
[Federal Register: June 22, 2010 (Volume 75, Number 119)]
[Rules and Regulations]               
[Page 35318-35329]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22jn10-10]                         

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DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

49 CFR Parts 365 and 387

[Docket No. FMCSA-2010-0189]
RIN 2126-AB21

 
Cargo Insurance for Property Loss or Damage

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.

ACTION: Final rule.

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SUMMARY: The Federal Motor Carrier Safety Administration eliminates the 
requirement for most for-hire motor common carriers of property and 
freight forwarders to maintain cargo insurance in prescribed minimum 
amounts and file evidence of this insurance with FMCSA. Household goods 
motor carriers and household goods freight forwarders will continue to 
be subject to this cargo insurance requirement.

DATES: Effective March 21, 2011.

FOR FURTHER INFORMATION CONTACT: Ms. Dorothea Grymes, FMCSA Insurance 
Team, Commercial Enforcement Division, telephone (202) 385-2400.

SUPPLEMENTARY INFORMATION:

Availability of Rulemaking Documents

    For access to the docket to read background documents or comments 
received, go to http://www.regulations.gov at any time or to 1200 New 
Jersey Avenue, SE., Washington, DC, between 9 a.m. and 5 p.m., Monday 
through Friday, except Federal Holidays.

Entities That Are Discussed in This Final Rule

    This proceeding applies only to for-hire motor carriers and freight 
forwarders as defined in 49 U.S.C. 13102. The term ``motor carrier'' 
means a person providing motor vehicle transportation for compensation. 
(Sec.  13102(14)). The term ``freight forwarder,'' in Sec.  13102(8) 
means a person holding itself out to the general public (other than as 
a pipeline, rail, motor, or water carrier) to provide transportation of 
property for compensation and in the ordinary course of its business--
    (A) Assembles and consolidates, or provides for assembling and 
consolidating, shipments and performs or provides for break-bulk and 
distribution operations of the shipments;
    (B) assumes responsibility for the transportation from the place of 
receipt to the place of destination; and
    (C) uses for any part of the transportation a carrier subject to 
jurisdiction under 49 U.S.C. subtitle IV-Interstate Transportation.
    The term ``freight forwarder'' does not include a person using 
transportation of an air carrier subject to part A of subtitle VII of 
title 49, United States Code-Aviation Programs.
    Of the approximately 252,600 total for-hire carriers and freight 
forwarders, there are about 166,700 for-hire motor carriers and 1,600 
freight forwarders registered with FMCSA to provide transportation or 
services that could be subject to cargo insurance requirements if FMCSA 
fully implemented its authority to require motor carriers and freight 
forwarders subject to 49 U.S.C. 13906(a)(4) and 13906(c)(2). See Table 
1 below. Of these, about 154,700 entities (contract only and ``exempt'' 
type) have not been subject to the cargo insurance requirements in the 
past. About 97,900 of the 252,600 entities are currently subject to the 
cargo insurance requirements. About 4,000 entities have authority to 
transport household goods, which are defined at 49 U.S.C. 13102(10).

[[Page 35319]]



                                         Table 1--For-Hire Carriers and Freight Forwarders by Authority and Type
                                                                  [as of February 2009]
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                                                                                                               Cargo insurance required         Number
              Active                      Authority                Type             Total      % of total ---------------------------------- affected by
                                                                                                                Before           After           rule
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Motor                               Common Only..........  Household Goods.....        3,600         1.4%  Yes............  Yes............
Carriers..........................
                                                           Non-Household Goods.       76,035        30.1%  Yes............  No.............       76,035
                                   ---------------------------------------------
                                    Contract Only........  ....................       70,400        27.9%  No.............  No.............
                                    Both Common and        ....................       16,600         6.6%  Yes............  No.............       16,600
                                     Contract.
                                    ``Exempt''...........  ....................       84,300        33.4%  No.............  No.............
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Freight                             .....................  Household Goods.....          435         0.2%  Yes............  Yes............
Forwarders........................
                                                           Non-Household Goods.        1,200         0.5%  Yes............  No.............        1,200
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Source: FMCSA L&I Database Report 4284.........................................     ~252,600         100%  ...............  ...............       93,800
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``Exempt'' for-hire carriers, are not subject to 49 U.S.C. Subtitle IV, Part B,  ...........  ...........  % Affected by Rule                      37.1%
 and are not required to maintain cargo insurance.
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    FMCSA evaluated various combinations of these entity populations 
along with the benefits, impacts, and potential registration and 
enforcement issues arising for each combination of alternatives. After 
consideration of all the comments to the docket, the Agency has decided 
to subject only household goods motor carriers and household goods 
freight forwarders to the cargo insurance requirements for the reasons 
given later in this document.

Legal Basis for the Rulemaking

    Cargo insurance requirements for motor carriers were first 
authorized in the Motor Carrier Act of 1935 (August 9, 1935, Pub. L. 
74-255, 49 Stat. 543 (1935)), which brought motor carriers and brokers 
under the jurisdiction of the Interstate Commerce Commission (ICC). 
Section 215 of the 1935 Act authorized--but did not mandate--cargo 
financial responsibility requirements for common carriers subject to 
ICC jurisdiction. The ICC exercised its statutory authority by 
establishing minimum cargo insurance requirements for common carriers, 
which are now codified at 49 CFR 387.301 and 387.303.
    Cargo insurance requirements for freight forwarders were first 
authorized by a 1942 statute amending the Interstate Commerce Act 
(ICA), which brought freight forwarders under the jurisdiction of the 
ICC (Pub. L. 77-558, 56 Stat. 284, May 16, 1942). The 1942 Act added 
Section 403(c) to the ICA, which authorized--but did not mandate--the 
ICC to establish cargo financial responsibility requirements for 
freight forwarders subject to ICC jurisdiction. The ICC established 
minimum cargo insurance requirements for freight forwarders in 1944 (9 
FR 14548, December 13, 1944). These requirements are now codified at 49 
CFR part 387, subpart D.
    Section 103 of the ICC Termination Act of 1995 (Pub. L. 104-88, 109 
Stat. 803) (ICCTA) terminated the ICC and transferred jurisdiction over 
motor carrier and freight forwarder cargo insurance to the Secretary of 
Transportation, who delegated this authority to the Federal Highway 
Administration (FHWA). The ICCTA eliminated the distinction between 
common and contract carriers but, under the transition rule of 49 
U.S.C. 13902(d), allowed the Agency to continue to register motor 
carriers with these distinctions pending implementation of a new 
unified Federal registration system required by 49 U.S.C. 13908.
    Jurisdiction over motor carrier and freight forwarder cargo 
insurance was transferred to FMCSA following enactment of the Motor 
Carrier Safety Improvement Act of 1999 (MCSIA) (Pub. L. 106-159, 113 
Stat. 1748, December 9, 1999). FMCSA continued to register carriers as 
either ``common'' or ``contract'' under the transition rule because the 
Agency had not yet implemented the new unified registration system in 
accordance with the requirements of 49 U.S.C. 13908. In the Notice of 
Proposed Rulemaking (NPRM) designed to implement this new system (70 FR 
28990, May 19, 2005), FMCSA proposed to eliminate the cargo insurance 
requirement for all motor carriers and freight forwarders except those 
involved in the transportation of household goods for individual 
shippers.
    Section 4303 of the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: A Legacy for Users (SAFETEA-LU) (Pub. L. 
109-59, August 10, 2005) mandated that the transition rule be 
terminated by January 1, 2007. Consequently, effective January 1, 2007, 
all for-hire motor carriers subject to the Agency's commercial 
jurisdiction under Title 49, United States Code, Subtitle IV, Part B, 
were required to be issued Motor Carrier Certificates of Registration 
which no longer classified them as common or contract carriers. Section 
4303 also provided that all ``exempt'' for-hire \1\ and private motor 
carriers registered with FMCSA on January 1, 2005, under any section of 
title 49 U.S.C. (including FMCSA's safety registration requirements 
adopted under 49 U.S.C. 31136) would automatically be considered 
registered ``to provide such transportation or service for purposes of 
sections 13908 [Unified Registration System] and 14504a [Unified 
Carrier Registration].''
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    \1\ For-hire carriers not subject to 49 U.S.C. subtitle IV, part 
B.
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    As a result of the termination of the transition rule, FMCSA's 
cargo insurance regulations, which expressly applied only to common 
carriers and freight forwarders, were no longer consistent with the 
governing statute. Because of this inconsistency and the resulting 
confusion over the scope of the Agency's cargo insurance requirements, 
FMCSA considers it necessary to issue a final rule amending these 
requirements prior to issuance of a final

