Transportation Bill 2012 Update: Bond Increase for Brokers

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The Transportation Bill 2012 calls for a substantial increase for bonds for brokers and freight forwarders. Read how this might affect the industry.

With 20 years experience in managing a brokerage, I think this increase is punishing the majority of brokers. Truckers deserve assurance they will get paid and 65% increase in a bond punishes smaller, honest brokerage firms. The method in which the transportation bill was passed without much debate on the issue of bonding puts a sour taste in my mouth.

I’m sure many surety providers will be competing to get a jump on this increase and will hopefully offer some discounted rate. Depending on the amount of actual cash surety providers require from brokers will determine if a small broker can weather this storm.  

The other side to the coin is large brokerages and freight forwarding companies will be taking advantage of the opportunity by receiving more freight and starting agent satellite offices.  This could create a monopolistic situation for the brokerage industry. Ultimately this hurts truckers because the larger firms will be able to set the price of freight because they have more control over rates. 

 

The transportation bill passed by Congress last month includes a bond increase from $10,000 to $75,000 for brokers and freight forwarders. The last time the federal government increased the required bond was in the 1970’s.

Surety providers are required to pay claims within 30 days after the 60-day period for submissions. If a broker files for bankruptcy they are required to pay all claims within 30 days. 

Supporters of the bond like Owner-Operator Independent Drivers Association (OOIDA) and Transportation Intermediaries Association (TIA) OOIDA believe the increase will help eliminate fraudulent business practices by brokers and freight forwarders. TIA backed a $100,000 bond and TIA President and CEO explained the bond increase will prevent “underfunded companies” that give the industry a “black eye”. The new bond amount requirement will take effect July 2013.

Other provisions of the bill include civil penalties if brokers fail to keep the required amount. If the full amount of the bond is not maintained, brokers must report it to the FMCSA and notify the US Department of Transportation. The cancellation will be posted on DOT’s website. 

 

Follow our blog for more updates on the Transportation Bill 2012.