Fighting Fraud in Transportation

‍There are legal risks of not separating carrier and brokerage operations when both reside under the same roof.

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‍The main purpose of MAP-21 is to prohibit motor carriers from brokering freight, and brokers from providing motor carrier services. The intent is to clarify that motor carriers need a separate broker authority to LEGALLY broker freight. The sole purpose is to prevent carriers and brokers from illegally double brokering freight to unsafe carriers keeping them in business.

• 32915 – Requires anyone acting as a broker to register and obtain separate authority.-  A motor carrier may not broker transportation services unless the motor carrier has registered separately as a broker or forwarder.-  A motor carrier registered as a freight forwarder or broker may only provide transportation with vehicles owned by the carrier, or through interchange agreements (IF the originating carrier physically transports the shipment at some point and retains liability for the cargo and payment of the interchange carrier).-  A motor carrier may not arrange transportation unless the carrier has obtained separate registration as a forwarder or broker.
• 32916 – Requires the broker or forwarder to have an executive or officer with 3 years of experience in brokerage services, or provide the Secretary of Transportation with satisfactory evidence of the individuals’ knowledge.-  A broker may not provide transportation as a carrier unless it has registered separately as a carrier.
• 32918 – $75,000 bond requirement.
• 32919 – Unlawful brokerage activities.-  A person may provide brokerage services as a broker only if that person is registered and provided a satisfactory bond. Violation is a $10,000 fine and unlimited liability damages.-  Carriers may file an OP-1 to obtain broker authority, listing their DOT number, but leave the MC number blank, and the FMCSA will assign a separate MC registration number to the brokering authority at a later date for those who obtain carrier and broker authority under the same name.-  Those who choose to engage in brokering services without operating authority will be liable for penalties up to $10,000 and liable to pay valid claims to third parties regardless of the amount.

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Below is a general description of each section contained within this law: On September 5, 2013, the FMCSA issued Guidance on MAP-21 requirements related to registration and financial security for brokers.

1. Risk of $10,000 penalties – The FMCSA has increased the staff responsible for enforcing the MAP-21 Act. They are constantly monitoring training standards and verifying the $75,000 bond. With increased monitoring, the likelihood of being penalized with the $10,000 fine for not having separate brokerage registration increases.
2. Risk for accidents not caused by the brokering carrier – Without separate brokerage authority, a carrier opens itself up for liability claims and negligent hiring claims, without the protection associated with brokering. Without a separate brokerage authority, a carrier can be held liable for any accidents caused by the brokering carrier. 
3. Risk of unlimited liability for cargo damages – Carriers with separate brokerage authority are exempt from cargo liability under the Carmack Amendment.
4. Risk of non-coverage under insurance policies – If a carrier brokers or re-brokers loads but does not have separate brokerage authority, it is possible that a carrier’s liability insurance coverage may not provide coverage for brokering and any claimed loss, for either cargo or personal injury. Should the carrier fail to secure the correct liability insurance coverage, the brokering carrier could be held liable for any losses because it accepted responsibility for the shipment.

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To avoid putting your business at risk, it’s imperative, if you intend to have both a carrier and a brokerage authority, to keep the entities completely separate! Register for two separate MC Authorities, one as a brokerage and one as a carrier. If you’re interested in learning more about how Denim can help grow your credit and help build your business, we’d love to talk.

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The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.