
[Federal Register Volume 80, Number 61 (Tuesday, March 31, 2015)]
[Notices]
[Pages 17142-17147]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-07353]


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DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

[FMCSA-2013-0513]


Registration and Financial Security Requirements for Brokers of 
Property and Freight Forwarders; Association of Independent Property 
Brokers and Agents' Exemption Application

AGENCY: Federal Motor Carrier Safety Administration (FMCSA).

ACTION: Notice of denial of application for exemption.

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SUMMARY: FMCSA denies an application from the Association of 
Independent Property Brokers and Agents (AIPBA) for an exemption for 
all property brokers and freight forwarders from the $75,000 bond 
provision included in section 32918 of the Moving Ahead for Progress in 
the 21st Century Act (MAP-21), now codified in 49 U.S.C. 13906. AIPBA 
filed its request pursuant to 49 U.S.C. 13541 on August 14, 2013. On 
December 26, 2013, FMCSA published a notice in the Federal Register 
requesting comments from all interested parties on AIPBA's exemption 
application. After reviewing the public comments, the Agency has 
concluded that the exemption should be denied on the basis that 49 
U.S.C.13541 does not give FMCSA the authority to essentially nullify a 
statutory provision by exempting the entire class of persons subject to 
the provision. Furthermore, even if the Agency had the authority to 
issue such a blanket exemption, AIPBA's exemption application does not 
meet the factors provided in section 13541 because (1) the new $75,000 
bond requirement is necessary to carry out the National Transportation 
Policy at 49 U.S.C.13101, (2) there has been no showing that the 
$75,000 requirement ``is not needed to protect shippers from the abuse 
of market power'' and (3) the requested exemption is not in the public 
interest.

DATES: This decision is effective March 31, 2015.

FOR FURTHER INFORMATION CONTACT: Mr. Thomas Yager, Chief of Driver and 
Carrier Operations, (202) 366-4001 or thomas.yager@dot.gov, FMCSA, 
Department of Transportation, 1200 New Jersey Ave. SE., Washington, DC 
20590.

ADDRESSES: For access to the docket to read background documents, 
including those referenced in this document, or to read comments 
received, go to:
     Regulations.gov, http://www.regulations.gov, at any time 
and insert FMCSA-2013-0513 in the ``Keyword'' box, and then click 
``Search.''
     Docket Management Facility, Room W12-140, DOT Building, 
1200 New Jersey Ave. SE., Washington, DC 20590. You may view the docket 
online by visiting the facility between 9 a.m. and 5 p.m., Monday 
through Friday except Federal holidays.

Viewing Comments and Documents

    AIPBA's exemption application and all public comments are available 
in the public docket. To view comments filed in this docket, go to 
http://www.regulations.gov and click on the ``Read Comments'' box in 
the upper right hand side of the screen. Then, in the ``Keyword'' box, 
insert ``FMCSA-2013-0513'' and click ``Search.'' Next, click ``Open 
Docket Folder'' in the ``Actions'' column. Finally, in the ``Title'' 
column, click on the document you would like to review. If you do not 
have access to the Internet, you may view the docket by visiting the 
Docket Management Facility at the address above.

Privacy Act

    In accordance with 5 U.S.C. 553(c), DOT solicits comments from the 
public to better inform its rulemaking process. DOT posts these 
comments, without edit, including any personal information the 
commenter provides, to www.regulations.gov, as described in the system 
of records notice (DOT/ALL-14 FDMS), which can be reviewed at 
www.dot.gov/privacy.

SUPPLEMENTARY INFORMATION: 

Legal Basis for the Exemption Application and Proceeding

    Section 13541(a) of title 49 of the United States Code (49 U.S.C. 
13541) requires the Secretary of Transportation (Secretary) to exempt a 
person, class of persons, or a transaction or service from the 
application, in whole or in part, of a provision of 49 U.S.C., Subtitle 
IV, Part B (Chapters 131-149), or to use the exemption authority to 
modify the application of a provision of 49 U.S.C. Chapters 131-149 as 
it applies to such person, class, transaction, or service when the 
Secretary finds that the application of the provision:
     Is not necessary to carry out the transportation policy of 
49 U.S.C. 13101

[[Page 17143]]