[[Page 35320]]

rule in the section 13908 rulemaking proceeding.\2\
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    \2\ Because certain SAFETEA-LU provisions impacted proposals 
made in the May 2005 NPRM implementing section 13908, a Supplemental 
Notice of Proposed Rulemaking will be published in that proceeding 
revising the NPRM and soliciting additional public comment, further 
delaying issuance of a final rule.
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Background

Current Regulatory Requirements

    Prior to enactment of the ICCTA, a ``motor common carrier'' of 
property was defined as ``a person holding itself out to the general 
public to provide motor vehicle transportation for compensation over 
regular or irregular routes, or both.'' \3\ Approximately 79,600 active 
common carriers were registered with FMCSA at the end of February 2009. 
Pursuant to 49 CFR 387.303(c), in order to obtain operating authority, 
common carriers were required to ensure that their insurance provider 
or surety company file with FMCSA:
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    \3\ 49 U.S.C. 10102(15) (1995).
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    (1) Evidence of bodily injury and property damage liability in the 
minimum amount of $750,000 to $5 million depending on the nature of the 
cargo being transported; and
    (2) Evidence of cargo liability in the minimum amount of $5,000 per 
vehicle and $10,000 per incident.
    In addition to the cargo insurance filing requirement, normally 
accomplished by filing Form BMC-34, Motor Carrier Cargo Liability 
Certificate of Insurance with FMCSA, insurance companies must issue an 
endorsement using Form BMC-32, Endorsement for Motor Common Carrier 
Policies of Insurance for Cargo Liability attached to the cargo 
insurance policy. The name of the insurer/surety and the policy number 
is a matter of public record available on FMCSA's Web site. Under 49 
CFR 387.313(d), insurers and sureties may not cancel a carrier's 
insurance without notifying FMCSA in writing 30 days prior to 
cancellation.
    The cargo insurance and surety requirements have been relatively 
low, but they covered claims up to the $5,000 and $10,000 limits 
regardless of deductibles or exclusions that the policy might have. 
Shippers normally file claims for loss and damage with the motor 
carrier(s) involved in the transportation, which either pay, deny or 
settle the claims. However, if they are dissatisfied with the motor 
carrier's response or if the motor carrier is insolvent, shippers have 
the option of filing a claim directly with the insurance or surety 
company to recover actual losses to property up to the limits on the 
insurance policy or surety bond. The insurance or surety company would 
then have the right to seek to recover the amount of any policy 
deductibles from the motor carrier.
    Prior to enactment of the ICCTA, a ``motor contract carrier'' of 
property was defined as: ``a person providing motor vehicle 
transportation of property for compensation under continuing agreements 
with one or more persons--
    [1] By assigning motor vehicles for a continuing period of time for 
the exclusive use of each such person; or
    [2] designed to meet the distinct needs of each such person.'' \4\
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    \4\ 49 U.S.C. 10102(16)(1995).
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    Approximately 87,000 active ``contract'' carriers were registered 
with FMCSA in February 2009. About 70,400 of these 87,000 carriers had 
contract authority only, while about 16,600 had both common and 
contract authorities issued by FMCSA or its predecessors. Contract 
carriers are subject to the same bodily injury and property damage 
public liability requirements described above for common carriers. 
However, FMCSA does not require contract carriers to have cargo 
insurance or provide evidence of cargo insurance. Shippers who 
establish contracts with contract carriers generally require such 
carriers to maintain cargo insurance in specified minimum amounts.
    For-hire motor carriers transporting specific ``exempt'' 
commodities or providing other exempt transportation, as generally 
delineated in 49 U.S.C. 13502 through 13506, are exempt from FMCSA's 
commercial jurisdiction under Title 49, subtitle IV, Part B and are not 
required to obtain FMCSA operating authority or maintain cargo 
insurance.
    Exempt for-hire carriers, however, have always been subject to 
FMCSA's safety requirements under 49 U.S.C. 31136 and 31502, including 
the public liability financial responsibility requirements under 49 
U.S.C. 31138 and 31139 for any crashes that occur to their motor 
vehicles on the highways. These for-hire exempt carriers must register 
with FMCSA to obtain a USDOT registration number. Approximately 84,300 
active for-hire exempt carriers were registered with FMCSA in February 
2009. In accordance with 49 CFR 387.7, such carriers must maintain at 
their principal place of business one of the following forms, 
confirming coverage in the minimum amount of $750,000 up to $5 million, 
depending on the type of cargo the carrier is transporting:
    (1) A Form MCS-90 titled, ``Endorsement for Motor Carrier Policies 
of Insurance for Public Liability Under Sections 29 and 30 of the Motor 
Carrier Act of 1980;'' or
    (2) A Form MCS-82 titled, ``Motor Carrier Public Liability Surety 
Bond Under Sections 29 and 30 of the Motor Carrier Act of 1980.''

Motor Carrier Liability for Cargo Loss or Damage

    The requirements for cargo insurance do not affect the statutory 
liability of carriers for loss or damage to cargo. Congress addressed 
carrier liability in the 1906 Carmack Amendment to the Interstate 
Commerce Act. When motor carriers and freight forwarders were brought 
under the ICC's jurisdiction in 1935 and 1942, respectively, they 
became subject to the Carmack liability requirements. The Carmack 
Amendment, now codified at 49 U.S.C. 14706, provides ``first dollar'' 
coverage to all shippers for cargo loss or damage. Under 49 U.S.C. 
14706(a)(1), a carrier providing transportation or service subject to 
jurisdiction under subchapter I or III of chapter 135 \5\ must issue a 
receipt or bill of lading for property it receives for transportation, 
and is liable for the actual loss of or injury to the property caused 
by the receiving carrier, delivering carrier, or any other carrier 
involved in the line-haul transportation. Failure to issue a receipt or 
bill of lading does not affect a carrier's liability.
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    \5\ The definition of ``carrier'' in 49 U.S.C. 13102(3) includes 
freight forwarders. Subchapter I applies to motor carriers and 
subchapter III applies to freight forwarders.
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    Under 49 U.S.C. 14706(c), the carrier and shipper may agree to 
limit the carrier's liability to a value established by written or 
electronic agreement if that value would be reasonable under the 
circumstances surrounding the transportation. Carriers providing 
contract carriage, as defined in 49 U.S.C. 13102(4), may enter into 
contracts with shippers whereby the shipper waives its right to carrier 
liability for actual loss and damage (see 49 U.S.C. 14101(b)(1)). Such 
carriers, therefore, may establish both liability and insurance levels 
in their contracts with their customers.
    With the elimination of the distinction between common and contract 
carriers for registration purposes, FMCSA had to determine whether the 
requirement for cargo insurance should be retained and extended to all 
carriers, including the 70,400 contract carriers currently exempt from 
the requirement, or eliminated for some or all 96,300 common carriers 
and 1,600 freight forwarders. In its NPRM on the unified registration 
system, FMCSA proposed limiting the requirement for cargo

[[Page 35321]]

insurance to household goods motor carriers and household goods freight 
forwarders in order to protect individual shippers, who are relatively 
unsophisticated consumers of transportation services.\6\
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    \6\ Approximately 3,600 household goods motor carriers and 400 
household goods freight forwarders were registered with FMCSA as of 
February 2009.
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    In its discussion of the proposal, the Agency noted that motor 
carriers typically have cargo insurance well in excess of the 
regulatory requirements, in part because many shippers require such 
insurance as a condition of doing business. Some common carriers offer 
shippers the opportunity to purchase additional cargo insurance. 
Shippers have always had the opportunity to purchase cargo or inland-
marine insurance directly from insurance providers rather than rely on 
motor carriers and freight forwarders to provide coverage for loss and 
damage risks. Contract carriers negotiate issues of insurance and 
liability when they write contracts with shippers. Extending the 
coverage to the approximate 70,400 exclusive contract carriers would 
impose a burden on these carriers while providing little or no benefit 
to their customers, who already had contractual agreements dealing with 
carrier liability and insurance.
    The only shippers that FMCSA considered in need of the protection 
provided by the cargo insurance requirement are individuals who arrange 
to move their own household goods. FMCSA concluded that such 
individuals are less knowledgeable about carrier liability requirements 
and need the protection afforded by the existing regulations. FMCSA, 
therefore, proposed limiting the requirement for obtaining and filing 
evidence of cargo insurance to household goods motor carriers and 
household goods freight forwarders.

