Fighting Fraud in Transportation Act of 2011 focused on cleaning up messy brokerage practices

A new piece of legislation introduced by Congressmen Russ Carnahan (D-MO) and Frank Guinta (R-NH) is focused on addressing fraud-related issues in the freight transportation marketplace.

By ·

A new piece of legislation introduced by Congressmen Russ Carnahan (D-MO) and Frank Guinta (R-NH) is focused on addressing fraud-related issues in the freight transportation marketplace.

The bill, entitled H.R. 2357, Fighting Fraud in Transportation Act of 2011 (FFIT), has received the full support of three influential transportation groups: the Transportation Intermediaries Association (TIA); the Owner-Operator Independent Drivers Association (OOIDA), and the American Trucking Associations (ATA).

Among the major facets of this bill as outlined by the TIA (the bill’s official text is not yet available at press time) are:
-requiring brokers and freight forwarders to carry a $100,000 bond;
- provide strict regulation of broker surety companies so that they must fulfill their obligations to brokers and forwarders;
- provide greater transparency for those seeking to become brokers or forwarders;
-establish significant penalties including unlimited liability for freight charges for those operating without the required authority;
- establish significant penalties including unlimited liability for freight charges for those operating without the required authority; and
-clarifies that a motor carrier may provide transportation of property with self-propelled motor vehicles owned or leased by the motor carrier or through interchanges as permitted under regulation issued by the Secretary, provided that the originating carrier must physically transport the cargo at some point, and retains liability for the cargo and payment of interchanged carriers and require that there must be at least one corporate officer who has met minimum training standards or equivalent experience.

The impetus for this bill stems from the ICC (Interstate Commerce Commission) Termination Act of 1995, which involved a compromise on trucking in the very minimal amount of economic regulation was retained in order for the marketplace to properly function. But these regulations have been widely ignored by each Presidential administration since that time, according to TIA President and Chairman Bob Voltmann.

“What TIA, ATA, and OOIDA sought to do with this legislation is taking those minimal regulations and put them into law,” said Voltmann. “If they are regulations, only the Federal Motor Carrier Safety Administration (FMCSA) can enforce them. But when they are law, the private sector can enforce them.”

One of the biggest issues when it comes to the these minimal regulations is who can broker freight, said Voltmann, explaining that the ICC never allowed motor carriers to broker freight without a license or a bond, and they strictly defined what interlining was.

But nearly 20 years later, he said that there is now an environment where “everyone thinks they can broker freight without true regulation.

“You have motor carriers taking loads and brokering them and calling it interlining or whatever else they want to call it,” said Voltmann. “And in a world of lawsuits where companies get sued because of the trucking company they select, imagine going through the process where a shipper says ‘I want this and it has to have $200,000 worth of cargo coverage and only want super-safe carriers to move it.”

And after going through this qualifying process, shippers put their name on the line and the broker carrier flips the load to someone else the shipper has never met or heard about and does not pay the original carrier, which can lead to myriad problems, he said. In many instances, the performing carrier is an owner-operator struggling to get by that needs to repeatedly follow-up with the broker and carrier to get paid.

The FFIT Act of 2011 would effectively put that practice to an end, as it would make that middle motor carrier responsible for the payment and that carrier would face severe penalties for brokering without a license or a bond, with no limit to liability for payment. The idea behind the bond is to make sure companies are capitalized and not to put smaller or under-funded companies out of business, said Voltmann.

“Brokers are running a business in which they are collecting other people’s money, and it is a specious argument to say I should be able to collect hundreds of thousands of dollars of other people’s money but I cannot afford to protect it,” said Voltmann. “These are hollow arguments. We think this is a great bill, because it is going to deal with the capitalization issue and bonding companies that cheat brokers and motor carriers that have not been following those minimum regulations which require them to actually tell DOT they paid. It is going to stop this unauthorized re-brokerage and brokering without a license and know who is in business.”

The FFIT Act of 2011 was soundly endorsed by Mike Regan, president of TranzAct Technologies.

Changing the bonding requirement for brokers and freight forwarders is a positive step, explained Regan.

“And for those that operate legitimate companies, there is nothing in this bill that will force them to change how they do business,” he said. “What it is going to force them to do is to address the problem with the renegade operator that does not operate and ethical business and has little or no bonding and sells a relationship where it can go find a truck.”

Regan said he commends Voltmann and TIA for their effort in recognizing that with the ATA and OOIDA behind this bill they cannot fight City Hall forever, adding that this is a bill that will gain wide support.

About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Latest Whitepaper
How Lean is your Lean Quality Program?
Avoid quality program bureaucracy that can sap logistics productivity and increase costs
Download Today!
From the September 2016 Issue
Indecision revolving around three complex supply chain elements—transportation, technology and organizational structure—finds many companies waiting to commit to a strategic path. However, waiting too long will only result in a competitive disadvantage that will be difficult to overcome in today’s fast-paced, global economy.
Time for Asia’s ports to rebuild
Is the freight recession upon us…again?
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Supply Chain Best Practices: Visibility to In-Transit Inventory
During this webcast you'll learn on how various organizations have gained instant access to in-transit parcels and given access to this information to stakeholders.
Register Today!
25th Annual Masters of Logistics
Indecision revolving around three complex supply chain elements—transportation, technology and...
2016 Quest for Quality: Winners Take the Spotlight
Which carriers, third-party logistics providers and U.S. ports have crossed the service-excellence...

Regional ports concentrate on growth and connectivity
With the Panama Canal expansion complete, ocean cargo gateways in the Caribbean are investing to...
Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....