In My Opinion – Deregulation Complete

By Steve Fernlund

Section 4142 of the recently enacted federal highway bill has the effect of eliminating the registration requirements for brokers and freight forwarders. No more licenses; filing of process agents; surety bonds for brokers; or cargo insurance for freight forwarders.

While Representative Ted Stevens (R-AK) managed to get a bridge named after him in the highway bill, Transportation Secretary Norm Mineta, a long time friend of brokers and forwarders, got himself a little pork too. Section 4142 removes the word shall from current legislation and adds the following:

“The Secretary may register a person to provide service subject to jurisdiction under subchapter III of chapter 135 as a broker (other than a broker of household goods) if the Secretary finds that such registration is needed for the protection of shippers…”

Evidently the FMCSA had this language inserted so it could eliminate a large administrative function for which there was no offsetting revenue. If a brokerage received its license in 1995 it has paid no additional fees to the FMCSA for monitoring compliance with the few remaining regulations—surety filing and process agents. Also, there has been little demand from motor carriers, and even less from shippers, for continued oversight of the brokerage and freight forwarding industries.

Those of us who believe in free markets welcome this initiative by the regulators in Washington .

We know that most shippers, if they request a copy of our authority at all, will use it as file ballast.

Not one shipper cares that process agents exist in every state that we operate in. If they're going to sue, they know where we are.

Only a small percentage of shippers know that a surety bond must be obtained by brokers before they are licensed, and most of those who know it understand that the $10,000 surety is gone in minutes for a broker of any size.

Many shippers don't even ask for proof of licensing or surety. They have priorities—freight rates and available equipment. They may assume at their peril that the government is watching out for them, but clearly regulatory compliance is not a priority for too many shippers.

Motor carriers show a little more interest in the surety bond, but even the dimmest of them know that if a broker is going to fail, the claims on the bond will quickly eclipse $10,000—thus the weak efforts from time to time to increase the surety limit to some outrageous amount.

Granted, the lack of registration does create some uncertainties for brokers and forwarders; shippers; and motor carriers. Are there any regulations that still apply? Will state legislatures and courts inject themselves into broker and forwarder operations? Will liabilities for brokers and forwarders increase? Decrease? Or stay the same? Are there added liability concerns for shippers and carriers?

Those questions will be answered in the months and years to come. In the meantime, registration of brokers and forwarders did little to protect shippers and carriers over the last 25-years—so it's unlikely the Secretary of Transportation will ever find that registration is needed to protect shippers now.

Because we honest operators complied with the registration regulations, shippers and carriers made fatal assumptions that all brokers and forwarders were playing by the same rules. Unscrupulous brokers and forwarders duped shippers and motor carriers for millions of dollars over the last few decades without ever actually registering with the FMCSA.

Now, shippers and carriers know that they should do the same and proper homework on brokers and forwarders that they'd do for any other customer or vendor. The type of evidence gathering and decision making that has always kept free markets operating efficiently. This is a good thing for the honest and ethical brokers and forwarders.

 Steve Fernlund heads Generation Three Logistics in Las Vegas, NV. A former newspaper editor, Fernlund serves as chair of the Publications Committee for the Transportation Intermediaries Association .

 Details - www.generationthree.com