Discussion of Comments to May 2005 NPRM

    Thirty-two commenters addressed the proposal to eliminate the cargo 
insurance requirements for motor common carriers and forwarders of 
general freight. Commenters, included carriers, carrier associations, 
shippers, insurance companies and associations, freight claims 
collection services, brokers, traffic consultants, attorneys, and 
individuals. FMCSA received comments from Williams & Associates; 
Transportation and Logistics Council; T.D.L. Associates Commerce 
Consultant; National Small Shipments Traffic Conference, Inc; Lowe's 
Co.; Property Casualty Insurers Association of America; James 
Middleton; International Foodservice Distributors Association; Daniel 
C. Sullivan; Advocates for Highway and Auto Safety; Freight 
Transportation Consultants Association (FTCA); Transportation 
Intermediaries Association; National Conference of State Transportation 
Specialists; Third Party Logistics Providers; Certain Transportation 
Factors; C.S. Henry Transfer, Inc.; Dahlonega Transport, Inc.; Milan 
Express Co., Inc.; Silver Arrow, Inc.; National Association of Small 
Trucking Companies; Wisconsin Manufacturers & Commerce; Corporate 
Transportation Coalition; American Moving and Storage Association; 
National Private Truck Council, Inc.; Exel Transportation Services, 
Inc.; Owner-Operator Independent Drivers Association, Inc.; National 
Industrial Transportation League; Sysco Corporation; Wal-Mart 
Transportation, LLC; American Trucking Associations, Inc. (ATA); TM 
Claims Service, Inc.; and The Ooster Brush Company.
    FMCSA considered all comments in developing this final rule. A 
summary of and the Agency's response to pertinent comments is provided 
here.

General Comments

    Three commenters supported FMCSA's proposition to eliminate the 
cargo insurance requirement for most carriers and freight forwarders. 
The Property Casualty Insurers Association of America stated that the 
insurance marketplace is best qualified to determine appropriate 
insurance coverage. The Owner-Operator Independent Drivers Association 
agreed with FMCSA that most shippers require a higher amount of 
insurance coverage than the current federal minimums, so the current 
amount required serves little purpose.
    ATA stated that given the statute authorizes carriers registered as 
common carriers today to enter into contracts, and that the definitions 
of ``common carrier'' and ``contract carrier'' have been eliminated, 
the cargo insurance requirement must apply to all motor carriers or 
none. It wrote, ``ATA does not support extension of the cargo insurance 
requirements to all motor carriers and thus believes FMCSA's proposal 
to eliminate the cargo insurance endorsement requirement is the right 
approach.''
    Twenty-two commenters, mostly representing shippers, shippers' 
freight claims collection services, brokers, traffic consultants, and 
attorneys, stated that FMCSA should retain broad mandatory cargo 
insurance requirements because it is the most important protection for 
the shipping public with respect to loss and damage claims. They argued 
that the elimination of cargo insurance requirements is unjustified and 
contrary to the best interests of the shipping public. Sixteen 
commenters noted that the BMC-32 endorsement is the only protection 
against deductibles and other exclusions from liability found in cargo 
liability policies. They noted that in many cases the carriers' 
deductibles can be very high and the exclusions may eliminate most 
sources of loss or damage recovery. They also stated that the BMC-32 
endorsement permits the shipper to proceed directly against the 
insurer, providing relief to shippers in the event the carrier becomes 
insolvent or bankrupt.
    FMCSA Response. As stated above under the heading ``Legal Basis for 
the Rulemaking,'' the ICC had the statutory discretion under section 
215 of the Motor Carrier Act of 1935 to impose cargo insurance 
requirements on motor common carriers. The ICC chose to require such 
insurance beginning in 1937 based on the conditions existing in the 
marketplace during the mid-1930s (1 FR 1156, August 20, 1936, see also 
1 M.C.C. 45 (1936)). The transportation industry has changed 
significantly since that time. For more than 40 years, the ICC granted 
operating authority to new applicants only if they could demonstrate 
that existing carriers were not providing adequate service. Moreover, 
the agency permitted contract carriers to serve only a limited number 
of shippers. As a result, the market was dominated by common carriers 
facing little or no competition. Beginning around 1980, the statutory 
standards for obtaining operating authority were changed to encourage 
competition and the ICC removed the prior restrictions on the number of 
shippers that could be served by contract carriers. Accordingly, the 
number of new carriers entering the market increased significantly, 
particularly those providing only contract carrier service. As a result 
of this market shift, the ability of commercial shippers to negotiate 
the terms of their transportation arrangements has been significantly 
enhanced.
    When Congress transferred the remaining motor carrier provisions of 
the Motor Carrier Act of 1935 from the ICC to the Department of 
Transportation in the ICCTA, the House of Representatives' report 
accompanying the legislation specifically requested that DOT refrain 
from allocating scarce resources to resolve private disputes and only 
provide general oversight in the areas of regulations governing

[[Page 35322]]

commercial transactions between businesses. Congress wanted ``private, 
commercial disputes to be resolved the way all other commercial 
disputes are resolved--by the parties.'' See H.R. Rep. No. 104-311, at 
87-88 (1995). See also pages 117 and 121.
    Cargo insurance entails the transfer of financial risk from the 
purchaser to an insurer and subsequent risk-sharing with other 
insureds. FMCSA does not agree with those commenters who believe the 
BMC-32 endorsement is the only protection against deductibles and other 
exclusions from liability found in cargo liability policies. The 
Carmack Amendment, 49 U.S.C. 14706, establishes ``first dollar'' 
liability regardless of deductibles and other exclusions from liability 
found in cargo liability policies. While the Form BMC-32 offers 
additional protection in the event of the motor carrier's insolvency or 
refusal to pay legitimate claims, a carrier must compensate the shipper 
for the actual loss or damage of its property regardless of policy 
deductibles or exclusions, unless the shipper has agreed to limit or 
waive carrier liability.
    The Form BMC-32 endorsement does not mean that the shipper is 
necessarily entitled to proceed directly against the insurer without 
first filing a claim with the carrier. Under the regulations 
established in 49 CFR part 370 ``Principles and Practices for the 
Investigation and Voluntary Disposition of Loss and Damage Claims and 
Processing Salvage,'' shippers should be filing loss and damage claims 
directly with the appropriate motor carrier.
    FMCSA believes the cargo insurance requirement may have allowed 
commercial shippers and for-hire motor carriers to conduct business in 
economically inefficient ways. Shippers and motor carriers may have 
been taking transportation and business risks they probably would not 
have taken absent the BMC-32 endorsement. Carriers also may not have 
been spending adequately on cargo anti-theft/anti-damage systems, 
including training carrier personnel. When this final rule becomes 
effective, FMCSA believes the market will improve itself. Shippers and 
motor carriers will begin to better assess their risks and provide 
better cargo theft and loss prevention measures. FMCSA asked five 
insurers with the largest number of cargo policies on file with FMCSA 
what percentage of their clients carry more than the $10,000 aggregate 
minimum, as required by FMCSA. All five insurers responded that most of 
the policies they write for cargo liability are well above the FMCSA 
minimum. Most said their policies are for $50,000 to $100,000 
liability. Based on our inquiries, FMCSA believes most carriers will 
continue to carry cargo insurance because their customers will require 
it.
    In summary, FMCSA does not believe it is necessary to mandate cargo 
insurance requirements for the benefit of most commercial shippers. 
Commercial shippers should be able to protect their own property loss 
and damage interests in the marketplace without continued FMCSA 
intervention. In this respect, it should be noted that the current 
cargo insurance requirements apply to, at most, 30 percent of for-hire 
motor carriers regulated by FMCSA.\7\
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    \7\ This figure is based on the fact that approximately 252,600 
for-hire motor carriers had USDOT numbers at the end of February 
2009. Approximately 76,000 of these carriers were classified as 
motor common carriers potentially subject to the cargo insurance 
requirements (the actual number of carriers subject to the cargo 
insurance requirements may be smaller, because some common carriers 
haul only low value commodities that are exempt from cargo insurance 
requirements). 76,000/252,600 = 30.1%. The 70,400 carriers holding 
only contract carrier authority and the 84,300 for-hire carriers 
exempt from commercial registration requirements are not required to 
have cargo insurance.
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    FMCSA believes it is best to allow most motor carriers, insurance 
carriers, and general non-household-goods property shippers to conduct 
business efficiently, allow fair and expeditious decisions, and allow 
the industry to begin offering more variety in quality and price 
options to meet changing market demands and the diverse requirements of 
the shipping community.
    Check on Financial Stability. Nine commenters stated that the 
mandatory cargo insurance requirement is one of the few remaining 
objective checks on the financial stability of new carriers entering 
the marketplace. Under the current system, FMCSA will prohibit a motor 
carrier applicant from obtaining common carrier operating authority if 
it cannot obtain cargo insurance. These commenters argue that 
elimination of the requirement for cargo insurance will encourage 
financially unstable new entrants to enter the market.
    FMCSA Response. For-hire motor carriers that have been subject to 
the cargo insurance requirement will continue to be subject to the 
financial responsibility requirements for public liability. The costs 
of complying with the public liability requirements are far higher than 
the costs of purchasing cargo insurance at the current minimum levels 
and provide a more effective check on new carriers' financial 
stability. A November 2006 article in an industry periodical, 
Overdrive, \8\ estimated an owner-operator with a good safety record 
would likely pay about $5,000 for primary liability insurance of $1 
million to cover damage or injury done to others in case of a crash; 
$2,400 for physical damage insurance to cover damage done to the owner-
operator's vehicles in case of a crash; $1,000 for cargo insurance to 
cover damage to or theft of the load; and $450 for $1 million in non-
trucking-use liability insurance. While the Overdrive article did not 
state how much cargo loss or damage protection the $1,000 premium would 
cover, it did state that fleets typically buy $100,000 on the owner-
operator's behalf, which is the amount mandated by many shippers. 
Specialty haulers can carry far more, the Overdrive article said.
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    \8\ Overdrive, November 2006, http://www.etrucker.com/apps/news/
article.asp?id=56256.
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    Fraud Prevention. Three commenters stated that the shipping 
community relies on the BMC-32 endorsement to protect against 
unscrupulous motor carriers and freight forwarders seeking to avoid 
their financial responsibilities. One commenter stated that filing 
evidence of cargo insurance with FMCSA is essential to prevent fraud. 
The commenter stated that many instances of insurance fraud have been 
thwarted by having an independent government source for checking 
carrier insurance.
    FMCSA Response. As stated above, it may be true that the BMC-32 
endorsement may permit the shipper to proceed directly against the 
insurer as a last resort, possibly providing relief to shippers in the 
event the carrier becomes insolvent or bankrupt. FMCSA believes, 
however, that shippers should assume greater responsibility in 
assessing the risk of offering their property to authorized motor 
carriers and that the Agency should focus its scarce resources on motor 
carrier highway safety, rather than continuing to mandate a system that 
regulates loss exposure in connection with shipping commercial 
property. Commercial shippers getting rate quotes from motor carriers 
can simply ask additional questions of motor carriers offering their 
services to ascertain whether the motor carriers maintain cargo 
insurance in the amount and with the features the shipper desires.
    Benefit to Brokers and Intermediaries. Three commenters argued that 
the mandatory cargo insurance requirement is important to carriers that 
interline freight or use local cartage companies for pickup and 
delivery. Under the