     Is not needed to protect shippers from the abuse of market 
power or that the transaction or service is of limited scope; and
     Is in the public interest.
The exemption authority provided by section 13541 ``may not be used to 
relieve a person from the application of, and compliance with, any law, 
rule, regulation, standard, or order pertaining to cargo loss and 
damage [or] insurance . . . .'' 49 U.S.C. 13541(e)(1).
    AIPBA seeks an exemption from the $75,000 financial security 
requirements for brokers and freight forwarders at 49 U.S.C. 13906 (b) 
& (c). Section 13906 is located in 49 U.S.C. Subtitle IV Part B 
(chapter 139) and therefore may be considered within the general scope 
of the exemption authority provided by section 13541. The Secretary may 
begin a section 13541 exemption proceeding on the application of an 
interested party. 49 U.S.C. 13541(b). See, e.g., Motor Carrier 
Financial Information Reporting Requirements-Request for Public 
Comments, 68 FR 48987 (Aug. 15, 2003). The Secretary may ``specify the 
period of time during which an exemption'' is effective and may revoke 
the exemption ``to the extent specified, on finding that application of 
a provision of [49 U.S.C. Chapters 131-149] to the person, class, or 
transportation is necessary to carry out the transportation policy of 
[49 U.S.C.] section 13101.'' 49 U.S.C. 13541(c), (d).
    The Administrator of FMCSA has been delegated authority under 49 
CFR 1.87 to carry out the functions vested in the Secretary by 49 
U.S.C. 13541.

Background

    On July 6, 2012, the President signed MAP-21 into law, which 
included a number of mandatory, non-discretionary changes to FMCSA 
programs. Some of these changes amended the financial security 
requirements applicable to property brokers and freight forwarders 
operating under FMCSA's jurisdiction. Pub.L. 112-141, Sec.  32918, 126 
Stat. 405 (codified at 49 U.S.C. 13906(b) & (c)). More specifically, 49 
U.S.C. 13906(b) and (c) requires brokers and freight forwarders to 
provide evidence of minimum financial security in the amount of 
$75,000.
    On September 5, 2013, FMCSA published guidance (78 FR 54720) 
``concerning the implementation of certain provisions of . . . (MAP-21) 
concerning persons acting as a broker or a freight forwarder.'' On 
October 1, 2013, FMCSA issued regulations requiring brokers and freight 
forwarders to have a $75,000 surety bond or trust fund in effect. 49 
CFR 387.307(a), 387.403(c); 78 FR 60226, 60233.
    On November 14, 2013, after initially filing a complaint and then 
voluntarily dismissing the case in district court, AIPBA filed a 
petition for review in the U.S. Court of Appeals for the Eleventh 
Circuit. Association of Independent Property Brokers and Agents, Inc. 
v. Foxx, No. 13-15238-D (11th Cir.). The petition alleges that the 
Agency's October 1, 2013 final rule was improperly issued without 
notice and comment. The court, upon AIPBA's request, has stayed the 
case pending the resolution of this exemption proceeding.
    On January 23, 2015, AIPBA instituted another proceeding in the 
United States District Court for the Middle District of Florida, 
seeking to invalidate the $75,000 bond requirement from 49 U.S.C. 
13906. Association of Independent Property Brokers and Agents, Inc. v. 
Foxx et al, No. 5:15-cv-00038-JSM-PRL (M.D. Fla.). No additional briefs 
or rulings have been filed in the district court case.

AIPBA Exemption Application

    In an August 14, 2013 letter to the Secretary, AIPBA, through its 
counsel, requested that the Department ``permanently exempt all 
property brokers and freight forwarders from the $75,000 broker bond 
provision of MAP-21. . . .'' AIPBA argues that the ``$75,000 broker 
surety bond amount is not necessary to carry out the transportation 
policy of section 13101, [or] . . . to protect shippers from the abuse 
of market power . . . and . . . is not in the public interest.'' AIPBA 
seeks a categorical exemption ``so that property brokers and forwarders 
can continue to do business under the existing bond regulations.'' A 
copy of the exemption application is included in the docket referenced 
at the beginning of this notice.
    First, AIPBA believes that the $75,000 bond requirement is contrary 
to the transportation policy of 49 U.S.C. 13101 because it violates the 
federal government's policy to ``encourage fair competition, and 
reasonable rates for transportation by motor carriers of property'' and 
to ``allow a variety of quality and price options to meet changing 
market demands and the diverse requirements of the shipping and 
traveling public,'' citing 49 U.S.C. 13101(a) (2)(A),(D).
    AIPBA also argues that the $75,000 broker bond requirement ``is not 
necessary to protect shippers from the abuse of market power.'' 
According to AIPBA,''[t]he unnecessarily high $75,000 broker bond 
requirement will cause the majority of property brokers to leave the 
marketplace, which will expose shippers to abuses of market power by 
the few large property brokers able to stay in business.''
    With regard to the public interest, AIPBA believes that the new 
bond requirement will ``cause a significant increase in consumer prices 
once the supply of property brokers is drastically reduced.'' AIPBA 
indicated that a lack of competition will require shippers to pay more 
for transportation services. In addition to predicting that small and 
mid-sized brokers will be forced out of the marketplace due to the new 
higher bond requirement, AIPBA believes the new requirement will serve 
as a barrier to entry into the marketplace for other property brokers.
    Finally, while AIPBA acknowledges that ``there are certain 
regulations from which [the Secretary] cannot issue exemptions,'' it 
believes that:

``. . . the broker bond does not fall into one of the listed 
categories. Specifically, the bond is a financial security rather 
than a type of required insurance, a distinction emphasized in 49 
U.S.C 13906 by the choice of a bond or insurance as well as MAP-21's 
proposed amendment to 49 U.S.C. 13906, which still requires the 
broker bond but deletes all reference to insurance.''

