Get Ready for an Anticompetitive Attack on BMC-85 Trust Fund Agreements... Over the past two weeks, much has happened inside FMCSA. Anne Ferro has left the agency and we now have a new acting Administrator Scott Darling former chief counsel. See: (ttnews/articles/basetemplate.aspx?storyid=35835). On Friday, August 8th, FMCSA advised us they would be sending a speaker to Industry at Sea (industryatsea) to give our key note address and that the name of the speaker was forthcoming. On Monday, August 11th, they suddenly sent their regrets. More information was released later in the week, which revealed there was an apparent ethics issue brought up by FMCSA legal staff with respect to them appearing at our event, presumably due to the pending AIPBA law suit. That sent a message that they were lawyering up for a continued battle in the U.S. Court of Appeals over the broker bond. And while we believed an FMCSA address was a harbinger of good things to come, new information has now come to our attention, which leads us to believe FMCSA may be about to release a decision on the AIPBA exemption application that suggests that bonds are insurance and that they believe they do not have the authority to issue the exemption for that reason. That new information is essentially an April 2014 report published here: fmcsa.dot.gov/sites/fmcsa.dot.gov/files/docs/Financial-Responsibility-Requirements-Report-Enclosure-FINAL-April%202014.pdf See footnote two on page one (Executive Summary): The term financial responsibility used here refers to insurance. More specifically, it means liability coverage for bodily injury or property damage in the case of freight and passenger motor carriers as well as freight forwarders. When it comes to brokers and freight forwarders, insurance also means coverage for claims against unpaid freight charges. The terms financial responsibility and insurance are used interchangeably throughout this report (emphasis added). On page 5, they state: Section 32918 increased the financial security requirements for brokers to $75,000. There is a new $75,000 financial security requirement to ensure that freight forwarders pay their freight charges. The higher insurance threshold is designed to ensure payment of claims arising from a brokers failure to pay freight charges for transportation services it may have arranged.21 The FMCSA issued rules to implement the new requirements on October 1, 2013.22 The FMCSA expects to include an analysis of the limits on brokers and freight forwarders in future reports on financial responsibility. (emphasis added). I expect this will now result in an attack by TIA and other sureties and trade groups on the BMC-85 trust fund agreement instrument, in which insurance companies like Avalon and their partners like TIA, will claim that if FMCSA has determined bonds are insurance then FMCSA may not lawfully allow a provider to file a BMC-85 insurance instrument unless they are a licensed insurance company. I suspect FMCSA will be sued over the practice of continuing to allow the filing of BMC-85s by unlicensed entities selling insurance. This will likely put BMC-85 providers out of business. Today, I therefore asked FMCSA to think about this very carefully before they release the imminent final draft of their decision on the exemption application. My question to FMCSA is this: Notwithstanding the AIPBAs good faith argument to FMCSA in our pending application for an exemption from the $75,000 bond requirement for all freight brokers and forwarders, in which we offered that there is evidence that Congress does not consider bonds as insurance because of a distinction emphasized in 49 U.S.C. §13906 by the choice of a bond or insurance as well as MAP-21s amendment to 49 U.S.C. §13906, which still requires the broker bond but deletes all reference to insurance in the event that FMCSA were to issue a determination in the matter of the exemption application that bonds are insurance, how could FMCSA lawfully permit the filing of BMC-85 trust fund insurance agreements by financial institutions that are not duly licensed insurance companies moving forward? Wouldnt that obviously open FMCSA up to lawsuits by the BMC-84 issuing insurance providers, The Surety & Fidelity Association of America and/or the Transportation Intermediaries Association in the hopes of eliminating their BMC-85 competition and result in less choice and options for brokers and forwarders to comply? I also pointed out to FMCSA that-- according to a FOIA response from FMCSA, as of 2010, there are about 2203 authorized FMCSA filers of BMC 84/85 instruments. It appears that of them, approximately 617 (28%) file BMC-84 bonds and 1,586 (72%) file BMC-85 trust fund agreements. Clearly, loss of that 72% would be devastating... DOJs Antitrust Division was copied for their information insofar as the potential anticompetitive nature of such a determination by FMCSA would impact our pending Antitrust collusion complaint (aipba.vpweb/upload/Antitrust+Complaint+Final+Draft.pdf), which we understand is still under review by DOJ... in the event they wish to issue a competitive impact statement on the matter of the exemption application. So, although I was confident three weeks ago that good news was on the horizon, your guess as to what happens next is now as good as mine...
Posted on: Mon, 25 Aug 2014 12:48:08 +0000
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