[[Page 35323]]

Carmack Amendment, the shipper may seek recovery from either the 
receiving or delivering carrier, and a carrier paying a claim may seek 
indemnification from a connecting carrier that is responsible for the 
loss or damage. These commenters believe the right of subrogation 
against the BMC-32 endorsement is a valuable protection for such 
carriers when a connecting carrier that is responsible for a loss goes 
out of business or files for bankruptcy. The Transportation 
Intermediaries Association (TIA) commented that its members benefit 
from mandatory cargo insurance because brokers and other third-party 
intermediaries are often caught in the middle when shippers cannot 
collect claims from the motor carrier or freight forwarder. TIA 
commented that the BMC endorsement is often the only remedy available 
to a broker, and to its shipper customer, when a carrier routinely 
refuses claims that are within its deductible or fall into an exclusion 
from its insurance coverage. One commenter also noted that consignees 
who did not arrange for the transportation and have no business 
relationship with the delivering carrier often experience losses and 
file claims.
    FMCSA Response. Responsible transportation intermediaries generally 
screen potential carriers to ascertain which carriers would provide the 
best service to their clients. Cargo insurance monitoring and 
inspection can and should be part of the service intermediaries provide 
for their clients.
    Brokers and intermediaries should be offering loads only to 
financially responsible authorized motor carriers. Responsible brokers 
and intermediaries should not be using motor carriers that are unable 
or unwilling to pay loss and damage claims. The market should encourage 
such carriers to leave the market sooner than they would have under the 
current system. Brokers and intermediaries also have the court system 
to help them recover actual damages for their shipper clients.
    FMCSA's rationale for eliminating the cargo insurance requirements. 
Eight commenters argued that while the market drives the shippers to 
generally require cargo insurance as a condition of doing business, 
this is not an acceptable rationale for eliminating the cargo insurance 
requirements. Four commenters stated that smaller, occasional shippers 
rarely negotiate contracts or related cargo protections or ask carriers 
about their insurance coverage, and large shippers may be unaware of 
the deductibles and exclusions in carriers' cargo policies. Similarly, 
one commenter noted that many small-freight shippers may have no direct 
contact with the carriers that move their freight.
    Other commenters disagreed with FMCSA's statement that there does 
not appear to be a need to require common carriers of property to 
maintain cargo insurance because these carriers typically have cargo 
insurance well above FMCSA limits ($5,000/$10,000). Four commenters, 
including Wal-Mart and Sysco, stated that it is incorrect for FMCSA to 
assume that all motor carriers already carry more cargo insurance than 
the regulations require. Four other commenters noted that while 
responsible, financially secure motor carriers typically carry cargo 
insurance for amounts that exceed the federal minimum, this is not a 
valid basis for eliminating this requirement. The commenters noted that 
even when a carrier has substantially greater coverage, it may have 
deductibles and exclusions that make it difficult for the shipper to 
recover losses; the first dollar coverage provided by the Carmack 
Amendment protects small shippers who can recover from the insurance 
company up to the limits of the policy. The FTCA noted that although 
carriers usually have cargo insurance for amounts that exceed the 
Federal minimum, this explanation demonstrates FMCSA's lack of 
understanding of the real value to the shipping public the BMC-32 has 
provided. The FTCA also noted that 97.87 percent of the claims filed 
against less-than-truckload (LTL) motor carriers in the year 2000 were 
under $5,000.
    FMCSA Response. Shippers are like any other party in a transaction 
where one party will be providing services to another party. If the 
parties do not communicate the terms and conditions, or read the terms 
and conditions in their contracts (also known as bills of lading in 
transportation), the shipper assumes the risk. Shippers should ask 
carriers for copies of their policies, including all endorsements, 
exclusions, and declarations, to see whether the shippers' property or 
interests will be served by a particular motor carrier. While some 
small-freight shippers may have no direct contact with the carriers 
that actually move their freight, FMCSA believes these shippers should 
hold the service provider with whom they have direct contact 
accountable for checking to ensure motor carriers transporting the 
freight have adequate insurance. If the small-freight shippers cannot 
ensure the motor carriers have adequate cargo insurance, the small-
freight shippers' service providers may acquire cargo insurance on 
behalf of the small-freight shippers.
    FMCSA does not agree with the commenters who claim there is no 
rationale for eliminating the requirement based on the fact that common 
carriers typically carry cargo insurance in excess of the minimum 
requirements. As stated above, five insurers informed FMCSA that most 
of the policies they write for motor carrier cargo liability are for 
$50,000 to $100,000 liability. By eliminating the distinction between 
common and contract carriers for registration purposes, the ICCTA and 
SAFETEA-LU essentially mandated that we change our cargo insurance 
requirements so that carriers registered with the Agency are treated 
uniformly. As mentioned above, only 30 percent of for-hire carriers 
operating in interstate commerce are subject to the current 
requirements. Approximately 155,000 contract carriers and exempt for-
hire carriers are not required to maintain cargo insurance.
    FMCSA believes the individual shippers using the 3,600 for-hire 
household-goods motor carriers and 435 household-goods freight 
forwarders need the protection of cargo insurance, but not commercial 
shippers who can assess cargo loss and damage risks and cargo insurance 
requirements as a part of their normal business operations.
    The FTCA did not indicate how many of the under $5,000 claims filed 
against LTL motor carriers in the year 2000 were paid out of pocket and 
how many loss or damage claims they, in turn, filed with their insurer 
under their cargo insurance policy. The survey data FTCA provided from 
the Transportation Loss and Prevention and Security Association (TLPSA) 
does not break down this information. A cargo insurance policy, like a 
homeowner's insurance policy, is used generally for large claims, not 
claims the motor carrier, like the homeowner, believes it can handle 
out of its own treasury. In fact, FMCSA believes this is probably why 
many cargo insurance policies have high deductibles; for-hire motor 
carriers and insurers contemplate that motor carriers would handle all 
claims from the first dollar under their Carmack liability up to the 
deductible, thus self-insuring for the deductible amount.
    Flawed certificates of insurance. Seven commenters stated that 
certificates of insurance are flawed documents because they do not 
typically indicate the deductible and do not disclose exclusions in the 
policy; and that there is no mechanism for insuring the validity of the 
certificate or whether the policy remains in place. One commenter 
claimed that while a certificate of insurance may be useful in

