Broker reform: moving forward at last

By Karen Johnston, OOIDA Business Services Manager

Our lawmakers have moved ahead with a $75,000 bond requirement included in the 2012 highway bill. It was a smart move that will yield useful results.

I deal daily with small-business truckers who fulfill their agreed upon obligations only to find out 30 days later there is no pay. Then, to add insult to injury, they find out they cannot get paid through the trust whose sole purpose is to ensure payment of owed freight charges.

Simply increasing the bond/trust amount from the outdated amount of $10,000 to the more industry-practical amount of $75,000 will not resolve all the issues plaguing today's industry, but it is a step in the right direction.

It is also important to mention that the "broker legislation" included in the new MAP-21 goes much further than simply increasing the required surety or trust amount. Getting the legislation passed was simply step one. Before new rules are implemented into regulation, the requirements will go through the rulemaking process, which is usually where the final details are worked out.

Let's look at some facts. In this highly regulated industry, the broker sector is the least regulated entity of all. If you have $300 for the authority, have a credit line or the cash for the $10,000 surety or trust, you can be a broker. You can operate out of your home, or out of your vehicle. You go through no type of audit or review, and currently no one tracks your operation or activity. You are allowed to draw up contracts without guidance, restrictions or oversight.

Brokers are allowed to set payment periods at will. Thirty days is a common industry practice, but it is not a federal requirement. In addition, brokers are allowed to implement charges if a motor carrier would like to opt for quick pay instead of waiting the typical 30 days.

Compare that to the motor carrier side of things. Motor carriers – large, small or single-truck operations – are required to secure authority; have at least $750,000 liability coverage; cargo insurance; in some states mandatory occupational or work comp insurance; and be enrolled in a drug and alcohol testing program.

They are restricted in their daily operations by hours-of-service requirements and limitations. They must have updated state permits, must be registered with UCR, and IFTA, and are required to file quarterly and yearly reports, all of which come with fees. Not to mention the additional taxes and insurance. Motor carriers are also required to go through a new entrant audit within the first 18 months of operation. This is the cost of doing business as a motor carrier.

Each individual sector of this industry is going to have their own position on this matter, and all of us have an opinion. But we also have a responsibility to ensure those opinions are weighed by facts not individual desires. This is an important issue, one that is years past due in being addressed.

In an industry that is as regulated as the trucking industry is, why would it ever be OK with any of us to continue to allow small-business truckers to give their time, use their equipment, provide their insurance, and give front money for fuel to a broker that has no incentive to pay the agreed upon freight charges?

The legislative language included in the 2012 highway bill that was just passed does not fix the entire problem, but it is a step in the right direction. LL