Who says Congress is too distracted with the economy, elections and pressing foreign policy issues to get anything done domestically this year? Defying the predictions of many political and industry commentators, Congress passed the two-year Moving Ahead for Progress in the 21st Century Act (MAP-21) bill on June 29th, which President Obama signed into law on July 6th. MAP-21 replaces the Safe, Accountable, Flexible, and Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), which expired in September 2009, after Congress had passed a long series of temporary budgeting measures to keep the wheels of American commerce rolling.
MAP-21 is extremely broad, its eight separate divisions encompassing everything from funding of highway improvement programs to distribution of funds collected at seaports. It is a refreshing adoption of compromised positions espoused by trade associations representing most segments of the transportation industry. It was time for a legislation to catch up with industry and the times; MAP-21 does a respectable job doing so. This article reviews points bearing most significantly on freight transportation.
High on the list of freight related provisions is MAP-21’s National Freight Strategic Plan, which coordinates and spurs on freight strategies and activities by advisory committees on the state level. The U.S. Department of Transportation (USDOT) will establish a two-part National Freight Network, one “primary,” the other “rural.” The Primary Freight Network addresses improvements in the country’s most freight-crucial roadways, and will be the subject of state incentives aimed at rendering freight movement more efficient and cost effective. USDOT may notch up 3,000 miles over the existing 27,000 within the national network (although, disappointingly enough, the Primary Freight Network doesn’t include rail trackage). Various federal surface transportation programs will be consolidated in this context.
States will undertake more particularized efforts within the Rural aspect of the National Freight Strategic Plan. USDOT will establish performance measures, likely for such things as travel speeds, delays, and intermodal connections, which the states will apply and report on. Info about significant bottlenecks and other problems will be digested and incorporated into the national plan.
Most would agree that the omission within MAP-21 of any immediate increase in federal tax on diesel and gasoline is good news. Rates will stay the same at least through September 2016. Revenue from fuel tax will go into a Highway Trust Fund, which is the primary source of funding for surface transportation projects. Funding shortfalls caused Congress to divert some $35 billion from the general treasury because of increased fuel efficiency and recession, and the new law grants an additional $18.8 billion from general treasury to the trust fund. We have to keep funding in the pipeline.
The bad news for shippers and truckers is that lawmakers declined to increase the maximum size and weight limits for trucks operating on interstate highways. An increase from 80,000 to 97,000 pounds had been proposed subject to a six-axle caveat, but this never made it out of committee.
Affecting the nation’s seaports and related services, MAP-21 takes steps toward applying Harbor Maintenance Tax (HMT) funds collected over the years from cargo interests shipping freight into the U.S. by ocean carriage. HMT issues have been the subject of Congressional and Federal Maritime Commission attention in the last couple years due to concern that foreign ocean shippers and U.S. importers have been diverting their inbounds to go through Canadian ports so as to avoid the tax. See May 2012 Legal Lookout article. Those seeking to amend or abolish HMT point to some $6.4 billion in collected funds that have been sitting in an unallocated trust without application to harbor maintenance or any other purpose. This aspect of MAP-21 is intended to get the funds applied, hopefully with recognition to the ports that collect the Lion’s Share of them.
Particularly significant aspects of MAP-21 addressing motor carrier operations are found within its Division C, entitled the Commercial Motor Vehicle Safety Enhancement Act of 2012. Generally, this part of MAP-21 puts new teeth into USDOT’s regs, with harsher penalties for noncompliance, and sets forth a series of trucking safety provisions (including their enforcement). USDOT registration information for licensed entities will become more easily available on the net. Notably, USDOT’s CSA program (Compliance, Safety, Accountability – see December 2009 Legal Lookout article) is left undisturbed, perhaps with the understanding that it should be fought out on another battlefield.
Here are a few other particularly important developments under Division C:
Increased Surface Transportation Intermediary Bonding Requirement
Among the most controversial points, especially from the perspective of smaller trucking industry players, is the new law’s significant bump of the minimum surface broker/forwarder surety bond to $75,000 (up from the current $10,000, but actually down from the originally proposed $100,000),which becomes effective in one year. This figure places land-based brokers and forwarders on par with their ocean transportation intermediary cousins with respect to financial responsibility. The higher bonding requirement is said to take into account economic realities such as inflation, the level of potential exposure intermediaries might face for lost/damaged freight, and the need for uniform intermodal financial responsibility. It also responds to observations that alarming numbers of middlemen simply fold tent or go belly up in the face of high claims, leaving innocent shippers or carriers holding the bag.
Detractors argue that jumping up the bonding requirement seven fold within a year will run smaller industry players out of business (frequently, bonding companies require smaller brokers to collateralize the bond amount by ponying up cash). Some suggest that larger intermediaries designed, proposed and promoted the higher bonding, not out of concern about shippers’ rights or industry integrity, but simply to squash the little guys who attract significant levels of business. Litigation is already brewing over the issue. If this provision remains intact, USDOT will review the circumstances in six months, and every four years afterwards, to determine whether ill effects are resulting from higher bonding requirements.
Also, bonding companies will have to pay up when they’re supposed to (i.e., when the broker consents to, or a judgment is entered requiring, payment). If they don’t, and some apparently haven’t been, the bonding company will either have to give a satisfactory explanation within 30 days or pay a claimant’s attorneys’ fees.
Forwarders and Brokers Must Employ an Industry-Familiar Individual
In the Federal Maritime Commission-governed world of ocean transportation regulation, intermediaries must demonstrate a “qualified individual,” or “QI,” is on staff with a sufficiently high corporate position for the company to receive and maintain a license to operate. This ensures that someone within the company knows the shipping regs and accepted industry procedures, thereby keeping fly-by-night yahoos from doing business.
Now, surface transportation intermediaries will be subject to a similar requirement. USDOT registration requirements include the constant presence of an individual with at least three years trucking industry experience as an officer of the company.
Motor Carriers Must Have Broker Authority
The practice of interlining, which played a big role in the development of modern trucking regulation and the Carmack Amendment’s cargo liability regime, has received closer scrutiny in recent years. Motor carriers have long taken the liberty of rebooking freight for which they have accepted responsibility with other carriers which do the actual hauling. Oftentimes, shippers don’t even know who has their stuff, who lost or damaged it, or whom they have to pay.
Under Map-21, to broker freight like this, truckers will have to procure separate broker authority (subject to the same new bonding requirements). A transportation service provider will have to point out to its customers which had it’s wearing – trucker, broker, or forwarder – within each transaction by specifying the USDOT authority that governs its given task. This should make cargo claims and billing issues easier to discern (and adjudicate).
As with most comprehensive legislation addressing wide ranges of topics, MAP-21 has a lot of kinks that will need ironing out. That process probably will involve litigation on the administrative and judicial levels. Nonetheless, the new legislation’s modernization of the nation’s surface transportation infrastructure will benefit our system of interstate commerce in much needed ways.
Ref: Moving Ahead for Progress in the 21st Century Act, S 1813 ES, available at http://www.govtrack.us/congress/bills/112/s1813/text. Earlier Legal Lookout articles are available at http://www.forwarderlaw.com/library/index.php?category=16.
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