Request for Comments

    On December 26, 2013, FMCSA requested public comment on the AIPBA 
exemption application (78 FR 78472). Specifically, FMCSA requested 
comments on whether the Agency should grant or deny AIPBA's 
application, in whole or in part. The Agency also requested comments on 
how it should apply 49 U.S.C. 13541(a)(1-3) to AIPBA's request.

Discussion of Public Comments

General Discussion

    FMCSA received 80 responses to the December 26, 2013, notice, 23 of 
which were anonymous. Most of the commenters (52, including 16 of the 
anonymous commenters) supported the AIPBA application for an exemption 
and 26 (including 7 of the anonymous commenters) opposed the request. 
The named commenters are: Micah Applebee; AIPBA; Dave Britton; William 
Cohen; Gerard Coyle; Sue Cuthbertson; Raymond Donahue; Rodney 
Falkenstein; Christine Friend; Philip Fulmer; Kelley Gabor; Ray Gerdes; 
Kathy Harris; David Hoke; Scott Housely; Matt Kloss; James Lamb (2 
responses); Deborah J. Larson; Lew Levy; Stuart Looney (LineHaul 
Logistics, Inc.); Angela Maccombs; Michael Majerek; Mike Manzella; 
Aaron Menice; Deborah McCoy; Jenny Merkey; Michael Millard (2 
responses); John Miller; Gaetono P. Monteleone

[[Page 17144]]

(Transport Management Service Corporation); Ronald Morales; Hugh Nolan; 
Chris Olson; Charles Onsum; the Owner-Operator Independent Drivers 
Association (OOIDA); M. Peters; James Powers; Roger's Freight, LLC; 
James Randolph; Kevin Reidy; Paul Rosenweig, Jr.; Bev Smith; Michael 
Stanley (SMS Transportation); Robert Schwartz; Tracey Spence; the 
Surety & Fidelity Association of America (SFAA); Kelly Swickard; John 
Thomas; The Transportation Intermediaries Association (TIA); Veles 
Logistics, Inc.; Patrick Walsh; Werner Enterprises, Inc.; and, Gregory 
Williamson (Williamson's Enterprises). One commenter provided only his 
first name, Larry, and one hand-written comment (from Mike) included an 
illegible last name.
    Many of the commenters who wrote in support of AIPBA's application 
believe the increased bond requirement has resulted in a significant 
decrease in the number of freight forwarders and brokers with the 
requisite authority from FMCSA. Some of these commenters argue that the 
increased bond requirement has resulted in the loss of jobs and an 
adverse impact on consumer prices. A number of the commenters who 
identified themselves as brokers argued the new requirement is intended 
to reduce competition by eliminating small businesses rather than to 
reduce fraud. Several commenters also argue that implementation of the 
$75,000 bond requirement is inconsistent with the transportation policy 
in 49 U.S.C. 13101.
    Commenters writing in opposition to AIPBA's application argue that 
the previous $10,000 bond requirement was originally set in 1979 and 
that small trucking companies, especially owner operators, will be 
better protected and have better business opportunities with the 
$75,000 bond. A number of these commenters include brokers who state 
that obtaining the higher bond amount was relatively easy. And some 
state that the previous $10,000 bond was insufficient and resulted in 
transportation service providers being left unpaid after the broker 
went out of business.

