For example, having failed conspicuously in 2010 to convince enough of the Senators considering S. 3483  that a $100,000 surety requirement of this truly unique character would not be beyond the reach of most of the nation’s small business brokerage operations, the TIA  has blown their credibility entirely since then through representations made on their behalf asserting a truly preposterous argument in support of that already discredited proposition:

Specifically, consider the comments of the TIA’s Robert Voltmann quoted in an online “Transport Topics” article dated 4 July 2011, wherein he claims to have “refuted the notion that the [previous] bill [H.R. 2357] would put small brokers out of business”. The TIA’s official premise in such regards is that the only small business enterprises the proposed new $100,000 surety requirement

  … will squeeze out are underfunded or undercapitalized
brokers [since]… A $100,000 bond to move DOD freight costs�
$1,500.  If you can’t afford $1,500 what right do you have
to collect someone else’s money?  You shouldn’t start a
brokerage if you don’t have proper capitalization [of at least
$1,500 for an annual surety instrument premium payment!!!]….

(Click Here  for a copy of that on-line article).  Well, any small business enterprise would  need far more “capitalization” than just enough money to cover a single annual surety instrument premium payment  even to qualify for a license, much less actually to “start a brokerage“:                                                                                                                     

Quite obviously, the TIA’s line of argument in such regards relies on the absurd proposition that the verifiable underwriting risks characteristic of “a $100,000 bond to move DOD freight”, the sole purpose for which would be  “errors and omissions” indemnification for a single named “shipper”, somehow were  remotely comparable to the verifiable underlying risks characteristic of a $100,000 surety instrument specifically constituting an actual guarantee of payment for some unlimited number of allegedly uncompensated “motor carriers”, even to the extent that no collateral or other category of “proper capitalization” for a brokerage operation beyond the ability to “afford  $1,500” for an annual premium payment would be required for even a $10,000 surety instrument.  That’s because the category of indemnification in question is not some form of “insurance policy” for which mere premiums constitute the limits of  a broker’s financial responsibility to the surety provider involved.

 As a concrete example of just how preposterous the TIA’s official premise in support of their line of argument actually is, you only need to consider the following: (i) the fact that the specific language found in the introductory paragraphs of both the BMC-84 “Property Brokers Surety Bond” and the BMC-85 “Property Broker Trust Fund Agreement” forms  provides expressly for the indemnification of both “motor carriers and shippers”; and (ii) the corresponding fact that during the year 2010 Pacific Financial Association, the nation’s leading provider of transportation surety instruments, processed nearly 15,000 claims asserted against their BMC-85 filings by allegedly unpaid “motor carriers” and precisely three (3) asserted by “shippers”.

 In other words, the relative underwriting risk characteristic of the indemnification of  inconvenienced or otherwise allegedly injured “shippers” (such as the DOD), as distinct from allegedly unpaid “motor carriers”, may be assumed to be roughly 5,000 to 1.  That’s why, unlike a typical TIA member (such as C.H. Robinson) the vast majority of the current brokerage community never is going to find a legitimate surety provider willing to assume responsibility for what is virtually a blanket $100,000 letter of credit, an instrument applicable primarily to the payment of allegedly unsatisfied vendors and maintained for the express benefit of the entire regulated motor carrier industry, without that full amount  in hard collateral in the form of a cash deposit, letter of credit, or other immediately liquid assets above such a typical broker’s receivable financing and other operational capitalization requirements.  The ability to “afford $1,500” just doesn’t cut it!  In fact, the underwriting risk for a BMC-84 bonding company is significantly higher than that for a BMC-85 trustee even with a $10,000 limit of liability, a verifiable consideration even otherwise sophisticated ATA staff attorneys apparently fail to appreciate:

