Earlier this month, the Federal Motor Carrier Administration (FMCSA) issued a final rule covering a range of property broker requirements related to financial surety, agency reporting and potential non-compliance penalties for property brokers and freight forwarders.
The crux of the rule is centered on brokers and freight forwarders maintaining a financial security level of $75,000. Should a broker or freight forwarder's financial surety levels fall below the minimum level at any time, they are required to provide notification in writing to the FMCSA within two business days, and replenish funds back to the $75,000 minimum level within seven calendar days. The FMCSA determined that the $75,000 can be a combination of cash, letters of credit issued by a federally insured depository institution (i.e., bank) and U.S. Treasury bonds. Stocks and other forms of payment are not viewed as readily available to liquidate, and will not count towards the $75,000 financial requirement.
The final rule also places reporting requirements on the financial surety companies providing coverage, who must notify the FMCSA if they become aware if any of their insured companies are experiencing financial failure or insolvency. The effective date of the financial asset requirements begin in January 2025, with subsequent sections to take effect January 1, 2026.
Brokers, surety providers, and financial institutions must also comply with provisions regarding assets readily available and entities eligible to provide trust funds for Form BMC-85 by January 16, 2026. Once that provision takes effect, loan and loan servicing companies may no longer serve as BMC-85 trustees for industry.
What's Next for the Broker Industry?
The FMCSA has indicated they will address an earlier submitted petition requesting additional financial transparency for brokers in 2024 (delayed from a 2023 estimated timeframe).
The petition requests that all property brokers automatically provide an electronic copy of each transaction record within 48 hours after the contractual service has been completed. It also requests that brokers be prohibited from including any provision that requires a carrier to waive their rights to access the transaction records.
IAM plans to engage and submit comments in response to the petition-based rulemaking once issued by the FMCSA. IAM wants to ensure our members, and all legitimate brokers, freight forwarders are not punished or unduly burdened, due to the actions of rogue and fraudulent individuals operating in the broker space.
If you have questions on the regulation or connected requirements, please contact Bryan Vickers (703-403-2882, bvickers@pacellp.com) with IAM's Government and Regulatory Affairs Team.