Specific Issues Raised by AIPBA and Supporters of AIPBA's Application

Unintended Consequences
    A number of the commenters writing in support of AIPBA's 
application believe the increased bond requirement has resulted in 
unintended consequences such as brokers and freight forwarders being 
forced out of the industry, a loss of jobs and decreased rates for 
trucking companies. AIPBA indicated in its comments that the total 
number of property brokers on October 1, 2013, was 21,565 and that 
8,218 broker operating authority registrations have been revoked since 
December 1, 2013. AIPBA indicated that the total number of freight 
forwarders on October 1, 2013, was 2,212 with 1,583 freight forwarder 
operating authority registrations revoked since December 1, 2013.\1\ 
AIPBA believes there will be a secondary wave of revocations when 
bonding companies that rushed to acquire market share adjust their 
rates after the financial security market settles.
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    \1\ AIPBA's comments were dated January 22, 2014.
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    AIPBA also argues the increase in the bond requirements has 
resulted in the loss of jobs and an adverse impact on consumer prices. 
AIPBA believes the increase in bonds has had an adverse impact on rates 
for truckers as well.
Incremental Increase in Bond Requirement
    Matt Kloss supports the AIPBA exemption in part and believes FMCSA 
should consider an incremental increase in the bond limit rather than 
leaving the limit at $75,000. He states that he has been in the 
brokerage business for 12 years and he has never had a successful 
filing against his bond. He explains that he is not in the business to 
steal money from trucking companies. He argues that ``[e]stablished 
companies with good histories should have been required to increase the 
bond to $20,000 this year, with future increases that are manageable.''
    An anonymous commenter believes that the bond requirement ``. . . 
should be initially lowered to a more reasonable amount of $25,000.'' 
This commenter also argued that the rules should require a $25,000 fee 
per agent for large brokers.
Costs of the $75,000 Bond Will Drive Brokers Out of the Industry
    Sue Cuthbertson discusses the premiums that she had to pay to 
comply with the $75,000 bond requirement. She explains that she used to 
pay $900 per year for her broker bond and she now has to pay $3,500 per 
year for the $75,000 bond. She says that she could barely stay in 
business paying the $900.
    An anonymous commenter writing in support of the AIPBA application 
describes a similar experience with premiums for the $75,000 bond. The 
commenter explains that initially the premium quoted was $3,500. 
However, after the commenter shopped around for better rates, the same 
company quoted the commenter a more favorable premium of $1,300.

Specific Comments by Opponents of AIPBA's Application

Protection of the General Public's, Shippers' and Carriers' Financial 
Interests
    OOIDA believes that the $75,000 bond requirement helps to increase 
carriers' comfort in dealing with brokers they do not know and as such 
helps promote efficiency in the marketplace. According to OOIDA:

    ``Many of OOIDA's members are small business men and women who 
operate under their own federal operating authority and rely upon 
brokers to find freight to meet their business goals. Part of the 
efficiency of the current transportation marketplace is that brokers 
match motor carriers available to haul freight and shippers needing 
to move freight--parties who do not have an ongoing relationship, 
but who might make mutually beneficial connections on a load by load 
basis. This efficiency in the marketplace is increased greatly when 
motor carriers feel comfortable taking loads from brokers who they 
do [not] know (apparent omission in original). By securing the debts 
of brokers to the motor carrier, the federal broker bond or trust is 
intended to give motor carriers confidence that they will be paid 
when they are doing business with a broker they do not know.''

    OOIDA also argues that ``raising the bond or trust amount to 
$75,000 is intended to reduce harm caused by undercapitalized brokers 
who steal transportation service from motor carriers--the protected 
parties under the broker bond or trust statute . . . The $10,000 bond 
or trust was simply not sufficient to serve its intended purpose--to 
protect the motor carriers from non-payment by brokers.'' OOIDA also 
comments on the connection between the new $75,000 financial 
responsibility requirement and the National Transportation Policy (NTP) 
at 49 U.S.C. 13101. According to OOIDA, ``[b]y this statute, Congress 
burnished the national transportation goals of encouraging `sound 
economic conditions in transportation, including sound economic 
conditions among carriers;' 49 U.S.C. 13101(a)(1)(C), and acted to 
promote efficient transportation and to enable efficient and well-
managed carriers to . . . maintain fair wages and working conditions. 
Sections 13101(a)(2)(B)&(F).''
    Stuart Looney states:

    ``The purpose for requiring the posting of a bond is well 
established as furthering protection to the general public. The 
public is well served with this requirement as freight brokering is 
an easy entry undertaking and is fraught with many thinly 
capitalized and reasonably unprofessional participants.''


[[Page 17145]]


    The Surety & Fidelity Association of America (SFAA) believes a bond 
requirement of less than $75,000 would deprive shippers and carriers of 
the additional protection that Congress thought was necessary. 
According to SFAA ``the intent of the bond is to protect shippers and 
motor carriers . . . There are a number of cases in which the $10,000 
bond was not sufficient to pay all claims in the full amount . . . .'' 
SFAA cited multiple cases for its proposition.
    SFAA also argues that the surety bond:

``. . . protects the public interest by ensuring that FMCSA licenses 
are provided to qualified, well-capitalized brokers and freight 
forwarders . . . While claims handling is a critical function of the 
surety, another equally critical function is the surety's 
prequalification of a principal before the surety will write a bond. 
A surety will review the capabilities and financial strength of 
bonds applicants and provide bonds only to those entities that the 
surety has determined are capable of performing the underlying 
obligation . . . The bond provides financial protection to shippers 
and carriers, which serves to reduce costs in the long run by 
eliminating the need for a carrier or shipper to include the risk of 
nonpayment in its pricing.''