  Remarkably, in an email addressed to this Association’s in-house consultant, the ATA’s Robert Digges actually supports the TIA’s premise that the vast majority of small business brokers somehow would have no trouble convincing a BMC-84 bonding company underwriter to agree to an open ended  $100,000 guarantee of freight payments to “motor carriers” since, to quote Mr. Digges, “[t]he terms of the bond under subpart A ["of H.R. 2357"] are left to be negotiated by the broker and surety” (Click Here for a copy of that email). We suggest that opportunities for fruitful “negotiations” to that particular end are going to be rare:

Significantly, quite apart from the unprecedented claims activity and exposure characteristic of both BMC-84s and BMC-85s referenced above, BMC-84 bonding companies alone are subject to a further ongoing responsibility in terms of their state government mandated insurance reserves against which allegedly unpaid “motor carriers” could assert claims at any time within the statute of limitations for any jurisdiction which might be deemed appropriate.  Typically that would be up to six (6) years even after a BMC-84 filing had been cancelled and all the broker’s collateral had been refunded. In contrast, when a BMC-85 filing has been cancelled and all the broker’s collateral has been refunded (with no claims in prospect) the indemnification conveyed through that instrument terminates.   As a matter of fact, based on Pacific Financial’s own research involving their  5,000 broker customer base (constituting roughly 25% of all such licensed transportation intermediaries nationally), more than half of the brokers with BMC-85 filings chose such a purely collateralized surety instrument because the BMC-84 bonding companies they’d approached  had demanded full collateralization for even a $10,000 filing anyway.  Historically, as a direct result of the unprecedented claims activity such exposure is known to invite, the insurance industry has not been enthusiastic about this category of coverage, and insurance brokers and other producers regularly refer such business to Pacific Financial and other BMC-85 providers as a matter of course.

 If you haven’t joined yet, this Association still needs your membership in order to ensure a forum large enough to continue protesting this proposed increase effectively. The issues are clear. For example, just how forcing, say, 100 smaller brokers holding individual $10,000 bonds or trust agreements to sign up as agents for some larger broker holding a single $100,000 bond or trust agreement somehow is going to contribute to “fighting fraud in transportation”, the inevitable consequence of a process entailing the wholesale elimination of most of the nation’s small business brokerage operations, would tax anyone’s imagination. This Association will continue to waive its $25 annual membership fee throughout 2012 in order to simplify enrollment procedures for this continuing emergency lobbying effort.

 LOBBYING UPDATE - 14 May 2012

 Events have been moving almost  too fast to keep up with on a day to day basis since our  update on 8 March.  To  reiterate, following our 2 February 2012 update regarding that week’s scheduled markup by the House Transportation and Infrastructure Committee of H.R. 7, proposed legislation  entitled the “American Energy and Infrastructure Jobs Act“,  we already had warned that such was  the first of a series of similar proposed “infrastructure” measures to be considered this year to which some Member of Congress (or some combination of Members of Congress) might attempt to  attach a rider or amendment for the purpose of increasing the transportation broker surety requirement we’re concerned with.  Well, that’s exactly what has happened:

More recently, a 13 February Transport Topics article captioned “House, Senate Weigh Vastly Different Proposals” addresses the issue of competing legislation introduced in the Senate which did not  at that point in time include any provisions pertaining to broker surety requirements as originally drafted.   As a matter of fact, Democratic Senator Barbara Boxer, speaking for both herself and Republican Senator James Inhofe, was quoted in that article as having “begged colleagues not to attach controversial or extraneous amendments that would slow this bill down“.  (Click Here for a copy of the on-line version of that article). We couldn’t agree more.  

Unfortunately, as noted above, out of the 258 amendments proposed for Senate Bill S. 1813 one in particular, Amendment S. 1950, which mirrors that body’s “unsuccessful” S. 3483 from 2010, now  has been incorporated into the body of that comprehensive piece of legislation as an obviously “extraneous”  component of the “Reid Amendment” (docketed for procedural purposes as S.1761)  to the base text of S.1813. 

