To be sure, another piece of good news is that apparently, having failed conspicuously in committee to convince enough of the Senators involved last year that a $100,000 surety requirement would not be beyond the reach of most of the nation’s small business brokerage operations, the TIA now has blown their credibility entirely through asserting a truly preposterous argument in support of that position:

As one might expect, the TIA's, Robert Voltmann is quoted in an online “Transport Topics” article dated 4 July 2011 wherein he allegedly "refuted the notion that the bill would put small brokers out of business". The TIA's official premise in such regards is that the only small business enterprises the proposed new $100,000 surety requirement

                       … will squeeze out are underfunded or undercapitalized

                        brokers [since]… A $100,000 bond to move DOD freight costs   

                        $1,500.  If you can’t afford $1,500 what right do you have

                        to collect someone else’s money?  You shouldn’t start a

                        brokerage if you don’t have proper capitalization [at least

                        $1,500?]…. 

(Click Here  for a copy of that on-line article).

Quite obviously, such a line of argument would only be valid if the verifiable underwriting risks characteristic of "a $100,000 bond to move DOD freight", the sole purpose for which would be  indemnification of a single particular "shipper", somehow were even remotely comparable to the verifiable underlying risks characteristic of a $100,000 surety instrument which specifically entails the indemnification of some unlimited number of unpaid "motor carriers", even to the extent that no collateral or other category of “proper capitalization” for a brokerage operation beyond the ability to afford a mere $1,500 annual premium would be required.

As a concrete example of just how preposterous the TIA's official premise in support of that line of argument actually is, you only need to consider the following: (i) the fact that the specific language found in the introductory paragraphs of both the BMC-84 "Property Brokers Surity Bond” and the BMC-85 "Property Broker Trust Fund Agreement" forms expressly provides for the indemnification of both "motor carriers and shippers"; and (ii) the corresponding fact that during the year 2010 Pacific Financial Association, the nation’s leading provider of transportation surety instruments, processed more than 15,000 claims asserted against their BMC-85 filings by allegedly unpaid “motor carriers” and precisely three (3) asserted by “shippers”.

In other words, the relative underwriting risk characteristic of the indemnification of “shippers” (such as the DOD), as distinct from allegedly unpaid “motor carriers” may be assumed to be no less than 5,000 to 1.  That’s why, unlike a typical TIA member (such as C.H. Robinson), the vast majority of the current brokerage community never is going to find a legitimate surety provider willing to assume responsibility for what is virtually a blanket $100,000 letter of credit, an instrument applicable primarily to the payment of allegedly unsatisfied vendors and maintained for the express benefit of the entire regulated motor carrier industry, without $100,000 in hard collateral in the form of a cash deposit, letter of credit, or other immediately liquid assets above such a typical broker's receivable financing and other operational capitalization requirements.  In fact, the underwriting risk for a BMC-84 bonding company is significantly higher than that for a BMC-85 trustee even with a $10,000 instrument, a verifiable consideration even otherwise sophisticated ATA staff attorneys apparently fail to appreciate:

Remarkably, in an email addressed to the Association’s Chief Administrator, the ATA's Robert Digges actually supports the TIA's premise that the vast majority of small business brokers somehow would have no trouble convincing a BMC-84 bonding company underwriter to agree to an open ended  $100,000 guarantee of payment to "motor carriers" since, to quote Mr. Digges, "[t]he terms of the bond under subpart A ["of the new bill"] are left to be negotiated by the broker and surety" (Click Here for a copy of the email). We suggest that opportunities for fruitful “negotiations” to that particular end are going to be rare:

Significantly, quite apart from the unprecedented claims activity and exposure characteristic of both BMC-84s and BMC-85s referenced above, BMC-84 bonding companies alone are subject to a further ongoing responsibility in terms of their government mandated insurance reserves against which allegedly unpaid “motor carriers” could assert claims at any time within the statute of limitations for any jurisdiction which might be deemed appropriate.  Typically that would be up to six (6) years even after a BMC-84 filing had been cancelled and all the broker’s collateral had been refunded. In contrast, when a BMC-85 filing has been cancelled and all the brokers collateral has been refunded with no claims in prospect the trustee is off the hook. As a matter of fact, based on the Association’s research more than half of the brokers with BMC-85 filings chose such a collateralized trust instrument because the BMC-84 bonding companies they’d approached  had demanded full collateralization for even a $10,000 filing anyway.  Historically, as a direct result of the unpresidented claims activity such exposure is known to invite, the insurance industry has not been enthusiastic about this category of coverage, and insurance brokers and other producers regularly refer such business to Pacific Financial and other BMC-85 providers as a matter of course.