    The Transportation Intermediaries Association (TIA) indicates that 
eliminating the bond requirement is ``not acceptable'' to shippers or 
carriers. According to TIA, 2 major trucking organizations, the 
American Trucking Associations (ATA) and OOIDA have supported 
increasing the bond well above the new $75,000 amount. According to 
TIA, in a 2009 letter, ``ATA cited a study they conducted indicating 
that only 13 percent of carriers' claims against brokers were satisfied 
by the $10,000 bond.'' According to TIA, in recent years, its members 
have seen shippers demand $100,000 bonds to exclusively protect one 
shipper.
    Werner Enterprises, Inc. (Werner) argues that ``[t]he eroded value 
of the bond since it was last adjusted to $10,000 in 1977'' means 
``there is essentially no real security for broker misconduct.''
    Veles Logistics Inc. (Veles), which describes itself as a ``small 
group of owner-operators,'' believes the $75,000 bond will help to get 
rid of ``unstable unsafe financially weak and fraudulent brokers.'' 
Veles also believes the new bond requirement will increase the prices 
of loads by eliminating ``third and fourth and fifth resellers out of 
the freight moving chain.''
    Scott Housely argues:

    ``The brokerage limit as it stand[s] at $75,000.00 addresses a 
larger problem of unethical brokers who have not invested in the 
industry and don't intend to. Carriers in the past had little 
recourse in collecting bad debt from brokers or the shippers that 
they worked for due to the transient nature of many brokers. The 
limit as it stands does not [impede] any good brokers and enhances 
the relationship with the asset based carriers who are the backbone 
of the entire system. Please keep the current rule in place.''

Granting the Exemption Would Eliminate the Bond Requirement
    OOIDA expresses concern that if FMCSA granted AIPBA's request, the 
Agency would not have the discretion to return to the $10,000 bond 
limit; the Agency would have to allow brokers to operate without having 
a bond. OOIDA argues:

    ``The application would have the effect of permitting all 
brokers to operate without a broker bond or trust of any amount. 
When Congress enacted a $75,000 bond or trust statute, it repealed 
the $10,000 bond or trust statute. AIPBA's requested exemption would 
not reenact the $10,000 bond or trust requirement; it would exempt 
all property brokers from the requirement to carry any bond or 
trust. The statute found at 49 U.S.C. 13541 only permits FMCSA to 
grant exemptions from certain statutory requirements. It does not 
permit FMCSA to amend or revise applicable statutes. FMCSA has no 
power to institute a bond or trust requirement of any amount other 
than the statutorily set $75,000 amount. The goal of AIPBA's 
application, the creation of a broker industry with no bond or trust 
protecting the motor carrier industry, would completely subvert 
congressional intent.''

Costs of the Bond are Reasonable
    Werner states:

    ``The bond cost is a problem for some brokers for good reason. A 
bond such as this which is designed to guaranty the integrity and 
ability of a party to respond for their failures to another party is 
priced not only upon the total exposure of the company writing the 
bond but also upon the financial strength of the party being bonded. 
Our experience was that the cost of our $10,000 bond was $77 per 
year which increased to $338 for a $75,000 bond. The cost increase 
is not significant. Companies that are experiencing higher costs may 
be the companies for whom the shippers and motor carriers need 
protection.''

    TIA states:

    It is ironic that those making the argument to eliminate the 
bond increase because some brokers and forwarders cannot afford it, 
actually make the case for the higher bond. Congress determined that 
companies should not handle other people's money if they cannot 
afford to protect it. Broker and forwarder bonds are available in 
the marketplace today for less than $6,000 per year.

    TIA argues that when the cost for the bond is spread over an 
average of 5 loads per day, the bond premium works out to be less than 
$5.00 per load.

FMCSA Decision

    FMCSA has considered AIPBA's exemption request and all of the 
comments received, including AIPBA's subsequent comments, and FMCSA 
denies the request. FMCSA does not have the authority to disregard 
Congress's directive in the revised statutory provision by exempting 
all property brokers and freight forwarders from the bond requirement. 
Essentially, AIPBA's opposition to the increase in the bond amount is a 
challenge to Congress's judgment that the increase is necessary and 
appropriate, indeed in the public interest.
    Furthermore, even if the Agency had the authority to grant AIPBA's 
exemption application, AIPBA's request does not meet the three part 
statutory test in 49 U.S.C. 13541. Specifically, FMCSA finds that the 
$75,000 bond requirement at 49 U.S.C. 13906(b)-(c) is necessary to 
carry out the transportation policy of section 13101, and is needed to 
protect shippers from the abuse of market power. . . .'' \2\ Moreover, 
and most critically, an industry-wide exemption for brokers and freight 
forwarders from the $75,000 bond requirement is not in the public 
interest.
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    \2\ AIPBA does not argue that ``the transaction or service is of 
limited scope,'' 49 U.S.C. 13541(a)(2), nor do other commenters.
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The Scope of FMCSA's Exemption Authority

