Operating authority is not just for common carriers. Freight brokers and freight forwarders who deal with loads in or into the U.S. are also required to register with the Federal Motor Carrier Safety...
Operating authority is not just for common carriers. Freight brokers and freight forwarders who deal with loads in or into the U.S. are also required to register with the Federal Motor Carrier Safety Administration (FMCSA) by filing an application for operating authority and complying with applicable federal law.
The FMCSA defines a broker as “a person who arranges, or offers to arrange, for the transportation of property by an authorized motor carrier.”
Brokers do not assume responsibility for the cargo and normally do not take possession of the cargo.
A freight forwarder is defined as “a company that provides transportation of property, for compensation, in interstate commerce.
In the ordinary course of business it:
(1) performs or provides for the assembly, consolidation, break-bulk and distribution of shipments;
(2) assumes responsibility for transporting the cargo from the place where it was received to its destination; and
(3) uses a carrier subject to FMCSA jurisdiction.”
Load brokerage and forwarding can be accomplished without investment into transportation equipment, and it can be accomplished from Canada without any physical entry of the broker or forwarder into the United States. One may reasonably think that the scope of FMCSA regulations do not extend to a business that is domiciled in Canada, but keep in mind that it is the movement of goods in the U.S. that triggers FMCSA jurisdiction, not the location from which the broker or forwarder is operating.
There is no need to establish a U.S. corporation for purposes of registration.
A Canadian company can be the applicant for broker or freight forwarder operating authority, just like the numerous Canadian motor carriers who carry U.S. common carrier operating authority to engage in international transportation.
The eligibility standards for operating authority are not onerous. The standard for broker is the same as for common carriers, namely that “the applicant is fit, willing and able to perform the involved operations and to comply with all applicable statutory and regulatory provisions.” Applications for operating authority can only be opposed on the grounds that the applicant is not fit due to noncompliance with applicable financial responsibility or safety fitness requirements.
Freight forwarders, like household goods carriers, are subject to the additional requirements that the transportation to be provided will be consistent with the public interest and the “national transportation policy” which promotes efficient, competitive markets and safe, adequate, economical, and efficient transportation.
An applicant can have more than one type of authority, and the FMCSA filing fee depends on the number of authorities being requested.
An applicant may choose several types of authorities on one application form (e.g., common carrier and broker). The FMCSA filing fee is $300 for each type of authority.
Brokers and freight forwarders must carry $10,000 in cargo liability insurance, and freight forwarders are subject to the same public liability insurance requirements as common carriers. All applicants for operating authority must also designate “process agents” in each state who can accept legal papers on behalf of the applicant.
There are many service providers in the industry who can assist with the application process and post-filing compliance requirements.
Brokers have an additional statutory requirement of recordkeeping.
The FMCSA regulations require a broker to maintain the following information for at least three years:
* The name and address of the consignor;
* The name, address, and registration number of the originating motor carrier;
* The bill of lading or freight bill number;
* The amount of compensation received by the broker for the brokerage service performed and the name of the payer;
* A description of any non-brokerage service performed in connection with each shipment or other activity, the amount of compensation received for the service, and the name of the payer; and
* The amount of any freight charges collected by the broker and the date of payment to the carrier.
Many Canadian carriers engage in brokerage or freight forwarding activities as a secondary line of business.
Don’t overlook the U.S. laws relating to operating authority.
– Daniel Joyce can be reached at Hirsch and Joyce, Attorneys at Law, at 716-564-2727.
Want more information?
More information on doing business in the U.S. is available online. See Border Bound II, our second editorial supplement on the latest security regulations, available on www.trucknews.com.