[[Page 35324]]

determining that a policy has been issued with a face amount larger 
than the $5,000 BMC-32 requirement, the certificate of insurance is not 
evidence that a particular loss will be covered and is therefore of 
marginal utility. Three commenters stated that it is important to rely 
on the BMC-32 endorsement to confirm the existence of cargo insurance 
and satisfy that there is a policy that will offer true indemnity of 
claims.
    FMCSA Response. FMCSA believes all seven commenters were referring 
to the ACORD (Association for Cooperative Operations Research and 
Development) \9\ certificate of insurance document, rather than the 
BMC-34 Certificate of Insurance. The comments from Certain 
Transportation Factors and the Third Party Logistics Providers 
specifically name the ACORD certificate of insurance used by cargo 
insurers. The FTCA provided a virtually blank copy of an ACORD 
certificate on the last page of its submission.
---------------------------------------------------------------------------

    \9\ ACORD is a global, nonprofit insurance association whose 
mission is to facilitate the development and use of standards for 
the insurance, reinsurance and related financial services 
industries.
---------------------------------------------------------------------------

    FMCSA did not propose to modify the ACORD certificate. ACORD 
documents are written by an insurance standards organization and are 
not required to be filed with FMCSA. Nothing FMCSA does in this rule 
will change the number of carriers obtaining ACORD certificates of 
insurance or correct any perceived ``flaws'' in such forms.
    The Agency recognizes that elimination of the BMC-32 endorsement 
will make it less convenient for commercial shippers to confirm the 
existence of cargo insurance. However, FMCSA believes that motor 
carriers, in order to effectively compete for desirable traffic, will 
devise alternative means of facilitating shipper verification of their 
cargo insurance policies.
    Effect on small carriers/shippers/brokers. Another commenter stated 
that FMCSA, in proposing to eliminate the cargo insurance requirements, 
did not recognize the extent to which obtaining adequate cargo 
insurance is a problem for small carriers, as well as the ripple effect 
that abolition of the financial responsibility endorsement would have 
on small transportation service providers and small shippers and 
brokers, as well. The commenter argued that security-adequate, 
reasonably comprehensive cargo insurance is a particular problem for 
small carriers. Shippers are reluctant to do business with small 
carriers because the shipper fears that small carriers will be unable 
to pay for any cargo claim not covered by a cargo insurer. Three 
commenters argued that the BMC-32 endorsement allows smaller carriers 
to gain credibility in the marketplace. Similarly, one commenter noted 
that the current minimum cargo insurance requirement promotes 
competition and increases available capacity because shippers are more 
willing to trust a new entrant or ``Mom and Pop Trucking,'' knowing 
that mandatory minimum cargo coverage is available and can readily be 
accessed.
    FMCSA Response. The Agency does not believe that gaining 
credibility in the marketplace is an appropriate justification for 
maintaining existing cargo insurance requirements. The purpose of 
mandatory insurance minimums was to protect shippers, not to protect 
market share for carriers or new entrants lacking credibility. FMCSA 
believes that credible and trustworthy carriers have better and more 
efficient means of establishing themselves in the marketplace and 
should not have to rely on government-mandated insurance. The Agency 
does not believe it should use its regulatory authority to provide 
credibility to carriers or new entrants not otherwise equipped to 
establish themselves in the marketplace.
    FMCSA believes that the markets can solve credibility issues 
without continued government intervention. As stated above, firms in 
the motor carrier industry, especially small carriers, choose 
combinations of insurance and cargo security systems to ensure cargo 
safely gets to its destination. Some small motor carriers may prefer to 
obtain little cargo insurance but spend a lot on cargo anti-theft/anti-
damage systems, while other small motor carriers may choose to obtain 
more insurance but spend little on such anti-theft/anti-damage systems. 
FMCSA has been limiting all possible combinations by imposing a minimum 
insurance amount. All motor carriers will now be able to choose the 
combination which best suits their needs and abilities and those of 
their shippers and clients. The firms will have a better choice on how 
to best allocate resources, be financially responsible, and protect 
their exposure to risk without unnecessary government intervention.
    Congressional intent. Two commenters stated that there has been no 
indication of any intent by Congress to eliminate minimum mandatory 
cargo insurance coverage and, to the contrary, believe that Congress 
intended to preserve the requirement. Three commenters noted that the 
survival of these regulations throughout the deregulation process 
should demonstrate their value to the shipping community and thus 
justify their continued existence in the current regulatory 
environment. One commenter said elimination of the cargo insurance 
requirements would be an inadvertent endorsement of lower industry 
performance standards. Another commenter stated that FMCSA should 
enforce the current regulations rather than eliminate them, and FMCSA 
should be re-staffed and re-engineered to provide the essential 
services that Congress intended for the protection of the shipping 
public.
    FMCSA Response. FMCSA disagrees that Congress intended the Agency 
to preserve the cargo insurance requirement. Congress did not alter the 
existing statutory language, which permits -- but does not mandate -- 
the Agency to require cargo insurance. Congress continued to leave the 
decision about the need for cargo insurance to the Agency, as it had in 
the past. Because the level of required cargo insurance is already 
fairly low and many carriers maintain more than the required minimum, 
FMCSA does not believe that elimination of the requirements would be an 
inadvertent endorsement of lower industry performance standards.
    Cargo insurance requirements should be expanded to include all 
motor carriers. Nine commenters concluded that the mandatory cargo 
insurance requirement should not only be maintained, but extended to 
all for-hire motor carriers. One of these commenters, Advocates for 
Highway and Auto Safety, did not limit its recommendation to for-hire 
motor carriers, notwithstanding the fact that private carriers 
transport their own goods.
    FMCSA Response. FMCSA's authority to impose cargo insurance, 
codified at 49 U.S.C. 13906(a)(4), is limited to carriers required to 
register with the Agency under Chapter 139 of Title 49 of the United 
States Code. Consequently, we lack the necessary statutory authority to 
require ``exempt'' for-hire carriers or private carriers to obtain 
cargo insurance.
    FMCSA believes that extending the requirement to all non-exempt 
for-hire property carriers and passenger carriers is unnecessary. 
Entities engaged in contract carriage resolve cargo liability issues 
through contracts negotiated with their customers. The financial 
arrangements they elect to make with shippers are not a concern for the 
public, nor do they raise safety issues that might justify such Federal 
intervention. Although passenger carriers transport a limited amount of

