FMCSA To Consider Small Brokers' Security Bond Exemption Request

Federal regulators have asked for public comment on a petition for a five-year exemption for small-business truck brokers from a $75,000 security bond requirement.

The petition, filed with the Federal Motor Carrier Safety Administration (FMCSA) in September by the Small Business in Transportation Coalition (SBTC), is a resubmission of a 2013 bond exemption request by the Association of Independent Property Brokers and Agents, which merged with SBTC in 2016. The FMCSA denied the request in 2015.

"Under the current regulatory climate, unlicensed entities, including motor carriers and dispatch services, are permitted to engage in unfair competition because FMCSA has not enforced the broker licensing requirement and has allowed unlicensed entities arranging for transportation to operate with impunity," SBTC stated in its petition. The group asserted that FMCSA "had promised to crack down" on unlawful operations in 2013 but has so far failed to do so.

"We are therefore now asking for all small property brokers and freight forwarders as defined by the [Small Business Administration] for freight transportation arrangement with revenues under $15 million be made exempt for five years to give FMCSA more time to develop its ‘comprehensive enforcement program' to enforce the licensing and bonding requirement. Until FMCSA levels the playing field, enforcement against some transportation intermediaries — but not others — constitutes an unlawfully arbitrary and capricious regulatory scheme."

In denying the group's initial request filed in 2013, the FMCSA concluded that it could not issue a blanket exemption under its authority to exempt transportation services. And even if it did have the authority, FMCSA stated, the exemption application did not meet certain hurdles, including proof that the $75,000 bond requirement "is not needed to protect shippers from the abuse of market power."

SBTC also argues in its petition that during the previous recession, small carriers and owner-operators survived by securing a broker license and brokering freight to themselves in order to "cut out the middleman." But a $75,000 bond requirement "effectively eliminated this revenue-enhancement mechanism and forced small carriers and owner-operators to work with the large brokers represented by the Transportation Intermediaries Association," the group asserts.

"With fears of yet another recession on the horizon, now is the time for FMCSA to grant this exemption as it is in the public interest to ensure an uninterrupted supply chain. Rather than have no choice but to secure loads from large brokers, SBTC believes that small carriers should have the right to add small brokerage components to their existing operations. The current bond level impedes this."

Comments on SBTC's petition are due 30 days after the FMCSA application notice is posted in the Federal Register on April 10.