The FMCSA (Federal Motor Carrier Safety Administration) revised its regulations about the financial responsibility of a property broker and freight forwarder.
Effective January 16, 2024, the Final Rule outlines five regulatory areas relating to the financial responsibility of a property broker and freight forwarder.
- Assets Readily Available. Assets readily available are required “to pay claims without resort to personal guarantees or collection of pledged accounts receivable.” Assets readily available are defined as stable in value and can be liquidated within 7 calendar days, thus providing payment to a BMC-85 trust. The list includes but is not limited to, cash, ILCs issued by the FDIC or NCUA, and treasury bonds. Unacceptable asset types include but are not limited to, real estate, stocks, bonds, and other securities.
- Suspension of Broker/Freight Forwarder Operating Authority. A broker or freight forwarder will be notified of suspension if the available financial security falls below $75,000 and the broker or freight forwarder does not refill funds within 7 calendar days after the FMCSA notification. As explained in the notice, “a broker’s or freight forwarder’s ‘available financial security’ may fall below $75,000 because a broker or freight forwarder consents to a drawdown, or if a broker or freight forwarder does not respond to a valid notice of claim from a surety or trust provider, or if a claim against the broker or freight forwarder is converted to a judgment.”
- Surety or trust responsibilities of a broker/freight forwarder financial failure or insolvency. If a broker or freight forwarder is going through financial failure or insolvency, and a surety or trustee finds out, they are obligated to notify FMCSA and begin the cancelation process of the financial responsibility. FMCSA will then publish these findings with the FMCSA Register. The term “financial failure or insolvency,” according to the final ruling from the FMCSA, is defined as “any payment made or other default pursuant to § 387.307(e)(1), the regulatory provision that addresses the situations under which a broker or freight forwarder’s operating authority may be immediately suspended, which the broker or freight forwarder does not cure in accordance with § 387.307(e)(5) or (6).”
- Enforcement Authority. According to FMCSA’s requirement in MAP-21, implementation of a suspension of a surety or trust fund provider’s authority is allowable in certain circumstances. The process begins when FMCSA provides notice of the suspension to the surety/trust fund provider. The surety/trust fund provider then has 30 calendar days to respond before a final decision is made.
- Trust Funds for BMC-85 Filings Eligibility. Loan and financial companies have been removed from the list of providers eligible to serve as BMC-85 trustees. This type of institution “is not subject to the rigorous Federal regulations applicable to chartered depository institutions or to the state regulations applicable to insurance companies,” according to the FMCSA Final Rule.
Compliance to the provisions listed above will be required for brokers, surety providers, and financial institutions starting January 16, 2024. View the complete and Final Rule by FMCSA to stay in compliance.
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