[[Page 35325]]

cargo, the ICC declined, in its original cargo insurance rule, to 
require such carriers to have cargo insurance. See 1 FR 1156, at 1158, 
August 20, 1936.
    Minimum amounts of required cargo insurance should be increased. 
Six commenters strongly urged that, not only should the cargo insurance 
requirements remain intact for all motor carriers and freight 
forwarders, but the minimum amounts established in 1976 ($5,000/
$10,000) should be increased because: (1) The cost of living and the 
price of virtually all transported goods have increased, (2) modern 
trucks and trailers have significantly greater carrying capacity, and 
(3) new carriers entering the market and competition among carriers 
have increased the rate of carrier business failures. The FTCA 
suggested doubling the minimum amount of cargo insurance required for 
motor carriers and freight forwarders to $10,000/$20,000. Six 
commenters suggested that the levels should be increased to $25,000/
$50,000 to adequately compensate a shipper for a loss. Two commenters 
stated that insurers should be allowed, but not required, to post BMC-
32 endorsements higher than the $5,000 regulatory minimum.
    FMCSA Response. FMCSA recognizes that the current minimum levels of 
required cargo insurance are relatively low. As discussed above, the 
limits do not affect the motor carrier's liability for actual cargo 
loss or damage. Arguments for or against the proposal based on the 
observations that most shippers require an amount of insurance above 
the government-established minimum is largely irrelevant to the issue 
of whether the requirement should exist.
    Increased cost. Four commenters stated that there is no explanation 
offered for the FMCSA's estimate that the elimination of the insurance 
requirements would save carriers $3.95 million over 10 years. They 
stated that the elimination of the requirements will increase the cost 
to claimants. Commenters stated that without the BMC-32 endorsement, 
claimants would be forced to take settlement into their own hands, file 
claims against bankrupt carriers in Bankruptcy Courts, and recover 
little, if anything, for valid claims. They alleged the cost to 
shippers due to multiple exclusions, unpaid cargo claims, and the need 
to purchase their own cargo insurance would far exceed the potential 
savings claimed in the preamble to the proposed rule. One commenter 
stated that only 70 claims a year that are now covered by the terms of 
the BMC-32 endorsement need to be denied to offset the alleged savings 
to the motor carrier industry.
    Two commenters asserted that the elimination of mandatory cargo 
insurance will raise the transaction costs for shippers and motor 
carriers. The commenters stated that shippers have learned to rely on 
the terms and conditions of the FMCSA endorsement instead of reviewing 
the carrier's insurance policy. Therefore, if the protections of the 
BMC-32 endorsement are eliminated, shippers will be required to review 
the terms and conditions of the cargo insurance policies of every motor 
carrier with whom they interact to identify loopholes and determine 
whether there is actual protection or whether the existence of 
insurance coverage is illusory.
    FMCSA Response. FMCSA agrees that shippers have learned to rely on 
the terms and conditions of the FMCSA endorsement instead of reviewing 
the carrier's insurance policy. Shippers should be more proactive in 
determining what level of insurance protection they are actually 
receiving and take necessary safeguards.
    FMCSA agrees that many shippers now pay for insurance from the 
motor carrier in the form of higher transportation charges. The motor 
carrier is providing a service or product just like the shipper. The 
shipper, for example, may carry its own liability insurance in the 
event its products injure consumers and passes such costs along to 
consumers.
    Once this rule takes effect, some of the additional costs predicted 
by opponents of the proposal could develop due to the absence of a 
cargo insurance requirement. However, these costs are expected to be 
negligible. FMCSA has reevaluated the costs and benefits of this final 
rule. The Agency believes the market will react to the commenters' 
concerns by developing better ways of addressing these problems than 
the current insurance requirement.
    Elimination Will Cause a Litigation Increase. Three commenters 
stated that the proposed elimination of the requirements would cause a 
significant increase in litigation by encouraging insurance companies 
to deny more claims for more reasons. This increase in litigation would 
also increase shipper costs.
    FMCSA Response. These commenters do not provide any support for 
this proposition, which assumes that insurance companies and motor 
carriers are not now acting rationally (because they are not denying as 
many claims as they could). There is no evidence suggesting that 
insurance companies and motor carriers will behave differently as a 
result of this rule.

Updated Cost and Benefit Figures for the Final Rule

Costs

    FMCSA calculates the costs of this final rule to be small and 
indirect. Commercial shippers relying on motor carrier cargo insurance 
to cover their property against loss or damage will have to do some 
additional work identifying for-hire motor carriers and freight 
forwarders who have adequate cargo insurance (through phone calls, e-
mails, correspondence or other communications). The costs of this final 
rule are negligible and result primarily from shippers of shipments 
valued at less than $5,000 now having to verify that their potential 
carrier has adequate cargo insurance. FMCSA assumes that shippers of 
non-exempt cargo valued at greater than $5,000 are already verifying 
whether their shipments would be adequately insured, because their 
shipments would not be fully protected under the existing minimum cargo 
insurance requirement. Inasmuch as shippers of cargo valued at less 
than $5,000 already have to call or otherwise contact a carrier or 
broker to arrange for transportation, the additional time necessary to 
verify the existence of appropriate cargo insurance during this contact 
should, in most cases, be negligible. See the Regulatory Evaluation for 
the final rule in the docket for a detailed discussion of the cost 
estimates for this rule.

Benefits

    Direct benefits of this final rule include time savings to: (1) 
Industry and FMCSA personnel resulting from streamlining the motor 
carrier registration process; and (2) the industry's insurance 
representatives by eliminating cargo insurance filing requirements for 
most carriers formerly referred to as ``common carriers'' and freight 
forwarders of non-household goods.
    The total annual savings from the rule are estimated to be about 
$452,000 in the first year and $3.95 million over a ten-year period. 
The cost savings increase in each subsequent year of the analysis 
period because the entire carrier population increases by 3.71 percent 
annually.\10\ These future costs savings are discounted at seven 
percent. Thus, the total discounted cost saving

[[Page 35326]]

associated with this provision equals $452,000 in the first year and 
$3.95 million over the ten-year period. See the Regulatory Evaluation 
for the final rule in the docket for a detailed discussion of how FMCSA 
arrived at these figures.
---------------------------------------------------------------------------

    \10\ The eight-year (2000-08) average annual growth in motor 
carrier registrations with the FMCSA (interstate hazmat and non-
hazmat, and intrastate hazmat only) is 3.71%. Source: MCMIS 
Snapshot, 29-July-2009.
---------------------------------------------------------------------------

The Final Rule

    The final rule limits the requirements for cargo insurance filings 
during registration (Sec.  365.109) to household goods motor carriers 
and household goods freight forwarders. Similarly, the requirement to 
maintain cargo insurance as a condition of retaining active operating 
authority, as codified in Sec. Sec.  387.301(b), 387.303(c) and 
387.403(a), is limited to household goods motor carriers and household 
goods freight forwarders. Furthermore, the list of commodities exempt 
from cargo insurance requirements is being removed from Sec.  
387.301(b) as it is no longer needed.

Forms BMC-32 and BMC-34 for Non-Household-Goods Motor Carriers and 
Freight Forwarders

    All BMC-32 endorsements and BMC-34 certificates of insurance that 
insurers have issued to motor carriers and freight forwarders, except 
household goods motor carriers and household goods freight forwarders, 
will expire on the effective date of this final rule, March 21, 2011. 
FMCSA will be amending the BMC-32 endorsement and BMC-34 certificate of 
insurance to reflect the requirements of this final rule by removing 
the references to common carriers and amending other incorrect 
references. FMCSA will be seeking Office of Management and Budget (OMB) 
approval of the new forms before the effective date of the final rule. 
Insurance companies will not need to cancel any previous FMCSA filings. 
FMCSA will not remove the names of insurance companies and the 
appropriate policy numbers from FMCSA web sites and any other FMCSA 
distribution methods until March 18, 2013, the second anniversary of 
the effective date of this final rule, to facilitate identification of 
insurance coverage for claims arising from transportation occurring 
while the policies were in effect.
    The Agency has added a new paragraph (f) to both Sec. Sec.  387.313 
and 387.413. These new paragraphs will serve as notice to the public 
that any valid form BMC-32 endorsements and BMC-34 certificates of 
insurance on the day before the effective date will expire on the 
effective date of the final rule for those 70,000+ for-hire motor 
common carriers and freight forwarders that do not transport household 
goods for individual shippers. FMCSA believes it is unreasonable to 
require the insurance companies to cancel the filings electronically or 
manually, as they may do under Sec. Sec.  387.313(d) or 387.413(d). 
FMCSA will continue to maintain the previously filed data in its data 
systems until March 18, 2013, which is two years after the effective 
date of this final rule. Two years from notification of disallowance of 
the claim is the standard statute of limitations for filing a civil 
action based on a loss and damage claim under a receipt or bill of 
lading pursuant to 49 U.S.C. 14706(e).
    Finally, FMCSA removes from the authority citation for 49 CFR part 
365 the reference to 16 U.S.C. 1456, a provision of the Coastal Zone 
Management Act (CZMA) of 1972. The ICC added that reference in 1987 (52 
FR 18365, May 15, 1987) because its regulations governing operating 
authority (49 CFR part 1160) required water carriers subject to ICC 
jurisdiction to comply with the CZMA. As a result of the ICCTA, many 
ICC regulations were transferred to FMCSA; 49 CFR part 1160 was 
recodified as 49 CFR part 365. In 2002, FMCSA rescinded the passage in 
part 365 dealing with water carriers (49 CFR 365.101(c), 67 FR 61818, 
61820, October 2, 2002). We are now deleting the reference to the CZMA 
as well.

