[Federal Register Volume 71, Number 164 (Thursday, August 24, 2006)]
[Notices]
[Pages 50115-50117]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-14064]


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DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration


Registration of Brokers and Freight Forwarders of Non-Household 
Goods

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), United 
States Department of Transportation (DOT).

ACTION: Notice of determination.

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SUMMARY: Section 4142 of the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: A Legacy for Users (SAFETEA-LU), which was 
enacted into law August 10, 2005, authorizes the Secretary of 
Transportation (Secretary) to register brokers and freight forwarders 
of non-household goods (otherwise known as general commodities brokers 
and freight forwarders) if the Secretary finds that such registration 
is needed for the protection of shippers. FMCSA, which has been 
delegated authority to exercise the Secretary's functions and 
activities regarding broker and freight forwarder registration, is 
making a finding that registration of brokers and freight forwarders of 
non-household goods is needed for the protection of shippers. 
Accordingly, the Agency will continue to register all general 
commodities brokers and freight forwarders subject to its jurisdiction.

FOR FURTHER INFORMATION CONTACT: Mr. Michael J. Falk, Office of Chief 
Counsel, 202-366-0834; Federal Motor Carrier Safety Administration, 
U.S. Department of Transportation, 400 Seventh Street, SW., Washington, 
DC 20590-0001.

SUPPLEMENTARY INFORMATION:

Background

    FMCSA's jurisdiction over interstate property brokers is conferred 
by 49 U.S.C. 13501, which gives the Secretary jurisdiction ``over 
transportation by motor carrier and the procurement of that 
transportation'' to the extent the transportation is in interstate or 
foreign commerce. FMCSA's jurisdiction over interstate freight 
forwarders is conferred by 49 U.S.C. 13531, which gives the Secretary 
jurisdiction ``over service that a freight forwarder undertakes to 
provide, or is authorized or required under [Part B of subtitile IV of 
title 49, United States Code] to provide'' to the extent the 
transportation involved is in interstate commerce.
    Brokers and freight forwarders are transportation intermediaries 
who procure the services of motor carriers to transport property. 
Brokers generally do not handle the freight and do not assume legal 
liability for cargo loss and damage. On behalf of shippers, they 
arrange for motor carriers to transport individual shipments from 
origin to destination. Freight forwarders assemble small shipments into 
larger shipments, tender them to motor carriers and ensure that the 
larger shipment is disassembled into smaller shipments upon delivery. 
Freight forwarders may take physical possession of the shipment in 
carrying out these functions.\1\ Freight forwarders issue bills of 
lading and assume liability for cargo loss and damage.
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    \1\ The statutory definitions of broker and freight forwarder 
are codified at 49 U.S.C. 13102(2) and 13102(8), respectively.
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    Brokers arranging for transportation of property in interstate 
commerce were first regulated by the Interstate Commerce Commission 
(ICC) in 1935; interstate freight forwarders were regulated beginning 
in 1942. These

[[Page 50116]]

entities were required to obtain operating authority from the ICC and 
meet financial responsibility and other regulatory requirements. The 
Surface Freight Forwarder Deregulation Act of 1986, Pub. L. 99-521, 
deregulated general commodities freight forwarders by removing them 
from ICC licensing jurisdiction. The 1986 Act was intended to ``enable 
freight forwarders which deal with general commodities to compete more 
effectively with other transportation services and to improve the 
financial health of the freight forwarding industry''.\2\ The 1986 Act 
retained ICC jurisdiction over household goods freight forwarders.
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    \2\ S. Rep. 99-120, p. 2 (July 31, 1985).
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    The ICC Termination Act (ICCTA) of 1995, Pub. L. 104-88, reinstated 
Federal jurisdiction over general commodities freight forwarders and 
required all freight forwarders to register with DOT. The Senate report 
accompanying the legislation noted that since the 1986 Act, freight 
forwarders of shipments other than household goods were not required to 
obtain a license from the ICC, but were required to maintain a minimum 
level of cargo liability insurance. The Senate report also stated that 
the ``insurance requirement has been difficult to monitor and enforce 
without a Federal licensing requirement. By extending the registration 
requirement to all freight forwarders, the bill would fill an 
inappropriate regulatory gap.'' \3\
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    \3\ S. Rep. 104-176, p. 12 (Nov. 21, 1995).
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    The ICCTA continued the licensing (registration) and bond 
requirements for general commodities brokers, which, according to the 
Senate report, were ``needed to protect the public from unscrupulous 
brokers.'' \4\ The Motor Carrier Safety Improvement Act of 1999 
(MCSIA), Pub. L. 106-159, created FMCSA and, among other things, 
conferred on it jurisdiction over brokers and freight forwarders.
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    \4\ Id.
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    Prior to SAFETEA-LU, 49 U.S.C. 13903 and 13904 required FMCSA to 
register all freight forwarders and brokers, provided the prospective 
registrant was ``fit, willing and able'' to provide service and comply 
with applicable regulatory requirements. Section 4142 of SAFETEA-LU 
continued this registration requirement for freight forwarders and 
brokers of household goods. However, section 4142(b) amended Sec.  
13903 by providing that the Secretary may register a person as a 
freight forwarder of non-household goods to provide service subject to 
FMCSA jurisdiction if the Secretary finds that such registration is 
needed for the protection of shippers and that the person is fit, 
willing, and able to provide the service and to comply with applicable 
regulations of the Secretary and Surface Transportation Board.
    Section 4142(c) of SAFETEA-LU made a similar amendment to 49 U.S.C. 
13904 by providing that the Secretary may register a person to be a 
broker of non-household goods to provide service subject to FMCSA 
jurisdiction if the Secretary finds that such registration is needed 
for the protection of shippers and that the person is fit, willing, and 
able to provide the service and to comply with applicable regulations 
of the Secretary and Surface Transportation Board.