    In Section 32918 of MAP-21, Congress expressly mandated that all 
FMCSA regulated brokers and freight forwarders have a minimum of 
$75,000 in financial security. 49 U.S.C. 13906(b),(c). AIPBA asks the 
Agency to permanently exempt all property brokers and freight 
forwarders subject to section 32918's $75,000 bond requirement. FMCSA 
is denying AIPBA's exemption application because the Agency lacks the 
authority to issue the kind of blanket exemption that AIPBA seeks.
    While section 13541 gives the Agency broad authority to exempt 
certain persons or transactions, FMCSA does not have the authority to 
effectively nullify a statute by exempting the entire class of persons 
subject to the bond requirement, as AIPBA requests. 49 U.S.C. 13541(a); 
Terran ex rel. Terran v. Secretary of Health and Human Services, 195 
F.3d 1302, 1312 (Fed. Cir. 1999) (``The Constitution does not authorize 
members of the executive branch to enact, amend, or repeal 
statutes.''). AIPBA's request would

[[Page 17146]]

amount to a usurpation of a congressional mandate. Therefore, because 
the Agency lacks the authority to grant AIPBA's blanket exemption, the 
Agency is denying AIPBA's exemption application.

Public Interest

    Even if FMCSA had the authority to grant AIPBA's exemption 
application, a blanket exemption covering all brokers and freight 
forwarders is not in the public interest. ``Congress is presumed to 
legislate in the public interest.'' Time Warner Entertainment Co. L.P. 
v. F.C.C., 810 F.Supp. 1302, 1304 n.6 (D.D.C. 1992). As discussed 
above, granting an exemption to all brokers and freight forwarders 
would flout a clear and recent congressional directive and statement of 
the public interest. Further, numerous commenters have persuaded FMCSA 
that such an exemption is not in the public interest.
    First, FMCSA finds that granting AIPBA's request would undermine 
the purpose of the bond requirement--the protection of shippers and 
motor carriers that utilize brokers and freight forwarders as third 
party intermediaries. FMCSA's predecessor, the Interstate Commerce 
Commission (ICC), very clearly stated that `` `[t]he legislative 
history . . . clearly reveals that the primary purpose of Congress in 
regulating motor transportation brokers is to protect carriers and the 
traveling and shipping public against dishonest and financially 
unstable middlemen in the transportation industry.' '' Clarification of 
Insurance Regulation, 3 I.C.C.2d 689, 692 (1987)(quoting Carla Ticket 
Service, Inc., Broker Application, 94 M.C.C. 579, 580 (1964)).
    According to OOIDA, ``[t]he $10,000 bond or trust was simply not 
sufficient to serve its intended purpose--to protect the motor carriers 
from non-payment by brokers.'' And, as SFAA notes, ``the intent of the 
bond is to protect shippers and motor carriers. A bond in a lesser 
amount would deprive shippers and carriers of the additional protection 
that Congress thought was necessary. There are a number of cases in 
which the $10,000 bond was not sufficient to pay all claims in the full 
amount. . . .'' Moreover, according to TIA, in 2009, ``ATA cited a 
study they conducted indicating that only 13 percent of carriers' 
claims against brokers were satisfied by the $10,000 bond.'' This 
unanimity of input from members of the three industries most affected 
by the $75,000 requirement (transportation intermediaries, motor 
carriers and the surety bond industry) is noteworthy. Given that the 
purpose of the financial security requirement is to protect shippers 
and motor carriers, and the widespread view that the previous $10,000 
requirement \3\ was deficient in performing that function, it would not 
serve the public interest to grant AIPBA's requested exemption. FMCSA 
will not perpetuate, through the grant of an exemption, the pre-MAP-21 
status quo of shippers and motor carriers not being able to collect 
from financially insolvent brokers. Neither AIPBA nor any of the 
commenters that supported its request have shown how the public 
interest in protecting shippers and motor carriers would be served by 
granting the requested exemption.
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    \3\ FMCSA, by regulation, raised the bond requirement to $25,000 
for household goods (HHG) brokers in 2010. 49 CFR 387.307 (2012). 
Pursuant to regulation, as of October 1, 2013, all FMCSA regulated 
brokers and freight forwarders (HHG and non-HHG) are required to 
have $75,000 in financial security. 49 CFR 387.307(a) (brokers); 49 
CFR 387.403(c)(freight forwarders).
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    On the other hand, in its exemption application, AIPBA argues that 
the $75,000 broker surety bond amount is ``not in the public 
interest.'' AIPBA argues that the $75,000 broker bond would:

