brokers served a useful public purpose and operated under the assumption that any change of the non-household goods freight forwarder or broker regulations would be stripped out of any final legislation.

Unfortunately, the industry has been caught flat-footed. Lost in the pork of the 1,100-page highway bill are provisions that strip the requirement of registration and financial responsibility, leaving the decision up to DOT.

As originally proposed, the department would have to conduct a rulemaking, giving the industry time to comment before the regulation could be abolished, but the highway law as enacted does not make clear whether the regulation of property brokers and non-household goods freight forwarders terminates with the effective date in the absence of further departmental action or whether the industry gets a formal opportunity to express its opinion first.

Some things do appear clear, though. FMCSA’s primary objective is highway safety, and the agency has a pre-disposition to abandon any program that it believes has no direct impact on safety regardless of its marketplace benefits. Clearly, FMCSA does not recognize the mandate to provide even rudimentary information the industry needs if safety is not involved. After the anti-competitive policies of the filed rate doctrine and restrictive entry control, the pendulum has swung all the way to a laissez-faire attitude toward FMCSA’s involvement in the industry.

There is little apparent appreciation for the void that will be left if there is not at least some federal database identifying and qualifying transportation instrumentalities operating in interstate commerce. The states cannot do it because the services that are rendered are national in scope. FMCSA has developed a useful website that, at little cost to the registeree, has provided a home page for any constituent to check out a carrier or broker’s identity, financial responsibility and agents for service of process. It makes no sense to maintain the same database for safety-related information only.

Until Congress amends the national transportation policy (49 U.S.C. §13101), DOT’s mandate includes encouraging sound economic conditions among carriers as well as enabling efficient and well managed carriers to earn adequate profit and attract capital. Clearly, the industry now must shoulder the burden of demonstrating to DOT and to Congress that continued registration of brokers and non-household goods freight forwarders is consistent with this mandate and should be retained.

Congress, I believe, should be mandating registration for all intermediaries involved in the booking and transportation of freight, not just carriers. This congressional decision shows that the right hand does not understand what the left hand is doing in Washington. Chain of custody is a security issue that the FDA, the TSA and other federal agencies are trying to address. Does it make sense for the only agency with oversight over surface transportation to be considering abolishing the only national system to identify legitimate freight forwarders and brokers, while millions are spent to keep freight from falling into unidentifiable hands?
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