Regulatory Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review) and DOT 
Regulatory Policies and Procedures

    FMCSA has determined that this action is a significant regulatory 
action within the meaning of Executive Order 12866 due to public 
interest. The final rule has minimal costs. The Office of Management 
and Budget (OMB) has reviewed this document. The Agency has prepared a 
regulatory analysis of the costs and benefits of this action. A copy of 
the analysis document is included in the docket referenced at the 
beginning of this notice. The estimated ten-year costs and benefits of 
the analysis are shown in Table 2.

      Table 2--Estimated Ten-Year Costs, Benefits, and Net Benefits
                              [$ millions]
------------------------------------------------------------------------

------------------------------------------------------------------------
7% Discount Rate:
    Costs...............................................    Negligible
    Benefits............................................       $3.95
    Net Benefits........................................       $3.95
3% Discount Rate:
    Costs...............................................    Negligible
    Benefits............................................       $4.67
    Net Benefits........................................       $4.67
------------------------------------------------------------------------

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), FMCSA considered the effects of this regulatory action on small 
entities, as defined by the U.S. Small Business Administration's Office 
of Size Standards.
    The final rule applies to both new entrant (filing) and existing 
(re-filing) motor carriers and freight forwarders. Regarding new 
entrants, data from the FMCSA Licensing and Insurance database indicate 
that the number of new entrant for-hire motor common carriers filing 
annually with FMCSA averaged 18,442 in fiscal years 2007 and 2008. 
Subtracting out new entrant passenger carriers (886) and household 
goods carriers (859) because they will not be affected by this final 
rule, while adding in the average 183 new entrant freight forwarders 
estimated to have filed with FMCSA during the same fiscal years, 
results in an average of 16,880 annual new entrant for-hire carriers 
and freight forwarders whose insurance agents would not have to file 
proof of cargo insurance with FMCSA under this rule.
    Small Business Administration (SBA) regulations (13 CFR part 121) 
define a ``small entity'' in the motor carrier industry by average 
annual receipts, which is currently set at $25.5 million per firm for 
truck transportation and $7 million per firm for freight 
transportation. Although general freight transportation arrangement 
firms fall under this $7 million threshold, there is an exception for 
``non-vessel owning common carriers and household goods forwarders.'' 
This exception stipulates that, for this sub-set of freight forwarders, 
$25.5 million should be the revenue threshold. Since this subset 
appears to apply to freight forwarders in the trucking industry, we use 
$25.5 million as the revenue threshold for freight forwarders as well.
    Motor carriers and freight forwarders are not required to report 
revenue to the FMCSA, but are required to provide FMCSA with the number 
of power units they operate when they apply for operating authority and 
to update this figure biennially. Because FMCSA does not have direct 
revenue figures, power units serve as a proxy to determine the carrier 
and forwarder size that would qualify as a small business given the 
SBA's revenue threshold. In order to produce this estimate, it is 
necessary to determine the average revenue generated by a power unit. 
The Agency determined in the 2003 Hours of Service Rulemaking 
Regulatory Impact Analysis

[[Page 35327]]

and Small Business Analysis \11\ that a power unit produces about 
$172,000 in revenue annually (adjusted for inflation).\12\ According to 
the SBA, motor carriers and freight forwarders with an annual revenue 
of $25.5 million are considered a small business.\13\ This equates to 
148 power units (25,500,000/172,000). Thus, FMCSA considers motor 
carriers and freight forwarders with 148 power units or less to be a 
small business for SBA purposes.
---------------------------------------------------------------------------

    \11\ Regulatory Analysis for: Hours of Service of Drivers; 
Driver Rest and Sleep for Safe Operations, Final Rule. Federal Motor 
Carrier Safety. Published 4/23/2003. Docket FMCSA-1997-2350 item 
23302. It may be accessed on the Internet at this URL--http://
www.regulations.gov/search/Regs/
contentStreamer?objectId=090000648034dc9d&disposition=attachment&cont
entType=pdf.
    \12\ From the 2000 TTS Blue Book Of Trucking Companies, number 
adjusted to 2008 dollars for inflation.
    \13\ U.S. Small Business Associate Table of Small Business Size 
Standards Match to North American Industry Classification Systems 
Codes (NAIC), effective August 22, 2008. See NAIC Subsector 484, 
Truck Transportation.
---------------------------------------------------------------------------

    FMCSA has used data on revenue generated per power unit to 
determine that a motor carrier with approximately 148 power units would 
exceed the small business revenue level set by the SBA. Ninety-nine 
percent of motor carriers have fewer than 148 power units, and 
therefore could be expected to fall under the SBA's definition of a 
small business for this industry, with annual receipts of less than 
$25.5 million. Examining all freight forwarders within NAICS Code 4885, 
using the 2002 Economic Census, there are 12,266 freight transportation 
arrangement firms. Of these firms, 10,640 operated for the entire year, 
and 111, or approximately 1 percent, had revenues exceeding $25 
million.
    Thus, assuming that roughly 99 percent of both for-hire trucking 
firms and freight forwarders benefiting from this proposal have annual 
receipts of less than $25.5 million, FMCSA estimates that (93,800 times 
0.99) 92,900 for-hire small entity motor carrier trucking firms 
formerly holding common carrier authority and 1,176 small entity 
freight forwarder \14\ firms will benefit from this final rule. The 
average benefit per small entity will be $10 in direct or indirect fees 
the small motor carriers and freight forwarders would not be charged by 
their insurance carriers.
---------------------------------------------------------------------------

    \14\ A MCMIS data query on 14 February 2009 showed the FMCSA 
Licensing and Insurance database had 1,188 freight forwarders 
subject to FMCSA cargo-insurance regulations and 435 household-goods 
freight forwarders: 99 percent of 1,188 equals about 1,176 small 
entity freight forwarder firms.
---------------------------------------------------------------------------

    In addition, FMCSA notes that commercial shippers and freight 
brokers, which are indirectly affected by this final rule and which use 
motor carriers and freight forwarders that will no longer be subject to 
cargo insurance requirements, may incur minimal (indirect) costs to 
verify that carriers have insurance for shipments worth less than the 
eliminated insurance floor of $5,000.
    This final rule will remove the Federal mandate to purchase and 
maintain a minimum level of cargo insurance for most motor carriers and 
freight forwarders using trucks and trailers, including small entity 
motor carriers and freight forwarders. It will also reduce the Federal 
mandate for most motor carriers and freight forwarders to direct their 
insurance and surety providers to prepare a BMC-32 Endorsement for 
Motor Common Carrier Policies of Insurance for Cargo Liability and to 
file with FMCSA a BMC-34 Motor Carrier Cargo Liability Certificate of 
Insurance. The insurance or surety provider must pay FMCSA a $10 fee to 
file each BMC-34 Motor Carrier Cargo Liability Certificate of 
Insurance.
    The Agency considered the alternative of extending the cargo 
insurance requirements to all for-hire carriers (both former common and 
former contract carriers) in order to treat all regulated carriers 
uniformly. Rather than saving $452,000 as the elimination of the cargo 
insurance filing for common carriers would do, this alternative was 
estimated to have a one-time first-year cost of $891,000 and annual 
costs of about $222,000 thereafter--with little benefit to shippers 
that have contracts with for-hire motor carriers formerly known as 
contract carriers.
    FMCSA has determined that the impact on motor carrier and freight 
forwarder entities affected by this final rule will not be significant. 
The effect of the final rule will be to allow most motor carriers and 
freight forwarders to choose the optimal level of cargo insurance 
protection without having to notify or seek approval from FMCSA. FMCSA 
expects the impact of the final rule will be a reduction in the 
information collection burden for most motor carriers and freight 
forwarders, and their cargo insurance providers. FMCSA asserts that the 
economic impact of the reduction in paperwork will be minimal and 
entirely beneficial to small motor carriers and freight forwarders. 
Accordingly, the Administrator of the FMCSA hereby certifies that this 
final rule will not have a significant economic impact on a substantial 
number of small entities.

Unfunded Mandates Reform Act of 1995

    This rulemaking will not impose an unfunded Federal mandate, as 
defined by the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532, et 
seq.), that will result in the expenditure by State, local, and tribal 
governments, in the aggregate, or by the private sector, of $140.3 
million or more in any one year.