. . . cause a significant increase in consumer prices once the 
supply of property brokers is drastically reduced . . . In addition, 
the high amount of the broker bond will not only cause existing 
small and mid-size property brokers to leave the marketplace, but 
will also serve as a barrier to entry by other property brokers . . 
. The statutory loss of broker licenses on October 1, without 
further warning, will cause chaos in the trucking and shipping 
industry, and will cause thousands of brokers to lose their 
livelihood on October 1, 2013, a date now less than 60 days away. 
This will result in an immediate loss of jobs for these brokers and 
the agents they employ. It will also cause significant supply chain 
disruptions. Such a scenario is not in the public interest.

    In its January 22, 2014, comments in response to FMCSA's Federal 
Register Notice in this proceeding, AIPBA states ``[w]ith regard to the 
public interest . . . a lack of competition will require shippers to 
pay more for transportation services.'' AIPBA also argues that ``it is 
in the public interest to allow open competition, as the public 
benefits from lower consumer prices and increased employment. A larger 
pool of property brokers provides more competition and better access to 
brokers for shippers, which reduces the overall prices of products to 
consumers.''
    FMCSA acknowledges that the number of FMCSA-registered brokers and 
freight forwarders declined after the $75,000 bond requirement went 
into effect on October 1, 2013. Between September 2013 and December 
2013, the number of freight forwarders with active authority dropped 
from 2,351 to 925. The number of freight forwarders then increased to 
1,208 by December 2014. During this same period, the number of active 
brokers dropped from 21,375 to 13,839, and then increased to 15,471 in 
December 2014. However, AIPBA has provided no proof of a causal 
connection between the broker license revocations and an adverse impact 
on consumer prices or an adverse impact on rates for truckers.\4\
---------------------------------------------------------------------------

    \4\ In late-filed comments, James P. Lamb, AIPBA's president, 
alleged that the broker bond increase in MAP-21 ``caused 9,800 
intermediaries to lose their licenses, first time jobless claims 
then shot up, consumer prices are on the increase, and truckers' 
rates are down for all equipment types. . . .''
---------------------------------------------------------------------------

    Moreover, even if AIPBA had shown that the $75,000 requirement 
caused all of the consequences it alleges, it has not focused on the 
key public interest implicated in the broker bond--the protection of 
motor carriers and shippers. It has not provided, nor have we 
discerned, any evidence that shippers or motor carriers would be 
adequately protected by the pre-MAP-21 bond requirement.

Abuse of Market Power

    In its exemption application, AIPBA asserts that ``[t]he $75,000 
broker surety bond amount is not necessary to protect shippers from the 
abuse of market power.'' To the contrary, AIPBA asserts that 
``[e]xemption from the increased broker amount will protect shippers 
from an abuse of market power. The unnecessarily high $75,000 broker 
bond requirement will cause the majority of property brokers to leave 
the marketplace, which will expose shippers to abuses of market power 
by the few large property brokers able to stay in business.'' In its 
subsequent comments, AIPBA reiterates its assertion that the new 
``minimum financial security is not necessary to protect shippers from 
abuse of market power.'' AIPBA argues that ``the new minimum security 
amount is the direct result of collusion to abuse market power. The 
exemption would help stop the loss of property brokers and provide more 
options for shippers, which would protect shippers.'' Other commenters 
did not address the abuse of market power.
    Based on the record before it, FMCSA cannot find that application 
of the $75,000 broker/freight forwarder bond requirement under 49 
U.S.C. 13906(b),(c) ``is not needed to protect shippers from the abuse 
of market power. . . .'' 49 U.S.C. 13541(a)(2). While AIPBA 
hypothesizes that a smaller brokerage industry will abuse its market 
power with regard to shippers, it

[[Page 17147]]

provides no evidence outlining such abuse. Moreover, it provides no 
evidence that the new $75,000 bond requirement is not required to 
protect against such abuse of market power. Without any evidence, FMCSA 
will not exempt an entire industry from a clearly articulated 
congressional directive to raise the broker and freight forwarder 
financial responsibility requirements.