If you haven't joined yet, the Association still needs your membership in order to ensure a forum large enough to continue protesting this proposed increase effectively. The issues are clear. For example, just how forcing, say, 100 smaller brokers holding individual $10,000 bonds or trust agreements to sign up as agents for some larger broker holding a single $100,000 bond or trust agreement somehow is going to contribute to "fighting fraud in transportation", the inevitable consequence of a process entailing the wholesale elimination of most of the nation's small business brokerage operations, would tax anyone's imagination. The Association will continue to waive its $25 annual membership fee throughout 2011 in order to simplify enrollment procedures for this continuing emergency lobbying effort.

LOBBYING UPDATE - 1 August 2011

Accordingly, in order to follow up on the Association's previously well received pre-election lobbying efforts entailing hundreds of telephone, telefax, and email communications pertaining to Senate Bill 3483 with both Senate and House staff members, as well as with in-house attorneys and other representatives of the Small Business Association's Office of Advocacy, the Department of Justice's Antitrust Division, and various administrative units of the Federal Motor Carrier Safety Administration, you can be assured that  the Association's current staff and outside counsel are prepared to resume such concentrated efforts in the near future. To that end, we invite both your input and continued direct communication with appropriate elements of Congress and the administration.  Click Here for the Association's  "Previous Communications" occasioned by last years "unsuccessful" legislation, which includes a number of organic attachments material to the considerations still involved. 

NOT ALL BROKERS ARE THE SAME

As the Association continues to stress with respect to the proposed bonding requirement increase, those forms and procedures appropriate for large "third party logistics" providers, although widely regarded as the standard of the industry, are utterly inappropriate for small to medium-sized brokers. The reasons for this state of affairs, although uncomplicated, are not always appreciated:

While there's no question that all transportation brokers act as "independent contractors" with respect to bill of lading transactions, significant questions often arise (and always should be asked) as to the exact capacity in which such "independent contractors" actually serve in each particular instance. Forms and procedures establishing your brokerage as a common law "general contractor" somehow "hired" by shippers to "hire" motor carriers can cause significant problems for all concerned, including unwarranted cargo, BI & PD, workers compensation, and "double payment" liability for the shippers you serve. The right forms and procedures can prevent such problems without affecting your brokerage's day-to-day operations in any practical sense.

Transportation Brokers Service Association (the "Association" herein) is an Oregon Cooperative Corporation organized to qualify, secure, and otherwise facilitate a wide range of educational, legal, administrative, and financial services optimized for the vast majority of FMCSA licensed transportation brokers.  The affairs of the Association will be conducted strictly on a non-profit basis with the sole intention of benefiting its members.  Every member of the Association will be entitled to a full credit against the $25 annual membership fee in consideration for patronage of any Association certified vendor up to that amount within any calendar year. Click_Here for the Association's online "Application for Membership form and Click Here for a copy of the Association's "Corporate By-Laws".

CURRENT OPERATIONAL ARRANGEMENTS

Acting in response to the emergency lobbying effort referenced above, the Association is still in the process of enrolling and securing the input of numerous new members for which applications already have been requested. While an increase in the number of educational, legal, administrative, and financial service vendors under consideration for certification is anticipated as well, the development of new operational services will take second place to the emergency lobbying effort referenced above. In order to accommodate the Association's rapid increase in membership, for the time being all communications between the Association and current or prospective members will be conducted either electronically or through regular mail. The Association's email address is:

operations@transfinservice.com

and its initial physical address is:

Transportation Brokers Service Association

c/o  Transportation Management

706 E. Bell Rd., Ste. 102

Phoenix, AZ. 85022

(602) 424-1770, FAX (602) 424-1774

Check back periodically for further information and event postings.

CURRENTLY AVAILABLE SERVICES

In addition to the emergency lobbying effort, referenced above, the services currently available through the Association include a complete set of forms with corresponding instructions, draft transmittal letter language, and a comprehensive introduction, including a suggested "Brokered Bill of Lading - Short Form" drafted specifically for such applications, a specialized "Supplemental Delivery Receipt" intended to cure certain deficiencies in standard "inland marine" bill of lading language when considered from a broker's unique perspective, an optimum nine page "Broker - Carrier Master Agreement No. 2", and a simplified one page "Broker - Carrier Short Term Master Agreement".

For the time being, due to the increased interest in this offering, such material is available without further obligation to all licensed transportation brokers wishing to inquire upon entry of a valid MC Number below MC Number:

or upon receipt of a stamped pre-addressed "flat-rate" Priority Mail Envelope also bearing a valid MC Number next to the broker's business name. A series of one day seminars regarding the legal theories, practical applications, and other considerations material to the proper use of these forms will be scheduled just as soon as input from new members regarding appropriate times and locations may be solicited and calculated.