Executive Order 12988 (Civil Justice Reform)

    This action will meet applicable standards in sections 3(a) and 
3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden.

Executive Order 12630 (Taking of Private Property)

    This rulemaking does not effect a taking of private property or 
otherwise have taking implications under Executive Order 12630, 
Governmental Actions and Interference with Constitutionally Protected 
Property Rights.

Executive Order 13132 (Federalism)

    FMCSA analyzed this rule in accordance with the principles and 
criteria contained in Executive Order 13132. FMCSA has determined that 
this rulemaking will not have a substantial direct effect on States, 
nor will it limit the policy-making discretion of the States. Nothing 
in this document will preempt any State law or regulation. FMCSA has 
therefore determined this rule does not have federalism implications.

Executive Order 12372 (Intergovernmental Review)

    The regulations implementing Executive Order 12372 regarding 
intergovernmental consultation on Federal programs and activities do 
not apply to this program.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires 
that FMCSA consider the impact of paperwork and other information 
collection burdens imposed on the public. The changes in this final 
rule affect OMB Control No. 2126-0017 titled ``Financial 
Responsibility, Trucking, and Freight Forwarding.'' The final rule 
requires that cargo insurance filings be made only by household goods 
motor carriers and household goods freight forwarders.
    OMB Control No. 2126-0017 has 10 information collections (ICs) for 
10 different forms covering all FMCSA insurance, surety bond, trust 
fund, and performance bond filings for for-hire motor carriers of 
property and freight forwarders. IC-3, within the information 
collection request, is devoted to Form

[[Page 35328]]

BMC-34 entitled ``Motor Carrier Cargo Liability Certificate of 
Insurance.'' IC-3 will now be limited only to the 4,000 motor carriers 
and freight forwarders involved in authorized for-hire household goods 
carriage, but the other nine ICs in OMB Control No. 2126-0017 will 
still be applicable to all for-hire motor carriers of property and 
freight forwarders. The information collection burden for IC-3 will 
decrease from approximately 13,458 hours to about 673 total hours, a 
decrease of almost 12,800 hours.
    FMCSA has submitted a revised information collection request to OMB 
for this reduced information collection burden in IC-3.

National Environmental Policy Act

    FMCSA analyzed this final rule for the purpose of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and 
determined under our environmental procedures Order 5610.1, issued 
March 1, 2004 (69 FR 9680), that this action is categorically excluded 
from further environmental documentation under Appendix 2, paragraph 
6.v. of the Order (regulations prescribing minimum levels of financial 
responsibility). In addition, the agency believes that this action 
includes no extraordinary circumstances that will have any effect on 
the quality of the environment. Thus, the action does not require an 
environmental assessment or an environmental impact statement.
    FMCSA also analyzed this rule under the Clean Air Act, as amended 
(CAA), section 176(c) (42 U.S.C. 7401 et seq.), and implementing 
regulations promulgated by the Environmental Protection Agency. 
Approval of this action is exempt from the CAA's general conformity 
requirement since it involves rulemaking action. (See 40 CFR 
93.153(c)(2)). It will not result in any emissions increase nor would 
it have any potential to result in emissions that are above the general 
conformity rule's de minimis emission threshold levels. Moreover, it is 
reasonably foreseeable that this final rule will not increase total CMV 
mileage, or change the routing of CMVs, how CMVs operate, or the CMV 
fleet-mix of motor carriers. By this action, FMCSA merely removes a 
requirement that certain motor carriers purchase and maintain insurance 
for loss or damage to cargo and file evidence of such insurance with 
the Agency.

Executive Order 13211 (Energy Effects)

    FMCSA analyzed this action under Executive Order 13211, Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use. We determined that it is not a ``significant 
energy action'' under that Executive Order because it will not be 
economically significant and will not be likely to have a significant 
adverse effect on the supply, distribution, or use of energy.

List of Subjects

49 CFR Part 365

    Administrative practice and procedure, Brokers, Buses, Freight 
forwarders, Mexico, Motor carriers, Moving of household goods.

49 CFR Part 387

    Buses, Freight, Freight forwarders, Hazardous materials 
transportation, Highway safety, Insurance, Intergovernmental relations, 
Motor carriers, Motor vehicle safety, Moving of household goods, 
Penalties, Reporting and recordkeeping requirements, Surety bonds.


0
In consideration of the foregoing, FMCSA amends title 49, Code of 
Federal Regulations, chapter III, as follows:

PART 365--RULES GOVERNING APPLICATIONS FOR OPERATING AUTHORITY

0
1. The authority citation for part 365 is revised to read as follows:

    Authority: 5 U.S.C. 553 and 559; 49 U.S.C. 13101, 13301, 13901-
13906, 14708, 31138, and 31144; 49 CFR 1.73.


0
2. In Sec.  365.109, revise paragraph (a)(5)(iii) to read as follows:


Sec.  365.109  FMCSA review of the application.

    (a) * * *
    (5) * * *
    (iii) Form BMC 34 or BMC 83 surety bond--Cargo liability (household 
goods motor carriers and household goods freight forwarders).
* * * * *

PART 387--MINIMUM LEVELS OF FINANCIAL RESPONSIBILITY FOR MOTOR 
CARRIERS

0
3. The authority citation for part 387 continues to read as follows:

    Authority: 49 U.S.C. 13101, 13301, 13906, 14701, 31138, 31139, 
and 31144; and 49 CFR 1.73.


0
4. In Sec.  387.301, revise paragraph (b) to read as follows.


Sec.  387.301  Surety bond, certificate of insurance, or other 
securities.

* * * * *
    (b) Household goods motor carriers-cargo insurance. No household 
goods motor carrier subject to subtitle IV, part B, chapter 135 of 
title 49 of the U.S. Code shall engage in interstate or foreign 
commerce, nor shall any certificate be issued to such a household goods 
motor carrier or remain in force unless and until there shall have been 
filed with and accepted by the FMCSA, a surety bond, certificate of 
insurance, proof of qualifications as a self-insurer, or other 
securities or agreements in the amounts prescribed in Sec.  387.303, 
conditioned upon such carrier making compensation to individual 
shippers for all property belonging to individual shippers and coming 
into the possession of such carrier in connection with its 
transportation service. The terms ``household goods motor carrier'' and 
``individual shipper'' are defined in part 375 of this subchapter.
* * * * *

0
5. In Sec.  387.303, revise paragraph (c) to read as follows:


Sec.  387.303  Security for the protection of the public: Minimum 
limits.

* * * * *
    (c) Household goods motor carriers: Cargo liability. Security 
required to compensate individual shippers for loss or damage to 
property belonging to them and coming into the possession of household 
goods motor carriers in connection with their transportation service;
    (1) For loss of or damage to household goods carried on any one 
motor vehicle--$5,000,
    (2) For loss of or damage to or aggregate of losses or damages of 
or to household goods occurring at any one time and place--$10,000.

0
6. In Sec.  387.313, add a new paragraph (f) to read as follows:


Sec.  387.313  Forms and procedures.

* * * * *
    (f) Termination of Forms BMC-32 and BMC-34 for motor carriers 
transporting property other than household goods. Form BMC-32 
endorsements and Form BMC-34 certificates of insurance issued to motor 
carriers transporting property other than household goods that have 
been accepted by the FMCSA under these rules will expire on March 21, 
2011.

0
7. In Sec.  387.403, revise paragraph (a) to read as follows:


Sec.  387.403  General requirements.

    (a) Cargo. A household goods freight forwarder may not operate 
until it has filed with FMCSA an appropriate surety bond, certificate 
of insurance, qualifications as a self-insurer, or other securities or 
agreements, in the amounts

[[Page 35329]]

prescribed in Sec.  387.405, for loss of or damage to household goods.
* * * * *

0
8. In Sec.  387.413, add a new paragraph (f) to read as follows:


Sec.  387.413  Forms and procedures.

* * * * *
    (f) Termination of Forms BMC-32 and BMC-34 for freight forwarders 
of property other than household goods. Form BMC-32 endorsements and 
Form BMC-34 certificates of insurance issued to freight forwarders of 
property other than household goods that have been accepted by the 
FMCSA under these rules will expire on March 21, 2011.

    Issued on: June 15, 2010.
Anne S. Ferro,
Administrator.
[FR Doc. 2010-14866 Filed 6-21-10; 8:45 am]
BILLING CODE 4910-EX-P