National Transportation Policy (NTP)

    Finally, in its application, AIPBA argues that the $75,000 bond 
requirement is contrary to the transportation policy of 49 U.S.C. 
13101, because it violates the federal government's policy to 
``encourage fair competition, and reasonable rates for transportation 
by motor carriers of property'' and to ``allow a variety of quality and 
price options to meet changing market demands and the diverse 
requirements of the shipping and traveling public. . . .'' 49 U.S.C. 
13101(a)(2)(A), (D). AIPBA argues that the new broker bond amount 
``will likely result in a loss of tens of thousands of jobs and higher 
consumer prices as a matter of supply and demand.'' Further, according 
to AIPBA, ``per Kevin Reid of the National Association for Minority 
Truckers, the anti-competitive effects of the new broker bond 
requirement will detrimentally affect the participation of minorities 
in the motor carrier system, which is another violation of the 
transportation policy.''
    In its docket comments in this proceeding, AIPBA argues that ``a 
$75,000 bond to protect carriers is not necessary to implement the 
national transportation policy because there is no shipper bond to 
protect carriers when they receive loads without the involvement of an 
intermediary.'' Further, AIPBA argues that ``enforcement of the new 
financial security minimum is contrary to the national transportation 
policy of 49 U.S.C. 13101 because it restricts opportunity, competition 
and reasonable rates.''
    On the other hand, with regard to the National Transportation 
Policy (NTP), OOIDA argues that Congress's new $75,000 requirement 
``burnished the national transportation goals of encouraging `sound 
economic conditions in transportation, including sound economic 
conditions among carriers;' 49 U.S.C. 13101(a)(1)(C), and acted to 
promote efficient transportation and to enable efficient and well-
managed carriers to . . . maintain fair wages and working conditions. 
Sections 13101(a)(2)(B)&(F).'' OOIDA's point is well taken.
    While AIPBA is correct that the NTP provides that the policy of the 
United States Government is to ``encourage fair competition, and 
reasonable rates for transportation by motor carriers of property,'' 
``allow a variety of quality and price options to meet changing market 
demands and the diverse requirements of the shipping and traveling 
public'', 49 U.S.C. 13101(a)(2)(A), (D), and ``promote greater 
participation by minorities in the motor carrier system,'' 49 U.S.C. 
3101(a)(2)(J), these are not the only elements of the NTP. Among other 
goals, the NTP provides that federal transportation policy includes 
``promot[ing] efficiency in the motor carrier transportation system . . 
. ,'' 49 U.S.C. 13101(a)(2)(B), meeting the needs of shippers, 49 
U.S.C. 13101(a)(2)(C), and ``enabl[ing] efficient and well-managed 
carriers to earn adequate profits, attract capital, and maintain fair 
wages and working conditions. . . .'' 49 U.S.C. 13101(a)(2)(F).
    FMCSA finds that application of the $75,000 broker and freight 
forwarder financial responsibility requirements under 49 U.S.C. 
13906(b), (c) is ``necessary to carry out the transportation policy of 
section 13101. . . .'' 49 U.S.C. 13541(a)(1). First, Congress set that 
amount as the minimum requirement and in so doing, must be presumed to 
have acted in a manner consistent with the NTP. Second, as OOIDA, TIA 
and SFAA have shown, the previous $10,000 bond was inadequate in the 
event of broker financial problems. In such instances, both shippers 
and motor carriers faced losses. Accordingly, applying the new $75,000 
bond amount is necessary to meet the ``needs of shippers,'' 49 U.S.C. 
13101(a)(2)(C), and to allow motor carriers to ``earn adequate profits 
[and] attract capital,'' 49 U.S.C. 13101(a)(2)(F), as directed by the 
NTP.
    Moreover, AIPBA has not shown why applying the new $75,000 
requirement is not necessary to carry out those provisions of the NTP. 
FMCSA does not believe that AIPBA has provided evidence that there has 
been a decrease in motor carrier competition or an increase in shipping 
rates due to the implementation of the $75,000 bond requirement. Indeed 
at p. 5 of their docket comments, AIPBA admits that rates have actually 
decreased. Further, aside from an unsubstantiated projection, AIPBA 
makes no showing that the new $75,000 requirement will undermine the 
NTP's goal of ``promot[ing] greater participation by minorities in the 
motor carrier system. . . .'' 49 U.S.C. 13101(a)(2)(J).
    FMCSA does not find that the $75,000 financial responsibility 
requirement for brokers/freight forwarders is ``not necessary to carry 
out the transportation policy of section 13101. . . .'' 49 U.S.C. 
13541(a)(1). Nor does FMCSA find that continued regulation under 
section 13906(b), (c) ``is not needed to protect shippers from the 
abuse of market power'' or that the transaction or service at issue is 
of ``limited scope. . . .'' 49 U.S.C. 13541(a)(2). Finally, granting 
the exemption requested by AIPBA is not in the public interest. 49 
U.S.C. 13541(a)(3). Accordingly, AIBPA's request is denied.

    Issued on: March 25, 2015.
T.F. Scott Darling, III,
Chief Counsel.
[FR Doc. 2015-07353 Filed 3-30-15; 8:45 am]
BILLING CODE 4910-EX-P


