What's wrong at the Department of Transportation?

By Staff -- Logistics Management, 5/1/1998

Congress directed that the U.S. Department of Transportation present reports by Dec. 31, 1997, on two transportation issues: the department's Cargo Liability Study concerning motor carriers, and the registration system for motor carriers, brokers, and freight forwarders. In both instances, DOT issued only "interim" reports.

In its interim Cargo Liability Study, DOT merely reviewed the positions of the various interests instead of making recommendations. One could even see this interim report as a test to determine how the shipping public would react to the suggested $10 per-pound uniform limit of liability for LTL traffic. As expected, U.S. shippers objected to having uniform liability for domestic traffic replace the "strict liability" system mandated by the Carmack Amendment.

With respect to the registration system, DOT has failed to repeal the dual-operation system for motor carriers as mandated in the ICC Termination Act of 1995. In that law, Congress created a single category for all motor common carriers with the right to enter into contracts, rather than requiring carriers to obtain a certificate to operate as a common carrier and a separate permit to operate as a contract carrier. DOT should have eliminated the distinction between common and contract carriage on Jan. 1, 1996, as intended by Congress, and implemented a policy of charging only $300 to process applications seeking all types of authority (motor common carrier, contract carrier, broker, and freight forwarder). The agency, however, continued to collect $300 for each category of authority sought by an applicant.

DOT's failure to act in accord with congressional intent is detrimental to shippers insofar as it deprives them of the benefit of the special cargo-insurance protection mandated for motor carriers. Formerly, only common carriers were required to file a BMC 32 Endorsement, which made the cargo insurer primarily liable for losses of up to $5,000 per vehicle or $10,000 per occurrence, without regard for any deductible or exclusions in the cargo policy. Contract carriers, however, were not governed by this requirement.

The repeal of dual operations on Jan. 1, 1996, should have resulted in the filing of BMC 32 Endorsements by all motor carriers as a condition for conducting operations. Nevertheless, DOT continues to require only "common" carriers to maintain a BMC 32 Endorsement. The practical effect is to deprive claimants of the right to collect claims directly from cargo insurers when the carrier fails to pay a lawfully filed claim. This is particularly significant if the carrier is experiencing financial difficulties or files for bankruptcy protection.

Whenever Congress conducts its oversight of DOT, shippers need to express their frustration with that agency and demand that it be more responsive to the nation's needs. The former ICC understood the importance of its role in protecting the public interest and allocated the necessary manpower and funds to provide the required services. Why should a cabinet-level federal department, with a greater budget than the ICC ever had, have difficulty in concluding the projects assigned to it by Congress?

William J. Augello Esq. has practiced transportation law for 46 years. He also is the executive director of the Transportation Consumer Protection Council, an organization that is devoted to protecting shippers and receivers in transportation matters, such as freight loss and damage, undercharges, and contracts. He can be reached at (520) 531-0203 or via e-mail at augello@transportlaw.com.