Significance of Brokers and Freight Forwarders

    General commodities brokers and freight forwarders offer valuable 
services to the business community. They work with motor carriers to 
find less expensive transportation alternatives for commercial shippers 
and provide additional services to assist shippers, such as shipment 
tracing, warehousing and storage (freight forwarders) and filing loss 
and damage claims with the motor carrier responsible for the 
transportation. Without these transportation intermediaries, shippers 
would have to devote additional resources to locating and negotiating 
with motor carriers and would likely have to pay higher transportation 
costs. Smaller businesses in particular would be disadvantaged by not 
being able to rely on the services provided by brokers and freight 
forwarders. Available statistics also indicate a growing reliance on 
these entities in the shipment of goods.

 Brokers

    FMCSA's Motor Carrier Management Information System (MCMIS) 
indicates that approximately 16,930 active general commodities brokers 
are registered with the Agency as of April 17, 2006. The number of 
property broker applications filed annually with FMCSA has increased by 
30 percent since 2003.\5\ These figures indicate that property brokers 
represent an expanding segment of the transportation industry and are 
being utilized to help meet the transportation needs of a large number 
of commercial shippers.
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    \5\ In calendar year 2005, 3,274 applications were filed, 
compared to 2,518 in 2003 and 2,816 in 2004.
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 Freight Forwarders

    MCMIS indicates that approximately 1,040 active general commodities 
freight forwarders are registered with FMCSA. The number of freight 
forwarder applications filed with FMCSA annually has increased by 
approximately 80 percent since 2003.\6\ As with brokers, these figures 
indicate that freight forwarders represent a growing segment of the 
transportation industry whose services are relied upon by many 
commercial shippers to meet their transportation needs.
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    \6\ In calendar year 2005, 442 applications were filed, compared 
to 244 in 2003 and 205 in 2004.
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    U.S. Census Bureau statistics indicate there were 15,782 
establishments involved in the business of freight transportation 
arrangement in 1997. This industry group includes freight forwarders, 
marine shipping agents, and brokers. These businesses generated 
revenues of over $16 billion and employed over 140,000 employees with a 
cumulative annual payroll of approximately $5 billion. While not all 
these entities provided services subject to FMCSA jurisdiction, the 
more current MCMIS data indicate that the number of general commodities 
brokers and freight forwarders registered with FMCSA exceeds the size 
of the entire freight transportation arrangement industry reported in 
1997. Although FMCSA does not have figures on cumulative revenues and 
employment for regulated general commodities freight forwarders and 
brokers, the Census data provide a rough estimate of the potential 
impact on the regulated freight transportation arrangement industry and 
the national economy if general commodities freight forwarders and 
brokers are unable to be relied upon by shippers due to lack of 
confidence in their activities and financial responsibilities.

Registration of Non-Household Goods Brokers and Freight Forwarders Is 
Needed for the Protection of Shippers

    Pursuant to section 4142 of SAFETEA-LU, if the Agency determines 
that registration of non-household goods brokers and freight forwarders 
is needed for the protection of shippers, the Agency may require these 
entities to register.
    Under 49 U.S.C. 13906(b), brokers must maintain and file with FMCSA 
a bond, insurance policy or other type of approved security to ensure 
that the transportation which the broker arranges is provided. 
Currently, FMCSA regulations require general commodities brokers to 
file a surety bond or trust fund in the amount of $10,000 (49 CFR 
387.307(a)). This requirement is designed to protect shippers who pay 
brokers who renege on their obligations to arrange for the 
transportation or to pay the motor carrier. In the latter case,

[[Page 50117]]

the motor carrier may attempt to bill the shipper, who has already paid 
the broker for the shipment. It is also designed to protect motor 
carriers who are not paid for their services but are unwilling or 
unable to seek payment from the shipper. Section 13906(b) financial 
responsibility requirements are expressly linked to broker registration 
by the statute. In other words, without a registration requirement, 
FMCSA has no statutory authority to impose a bonding requirement to 
protect shippers and carriers against unscrupulous or financially 
irresponsible general commodities brokers.
    As is the case with brokers, the financial responsibility 
requirements applicable to freight forwarders are expressly linked to 
the registration requirement. Under 49 U.S.C. 13906(c)(1), FMCSA may 
register a person as a freight forwarder only if the person files with 
the agency evidence of public liability insurance to cover negligent 
operation, maintenance or use of motor vehicles by or under direction 
and control of the freight forwarder when providing transfer, 
collection or delivery services. Section 13906(c)(2) permits FMCSA to 
also require registered freight forwarders to file freight forwarder 
insurance to cover loss or damage to cargo for which the freight 
forwarder provides service. There are no independent financial 
responsibility requirements for the protection of shippers that would 
apply if general commodities freight forwarders are no longer being 
registered.
    Based on the foregoing, FMCSA finds that continued registration of 
non-household goods freight forwarders under 49 U.S.C. 13903 and non-
household goods brokers under 49 U.S.C. 13904 is needed for the 
protection of shippers. We also note that brokers and freight 
forwarders must register pursuant to 49 U.S.C. 13901 to engage in 
interstate transportation. Finally, based on FMCSA's determination 
above regarding the protection of shippers, any registration 
appropriately filed between August 10, 2005 (the date of enactment of 
SAFETEA-LU) and the date of this Notice shall be effective on the date 
the registration was approved by FMCSA.

    Issued on: August 16, 2006.
John H. Hill,
Administrator.
[FR Doc. E6-14064 Filed 8-23-06; 8:45 am]
BILLING CODE 4910-EX-P