Since then, on 14 March 2012, the Senate ACTUALLY PASSED  S.1813 as amended to include all the elements of the original S. 3483 we’ve been objecting to since 2010, particularly the provision increasing the broker surety requirement from $10,000 to $100,000.  In the event S.1813, as amended, was handed over to the House of Representatives for consideration as an alternative to the still pending H.R.7, and both bodies remain deadlocked over the particulars of proposed major infrastructure funding authorization totally unrelated to any aspect of transportation broker regulation.  Hence the passage on March 29 of the ninth in a series of continuing resolutions delaying consideration of such comprehensive legislative arrangements for another 90 days, which temporary expedient probably will be extended further in order to allow ultimately for a conference committee to reconcile major differences between the two conflicting bills.  

Most recently, rather than vote on H.R. 7 itself the House has passed yet another temporary extension of current transportation funding authorization through 30 September, the language of which bill contains a provision approving  funding of the Keystone Pipeline, a measure deemed significant enough to justify a House-Senate conference committee which met for the first time on 8 May.  For more information on that subject we refer you to PFA‘s own notice of 26 April distributed to their 5,000 BMC-85 cleints over the signature of Daniel Larson, that surety provider’s President and General Counsel, which identifies the members of that House-Senate conference committee (Click Here for a copy of that 26 April notice).

 Quite obviously such circumstances create an opportunity for those of you who would be adversely affected, those who either could not or would not choose to tie up $100,000 in hard assets in order to meet the necessary collateral requirements, to contact your local Member of the U.S. House of Representatives and both of your state’s Senators in order to influence any such reconciliation process through voicing your own concerns.   For more statistics and argument on that subject, we suggest you refer to PFA‘s previous notice of 12 April distributed to their 5,000 BMC-85 clients (Click Here for a copy of that 12 April previous notice).

 By way of background for any such action, with respect to a series of previous telephone contacts with Congressional staff members still material to this year’s legislative calendar, the most comprehensive written communication characteristic of this Association’s lobbying efforts since 2010 is the detailed letter of 1 November 2011 addressed to the Chairman of the House Small Business Committee drafted by James Lamb on behalf of both the AIPBA  and this Association, copies of which have been circulated widely to other federal offices  (Click Here for a copy of  that comprehensive written communication).

To that same end, in order to follow up on the Association’s demonstrably well received lobbying efforts entailing hundreds of telephone, telefax, and email communications pertaining to essentially the same adverse provisions originally proposed in the since derailed Senate Bill 3483, those lobbying efforts directed previously to both appropriate Senate and House staff members as well as to numerous in-house attorneys and other representatives of the SBA’s  Office of Advocacy, the DOJ’s  Antitrust Division, and various administrative units of the FMCSA,  the Association’s current staff and outside counsel have resumed our concentrated efforts predicated on the same verifiable set of circumstances in the near future.  Click Here  for copies of this Association’s “Previous Communications” occasioned by such “unsuccessful” legislation of precisely the same character introduced in the Senate in 2010, which includes a number of organic attachments material to the considerations still involved.

Accordingly, we urge both your input and continued direct communication with appropriate Congressional and Administrative staff members and officials regarding the growing industry wide opposition those elements of transportation broker re-regulation now buried in the base texts of both H.R.7  and S.1813.

Finally, while this Association remains opposed generally to further economic regulation of the brokerage industry at this time, please consider our in-house consultant’s 23 August 2010 letter to the ‘FMCA’S Enforcement Division regarding those suggested rule making clarifications proposed as a much less disruptive alternative to legislation such as (or “closely tracking”) the former Senate Bill 3483 should some corrective measures ultimately be deemed necessary (see Item ((B) of the “Previous Communications” referenced above).  In that regard, Click Here for a copy of a 28 August 2010 “Press Release” issued by the AIPBA material to such concerns.

