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Apr.20, 2015

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Q&A 76 THE JOURNAL OF COMMERCE www.joc.com APRIL 20.2015 By Colin Barrett INCREASED BOND WON'T BREAK BROKERS Q: WOULD YOU GIVE me your reaction to the Federal Motor Car- rier Safety Administration's recent decision not to waive the $75,000 bond requirement for motor carrier brokers? This requirement, included in the MAP-21 legislation, enacted by Congress in 2012, has always been unfair and inequitable. Because of the lobbying of larger brokers who wanted to unfairly discourage com - petition, Congress was persuaded to enact this huge increase in the broker bond, which used to be $10,000. The impact on smaller brokers has been immense, and many of them have been forced out of the industry by the cost involved, which, of course, was the point. The FMCSA had the opportunity to correct this situation, but has refused to do it, again as a result of strong lobbying on the part of the larger brokers. I think it's unbelievable how much these big companies are able to influence the federal government to take their side in this anti-compet- itive dispute. In effect, they're getting government support for their monopo- listic practices. I find the entire thing disgusting. There is still a lawsuit pending to overturn this provision of the law, but I'm told it doesn't have much prospect of success. The FMCSA was basically the last hope of the beleaguered small brokers to escape this excessive bur- den, and now they've turned us down. Can you offer me any ray of hope, or is the brokerage industry simply stuck with this unreasonable requirement that is driving so many brokers out of business? A: WOW. YOU REALLY DO MAKE it sound as if the end of the world is right around the corner, and the architects of the coming conf la- gration are these "robber baron" large brokers. I gather you're one of the small brokers, so perhaps it does seem that way from your perspective. But I'm sorry to tell you that I don't agree. You blame the increased bond requirement solely on large brokers, who you say lobbied heav- ily for it in Congress and against the waiver by the FMCSA, but fac- tually you're on extremely shaky ground. Actually, the prime movers were carriers and shippers concerned about the impact of broker failures on their finances, and the main pur- pose of the legislative provision was to alleviate that problem. Now, I think it's questionable that a $75,000 bond is actually go- ing to accomplish this objective, but it's certainly a lot more realis- tic than the old $10,000 bond. In today's world, $10,000 isn't much more than pocket change to an active broker, even a small one. At least $75,000 is a bit closer to the economic reality of the indebted - ness that a failed broker is likely to leave behind. The effort by the Association of Independent Property Brokers and Agents, an organization com- prised largely of small brokers, to persuade the FMCSA to grant a blanket waiver of the requirement was pretty much foredoomed to fail- ure. Basically, the AIPBA was trying to persuade the agency to nullify an act of Congress, which is far beyond the scope of its powers. In fact, had the agency granted the petition, I think it would have been overturned in court. It's not within the purview of any agency of the executive branch of government to substitute its judgment for that of the legislative branch. And the lawsuit against this provision of MAP-21 seems des- tined to fail on the same basis — it's also beyond the scope of what the Constitution allows for the judicial branch to substitute its judgment for that of the legislative branch. You bemoan the effect of this law on small brokers, but please consider the effect that the failure of small brokers has had on shippers and carriers. When a broker goes out of business, it typically leaves behind carriers that haven't been paid for their services. That, of course, injures the car- riers, and if they try to correct that injury by suing the beneficial ship- per — the broker's client — that's merely an attempt to pass the injury on to the shipper, who will thereby wind up paying twice for the same service — once to the broker and a second time to the carrier. And the two things are not eco- nomically comparable. The new bond requirement adds perhaps $5,000 to a broker's annual cost, not trivial, but still fairly small. On the other hand, a single unpaid car- rier bill can amount to that much or more coming out of the pocket of an innocent carrier or shipper. Given that somebody's ox is going to get gored either way, it seems to me that Congress and the FMCSA made the correct choice. JOC Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.

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