As we’ve mentioned before, we suggest that you draft your own letters of opposition to whatever harmful provisions might be conveyed through those particular elements of this year’s H.R.7 and last year’s now pending S. 1813 as amended, which correspondence should be addressed directly to your own local Member of the U.S. House of Representatives and to both of your state’s  U.S. Senators.    You also might wish to contact the Washington office of  Representative John L. Mica, Chairman of the House Transportation and Infrastructure Committee. 

 While we recommend that you use our own in-house consultant’s 13 September 2010 letter to Senator Kay Bailey Hutchinson (see Item (A) of the “Previous Communications” referenced above) as a rough guide, our Washington counsel believes that obvious form letters have little credibility.  In other words, specific details regarding the probable impact of the proposed legislation on your own business prospects definitely would be helpful (see Item (F) of the “Previous Communications” referenced above for an example of just such an effort).    Click Here for the number of similarly situated brokers in your own state, a significant statistic which you might choose to reference in your correspondence.

NOT ALL BROKERS ARE THE SAME

  As this Association continues to stress  with respect to the proposed bonding requirement increase, the forms and procedures appropriate for a large “third party logistics” providers, although widely regarded as the standard in the industry, are utterly inappropriate for small to medium sized brokers.  The reasons for this state of affairs, although uncomplicated, are not always appreciated.

While there’s no question that all transportation brokers act as “independent contractors” with respect to bill of lading transactions, significant questions often arise (and always should be asked) as to the exact capacity in which such “independent contractors” actually serve in each particular instance.  Forms and procedures establishing your brokerage as a common law “general contractor” somehow “hired” by shippers to “hire” motor carriers can cause significant problems for all concerned, including unwarranted cargo, BI &PD, workers compensation, and ‘double payment” liability for the shippers you serve.  The right forms and procedures can prevent such problems  without affecting your brokerage’s day-to-day operations in any practical sense.

More generally this Association, is registered under the name Transportation Broker’s Service Association  as an Oregon Cooperative Corporation organized to qualify, secure, and otherwise facilitate a wide range of education, legal, and administrative, and financial services optimized for the vast majority of FMCA licensed transportation brokers.  The affairs of this Association will be conducted strictly on a non-profit basis with the sole intention of benefitting it’s members.  Every member of the Association will be entitled to a full credit against the $25 annual membership fee in consideration for patronage of any Association certified vendor up to that amount within any calendar year.  Click Here for the Association’s online “Application for Membership” form and Click Here for a copy of the Association’s “Corporate By-Laws”.

CURRENT OPERATIONAL ARRANGEMENTS

 Acting in response to the continuing emergency lobbying effort referenced above, the Association is still in the process of enrolling and securing the input of numerous new members for which applications already have been requested. While an increase in the number of educational, legal, administrative, and financial service vendors under consideration for certification is anticipated as well, the development of new operational services will take second place to the emergency lobbying effort referenced above. In order to accommodate the Association’s rapid increase in membership, for the time being all communications between the Association and current or prospective members will be conducted either electronically or through regular mail. The Association’s email address is:

operations@transfinservice.com

and its initial physical address is:

Transportation Brokers Service Association
c/o  Transportation Management
706 E. Bell Rd., Ste. 102
Phoenix, AZ. 85022
(602) 424-1770, FAX (602) 424-1774

Check back periodically for further information and event postings.

 CURRENTLY AVAILABLE SERVICES

 In addition to the emergency lobbying effort, referenced above, the services currently available through the Association include a complete set of forms with corresponding instructions, draft transmittal letter language, and a comprehensive introduction, including a suggested “Brokered Bill of Lading – Short Form” drafted specifically for such applications, a specialized “Supplemental Delivery Receipt” intended to cure certain deficiencies in standard “inland marine” bill of lading language when considered from a broker’s unique perspective, an optimum nine page “Broker – Carrier Master Agreement No. 2″, and a simplified one page “Broker – Carrier Short Term Master Agreement”.

 For the time being, due to consistent interest in this offering, such material is available without further obligation to all licensed transportation brokers wishing to inquire upon entry of a valid MC Number below

 MC Number: