Document ID: FMCSA-2016-0102-0081
Agency: fmcsa
Document Type: Proposed Rule
Title: Broker and Freight Forwarder Financial Responsibility
Posted Date: 2023-01-05T05:00Z

[Federal Register Volume 88, Number 3 (Thursday, January 5, 2023)]
[Proposed Rules]
[Pages 830-854]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-28259]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

49 CFR Parts 386 and 387

[Docket No. FMCSA-2016-0102]
RIN 2126-AC10

Broker and Freight Forwarder Financial Responsibility

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), Department 
of Transportation (DOT).

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: FMCSA proposes the implementation of certain requirements 
under the Moving Ahead for Progress in the 21st Century Act (MAP-21). 
Previously, FMCSA implemented the MAP-21 requirement to increase the 
financial security amount for brokers from $25,000 to $75,000 for 
household brokers and from $10,000 to $75,000 for all other property 
brokers and, for the first time, established financial security 
requirements for freight forwarders. The agency proposes regulations in 
five separate areas: Assets readily available; immediate suspension of 
broker/freight forwarder operating authority; surety or trust 
responsibilities in cases of broker/freight forwarder financial failure 
or insolvency; enforcement authority; and entities eligible to provide 
trust funds for form BMC-85 trust fund filings.

DATES: Comments must be received on or before March 6, 2023.

ADDRESSES: You may submit comments identified by Docket Number FMCSA-
2016-0102 using any of the following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov/docket/FMCSA-2016-0102/document. Follow the online 
instructions for submitting comments.
     Mail: Dockets Operations, U.S. Department of 
Transportation, 1200 New Jersey Avenue SE, West Building, Ground Floor, 
Room W12-140, Washington, DC 20590-0001.
     Hand Delivery or Courier: Dockets Operations, U.S. 
Department of Transportation, 1200 New Jersey Avenue SE, West Building, 
Ground Floor, Room W12-140, Washington, DC

[[Page 831]]

20590-0001, between 9 a.m. and 5 p.m., Monday through Friday, except 
Federal holidays. To be sure someone is there to help you, please call 
(202) 366-9317 or (202) 366-9826 before visiting Dockets Operations.
     Fax: (202) 493-2251.

FOR FURTHER INFORMATION CONTACT: Mr. Jeffrey L. Secrist, Chief, 
Registration, Licensing, and Insurance Division, Office of 
Registration, FMCSA, 1200 New Jersey Avenue SE, Washington, DC 20590-
0001 or by phone at (202) 385-2367; [email protected]. If you 
have questions on viewing or submitting material to the docket, call 
Dockets Operations at (202) 366-9826.

SUPPLEMENTARY INFORMATION: FMCSA organizes this notice of proposed 
rulemaking (NPRM) as follows:

I. Public Participation and Request for Comments
    A. Submitting Comments
    B. Viewing Comments and Documents
    C. Privacy
    D. Comments on the Information Collection
II. Executive Summary
    A. Purpose and Summary of the Regulatory Action
    B. Summary of Major Provisions
    C. Costs and Benefits
III. Abbreviations
IV. Legal Basis
V. Background
VI. Comments on the Advance Notice of Proposed Rulemaking (ANPRM)
    A. Group Surety Bond and Group Trust Fund
    B. Assets Readily Available
    C. Immediate Suspension of Broker and Freight Forwarder 
Operating Authority
    D. Surety or Trust Responsibilities in Cases of Broker or 
Freight Forwarder Financial Failure or Insolvency
    E. Enforcement Authority
    F. Entities Eligible To Provide BMC-85 Trust Fund Filings
    G. Revisions to Forms BMC-84 and BMC-85
    H. Household Goods (HHG)
    I. Market's Ability To Address Broker/Freight Forwarder 
Noncompliance
    J. Comments on Impact of Regulatory Changes
    K. Miscellaneous Comments on the ANPRM
VII. Discussion of Proposed Rulemaking
VIII. Section-by-Section Analysis
IX. Regulatory Analyses
    A. Executive Order (E.O.) 12866 (Regulatory Planning and 
Review), E.O. 13563 (Improving Regulation and Regulatory Review), 
and DOT Regulatory Policies and Procedures
    B. Congressional Review Act
    C. Advance Notice of Proposed Rulemaking
    D. Regulatory Flexibility Act (Small Entities)
    E. Assistance for Small Entities
    F. Unfunded Mandates Reform Act of 1995
    G. Paperwork Reduction Act (Collection of Information)
    H. E.O. 13132 (Federalism)
    I. Privacy
    J. E.O. 13175 (Indian Tribal Governments)
    K. National Environmental Policy Act of 1969

I. Public Participation and Request for Comments

A. Submitting Comments

    If you submit a comment, please include the docket number for this 
NPRM (FMCSA-2016-0102), indicate the specific section of this document 
to which your comment applies, and provide a reason for each suggestion 
or recommendation. You may submit your comments and material online or 
by fax, mail, or hand delivery, but please use only one of these means. 
FMCSA recommends that you include your name and a mailing address, an 
email address, or a phone number in the body of your document so FMCSA 
can contact you if there are questions regarding your submission.
    To submit your comment online, go to https://www.regulations.gov/docket/FMCSA-2016-0102/document, click on this NPRM, click ``Comment,'' 
and type your comment into the text box on the following screen.
    If you submit your comments by mail or hand delivery, submit them 
in an unbound format, no larger than 8\1/2\ by 11 inches, suitable for 
copying and electronic filing. If you submit comments by mail and would 
like to know that they reached the facility, please enclose a stamped, 
self-addressed postcard or envelope.
    FMCSA will consider all comments and material received during the 
comment period.
Confidential Business Information (CBI)
    CBI is commercial or financial information that is both customarily 
and actually treated as private by its owner. Under the Freedom of 
Information Act (5 U.S.C. 552), CBI is exempt from public disclosure. 
If your comments responsive to the NPRM contain commercial or financial 
information that is customarily treated as private, that you actually 
treat as private, and that is relevant or responsive to the NPRM, it is 
important that you clearly designate the submitted comments as CBI. 
Please mark each page of your submission that constitutes CBI as 
``PROPIN'' to indicate it contains proprietary information. FMCSA will 
treat such marked submissions as confidential under the Freedom of 
Information Act, and they will not be placed in the public docket of 
the NPRM. Submissions containing CBI should be sent to Mr. Brian 
Dahlin, Chief, Regulatory Analysis Division, Office of Policy, FMCSA, 
1200 New Jersey Avenue SE, Washington, DC 20590-0001. Any comments 
FMCSA receives not specifically designated as CBI will be placed in the 
public docket for this rulemaking.

B. Viewing Comments and Documents

    To view any documents mentioned as being available in the docket, 
go to https://www.regulations.gov/docket/FMCSA-2016-0102/document and 
choose the document to review. To view comments, click this NPRM, then 
click ``Browse Comments.'' If you do not have access to the internet, 
you may view the docket online by visiting Dockets Operations in Room 
W12-140 on the ground floor of the DOT West Building, 1200 New Jersey 
Avenue SE, Washington, DC 20590-0001, between 9 a.m. and 5 p.m., Monday 
through Friday, except Federal holidays. To be sure someone is there to 
help you, please call (202) 366-9317 or (202) 366-9826 before visiting 
Dockets Operations.

C. Privacy

    DOT solicits comments from the public to better inform its 
regulatory process, in accordance with 5 U.S.C. 553(c). DOT posts these 
comments, without edit, including any personal information the 
commenter provides, to www.regulations.gov, as described in the system 
of records notice (DOT/ALL 14--Federal Docket Management System), which 
can be reviewed at https://www.govinfo.gov/content/pkg/FR-2008-01-17/pdf/E8-785.pdf.

D. Comments on the Information Collection

    Written comments and recommendations for the information collection 
discussed in this NPRM should be sent within 60 days of publication to 
www.reginfo.gov/public/do/PRAMain. Find this information collection by 
clicking the link that reads ``Currently under Review--Open for Public 
Comments'' or by entering Office of Management and Budget (OMB) 
information request control number 2126-0017 in the search bar and 
clicking on the last entry to reach the ``comment'' button.

II. Executive Summary

A. Purpose and Summary of the Regulatory Action

    FMCSA proposes modifications to broker and freight forwarder 
financial responsibility requirements.

B. Summary of Major Provisions

    This NPRM proposes modification in five regulatory areas.

[[Page 832]]

    Assets Readily Available. The NPRM proposes allowing brokers or 
freight forwarders to meet the MAP-21 requirement to have ``assets 
readily available'' by maintaining trusts that meet certain criteria, 
including that the assets can be liquidated within 7 calendar days of 
the event that triggers a payment from the trust, and that do not 
contain certain assets as specified in this NPRM.
    Immediate Suspension of Broker/Freight Forwarder Operating 
Authority. The NPRM proposes that ``available financial security'' 
falls below $75,000 when there is a drawdown on the broker or freight 
forwarder's surety bond or trust fund. This would happen when a broker 
or freight forwarder consents to a drawdown, or if the broker or 
freight forwarder does not respond to a valid notice of claim from the 
surety or trust provider, causing the provider to pay the claim, or if 
the claim against the broker or freight forwarder is converted to a 
judgment and the surety or trust provider pays the claim. FMCSA also 
proposes that, if a broker or freight forwarder does not replenish 
funds within 7 business days after notice by FMCSA, the agency will 
issue a notification of suspension of operating authority to the broker 
or freight forwarder.
    Surety or trust responsibilities in cases of broker/freight 
forwarder financial failure or insolvency. FMCSA proposes to define 
``financial failure or insolvency'' as bankruptcy filing or State 
insolvency filing. This proposal also requires that if the surety/
trustee is notified of any insolvency of the broker or freight 
forwarder, it must notify FMCSA and initiate cancelation of the 
financial responsibility. In addition, FMCSA proposes to publish a 
notice of failure in the FMCSA Register immediately.\1\
---------------------------------------------------------------------------

    \1\ The FMCSA Register is available at https://li-public.fmcsa.dot.gov/LIVIEW/pkg_menu.prc_menu.
---------------------------------------------------------------------------

    Enforcement Authority. FMCSA proposes that to implement MAP-21's 
requirement for suspension of a surety provider's authority, the agency 
would first provide notice of the suspension to the surety/trust fund 
provider, followed by 30 calendar days for the surety or trust fund 
provider to respond before a final Agency decision is issued. The 
agency also proposes to add penalties in 49 CFR part 386, appendix B, 
for violations of the new requirements.
    Entities Eligible To Provide Trust Funds for BMC-85 Filings. FMCSA 
proposes to remove the rule allowing loan and finance companies to 
serve as BMC-85 trustees.

C. Costs and Benefits

    Brokers and freight forwarders, surety bond and trust fund 
providers, and the Federal Government would incur costs for compliance 
and implementation. The quantified costs of the proposed rule include 
notification costs related to a drawdown on a surety bond or trust 
fund, and immediate suspension proceedings, FMCSA costs to hire new 
personnel, and costs associated with the development and maintenance of 
the BMC-84/85 Filing and Management Information Technology (IT) System. 
As shown in Table 1, FMCSA estimates that the 10-year cost of the 
proposed rule would total $5.4 million on an undiscounted basis, $3.8 
million discounted at 7 percent, and $4.6 million discounted at 3 
percent (all in 2020 dollars). The annualized cost of the rule would be 
$545,505 discounted at 7 percent and $542,343 at 3 percent. Ninety-
eight percent of the costs would be incurred by the Federal Government.

                                                        Table 1--Total Cost of the Proposed Rule
                                                                       [In 2020 $]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Undiscounted                                      Discounted
                                                      --------------------------------------------------------------------------------------------------
                         Year                            Brokers and       Financial
                                                           freight       responsibility    Federal govt.     Total \a\     Discounted at   Discounted at
                                                         forwarders        providers                                         7 percent       3 percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
2025.................................................          $2,600             $3,800        $691,900        $698,200        $652,600        $677,900
2026.................................................           2,800              4,100         512,000         518,900         453,200         489,100
2027.................................................           3,100              4,500         512,000         519,600         424,200         475,500
2028.................................................           3,400              4,900         512,100         520,400         397,000         462,400
2029.................................................           3,700              5,400         512,200         521,300         371,700         449,700
2030.................................................           4,000              5,900         512,300         522,200         348,000         437,300
2031.................................................           4,400              6,500         512,400         523,300         325,900         425,500
2032.................................................           4,800              7,100         512,500         524,400         305,200         414,000
2033.................................................           5,300              7,700         512,600         525,600         285,900         402,800
2034.................................................           5,800              8,500         512,700         527,000         267,900         392,100
                                                      --------------------------------------------------------------------------------------------------
    Total............................................          39,800             58,400       5,302,700       5,400,900       3,831,400       4,626,300
                                                      --------------------------------------------------------------------------------------------------
        Annualized...................................  ..............  .................  ..............  ..............         545,505         542,343
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Total cost values may not equal the sum of the components due to rounding (the totals shown in this column are the rounded sum of unrounded
  components).

    This proposed rule would result in benefits to motor carriers. 
FMCSA is aware that some brokers improperly choose to withhold payment 
to motor carriers for services rendered. Motor carriers can then submit 
claims to the financial responsibility provider in an attempt to 
receive payment. If the financial responsibility provider has received 
claims against an individual broker that exceed $75,000, the financial 
responsibility provider will often submit the claims to a court in an 
interpleader action \2\ to determine how to allocate the broker bond or 
trust fund. The interpleader process can be costly and time consuming 
for motor carriers, and generally results in motor carrier claims being 
paid pro rata, depending on the number of claims against the broker 
bond or trust fund. FMCSA

[[Page 833]]

believes that most brokers operate with integrity and uphold the 
contracts made with motor carriers and shippers. However, a minority of 
brokers with unscrupulous business practices can create unnecessary 
financial hardship for unsuspecting motor carriers.
---------------------------------------------------------------------------

    \2\ ``By definition, interpleader is a suit to determine a right 
to property held by a disinterested third party who is in doubt 
about ownership and who deposits the property with the court so that 
interested parties can litigate ownership.'' Scottrade, Inc. v. 
Davenport, No. CV-11-03-BLG-RFC, 2011 WL 153999, at *1 (D. Mont. 
Apr. 21, 2011).
---------------------------------------------------------------------------

    FMCSA is relying on available data from which to draw an estimated 
percentage of how many brokers fail to pay motor carriers. The Agency's 
best estimate is that approximately 1.3 percent of brokers 
(approximately 440 in 2022) would experience a drawdown on their surety 
bond or trust fund within a given year, with average claim amounts of 
approximately $1,700 per claim submitted. Of these brokers, 17 percent 
may receive total claims in excess of $75,000, potentially leading to 
interpleader proceedings. Because this data is limited in scope, FMCSA 
cannot quantify benefits resulting from this proposal. It is FMCSA's 
intent that the provisions in this rule, if finalized, would mitigate 
the need to initiate interpleader proceedings and alleviate the concern 
of broker non-payment of claims.

III. Abbreviations

ANPRM Advance Notice of Proposed Rulemaking
ATA American Trucking Associations
CSBS Conference of State Banking Supervisors
DOT Department of Transportation
E.O. Executive Order
FDIC Federal Deposit Insurance Corporation
FMC Federal Maritime Commission
FR Federal Register
HHG Household Goods
ILOC Irrevocable Letter of Credit
IT Information Technology
IRFA Initial Regulatory Flexibility Analysis
MAP-21 The Moving Ahead for Progress in the 21st Century Act
NPRM Notice of Proposed Rulemaking
NRSRO Nationally Recognized Statistical Rating Organization
OIRA Office of Information and Regulatory Affairs
OMB Office of Management and Budget
OOIDA Owner-Operator Independent Driver's Association
TIA Transportation Intermediaries Association
Treasury United States Department of the Treasury, Federal Insurance 
Office
UMRA The Unfunded Mandates Reform Act of 1995
U.S.C. United States Code

IV. Legal Basis for the Rulemaking

    In 2012, Congress enacted MAP-21 (Pub. L. 112-141, 126 Stat. 405, 
822), section 32918 which contained requirements for the financial 
security of brokers and freight forwarders in amendments to 49 U.S.C. 
13906(b) and (c). Section 32918(b) of MAP-21 (note to 49 U.S.C. 13906) 
directed the Secretary to issue regulations to implement and enforce 
the requirements under subsections (b) and (c) of section 13906. 
Authority to carry out and enforce these provisions has been delegated 
to the Administrator of FMCSA. (49 CFR 1.87(a)(5))

V. Background

    A ``broker'' is a ``person . . . that as a principal or agent 
sells, offers for sale, negotiates for, or holds itself out by 
solicitation, advertisement, or otherwise as selling, providing, or 
arranging for, transportation by motor carrier for compensation.'' 49 
U.S.C. 13102(2); see also 49 CFR 371.2(a)(FMCSA regulatory definition 
of ``Broker''). A ``freight forwarder'' is defined as ``a person 
holding itself out to the general public (other than as a pipeline, 
rail, motor, or water carrier) to provide transportation of property 
for compensation and in the ordinary course of its business'' (1) 
performs certain services including assembly, break-bulk or 
distribution services, (2) ``assumes responsibility for the 
transportation from the place of receipt to the place of destination'' 
and (3) ``uses for any part of the transportation a carrier'' such as a 
motor carrier. 49 U.S.C. 13102(8); see also 49 CFR 387.401(a)(FMCSA 
regulatory definition of freight forwarder).
    Pursuant to 49 U.S.C. 13906(b), (c), brokers and freight forwarders 
must maintain financial security for the circumstance in which the 
broker or freight forwarder does not pay a motor carrier for services 
it provides. Prior to MAP-21, FMCSA required brokers to maintain 
financial security in the amount of $10,000 ($25,000 for household 
goods brokers). In MAP-21, Congress increased the broker financial 
responsibility requirement to $75,000 and extended those requirements 
to freight forwarders for the first time. (codified at 49 U.S.C. 
(b)(3), (c)(4)).
    FMCSA implemented those MAP-21 financial responsibility limit 
requirements in a 2013 Omnibus rulemaking, 78 FR 60226 (Oct. 1, 2013), 
codified at 49 CFR 387.307(a) (brokers) and 49 CFR 387.403T(c) and 
387.405 (freight forwarders). As a condition to obtain registration, 
brokers and freight forwarders must provide evidence of either a surety 
bond by filing a form BMC-84 or a trust fund by filing a form BMC-85 
with the Agency.

A. Rulemaking History

    In May 2016, FMCSA gathered stakeholders for an informal roundtable 
discussion on broker/freight forwarder financial responsibility (81 FR 
24935, 24936, Apr. 27, 2016). Representatives of brokers, freight 
forwarders, motor carriers, surety providers, and trust fund providers 
participated in the roundtable and provided public comments to the 
docket established for the meeting. A transcript of this meeting is 
available in the docket for this rulemaking.
    On September 27, 2018, FMCSA published an advance notice of 
proposed rulemaking (83 FR 48779) (ANPRM). The ANPRM indicated that the 
Agency was considering changes or additions in eight separate areas: 
Group surety bonds/trust funds; assets readily available; immediate 
suspension of broker/freight forwarder operating authority; surety or 
trust responsibilities in cases of broker/freight forwarder financial 
failure or insolvency; enforcement authority; entities eligible to 
provide trust funds for form BMC-85 trust fund filings; Form BMC-84 and 
BMC-85 trust fund revisions; and household goods (HHG). The Agency 
sought comments and data in response to the ANPRM.

B. Related Activities

    When considering the data FMCSA received from its ANPRM, the Agency 
sought input from two Federal regulatory agencies, and based upon their 
suggestions reached out to several non-Federal entities as well. FMCSA 
appreciates the information shared by these entities, some of which 
helped inform our responses to comments on the ANPRM below. FMCSA met 
with the following entities:
    1. United States Department of the Treasury, Federal Insurance 
Office (Treasury) on September 24, 2020.
    2. Federal Deposit Insurance Corporation (FDIC) on October 13, 
2020. In addition to offering their own thoughts, FDIC representatives 
suggested that FMCSA contact the Conference of State Banking 
Supervisors (CSBS) regarding relevant State regulations, sureties, 
trusts, and the regulation of broker and freight forwarder trust fund 
providers.
    3. CSBS. FMCSA met with CSBS staff on October 14, 2020. FMCSA asked 
CSBS about oversight of financial companies including ``loan or finance 
companies,'' as well as definitions.
    4. Florida Office of Financial Regulation on February 4, 2021. 
FMCSA asked for input regarding State regulation of entities providing 
financial responsibility.
    5. Texas Office of Consumer Credit Commissioner on February 11, 
2021. FMCSA shared relevant regulatory text and forms, as well as 
information regarding BMC-85 trust fund filers based in Texas.

[[Page 834]]

VI. Comments and Resposes to the ANPRM

    FMCSA received 33 comments responsive to the ANPRM: 18 from 
individuals, 2 from a motor carrier and an owner-operator, 6 from trade 
organizations, 1 from a factoring company, 6 from surety providers or 
trust fund providers. Of the surety providers, one provided both BMC-84 
surety bonds and BMC-85 trust funds and three provided BMC-84 sureties 
only. Two commenters provided BMC-85 trust funds. Seven commenters, 
including the Transportation Intermediaries Association (TIA), American 
Trucking Associations (ATA), and the Owner-Operator Independent 
Driver's Association (OOIDA), voiced their general support for the 
agency's plan to implement rulemaking. Two commenters objected to any 
rulemaking.
    In the ANPRM, FMCSA asked for comments and data on eight areas 
related to broker and freight forwarder financial responsibility. To 
organize responses, the agency provided a list of 17 issues and asked 
commenters to address their comments to these issues (83 FR at 48786).

A. Group Surety Bond and Group Trust Fund

    FMCSA specifically sought comment on the definitions of group 
surety bond and group trust fund and how the agency could administer 
such a group surety or trust option given its limited resources.
Definition of Group Surety Bond or Group Trust Fund Including Responses 
to ``How could the Agency administer a group surety bond or group trust 
fund?''
    Only one commenter attempted to provide a definition of group 
surety bond. The surety provider would define a group bond to mean 
``any number of Freight Brokers and/or Freight Forwarders who operate 
as a group or association under the MAP-21 section 32918 and file a 
surety instrument collectively to ensure compliance individually to the 
financial responsibility requirement of the above section. This surety 
instrument shall be available to pay any claim pursuant to the above 
regulations.'' Based on the success of the Federal Maritime Commission 
(FMC) in administering a group surety bond option, this commenter 
recommended that FMCSA follow the guidelines of the FMC group bond, 
stating that FMCSA and FMC share common objectives. A trade 
organization appeared to define group financial responsibility by 
referencing the FMC regulations in 46 CFR 515.21(b). It also 
recommended that FMCSA follow FMC's lead.
    A trade organization stated that while multiple bond principals may 
be covered under a single bond, there is no specific definition of what 
constitutes a group bond. It noted that a bond with multiple principals 
is far less common than one with a single principal. The commenter 
believed that such a bond program would require the formation of a 
group or association of principals that have agreed among themselves to 
accept liability for the total financial responsibility and bonded 
activities of the group. The surety could then underwrite the bond, 
prequalifying each principal.
    Another trade organization opposed any attempt to define group 
surety bonds or group trust funds. It maintained that any attempt would 
waste FMCSA's resources and harm motor carriers and drivers. Two 
commenters agreed that group surety bonds or trust funds would create 
an administrative burden for FMCSA and present the possibility of 
increased risk. They recommended that FMCSA not allow group trust funds 
or group bonds.
    A trust fund provider recommended the following guidelines for the 
group or association providing a surety instrument for its members and 
believed they would not encumber the agency. The recommended guidelines 
would include: (1) providing coverage using an internal letter of 
credit guaranteed by dedicated assets; (2) annually providing audited 
financial statements to confirm stated assets, accompanied by an 
opinion letter from the certified public accounting firm conducting the 
audit; (3) establishing financial responsibility in an internal letter 
of credit in an amount equal to the lesser of the total individual 
member's liability or the aggregate amount; and (4) having an aggregate 
of $3 million for the group bond (based on the model of the FMC group 
bond).
    Regarding the freight broker industry, a surety provider believed 
there is no need for group surety bonds or group trust funds, ``nor an 
appetite to offer it in the surety industry.'' The commenter wrote that 
the group surety bond or trust fund proposal does not provide an 
adequate model for the agency to ensure the levels of financial 
security as described by the statute. If FMCSA does not have the 
resources or expertise to regulate claims, the commenter recommended it 
not consider adding another option to satisfy the financial guarantee 
requirement.
    In the absence of any evidence that demand for broker/freight 
forwarder securities cannot be met if the agency does not accept group 
sureties or trust funds, one trade organization commented it would be 
difficult to justify the burden for FMCSA of monitoring the sufficiency 
of group instruments. This commenter believed carriers would be wary of 
the uncertainty if brokers and freight forwarders were permitted to 
meet their financial responsibility requirements through group 
securities, which would open the door to a lower aggregate amount of 
assets available to pay claims.
Comments on the FMC Model
    A surety provider commented that providing a definition for a group 
trust fund would be difficult, ``as the FMCSA would be the first in the 
nation to accept such an instrument.'' It noted that the FMC group 
surety bond is not a group bond/trust but a group surety bond, backed 
by insurance carriers that are regulated by government agencies other 
than the FMC. The commenter wrote that such a group trust fund would 
need to have a dollar funded in the trust for each dollar of liability: 
if a group trust fund had 100 freight brokers in the group, it would 
require $7.5 million ($75,000 x 100) in funds available. Anything less 
``provides no benefit over a singular BMC-85 trust fund, but many 
distinct disadvantages [that] would pose additional risk.'' Another 
commenter, a trade organization, recommended that the agency simply 
require individual surety bonds based upon the FMC requirements. It 
wrote that FMCSA should not accept group surety bonds and trust funds 
until the agency fulfills the basic requirements to ensure that BMC-85 
trusts are fully funded.
    Another trade organization believed the approach used by the ocean 
transportation industry may not be transferable to highway 
transportation because the two industries are drastically different, 
and the oversight exerted by FMC and FMCSA is also vastly different. 
Another surety provider provided background on FMC's rules, and 
reported that nearly 90 percent of foreign firms, and nearly 97 percent 
of all non-vessel operating common carriers, do not choose to make use 
of a group alternative. Noting this minimal use of FMC's group 
instrument, this commenter believed that individual bonding is 
sufficient to meet the needs of the marketplace and any group bond or 
trust is not necessary. This commenter also noted that, while the FMC 
regulations provide for a maximum liability limit of $3 million for a 
group bond, each member listed is required by regulation to maintain an 
individual level of financial responsibility of $75,000 (if in the 
U.S.)

[[Page 835]]

or $150,000 (if foreign). This commenter stated that, if FMCSA adopts 
the use of a group bond or group trust, the instrument cannot be 
allowed to provide any amount of coverage less than that which each 
member would provide the public individually.
    FMCSA response: FMCSA is not proposing new regulations concerning 
group surety bonds or trust funds. FMCSA considered proposing a 
definition, including those definitions submitted in the comments, but 
ultimately declines to do so. There was no consensus or commonly used 
definition of group bond or group fund, and several commenters 
supporting the use of group instruments also pointed out areas of 
concern. While some commenters advocated for the inclusion of a group 
surety bond or trust fund, the benefits were not well-explained or 
quantified by commenters. Moreover, the TIA, which appears to have 
supported inclusion of the group option in MAP-21 based upon the FMC 
model, later acknowledged that such an option was not transferrable to 
freight brokers or freight forwarders.
    FMCSA agrees with the commenter who noted that there is no evidence 
that the demand for individual instruments is not being met and that it 
would be difficult to justify the burden on FMCSA to monitor group 
instruments. FMCSA also finds it highly compelling that the original 
proponent of the group model no longer supports its inclusion as an 
option. In addition, FMCSA agrees with commenters that if the agency 
were to propose this group option, FMCSA would need to increase 
oversight to combat fraud. Given that FMCSA is primarily responsible 
for safety regulation and does not have extensive expertise in or 
resources for financial regulation, the agency believes focusing on 
existing financial tools to be the best use of its resources.
    Due to the complexity and lack of an existing regulatory 
definition, FMCSA declines to propose allowing group surety bonds or 
group trust funds to provide financial responsibility.
Other Comments Related to Group Surety Bonds or Group Trust Funds
    By following FMC's lead and allowing group financial security for 
surface transportation intermediaries, one trade organization believed 
FMCSA could ``minimize the devastating effect of the anti-competitive 
$75,000 financial security imposed by Congress.''
    A surety provider wrote that if FMCSA allows group surety bonds or 
trust funds, the surety industry will not offer them as an option, 
because the surety industry underwrites each freight broker on its own 
merits, not in groups. This commenter noted further that, because the 
FDIC provides insurance coverage of $250,000 per depositor per FDIC-
insured bank, each trustee should establish a separate bank account for 
every trust filed, in order to minimize the risk of claims.
    FMCSA response: FMCSA appreciates these comments. As noted above, 
FMCSA declines to propose allowing group surety bonds or group Trust 
Funds to provide financial responsibility.

B. Assets Readily Available

    MAP-21 Section 32918 required that trust funds or other financial 
security be limited only to ``assets readily available to pay claims 
without resort to personal guarantees or collection of pledged accounts 
receivable.'' 49 U.S.C. 13906(b)(1)(C) and (c)(1)(D). The agency asked 
for suggestions from the trust fund industry and others about 
instruments the agency could accept that would meet the ``assets 
readily available'' standard without requiring significant FMCSA 
oversight or evaluation that would divert scarce safety oversight 
resources.
How should assets readily available be defined?
    In the ANPRM, the agency wrote that it is committed to adopting a 
definition of assets readily available for BMC-85 trust fund assets 
that both implements the will of Congress and is reasonable for the 
agency to administer. FMCSA wrote it was considering proposing a 
definition of assets readily available that would include cash or 
letters of credit from FDIC-approved banks, but said it was open to 
other options. (83 FR 48783)
    A number of commenters agreed that assets readily available should 
include only cash or letters of credit from FDIC-approved banks, with 
others indicating cash bonds should be allowable; some of these 
commenters noted that only cash or equally liquid assets would satisfy 
the statutory mandate. A surety provider noted that the May 2016 
roundtable discussion on this subject provided a general consensus that 
cash and letters of credit drawn on FDIC-approved banks should be 
acceptable. A trade organization commented that FMCSA must require 
trusts to be funded with cash or an equally liquid equivalent asset, 
such as an irrevocable letter of credit drawn on a federally regulated 
bank or trust company. One trade organization believed the only 
sufficient trust fund or surety funding sources are cash and an 
unconditional FDIC insured letter of credit, with the funds placed in a 
segregated account to be used solely for carrier claims.
    These commenters stated that finance bonds should not be allowed, 
and that BMC-85s exist only because FMCSA allows them; FMCSA therefore 
should regulate and provide oversight of them.
    Some commenters were concerned that some BMC-85 trustees may be 
comingling the available financial securities of brokers with other 
brokers' securities and even with the trustee's general operating 
accounts. A commenter wrote that the use of ``unknown, hybrid, and 
possibly unenforceable internal debt instruments in lieu of cash or 
FDIC insured letters of credit violates the fiduciary responsibilities 
of BMC-85 trustees and undermines the objective of ensuring that 
brokers can personally meet the statutory financial requirements.'' 
Some commenters, including a trade organization, recommended FMCSA 
allow letters of credit in the interest of making broker licenses 
accessible to start-up businesses and preventing unreasonable obstacles 
to entry. An individual commented that it is crucial that FMCSA support 
``the BMC-85 insurance products currently available to brokers in lieu 
of forcing brokers to have $75,000 available in cash at all times to 
pay claims.'' This commenter believed that larger third-party logistics 
and broker entities otherwise will force smaller companies out of 
business, which will enable those larger companies to drive up rates. A 
commenter questioned whether FMCSA can limit the interpretation of 
``assets readily available'' beyond saying that they are not personal 
guarantees or a collection of pledged accounts receivable, as provided 
in MAP-21. However, this commenter proposed using its ``internal letter 
of credit plan,'' $75,000 in cash, and/or a combination of a letter of 
credit supplied by an FDIC-insured bank to the surety provider. If 
interpretations relating to financial responsibility proposed by BMC-84 
suppliers are implemented, this commenter believed, several BMC-85 
providers may be forced out of the marketplace and the choices 
available to freight brokers and forwarders could be severely limited.
    Another commenter believed the definition of ``assets readily 
available'' should be expansive enough to include ``all kinds of 
investments.'' The commenter wrote that the term should include 
publicly traded securities that can be quickly bought and sold on a 
highly regulated open market exchange. The commenter noted that, in 
reality, claims are not paid before 30 days of the claim being filed.

[[Page 836]]

    A trade organization encouraged the agency to adopt a definition of 
assets readily available to include the assets set forth in Federal 
Acquisition Regulation 28.204-1-28.204-3, which applies to the type of 
securities that may be deposited by a contractor in lieu of a surety 
bond on public works. The types of assets are: (1) notes or bonds 
issued by the U.S. Government; (2) certified or cashier's check, bank 
draft, postal money order, or currency; or (3) an irrevocable letter of 
credit issued by a federally insured financial institution rated 
investment grade. The commenter maintained that a broader and riskier 
asset class would require more intensive monitoring and ongoing 
valuation by the agency to ensure that the BMC-85 trust fund remains 
capitalized over the $75,000 requirement.
    FMCSA response: In an effort to provide flexibility, FMCSA proposes 
only a list of prohibited asset types. FMCSA further specifies that 
assets considered readily available be able to be made liquid in 7 
days. FMCSA believes that its approach strikes the best balance between 
allowing multiple ways of complying with the assets readily available 
requirement for small businesses and still setting a high standard that 
will protect motor carriers and shippers.
Suggest a Process That Would Allow FMCSA To Accept Letters of Credit 
and Other Instruments Without Significant Oversight
    BMC-84 bond providers are overseen by the Treasury, while BMC-85 
trusts are overseen by FMCSA, in addition to other regulators. The 
agency solicited suggestions about how it could accept letters of 
credit and other instruments that could meet the assets readily 
available standard for broker/freight forwarder trust funds without 
requiring significant oversight or evaluation that would divert scarce 
agency safety resources. (83 FR 48783)
    A trade organization wrote that the acceptance of any third-party 
collateral instrument, personal guarantees, or a pledge of business 
assets should not be considered eligible trust collateral unless the 
agency is satisfied with the financial structure of the issuer/obligor 
and that it possesses unimpeded access to assets in the event of 
payment demand. Because such information is not currently available to 
the FMCSA or to motor carriers, any attempt to define or administer 
such an option would be wasteful of FMCSA resources and harmful to the 
motor carriers and drivers.
    A trade organization recommended the agency require the trust to 
conduct a regular, independent audit confirming that the trust is fully 
funded. It commented that a broader and riskier asset class might 
impair the value of the BMC-85 trust fund, trigger a suspension 
required under 49 U.S.C. 13906(b)(5) and (c)(6), and require more 
intensive monitoring and ongoing valuation by the agency. A surety 
provider wrote that FMCSA could verify annually that a letter of credit 
issued by an FDIC-insured bank is in force without hardship.
    A surety provider suggested that the property broker or freight 
forwarder needs to deposit with the trust administrator cash or similar 
assets like Treasury debt instruments. It also believed that the trust 
could accept a qualified bank letter of credit (e.g., irrevocable and 
issued by an FDIC-insured bank), or a qualified surety bond (e.g., 
where the trust administrator is the bond obligee and the surety is 
listed on Treasury's Circular 570)--alternatives that provide fast 
liquidity and firm valuation. The commenter also provided examples of 
assets that are not readily available.
    A surety provider rejected the argument that FMCSA accept self-
issued or internal letters of credit. It stated that FMCSA would have 
no assurance or control over the quality or quantity of the security 
behind the letter of credit. This plan would place an administrative 
burden on the agency and increase the potential for losses to the 
intended beneficiaries.
    A surety provider wrote that, to ensure that assets are readily 
available, they must be defined, insured, and verified. While it had 
previously recommended defining assets readily available as cash and an 
irrevocable letter of credit (ILOC) from an FDIC-insured bank, in 
consideration of FMCSA's desire to limit its oversight 
responsibilities, this commenter changed its asset recommendation to 
cash only. The commenter believed that allowing any other asset would 
add to the administrative burden of FMCSA's oversight. Because assets 
must be properly insured, the commenter said it is imperative that the 
assets be held in an FDIC-insured bank to provide FDIC insurance 
coverage of $250,000 per account and ensure that FMCSA does not have to 
underwrite or question the solvency of the bank holding the assets. The 
commenter maintained that an ILOC is not insured by the FDIC (even if 
issued by an FDIC-insured bank) unless there is a deposit of cash in an 
FDIC-insured bank backing the ILOC. Should FMCSA allow ILOCs, the 
commenter said FMCSA would have to verify whether each bank backing the 
ILOC was FDIC-insured, and that the balance was under the $250,000 
insurance threshold. Further, the commenter reasoned that, if cash were 
the only accepted form of assets readily available, the trustee could 
use one bank to manage all assets, creating a separate account of 
$75,000 for each trustor.
    This same surety provider also recommended that FMCSA require trust 
providers to submit audited financial statements prepared by a licensed 
third-party certified public accountant on a quarterly basis, to 
lighten FMCSA's administrative burden of verifying assets. If the 
acceptable assets were limited to cash, the commenter believed that 
FMCSA could easily confirm enough cash is being held by reviewing the 
financial statement. However, should FMCSA wish to allow ILOCs, FMCSA 
would need to ensure that each BMC-85 has an ILOC from an FDIC-insured 
bank along with a bank account with deposits to fund the ILOC in full, 
making audits far more complex.
    FMCSA response: In this proposal, FMCSA has designed a process that 
allows it to accept a wide range of financial instruments without 
imposing a burden on the agency's limited resources.
What is the capacity of the surety bond industry to meet increased 
demand?
    In the ANPRM, FMCSA specifically sought comment from the surety 
bond industry on that industry's capacity to meet market demand if 
FMCSA were to adopt a cash-only standard for BMC-85 trust funds. The 
agency asked whether such a policy could drive a significant segment of 
the broker/freight forwarder industry into surety bond coverage.
    Commenters responded that they believed surety-bond providers could 
meet this demand.
    FMCSA response: The agency thanks those commenters but proposes 
that certain non-cash instruments could be used to meet this proposed 
requirement.
What is the cost to brokers and freight forwarders of BMC-84 surety 
bonds?
    FMCSA sought comments and data from the surety bond industry on the 
cost to brokers and freight forwarders of BMC-84 surety bonds. In 
response to this issue, one trust provider commented that the question 
should not be the cost to brokers of BMC-84 surety bonds, but what 
percentage of the market currently serviced by BMC-85 providers will be 
lost. This commenter noted that BMC-85 providers service roughly 25 
percent of the total licensed freight brokers and freight forwarders in 
the country.

[[Page 837]]

    One trade organization and three surety providers provided a range 
of estimates of the cost of a bond. The trade organization reported 
that a BMC-84 bond will typically cost its principal 1 to 2 percent of 
the face value of the bond. A creditworthy broker or freight forwarder 
would expect to pay approximately $750 to $1,500 to obtain a $75,000 
BMC-84 bond. The commenter did not expect that cost to increase, even 
with increased demand for the bonds. A surety provider wrote that 
pricing for this class of bond usually ranges from 2 to 5 percent of 
the amount of the bond, calculated and charged on an annual basis. The 
commenter noted that the pricing range is typically driven by the 
credit strength of the business and qualified indemnitors. Another 
surety provider commented that typical costs for license and permit 
bonds run from 1 to 4 percent of the face amount of the bond. A third 
surety provider reported that average surety premiums have dropped each 
year since 2013 with rates as low as $750 per year.\3\ Due to the 
increased surety competition, while coverage has increased 750 percent 
(from $10,000 to $75,000), typical costs incurred by freight brokers/
forwarders for their annual premiums have risen only 15 to 30 percent.
---------------------------------------------------------------------------

    \3\ According to comments provided in 2020 in connection with 
the Small Business in Transportation Coalition's petition for 
exemption from the $75,000 financial responsibility requirement, the 
annual surety bond premium is less than $2,000 on average. 86 FR 
71538, 71542 (Dec. 16, 2021).
---------------------------------------------------------------------------

    FMCSA response: FMCSA appreciates the comments provided and 
believes it has sufficient information on the cost of BMC-84 surety 
bonds to inform this proposed rule.
Other Comments Related to Assets Readily Available
    Some commenters noted other issues related to assets readily 
available. Several commenters were concerned with what they believed 
are irregularities in the BMC-85 trust fund industry. A trade 
organization commented that a major concern is that certain trust fund 
operators are not following the laws and regulations, to the detriment 
of safety. If small motor carriers are not paid, necessary maintenance 
and repairs may be put off or ignored due to reduced cash flow.
    One trade organization recommended that, in order for a BMC-85 
trust fund to be equivalent to a surety bond, the BMC-85 trust fund 
should have a prequalification function, where a surety reviews the 
capabilities and financial strength of a bond applicant. It believed an 
adequate version of prequalification can be achieved if the broker or 
freight forwarder is required to fund the BMC-85 trust with its own 
assets. In this way, the agency and carriers would have the assurance 
that the brokers and freight forwarders have the operational capability 
to commit $75,000 of their own assets into the fund.
    A surety bond provider expressed the belief, based on the comments 
at the roundtable and the definition of a trustee, that most BMC-85 
providers are not trustees but are providing unregulated surety bond 
insurance without a license to do so. This commenter indicated that 
FMCSA must regularly examine trust providers to ensure that the defined 
assets meet the aggregate liability of the trust provider.
    A surety provider commented that, if trusts are to be funded with a 
limited category of assets, without requiring significant FMCSA 
oversight or evaluation, trust fund administrators should be allowed to 
invest the assets only in highly-liquid, short duration, and very safe 
investments, and it provided examples. The commenter recommended that 
all investments should be easily provable to the FMCSA, e.g., via 
investment account and bank account statements. Finally, assets under 
trust must never be comingled with the accounts of the trust 
administrator that are utilized for its day-to-day business needs.
    Two commenters responded to the concern about the financial 
wherewithal of BMC-85 trust providers and the sufficiency of the assets 
in BMC-85 trusts to pay legitimate claims by motor carriers or 
shippers. A commenter noted FMCSA's statement in the ANPRM that 
representatives of the BMC-85 trust fund provider community asserted 
that, with one limited exception, no evidence had been provided showing 
that BMC-85 providers have failed to pay legitimate claims made on 
their trusts by motor carriers or shippers to any significant degree. 
The commenter also believed that no legitimate stakeholder who had 
suffered any financial losses had appeared. This commenter therefore 
did not believe that rulemaking in this regard is necessary.
    A BMC-85 trust fund provider sought to refute the contention that 
such providers support financially unstable brokers to the detriment of 
motor carriers and the transportation industry in general. The 
commenter believes it has the largest claims database specific to this 
industry and said that its claims data do not support those assertions. 
The commenter stated that, on the contrary, many BMC-84 surety 
companies enter and leave the market every few years because their 
realized losses are much higher than initially anticipated. The 
commenter said many surety companies will not issue BMC-84s due to the 
inherent high-risk factors.
    FMCSA response: FMCSA appreciates all of stakeholders' comments 
regarding assets readily available. Today's proposal is intended to 
balance protection of motor carriers and shippers with cost. FMCSA 
believes that its proposal will meet the congressional goal of ensuring 
that motor carrier claims are paid in a timely fashion without causing 
significant disruption to the broker and freight forwarder industry.

C. Immediate Suspension of Broker and Freight Forwarder Operating 
Authority

    MAP-21 provides that FMCSA shall immediately suspend the 
registration of a broker or freight forwarder if their available 
financial security falls below $75,000 (49 U.S.C. 13906(b)(5), (c)(6)). 
In the ANPRM the agency discussed, and invited comment on, how it could 
immediately suspend broker/freight forwarder operating authority 
registration consistent with due process requirements, e.g., by 
providing an appropriate opportunity for post-deprivation review.
How can the Agency determine that the available financial security of a 
broker or freight forwarder has fallen below $75,000?
    In the ANPRM, FMCSA said that it first needed to determine when the 
available financial security of a broker/freight forwarder is below 
$75,000. The agency considered effecting immediate registration 
suspension in either or both of two situations. First, FMCSA would 
suspend when it receives notice from the surety or trust fund provider 
that a drawdown/payout on the bond/trust has occurred, such that the 
available financial security is less than $75,000. The second situation 
would be where: (a) a surety or trust fund provider gives reasonable 
notice of a claim to the broker/freight forwarder, (b) the broker/
freight forwarder does not respond, and (c) the surety/trust fund 
provider determines that the claim is valid and provides notice of 
these events to FMCSA. . A trade organization supported the agency's 
proposed approach to triggering the agency's statutory obligation to 
immediately suspend registrations, saying it appeared to be a sensible 
proposal. A surety provider agreed that it must be ``explicitly 
detailed as to when the security falls below $75,000.''

[[Page 838]]

    A trade organization wrote that it supported a recommendation of 
Avalon Risk Management that three or more valid claims from different 
sources, aggregating more than $25,000, that have remained unresolved 
for at least 30-days is one reasonable standard. It wrote that the 
agency needs to clarify what constitutes financial failure or 
insolvency so that the surety or trust provider will not be at risk if 
it invokes the procedures under 49 U.S.C. 13906(b)(6) and (c)(7) to 
terminate the security and start the 60-day period for submission of 
claims. The commenter noted that this sometimes occurs over the 
objections of the broker or freight forwarder.
    A surety provider suggested that failure of the broker/forwarder to 
respond in any manner to the surety or trust fund provider in 5 
business days should be sufficient to permit the surety/trust to 
request immediate suspension, publish the notice, and start the 60-day 
clock for presentation of claims.
    The same commenter added that, if written evidence is provided that 
the validity of the claim is reasonably disputed, parties should be 
afforded more time. In addition, the commenter believed that failure to 
resolve a specified number of undisputed claims representing a 
specified percentage of the security after 30 days should be construed 
as an impairment of that security and a financial failure, triggering 
immediate suspension. The commenter believed that financial failure 
outside of bankruptcy should be a trigger for immediate suspension, but 
noted that ``financial failure'' is undefined, and the operating 
authority holder's actual situation is difficult to determine. While 
the commenter recognized that larger operators would have more claims, 
it asserted that best practices would keep them within these 
parameters.
    A surety provider believed that the only scenario where the 
financial security amount would drop below $75,000 in the case of a 
surety would be if the surety were to issue some sort of refund or if 
the surety were to pay a claim, which would reduce the value of the 
trust below $75,000; thus, this section should be read in conjunction 
with 49 U.S.C. 13906(b)(2)(A), ``Payment of Claims.'' However, the 
commenter anticipated problems with any of the scenarios in which the 
surety provider pays a claim against a broker as a justification for 
immediate suspension. The commenter believed that a broker's failure to 
respond to emails and phone calls from the surety is a good indication 
that the brokerage is experiencing or has already experienced financial 
failure warranting immediate cancellation. Another situation that might 
trigger immediate cancellation would be if a broker responds but fails 
to provide information to resolve the claim within a reasonable period. 
The surety provider wrote that a brokerage experiencing financial 
failure typically uses delaying tactics to buy more time. The commenter 
recommended that the surety provider be able to request the immediate 
suspension of a brokerage, given the totality of the circumstances 
involved (i.e. evasive responses, delaying tactics, payments bouncing, 
and prior claim history). The commenter also cautioned that ``any 
bright line rule that calls for cancellation based upon either the 
number or claims received or total dollar amount of claims would be 
difficult to apply as there is no `one size fits all' number. Large, 
and even small brokerages, will get claims that may or may not be valid 
and that may or may not indicate `financial failure or insolvency.' ''
    A trade organization provided a draft of a new Sec.  387.307 
containing a process that the commenter believed would lead to FMCSA's 
suspension of a broker's operating authority when required under the 
statute. The commenter recommended that, if by the end of 10 days 
following notice of the claim, the broker ignores the notice, does not 
dispute the motor carrier's claim, does not pay the claim, or does not 
provide the information and documents described in the draft section, 
the surety consider the motor carrier's claim valid and payable under 
the bond or trust. The surety would then have to notify FMCSA that the 
amount of available security is less than required by law, triggering 
the 30-day period for cancellation under 49 U.S.C. 13906(b)(4)(A). 
Under the commenter's proposal, the presumption of insolvency and 
cancellation notice would be lifted if the broker were to file a 
completely new bond or trust within 30 days. The commenter believed 
that, if a broker owes a motor carrier money and does not pay the motor 
carrier, or ignores the surety's notice of the claim, FMCSA could 
reasonably consider the broker to be financially insolvent under 49 
U.S.C. 13906(b)(6). The only time a 30-day cancellation period should 
run while the broker continues to do business is when there have been 
no valid claims filed on its bond. The commenter believed such a rule 
would prevent brokers from continuing to incur debt to motor carriers 
that is not protected by a compliant surety bond or trust.
    FMCSA response: After consideration of the comments received on the 
ANPRM, FMCSA proposes that the most workable standard for determining 
that available financial security has fallen below $75,000 is when an 
actual drawdown has taken place. It would then be very clear to both 
brokers and freight forwarders that if they don't quickly replenish 
their trust funds or surety bonds that their operating authority 
registration will be suspended.
What is the appropriate allowable time period for brokers or freight 
forwarders to respond to claims?
    In the ANPRM, FMCSA sought comment on the appropriate allowable 
time period or ``cushion time'' for brokers or freight forwarders to 
respond to claims made to guarantors, valid or otherwise. Such a grace 
period would give firms adequate time to adjudicate claims and 
settlements internally, as well as to factor in costs associated with 
contract noncompliance when setting their pricing.
    Several individuals who commented on this process believed the 
broker should have 30 days to pay the driver or company. One individual 
added that the bond company should have 30 days after that to pay the 
carrier. Another commenter believed the broker needs at least 60 days 
from the time the notice of a violation/claim is issued to respond and 
up to 90 days after acknowledgement of receipt to show corrective 
action. A third commenter said that carriers must be paid within a day. 
Three individuals wrote that brokers should have their licenses revoked 
immediately.
    A trust provider, responding to FMCSA's suggested 14-day grace 
period for brokerage response to a notice or claim, said a surety 
company's determination of cancellation is routinely made much sooner. 
The commenter said 5 business days is all that is necessary to 
determine if a brokerage is still in operation, can be contacted, and 
can respond appropriately to the notice of claim. The commenter 
emphasized that any bright line rule would not work, and instead the 
agency's determination should be based on the totality of circumstances 
and the surety's prior experience and knowledge. A trade organization, 
however, believed a period of at least 2 weeks is appropriate. While 
that commenter appreciated the need to move swiftly, it also recognized 
that intermediaries need time to internally investigate claims and that 
suspending an intermediary's registration may result

[[Page 839]]

in significant supply chain disruptions. The commenter reported that 
the 2-week period would also correspond to the 14-day response period 
FMCSA is considering for a proposed definition of financial failure 
that would trigger the responsibility of a guarantor to take action 
against the intermediary's bond or trust fund.
    A surety provider believed that, if after 3 to 5 days the principal 
has not made payment or explained its reason for non-payment, the 
surety can start to presume the principal may be experiencing financial 
failure or insolvency. The commenter wrote that a broker or freight 
forwarder should be able to determine, almost immediately, why it has 
not paid the carrier within the period to which both carrier and broker 
had contractually agreed. Because not every bond termination would be 
due to claims, it commented that FMCSA must allow for the surety or 
trust provider to be able to identify when a termination should involve 
immediate suspension of authority.
    A surety provider believed that revocation of authority immediately 
or within 48 hours of cancellation of bond/trust would help prevent 
carriers from being left with little or nothing to show for their 
services. The commenter wrote that there are brokers who have entered 
the industry who post loads with no intent on paying the carrier. It 
explained that the surety or trust company will not receive a claim 
against these brokers for at least 30 days since, under the current 
regulations, brokers have an additional 30 days to broker loads before 
their authority is revoked by FMCSA (33 actual days). The commenter 
said this is one of the reasons why so many carriers receive only 
partial settlement of their original claim amount.
    A surety provider commented that protection of motor carriers 
requires that a broker or freight forwarder who fails to pay should be 
immediately suspended or otherwise sanctioned to induce the payment. 
The commenter again suggested that the failure of the broker/forwarder 
to respond in any manner to the surety/trust within 5 business days 
should be sufficient to permit the surety/trust to request immediate 
suspension, publish the notice, and start the clock on the time to 
present claims. If written evidence is provided that the validity of 
the claim is reasonably disputed, the parties should be afforded time 
to resolve their issues, including reducing the claim to judgment if 
necessary. The commenter asserted, however, that in any case when a 
surety or trust provider submits a request for immediate termination, 
the termination should be effective within 2 business days from the 
request. A surety provider noted that it is difficult to establish a 
hard rule regarding a grace period, as each situation is unique.
    FMCSA response: FMCSA is not proposing a specific time for brokers 
or freight forwarders to respond to claims made to surety providers or 
trustees in this NPRM. Parties will be able to freely negotiate 
appropriate time periods under their private contracts.
How can the Agency suspend broker or freight forwarder operating 
authority?
    Suspending broker or freight forwarder operating authority whenever 
a claim is filed against a broker or freight forwarder or its bond or 
trust would raise due process concerns, as the agency would be 
prohibiting the broker or freight forwarder from lawfully operating, 
without affording the company a chance to respond. In the ANPRM, the 
agency wrote it would consider how it could immediately suspend broker 
or freight operating authority registration in a manner consistent with 
constitutional due process requirements, e.g., by providing an 
appropriate opportunity for post-deprivation review.
    A surety provider commented that due process requires that the 
broker or forwarder be given an opportunity to address the claim and 
present any defenses that may exist.
    A trade organization raised a Fourteenth Amendment ``Equal 
Protection of the Law'' claim and asserted that the government cannot 
lawfully suspend the authority of brokers and forwarders upon mere 
notice of cancellation and not apply the same procedure to situations 
in which motor carriers' insurance companies have filed similar notices 
of cancellation. The commenter wrote that the procedure currently in 
place was enacted to ensure due process and a reasonable time to 
respond.
    A trade organization commented that a licensed property broker or 
freight forwarder should not have its authority suspended immediately 
based on claims received, because invalid claims are often made. 
Ensuring fair due process is an essential part of this rulemaking for 
the commenter and its members. Furthermore, suspending authority 
without due process would cause a flood of authority reinstatements and 
re-processing for all involved, increasing the burden on the agency.
    Specifically in response to this issue, a surety provider described 
the existing process when a surety receives claims against a bond: (1) 
the surety contacts the bond principal to advise it of the claim, 
determine whether any defenses exist, and/or whether the claim will be 
promptly handled by the bond principal; (2) the surety may become aware 
that the business is failing and may determine the bond should be 
terminated; (3) when this happens, the surety gives notice of 
termination to FMCSA, which takes effect 30 days later. As the 
reporting window for claims begins, the surety may receive more claims 
from other parties for transportation before and after the date on 
which notice of the bond termination was given to FMCSA.
    A trade organization proposed detailed regulatory language that it 
believed would set up a clear process that would lead to FMCSA's 
suspension of a broker's operating authority when required under the 
statute. This draft language proposed by the trade organization sets 
out the information a motor carrier would be required to submit to a 
surety or trustee to make a claim and establishes that the motor 
carrier may not be required to provide any other information. The 
commenter's proposed text requires that, if the motor carrier does not 
submit a claim that meets the requirements, the surety may immediately 
provide notice of the claim's deficiencies and give the motor carrier 
an opportunity to refile the claim. If the motor carrier provides a 
copy of a judgment in its favor against the broker, the surety will 
consider the motor carrier's claim against the bond valid. The 
commenter also proposed detailed procedures the surety would use to 
give brokers notice of a claim against the bond, provide the broker the 
opportunity to pay the motor carrier and provide proof to the surety. 
It also proposed a procedure for a broker's response to a claim--which 
the broker would have to provide within 10 business days of receiving 
notice of a claim against its surety bond from a surety or trustee. 
However, the commenter noted that it did not intend for this proposed 
process to be a substitute for the resolution of legitimate disputed 
claims between brokers and motor carriers. Instead, the proposal was 
intended to apply when brokers ignore a surety's notice of motor 
carrier claims or when brokers do not bother to dispute such claims 
with the minimal, timely response required under the rules. This 
distinction was intended to ensure that sureties and FMCSA do not have 
the duty to resolve legitimate disputes between a broker and a motor 
carrier. Sureties only need to identify that there is a legitimate 
dispute, as described above. The same commenter also encouraged FMCSA 
to adopt a process that would allow

[[Page 840]]

members of the public to petition the agency to revoke the registration 
of brokers that make a false statement at any point in the claims 
process.
    A surety provider commented that, if it was forced to cancel a 
policy upon notice of a claim, freight brokers would be regularly shut 
down even for illegitimate claims. While forcing an immediate 
suspension of all freight brokers with claim activity would be better 
for its own bottom line, the commenter believed ``it simply is not fair 
to freight brokers.'' The commenter therefore recommended that surety 
bond and trust providers not be forced to cancel until a claim has been 
paid, which would be consistent with MAP-21 section 32918. Instead, 
cancellation prior to claims being paid out should be left to the 
discretion of the surety, and this approach is consistent with that 
taken by many other government agencies. The commenter added that the 
insurance carriers that back its bonds are highly motivated to ensure 
that they cancel bonds with legitimate claims as soon as possible, as 
each legitimate claim greatly impacts the profitability of the surety 
industry.
    FMCSA response: Based on today's proposal, FMCSA would suspend the 
operating authority registration of a broker or freight forwarder only 
in the event of a drawdown on the bond or trust. Any other formulation 
is administratively unworkable. Moreover, as proposed later in this 
NPRM, FMCSA would give brokers or freight forwarders seven business 
days to contest any immediate suspension action before it takes effect, 
in order to meet constitutional due process concerns.
Comments on Actual Incidence of Non-Payment by Brokers or Freight 
Forwarders
    In the ANPRM, FMCSA asked for documented incidents of actual 
nonpayment that occurred after a financially troubled broker or freight 
forwarder was not immediately suspended. A trade organization commented 
that FMCSA must immediately suspend the registration of a broker before 
the broker's nonpayment to motor carriers results in claims on its bond 
or trust in an aggregate amount of more than $75,000. Further, it 
commented that FMCSA must reject the fiction that considers a bond to 
be in effect until a claim is actually paid on the bond, which means 
the broker can continue to conduct business even if there is 
effectively no longer any financial security in place. The commenter 
wrote that, under this practice sureties now wait to confirm that they 
have collected all the claims triggered by the broker before making any 
payout. By then, the pro-rata payouts from the bond to motor carrier 
claimants amount to cents on the dollar. The trade organization 
appended to its comment an excerpt of a list of motor carrier claims 
against broker bonds that it had helped the motor carriers lodge with 
sureties and trustees. The commenter believed this list shows that the 
failure of the bond or trust security to cover all of a broker's debts 
to its motor carriers is a common problem. The commenter also provided 
as an example a September 2018 court case in which a BMC-84 surety 
provider (Merchants Bonding Co.) filed an amended complaint in 
interpleader asking a U.S. District Court to determine how to pay the 
$75,000 bond to a total of 646 claimants.
    A representative of a motor carrier reported that it had not been 
paid for a few loads by freight brokers and could collect only about 10 
percent of what was due because there were too many claims. Because the 
freight brokers are permitted to work for 45 days after such unpaid 
claims are reported, they can increase the amount they owe; however, 
the motor carrier believed that those brokers never intended to pay 
anything.
    A surety provider submitted an example of a brokerage that 
continued to book 27 loads with a total value of more than $35,000 
after cancellation had been requested. This provider commented that 
terminating the bond immediately does not stop claims from 
accumulating, but it does help mitigate damages. Further, it wrote that 
moving loads so close to effective cancellation decreases the motor 
carriers' chances of filing a claim within 60 days of effective 
cancellation (as they are normally contacting the surety 60 to 90 days 
after delivery and therefore the 60-day window for accepting 
applications will have passed) and increases the chances that the 
payout will be pro rata. A second surety provider submitted the example 
of a logistics company that had accumulated $945,739 in unpaid motor 
carrier claims after paying out the full corpus of a $75,000 BMC-85 
Trust.
    A surety provider wrote that many bond principals, terminated 
recently due to claims, also had claims for shipments that began after 
the termination notice was given, but still within the time when the 
bond principal's FMCSA operating authority was valid. For moves that 
occurred after the termination notice was given, it reported that 
nearly all occurred within the first 14 calendar days. This commenter 
believed that when a bond termination is due to claims, an immediate 
suspension of FMCSA operating authority would prevent post-notice 
shipments from becoming the subject of further claims, and would 
prevent carriers on those shipments from encountering delays in getting 
paid under the bond or getting only partial payment. The commenter 
added that the pre-notice claims would benefit from a higher pro-rata 
payment.
    FMCSA response: FMCSA appreciates the empirical data regarding the 
non-payment of claims. FMCSA renews its call in this NPRM for data that 
shows the amount of nonpayment that could be avoided through FMCSA's 
implementation of the immediate suspension provision. FMCSA believes 
that most brokers do not have unpaid legitimate claims. A small but 
significant population of brokers do fail to pay legitimate claims, 
however, are non-responsive to motor carriers and BMC-84/85 providers 
and continue accumulating claims until their FMCSA operating authority 
registration is revoked. Ultimately, $75,000 can be insufficient to pay 
the multiple unpaid claims, and motor carriers are often paid a 
fraction of what they are owed through interpleader proceedings. FMCSA 
will attempt through this rulemaking, consistent with MAP-21, to 
suspend the operating authority registration of these delinquent 
brokers before the unpaid claims exceed the value of the brokers' 
financial responsibility instruments.
Other Comments Related to Immediate Suspension
    A trade organization commented that an unintended consequence of a 
larger bond is that $75,000 actually gives truly fraudulent brokers 
more room to steal than the original $10,000 bond. While it believed 
the government should enforce the laws, it concluded that ``[t]he 
principles of laissez-faire should apply here.''
    Another trade organization believed that many carriers know there 
is little hope to recover from a bond and do not even bother filing 
their claims against the bond. Those who do file a claim must have the 
ability to file a complaint in interpleader or hire a lawyer.
    A surety provider commented that the surety/trustee is being placed 
in the role of arbiter with further restrictions on how to execute the 
role. If a broker or forwarder disputes a claim, this commenter wrote, 
the surety or trustee has its hands tied and the claimant must be told 
it needs to obtain a judgment to pursue the claim. Questionable 
operators can continue to stack up liabilities by asserting that the 
claim is being taken care of but then fail to resolve the claim or 
provide any evidence of its invalidity. The

[[Page 841]]

commenter asserted that this part of the regulation needs to be 
changed.
    FMCSA response: FMCSA appreciates these comments and believes that 
implementation of the proposed immediate suspension provision would 
reduce the time a broker is permitted to operate and accumulate claims 
and the number of interpleader actions that are filed.

D. Surety or Trust Responsibilities in Cases of Broker or Freight 
Forwarder Financial Failure or Insolvency

    The ANPRM sought comments on the how financial failure or 
insolvency and publicly advertise should be defined in accordance with 
49 U.S.C. 13906(b)(6) and (c)(7).
How should financial failure or insolvency be defined?
    In the ANPRM, the agency suggested criteria for a definition of 
financial failure or insolvency (83 FR 48779, 48784). The agency wrote 
it is considering a definition of financial failure or insolvency that 
would apply at a pre-bankruptcy stage. FMCSA suggested criteria for 
financial failure or insolvency that included situations where the 
broker or freight forwarder has claims against its bond/trust, is not 
responding to notifications from the trust or surety provider within 14 
calendar days, and is not in bankruptcy proceedings.
    None of the commenters on this issue believed that establishing an 
absolute definition of financial failure or insolvency would be a good 
idea. A trade organization suggested that FMCSA should define financial 
failure/insolvency simply as receipt of notice by the broker or 
forwarder of its inability to pay its bond/trust fund premium. The 
commenter also wrote that FMCSA could require brokers and forwarders to 
provide notice of the filing of a bankruptcy petition to their surety 
or trust administrator. However, this trade organization believed that 
anything beyond this would require the surety provider to supervise the 
operations of the broker or freight forwarder, which transcends the 
normal role of a fiduciary. A second trade organization maintained that 
the filing of bankruptcy by the bonded principal is the clearest, most 
objective test for financial failure or insolvency. The commenter 
stated that financial failure or insolvency should not be premised on a 
certain number of claims made in a certain period or an aggregate value 
of claims unresolved within a certain timeframe. The commenter wrote 
that defining financial failure or insolvency in a pre-bankruptcy 
context may not be practical.
    A surety provider defined financial failure or insolvency as the 
inability to pay debts as they become due and referenced 11 U.S.C. 101. 
However, this commenter maintained that the scenario should be 
interpreted very broadly, allowing the surety provider to use its 
discretion. It also opposed any ``bright line rule'' based on the 
number of claims received, the total dollar amount of claims, or a 
certain number of claims in a certain time period, as there is no ``one 
size fits all'' number. Another surety provider agreed that 
``insolvency is routinely defined as an inability to pay one's debt, so 
a broker/freight forwarder that is not paying its bills when they come 
due meets this insolvency definition.'' However, the commenter believed 
it may not be possible to define financial failure or insolvency, and 
recommended FMCSA consider reasonable interpretations by the surety and 
trust industry of that standard.
    FMCSA response: FMCSA agrees with the commenter who believes that 
defining financial failure or insolvency as a bankruptcy filing (or 
State insolvency filing) is the most appropriate and practical. FMCSA 
outlines its rationale for such a standard later in this preamble.
How should publicly advertise be defined?
    In the event of financial failure or insolvency, surety providers 
must publicly advertise for claims for 60 days beginning on the date 
FMCSA publishes the surety's notice to cancel the surety bond/trust (49 
U.S.C. 13906(b)(6)(B), (c)(7)(B)). In the ANPRM, FMCSA wrote that it is 
considering a definition of publicly advertise that would deem notice 
to FMCSA of the financial failure or insolvency of the broker or 
freight forwarder as publicly advertising for claims under MAP-21 (83 
FR 48779, 48785). The agency also reported that it is investigating 
whether it can flag such cancellation notices with a special code, so 
that potential claimants reviewing a broker or freight forwarder's 
records on the FMCSA website would know that the 60-day period to make 
a claim has begun.
    Most of those who commented on this issue believed that the 
requirement to publicly advertise should be satisfied by the surety 
provider giving notice to FMCSA, which FMCSA would then make publicly 
available. However, one trade organization recommended that FMCSA 
publish a notice in the Federal Register. A second trade organization 
commented that if insolvency is based on bond claims FMCSA could ask 
the surety to notify the agency of all claims made on the bond, which 
would allow the agency to determine if financial failure or insolvency 
triggered by outstanding claims has occurred. If financial failure or 
insolvency was based on the principal's bankruptcy, the agency could 
require notice of the bankruptcy filing. This commenter believed that 
FMCSA serving as a centralized, public location that brokers or freight 
forwarders could monitor for these notices would be far more efficient 
than each surety posting notice on its respective website.
    A trade organization believed that if FMCSA provided public notice 
of cancellation under 49 U.S.C. 13906(b)(4)(B), motor carriers could 
look up a broker's registration status before taking a load from that 
broker. Such FMCSA notice would also provide the dates that the 60-day 
claims period commenced and the due date for claims to be filed with 
the surety on the bond. The commenter recommended that FMCSA change its 
Licensing and Insurance page to provide a link to the surety's web page 
indicating how many unresolved claims have been submitted against the 
bond, similar to FMCSA's publication of motor carrier inspection and 
accident data on the Motor Carrier Management Information System.
    In addition to notice on the FMCSA website, several surety 
providers suggested posting on the surety provider's website or FMCSA 
providing a hyperlink to the provider's website. A surety provider 
believed that flagging the posting with a code identifying the reason 
for cancellation (claim activity vs. non-compliance) would benefit both 
motor carriers and other surety providers, as many of these ``bad'' 
brokerages jump from surety to surety, leaving claims behind. This 
commenter also believed that, as approved filers with login 
credentials, surety providers should be provided access to all 
information and documentation that has been filed with FMCSA (e.g., 
Application for Motor Property Carrier and Broker Authority filing, 
Unified Registration System information) by the provider for which they 
have completed the BMC-84 or BMC-85 filing. A surety provider believed 
FMCSA should host the list of entities in financial failure or 
insolvency across all surety companies and trust providers in one 
location to make it easier for the public to become aware of these 
notices. A third surety provider wrote that the requirement to publicly 
advertise would be satisfied by maintaining the information on the 
surety/trust website, augmented by listing the payees upon closure of 
the

[[Page 842]]

case. One surety provider noted that these public advertisements are 
only of value if they are easily found and recommended a consolidated 
location.
    A surety provider wrote that upon cancellation of a BMC-84 surety 
bond or a BMC-85 trust, the issuer of the bond or trust should be 
required to post the cancellation and advertise for claim submission on 
its website for no less than 60 days. The commenter asked FMCSA to 
allow 30 days for the surety or trust provider to investigate the claim 
and an additional 30 days to make payment or denial (citing reason) to 
claimant: 60 days to advertise, plus an additional 60 days to 
investigate and settle claim.
    FMCSA response: Consistent with the position of most commenters, 
FMCSA will consider the surety or trust's duty to publicly advertise 
claims to be met through the provision of notice of financial failure 
or insolvency to FMCSA. In this NPRM, FMCSA proposes to post such 
notices in the FMCSA Register section of its website to provide a 
centralized location for notice of claims periods.
Other Comments Related to Surety or Trust Responsibilities
    Sureties or trust fund providers will have to commence action to 
cancel broker or freight forwarder surety bonds or trust funds in the 
event of broker/freight forwarder financial failure or insolvency (49 
U.S.C. 13906(b)(6), (c)(7)). To effectively implement this provision, 
commenters provided other insights on surety or trust responsibilities 
in these cases.
    A trade organization suggested that the requirements for the 
qualifications for trustees and trusts be sufficiently effective so 
that trustees are compelled to do better underwriting of brokers, 
eliminating those from the industry who may be likely to default on 
their payments to motor carriers.
    A surety provider noted that the authority for pro-rata payments to 
claimants who have filed following publication of the need to file 
claims but before the cut-off date, should be explicitly set out in the 
regulations to protect the surety or trust and eliminate any delay in 
making payments to motor carriers.
    FMCSA response: FMCSA believes that this NPRM would improve 
regulation of trustees and lead to fewer brokers or freight forwarders 
defaulting on their payments. Regarding the latter comment, FMCSA does 
not believe that a specific provision in the regulations is necessary 
because the statute regarding pro-rata payment of claims is self-
implementing.

E. Enforcement Authority

Surety Suspension Procedures Under 49 U.S.C. 13906(b)(7) and (c)(8)
    The agency sought input on the development of surety suspension 
procedures authorized pursuant to 49 U.S.C. 13906(b)(7) and (c)(8). 
FMCSA has authority under MAP-21 to suspend non-compliant surety 
providers from providing broker or freight forwarder financial 
responsibility for 3 years, seek civil penalties against surety 
providers, and sue non-compliant surety providers in Federal court. In 
the ANPRM, the agency noted that it expects to establish a procedure 
for suspensions where it will issue an order to show cause against a 
non-compliant surety provider, weigh any evidence submitted by the 
provider, and make a final decision. (83 FR 48785)
    A trade organization commented that FMCSA's enforcement authority 
is likely to be exercised mainly against sureties providing BMC-85 
trusts since Treasury has authority to regulate sureties providing BMC-
84 bonds. It supported the use of the simplified show cause procedure 
proposed by FMCSA, adding that the show cause order should be published 
to allow interested members of the public to comment. This trade 
organization recommended that, in order to ensure funds are available 
to pay motor carrier claims without a large expenditure of agency 
resources, the agency should require trust providers to issue only 
fully funded trusts and allow the market to regulate this by requiring 
the trustor to publish a list of valid claims paid on a publicly 
accessible website. According to the commenter, this information is 
currently required to be submitted to FMCSA, and the commenter believed 
there is no reason it should not also be made publicly available, so 
that motor carriers and others can see for themselves whether a trust 
provider is paying valid claims. The commenter wrote that the agency 
must make the distinction between ``paid claims'' and ``filed claims.'' 
Only valid claims paid should be required to be filed with the agency. 
This same trade organization commented that, in order to show that a 
trustee is holding $75,000 in cash or a cash equivalent for each of the 
brokers for whom it has filed a BMC-85, FMCSA should require the 
trustees to file audited financial statements with the agency showing 
the number of brokers for whom it has filed BMC-85 forms with the 
FMCSA, and the value and type of assets it is holding in trust to 
support them. The commenter said that FMCSA should make these audited 
financials publicly available so that the beneficiaries of these trusts 
can determine whether the trusts are fully funded with liquid assets 
``readily available to pay claims.'' If they are not, then the 
Government should take enforcement action by cancelling the trust's 
registration number and terminating its ability to file BMC-85s.
    A second trade organization laid out the surety's duties and 
procedures in detail in a draft proposed rule. The commenter believed 
these rules would define the limits of the surety's liability and 
remove any concerns that it must wait to collect all potential claims 
before paying claims on the bond. This trade organization encouraged 
FMCSA to adopt a process that would allow a member of the public to 
petition the agency to revoke the right of a surety or trustee to file 
bonds and trusts with the agency, if that surety or trustee has failed 
to follow the procedures in its draft Sec.  387.307, Property broker 
surety bond or trust fund.
    A surety provider wrote that a BMC-84 surety provider or BMC-85 
trust fund provider becomes insolvent when it is unable to pay claims 
or redemptions upon demand. The commenter believed that when FMCSA can 
verify this, the agency should issue a notice to show cause and demand 
the surety provide proof of financial stability. If the surety is 
unable to adequately respond, FMCSA should issue a notice to the 
holders of the respective BMC-84s or BMC-85s that their ``proof of 
minimum financial responsibility'' will be suspended in 30 days if they 
do not obtain alternative surety filing.
    A surety provider believed that FMCSA should suspend or revoke a 
surety or trust provider's authority to file BMC-84s or BMC-85s only if 
a written complaint with supporting evidence was filed with FMCSA, 
investigated, and ruled on by FMCSA as to suspension or revocation. The 
commenter stated that FMCSA must clearly define compliance rules before 
suspension or revocation is adopted practice.
    A surety provider wrote that FMCSA must be certain any regulations 
or procedures it adopts do not conflict with Treasury's regulations in 
31 CFR 223.17(b), regarding an agency's decision to refuse to accept a 
bond from a surety listed on OMB Circular 570. The commenter noted 
that, while FMCSA may determine that the Treasury procedure is enough, 
U.S. Customs and Border Protection has regulations outlining how that 
agency determines when to refuse to accept a surety's bond (19 CFR 
113.38), without creating a referral to Treasury for

[[Page 843]]

removal from OMB Circular 570. This surety provider commented that the 
suspension of the eligibility to provide surety bonds or trust 
functions, on behalf of FMCSA financial responsibility instruments, 
must not be the result of any arbitrary or capricious decision making.
    A surety provider believed if any trust provider is found not to be 
holding the funds required in support of the aggregated trusts they 
have underwritten or if a surety loses its authority granted by 
Treasury, that provider should immediately lose its authority to 
provide bonds or trusts. However, since suspension of the surety or 
trust will impact all of the principals for bonds issued by that surety 
or trust, the matter must be taken seriously and not be solely 
triggered by a complaint. The commenter believed the agency should 
provide the surety or trust with a notice to show cause why its 
authority should not be suspended, together with a list of particulars, 
and should provide the surety or trust with an opportunity for a 
hearing. The commenter said that if the agency has concerns, industry 
would expect it to initiate a dialogue so that the surety or trust 
might address those concerns before it reaches a show cause condition.
    A surety provider recommended that FMCSA provide bond and trust 
providers the ability to post information related to surety suspension 
procedures on the FMCSA website, or to have the information sent to the 
FMCSA for posting.
    FMCSA response: After consideration of the comments, FMCSA proposes 
a surety or trust suspension procedure as described later in this 
preamble and consistent with what it described in the ANPRM.
Other Comments Related to FMCSA's Enforcement Authority
    Commenters provided other views related to FMCSA's enforcement 
authority. A trust fund provider noted that ``the lone imploding BMC-85 
provider, Oasis Capital, Inc., which exited the marketplace owing 
claimants and redemptions, was a singular event.'' This commenter 
maintained that there is no other evidence of BMC-85 providers not 
paying claims or not providing redemptions to their customers. By 
contrast, another commenter asserted that there is evidence, revealed 
by a Google search, that BMC-85 providers have failed to pay legitimate 
claims. It also reported no claim issues can be found doing similar 
online searches for BMC-84 providers.
    Another trade organization urged the agency to require all BMC-85 
trust providers to submit timely notice of the financial failure of any 
of their clients and to make information regarding claims paid publicly 
available. The commenter wrote that underfunded or insolvent trust fund 
providers ``tarnish the brokerage industry and disadvantage those 
operating legally, enable irresponsible brokers to continue operating 
without adequate security, and cheat motor carriers, thereby lessening 
the safety of the transportation industry.'' The commenter reported 
that when owner-operators do not get paid, they may not be able to 
invest adequately in maintenance and safety improvements. The commenter 
wrote that FMCSA must enforce the law and give its highest priority to 
ensuring that trust providers are fully funded.
    While it understood that the agency focus is on safety, a trade 
organization believed that the economic well-being of small business 
motor carriers has a huge impact on safety because the loss of one 
payment can cause a motor carrier to defer maintenance and run harder 
until it makes up the shortfall. The commenter provided suggested 
regulatory text that it believed would keep persons with little 
financial backing from entering the broker industry, reducing the need 
for FMCSA enforcement action.
    FMCSA response: After consideration of the comments, FMCSA proposes 
a surety or trust suspension procedure as described later in this 
preamble and consistent with what it described in the ANPRM.

F. Entities Eligible To Provide BMC-85 Trust Fund Filings; should BMC-
85 providers be licensed as trust providers?

    Under MAP-21, FMCSA has broad authority to determine who is 
eligible to provide trust fund services on behalf of brokers or freight 
forwarders. A broker must file a surety bond or trust fund from a 
provider ``determined by the Secretary to be adequate to ensure 
financial responsibility'' (49 U.S.C. 13906(b)(1)(A)). Section 
13906(c)(1)(A) contains similar language for freight forwarders. Under 
current regulations, a financial institution may file trust funds 
(Sec.  387.307). In addition to other types of entities, loan or 
finance companies are considered financial institutions pursuant to 
Sec.  387.307(c)(7). In the ANPRM, the agency asked whether FMCSA 
should require BMC-85 trust fund providers to be licensed as trust 
providers. It also asked how Sec.  387.307(c)(7) (loan or finance 
company) could be amended to ensure adequate monitoring of BMC-85 
providers' ability to pay claims.
    A number of commenters believed that providers of BMC-85 trust 
funds should be licensed as trust providers.
    A surety provider believed that, while requiring BMC-85 trust 
providers to become licensed trust providers would add further 
regulatory oversight, the government agencies that provide the trustee 
licenses would not enforce or know the proper amount of assets that the 
trustees should have in trust. The commenter wrote that FMCSA needs to 
provide further oversight of the BMC-85 trusts. The commenter reported 
that when the BMC-85 trust providers were directly asked at the May 
2016 roundtable if they were collecting $75,000 to be held in trust, 
none claimed they were. Instead, they collect a small percentage annual 
fee, akin to unlicensed surety bonds, with none of the regulatory 
oversight or safeguards. The commenter wrote that a trust license 
requirement would not change this, but oversight and regulation from 
the FMCSA could.
    FMCSA response: After consideration of the comments, FMCSA is not 
proposing that BMC-85 trust providers be licensed as trust companies. 
Given both the proposed enhanced asset quality requirements and the 
requirement that BMC-85 trustees be more robustly monitored by 
financial regulators, FMCSA believes it is unnecessary to require that 
BMC-85 providers be licensed as trustees given the added cost such a 
requirement may impose.
Other Comments Related to Which Entities Should Be Eligible To Provide 
Trust Funds
    A trade organization endorsed the previously filed comments of the 
Association of Independent Property Brokers & Agents and quoted from 
them extensively regarding what it believed is a conflict-of-interest 
issue regarding ``the current practice of non-profit entities engaging 
in the normally for-profit business of selling or the brokering of 
financial security.'' The commenter believed that instead of working to 
fulfill important MAP-21 mandates, industry had been asked to ``engage 
in furtherance of what we believe is nothing more than a trust fund 
supplier `witch hunt' asked for by competing BMC-84 bond issuers and/or 
other entities that represent themselves as bona fide, non-profit trade 
groups, but are actually for-profit BMC-84 bond peddlers in disguise.'' 
The commenter recommended that FMCSA restrict industry trade groups 
from selling financial security instruments.

[[Page 844]]

    A surety provider suggested FMCSA consider promulgating regulations 
establishing financial criteria that FMCSA believes BMC-85 trust funds 
should meet. FMCSA could then require annual reports by independent 
accountants from every BMC-85 trust company that wants to obtain filer 
authority, verifying that these criteria had been met. If the company 
did not provide this annual report, its authority would be revoked. The 
BMC-85 trust company would need to have assets readily available that 
exceed the liability for trust funds on deposit. The commenter believed 
a process like this would be relatively easy for FMCSA to monitor.
    A trade organization demanded a change to the licensing process 
because of the lack of a qualified, independent monitoring source and 
false reliance on a State's initial issuance/reissuance of its business 
license. The commenter believed that loan or finance companies should 
not be treated as financial institutions, because of concerns that 
States will not monitor BMC-85 providers' ability to pay claims from a 
trust or, further, monitor such companies for enforcement purposes. The 
commenter also believed that the National Insurance Producers Registry 
license is only an industry-sponsored listing service of insurance 
agents and brokers.
    FMCSA response: FMCSA does not believe that there is a need to 
restrict industry trade groups from selling financial instruments. 
FMCSA's authority is limited to ensuring that BMC-85 trust fund 
providers are adequately regulated and suitable for administering trust 
funds. Whether such providers are industry associations is not relevant 
to that determination.
    In regard to the comment suggesting that trustees be required to 
have annual reports from independent accountants to measure their 
compliance with FMCSA regulations, FMCSA believes that such a 
requirement would impose cost upon trustees that is unnecessary. FMCSA 
believes that the proposed regulatory structure, where trusts will need 
to contain high quality financial instruments that are available to 
meet $75,000 in claims, along with the enhancement of the regulatory 
requirements for being a BMC-85 trustee, will make such an annual 
reporting requirement unnecessary.
    Finally, FMCSA agrees with commenter's suggestion that being a loan 
or finance company is not sufficient to serve as a BMC-85 trustee. 
Through its outreach to financial regulators and their representatives, 
FMCSA has received robust feedback that loan or finance companies are 
not adequately regulated and hence inappropriate for serving as 
stewards of money held in trust for motor carriers and shippers.

G. Revisions to Forms BMC-84 and BMC-85

    The agency anticipated the need for revisions to the BMC-84 and 
BMC-85 forms if a rulemaking was proposed. In the ANPRM, FMCSA 
requested comments to identify suggested changes to the forms.
    After review of the BMC-84, a trade organization found it to be 
well drafted. The commenter's only recommendation was that the form 
require the surety underwriting the bond to be a corporation appearing 
on Treasury's list of approved sureties and certified, pursuant to 31 
U.S.C. 9304 through 9308, to provide bonds to the Federal Government.
    A surety provider suggested that the best approach to revising the 
forms would be incorporating regulatory language by reference, rather 
than repeating language found in the FMCSA regulations.
    Two surety providers believed there is no need to modify the forms 
except to conform to changes from rulemaking.
    A trade organization encouraged the agency, if it does change these 
forms or adopt an electronic version for filing, to revise them to 
state that ``no provision on the form or in a contract or agreement 
between a broker and a surety or trustee, or a contract or agreement 
between a broker and motor carrier, can conflict with or exempt any 
party from their rights or duties under the new rules. Nor can any such 
contract bind a person to waive their rights or duties under the new 
rules.'' The commenter also believed the forms should state that the 
contract includes by reference all applicable provisions of 49 U.S.C. 
13906 and the regulations themselves. The commenter also noted that 
electronic filing of some fields from the physical documents has caused 
confusion as to the contents of the form. There are provisions on the 
BMC-84 setting legal responsibilities and liabilities that are not 
provided by the current statute or regulations.
    A surety provider believed that removing the 30-day cancellation 
clause, allowing a trust or bond company to cancel on demand, will 
reduce the number of claims and lower premiums.
    FMCSA response: FMCSA appreciates the comments submitted by 
stakeholders. FMCSA may propose revisions to the BMC-84 and BMC-85 
forms to align with any changes made to the regulations as a result of 
this rulemaking. While any revised forms will be made available for 
comment in a future notice, FMCSA also welcomes comments in response to 
the NPRM on items to consider for inclusion or revision.

H. Should HHG brokers and freight forwarders be regulated differently?

    FMCSA asked whether HHG brokers and freight forwarders should be 
regulated differently than general property brokers and freight 
forwarders in a rulemaking on broker/freight forwarder financial 
responsibility. Two surety providers believed that HHG brokers should 
be regulated differently. One commenter noted that the movement of HHG 
deals directly with the public. The second commenter also noted that 
HHG shippers are consumers who know very little about the 
transportation industry. This commenter wrote that in its experience 
this segment of the industry often violates existing regulations 
regarding estimates and carriers holding loads hostage. It suggested 
that enforcement of the existing regulations would reduce those 
problems.
    A surety provider wrote that, from an underwriting standpoint, it 
is unlikely that the surety industry will view HHG differently. The 
surety market underwriters already have the ability to segregate 
policies based on their operations and have chosen not to do so.
    A trade organization representing the moving industry believed that 
any additional fraud protections imposed by FMCSA should apply only to 
online HHG brokers. A second trade organization representing the moving 
industry did not believe that additional fraud protections pertaining 
to HHG brokers were warranted.
    FMCSA response: FMCSA has decided not to propose regulations 
dealing specifically with HHG brokerage or freight forwarding at this 
time. FMCSA believes that it is most useful to continue to address 
moving fraud through other means. Moreover, there is no requirement in 
49 U.S.C. 13906 to issue HHG-specific rules.

I. Market's Ability To Address Broker/Freight Forwarder Noncompliance

    FMCSA sought comment on whether the market is able to address 
broker/freight forwarder noncompliance. For example, if a broker or 
freight forwarder has a history of noncompliance with contracts, 
wouldn't surety or trust firms be less likely to back them, or to 
charge a higher premium or trust fund management fee? Is there a market

[[Page 845]]

failure that is preventing these transactions from taking place 
efficiently?
    Three surety providers agreed that sureties would decline to 
provide BMC-84s or BMC-85s to any broker or freight forwarder with a 
known history of noncompliance with a BMC-84 or BMC-85, except under 
special circumstances. These commenters reported that the problem is 
with reincarnated brokers and freight forwarders that slip through the 
process. One of these commenters wrote that sureties collect a variety 
of personal identification information as part of the underwriting 
process to ferret out reincarnated entities, but this does not always 
prevent these entities from finding another surety, because such 
information cannot be disclosed unless the surety is required to 
provide it to the agency. Another of these surety providers believed 
that a consolidated public posting of the MC number, company name, and 
name of the owner(s) of noncompliant brokers and freight forwarders 
would help combat reincarnated companies.
    A surety provider noted that the whole industry should vet the 
broker or freight forwarder using FMCSA's Licensing and Insurance 
website, before entering any monetary relationship.
    FMCSA response: FMCSA appreciates the information provided through 
the ANPRM and has considered it in forming our proposed rule. As 
explained elsewhere in this document, FMCSA has attempted to strike an 
appropriate balance in how additional regulations may positively or 
negatively impact those affected by the proposed changes. FMCSA 
encourages stakeholders to review the proposal and provide comments and 
particularly data, where possible, to support their positions.

J. Comments on Other Aspects of MAP-21 Section 32918

    FMCSA requested comments on any other aspects of implementing MAP-
21 section 32918 that may be necessary, including how these areas could 
be implemented in a way that would not divert scarce safety oversight 
resources.
    One trade organization offered detailed proposed regulatory text. 
It suggested that FMCSA's primary role in an NPRM would be to promptly 
publish on its Licensing and Insurance website: (1) information 
provided by sureties about when a broker obtains a bond or trust that 
complies with the rules; (2) information regarding the status of the 
broker's registration; and (3) the website link provided by the surety 
with which the public can obtain information about the current bond. By 
making public timely information about pending bond claims and the 
status of a broker's registration, the commenter wrote that the motor 
carrier can choose whether to do business with a broker or not.
    A surety provider indicated that a license as a premium financing 
company, available in all 50 States, with oversight by each State's 
department of insurance or banking department, would relieve FMCSA of 
the need for an annual review, leaving its limited resources available 
for safety oversight. The commenter included a table describing the 
licensing requirements for each State.
    A surety provider believed that limiting the acceptable financial 
instruments to BMC-84 surety bonds is the best way to ensure that FMCSA 
does not divert its resources because the BMC-84 bond is the only 
product that relies strictly on other government agencies for solvency 
and claims handling. The commenter maintained that BMC-84 surety bonds 
are less expensive than BMC-85 trusts. The same commenter wrote that 
while there are thousands of bond requirements similar to the $75,000 
freight broker bond at the local, State, and Federal level, the 
Government agencies issuing the requirements rely on other Government 
agencies to regulate the companies backing the risk, which allows them 
to focus on their regulatory duties. For surety bonds (BMC-84), third 
party trusts (BMC-85), ILOCs from FDIC-insured banks, and cash, the 
commenter provided two tables describing which Government agencies 
regulate each product and what percentage of obligees accept each 
product. The commenter noted that FMCSA is the only Government agency 
that allows third-party trust companies to hold the ILOCs or cash on 
behalf of the agency, greatly adding to FMCSA's oversight 
responsibilities.
    FMCSA response: FMCSA appreciates the insight provided by the 
commenters and the details on varying requirements across the States. 
FMCSA reviewed and considered this information in the development of 
this NPRM.
Small Business Impacts
    FMCSA requested comment on the small business impacts of its 
suggested courses of action in the ANPRM. An individual commenter 
believed this to be the single most crucial question the agency asked. 
He reported that small business truckers must be fully compensated in 
order to operate safely; if they are not justly compensated for their 
efforts, they have been failed by the system which is in place to 
protect them.
    A trust fund provider noted that thousands of freight brokers are 
small business owners; any disruption to their bond placement or in 
their potential authority status may result in lost revenues. The 
commenter also wrote that many BMC-85 providers also qualify as small 
businesses that could be put out of business if FMCSA adopts a cash-
only standard for BMC-85 trust funds.
    A surety provider wrote that, if BMC-85s continue to be offered as 
an option, FMCSA must communicate where to report claim issues and must 
handle complaints in a timely fashion or small freight carriers will 
continue to be forced to close. The commenter added that only FMCSA can 
positively impact small freight carriers that have been harmed by the 
lack of BMC-85 trust regulation.
    FMCSA response: FMCSA understands the differing implications of 
regulations, and the absence of regulations, on the affected entities 
and has considered the impacts both from broker nonpayment on small 
motor carriers and from more stringent requirements on small brokers 
and freight forwarders in the development of this NRPM. The impact to 
surety bond and trust fund providers was also considered in the 
development of this NPRM.

K. Miscellaneous Comments on the ANPRM

    Some commenters raised issues or offered explanations that were 
related to broker/freight forwarder financial responsibility but 
outside the specific issues that FMCSA raised in the ANPRM. A trade 
organization proposed regulatory language to ensure that a broker 
operates and incurs debt to motor carriers only when it has the amount 
of security required by statute. This commenter asked for industry 
input on the reasons for a legitimate dispute between a broker and 
carrier over payment of a load so they could be incorporated into the 
regulations. Other than claiming that it did not contract with the 
broker, the commenter believed that the only legitimate dispute would 
be one where the shipper or receiver of the load in question had 
memorialized a claim in a document given to the broker stating with 
particularity that the motor carrier did not perform the transportation 
as agreed to. The commenter noted that, when brokers go out of business 
with claims exceeding the amount of the bond, those claims are rarely 
the subject of a dispute between the broker and the carrier.

[[Page 846]]

    This same commenter noted that these financial security rules are 
important for the smooth function and safety of the motor carrier 
industry. If the rulemaking produces effective steps for the resolution 
of motor carrier claims against a bond or trust, this trade 
organization believed that ``disputes between motor carriers and 
sureties will be reduced, there will be less need for litigation, less 
need for FMCSA intervention, and the economic health of the broker/
motor carrier component of the transportation industry will be 
stronger.''
    In response to the agency's assertion that FMCSA had heard little 
from the BMC[hyphen]85 industry, a trust fund provider complained that 
FMCSA had failed to consider his comment properly. In his June 16, 2016 
post-round table comments, this surety provider wrote that his company 
``reiterates and incorporates the entirety of PFA's post-event 
`comments regarding the FMCSA roundtable on May 20, 2016.' '' This same 
surety provider believed that FMCSA did not appropriately distinguish 
between the legitimate interests of motor carriers and shippers and the 
``often questionable benefits'' of BMC-84 surety providers.
    A factoring company noted that it endorsed the submissions of 
Transport Financial Services. The commenter wrote that attendees at a 
transportation factoring software users conference agreed that BMC-85 
trust providers are preferable to BMC-84 surety providers with respect 
to economically regulated transportation claims processing and better 
informed regarding such specialized activity than the licensed 
insurance adjusters handling a much wider range of claims. A surety 
provider believed a rulemaking alone would not provide the adequate 
changes needed to solve the issues posed by BMC-85s.
    Commenters believed that FMCSA should do more to screen brokers. An 
individual wrote that FMCSA should require more proof of financial 
stability from brokers, and the broker or forwarder should prove this 
to the shipper too. The commenter recommended creating a reporting 
portal that would provide a track record of issues with on time 
payments or other issues that FMCSA could investigate and act on.
    One individual believed that FMCSA is not doing enough to vet 
brokers that fail to pay carriers and then close their doors, change 
their business name, and/or file for bankruptcy, leaving the surety to 
handle the debt. The commenter wrote that FMCSA needs to collect the 
social security number of the brokers, their spouses, and managing 
partners and then create a database to monitor and even reject ``fly by 
night'' operations. The commenter recommended that FMCSA make it a 
criminal act to lie on the property broker application and provided 
examples of questions intended to weed out chameleon brokers.
    A number of commenters believed that the bond amount should be 
higher than $75,000. However, one trade organization commented that the 
$75,000 bond is too high and serves as an unreasonable barrier to 
entry. It recommended it be lowered by Congress to $25,000. Another 
surety provider wrote that raising the financial requirement for 
brokers and freight forwarders only increased the amount of money 
unscrupulous operators could steal.
    FMCSA response: FMCSA appreciates these comments and may address 
them if they are renewed in response to this NPRM. The $75,000 minimum 
requirement is currently mandated by statute. 49 U.S.C. 13906(b)(3) and 
(c)(4).

VII. Discussion of Proposed Rulemaking 4
---------------------------------------------------------------------------

    \4\ Unless ``freight forwarder'' is specifically referenced in 
these proposed regulations, all changes to broker financial 
responsibility requirements are applicable to freight forwarder 
financial responsibility pursuant to 49 CFR 387.403T(c) and 49 CFR 
387.403(c). The agency requests comment on whether the agency should 
adopt separate regulatory changes on freight forwarder financial 
responsibility that mirror the broker regulations or maintain the 
current adoption by reference.
---------------------------------------------------------------------------

Assets Readily Available

    This NPRM proposes to allow brokers and freight forwarders to meet 
MAP-21's assets readily available requirement by maintaining trusts 
that have assets that can be liquidated within 7 business days of the 
event that triggers a payment from the trust, as certified on a BMC-85, 
and that do not contain the following assets:
    (1) Interests in real property;
    (2) Intercorporate agreements or guarantees;
    (3) Internal Letters of Credit;
    (4) Certain assets determined by States to be illiquid including 
second trust deeds, personal property and vehicles;
    (5) Bonds that do not receive the highest rating from a credit 
rating agency (a nationally recognized statistical rating organization 
registered with the Securities and Exchange Commission); and
    (6) Any other asset that the broker cannot certify (on a BMC-85) 
will be available in the amount of $75,000 within 7 business days.
    After consideration of the 2016 roundtable discussion and 
associated comments and the comments in response to the 2018 ANPRM, 
FMCSA proposes the list of assets that are not suitable for a BMC-85 
trust fund above.
    First, the Agency believes that 7 business days is a reasonable 
period for an asset to be considered ``readily'' available for 
liquidation. That will give the broker or freight forwarder adequate 
time to convert the asset to cash (if not cash already) but it will be 
available for claimants within a reasonably short period, and indeed 
quicker than routine collection of commercial debt in other contexts.
    Second, FMCSA carefully developed the list of assets that it will 
not consider to be ``assets readily available.'' It addresses each of 
these in turn.
    FMCSA does not believe interests in real property should be in BMC-
85 trust funds as such interest may be difficult to liquidate within 7 
business days. Moreover, the value of real property fluctuates, and 
FMCSA is concerned that an interest in real property initially worth 
$75,000 will not retain its value at the time of a claim on a bond or 
trust.
    Second, intercorporate guarantees or agreements are dependent on 
the financial health of the guarantor, which makes their availability 
in the case of a drawdown uncertain. In addition, FMCSA lacks the 
information and resources to monitor the financial health of 
guarantors.\5\
---------------------------------------------------------------------------

    \5\ While the agency does accept corporate guarantees in its 
self-insurance program, pursuant to 49 U.S.C. 13906(d), such 
guarantors are part of a package of collateral that the agency 
requires. Moreover, the agency employs a financial contractor to 
assist it in that program. The agency's ability to monitor such 
instruments in the context of a program with fewer than 50 
participants is very different from its ability to assess 
intercorporate agreements or guarantees of thousands of brokers and 
freight forwarders.
---------------------------------------------------------------------------

    Third, FMCSA does not believe internal letters of credit are 
appropriate for BMC-85s. In order for FMCSA to accept letters of credit 
in BMC-85 trust funds, the Agency needs to be confident that the issuer 
of the letter of credit is able to pay a claim in the event of a 
drawdown. Internal letters of credit do not appear to provide such 
reassurance. FMCSA is aware that a leading trust fund provider uses 
internal letters of credit in its trust funds, and the agency welcomes 
comments on how it can be assured that such letters of credit will be 
available for the payment of claims.
    Fourth, in preparing this proposed rule, FMCSA explored whether 
States have defined assets readily available. FMCSA learned that at 
least two States have considered second trust deeds, personal property, 
and vehicles to be

[[Page 847]]

illiquid.\6\ Accordingly, given the need for assets to be ``readily 
available,'' the agency cannot accept these illiquid assets, and it 
proposes to prohibit these assets from being maintained in trust funds.
---------------------------------------------------------------------------

    \6\ 10 CCR section 1780 (second trust deeds); Haw. Admin. Rules 
section 17-675-2 (personal property and vehicles).
---------------------------------------------------------------------------

    Fifth, FMCSA has determined that given their higher default risk, 
bonds that are not considered the highest rated by a nationally 
recognized statistical rating organization (NRSRO),\7\ are too risky to 
be considered readily available for the payment of claims. FMCSA 
welcomes comment on whether a less restrictive approach may protect 
motor carriers and shippers.
---------------------------------------------------------------------------

    \7\ NRSROs are those organizations registered with the 
Securities and Exchange Commission (SEC) pursuant to authority in 
the Exchange Act, 15 U.S.C. 78c(b), 78o-7, 78q, 78w, and 78mm, and 
SEC regulations in 17 CFR 240.17g-1. A list of the ten currently 
registered NRSROs is available on the SEC's website. See https://www.sec.gov/ocr/ocr-current-nrsros.html (retrieved Oct. 18, 2022).
---------------------------------------------------------------------------

    Finally, to provide maximum flexibility for BMC-85 trust providers 
and brokers and freight forwarders, FMCSA will allow all other assets 
in trusts, provided the broker or freight forwarder can certify under 
penalty of perjury that the asset will be convertible to cash within 7 
business days of the event triggering its liquidation. This rule also 
proposes a 3-year compliance date to give time for brokers or freight 
forwarders to meet the new asset requirement. FMCSA believes this will 
allow brokers and freight forwarders to transition to the new standard.
    FMCSA invites comments from the public regarding other types of 
assets that should not be considered assets readily available. FMCSA 
also requests comments from the public regarding whether a 
comprehensive list of appropriate assets is possible or desirable.

Entities Eligible To Provide Trust Funds for BMC-85 Filings

    FMCSA proposes removing loan and finance companies from the list of 
entities authorized to serve as BMC-85 trustees. FMCSA reaches this 
conclusion for several reasons. First, FMCSA is not a financial 
regulator, and given its primary safety mission it must rely on other 
regulators to regulate the trustees that provide BMC-85 trust funds. In 
that regard, FMCSA is concerned that loan and finance companies are not 
adequately regulated at the State level for the purpose of issuing BMC-
85s. Because these entities are unregulated, they may engage in 
practices that create risk to the public. Specifically, many of these 
loan and finance companies offer access to a $75,000 trust via a 
monthly membership fee. This business model is not within the intent of 
MAP-21 and may not provide the readily available assets to pay claims. 
Its meetings with both State and Federal regulators were informative on 
this point. CSBS indicated that loan companies are not looked at for 
safety and soundness or financial condition. They are generally 
examined for consumer protection compliance. Moreover, there are too 
many companies for the amount of state examination capacity. The FDIC 
indicated that state finance companies are not regulated as robustly as 
FDIC insured banks. And, the Florida Office of Financial Regulation, 
which regulates Florida ``consumer finance companies,'' one of which is 
a significant provider of BMC-85 trusts, indicated that there is no 
regulation of these companies in the business that FMCSA allows them to 
be engaged in. FMCSA welcomes comments from BMC-85 providers and others 
as to why loan and finance companies are adequately regulated for the 
purpose of issuing BMC-85s, as opposed to being regulated by states for 
either purpose.
    FMCSA also proposes a 3-year compliance date for trustees to meet 
these new requirements to allow BMC-85 providers to transition.

Group Surety Bonds/Trust Funds

    FMCSA does not currently allow the use of group surety bonds or 
group trust funds (78 FR 54720, 54721, Sept. 5, 2013), and this NPRM 
does not propose any changes to the agency's position. After 
considering the comments on the ANPRM and additional agency discussion, 
FMCSA determined that the use of these bonds and funds would not be 
likely to provide a cost savings for brokers and freight forwarders, as 
brokers and freight forwarders would still need to hold $75,000 in 
financial responsibility. In addition, group surety bonds/trust funds 
are difficult and costly to administer. As noted in the comment 
discussion, the main proponent of their inclusion in implementation of 
49 U.S.C. 13906(b) and (c) has since acknowledged that they are 
inappropriate for FMCSA financial responsibility requirements, a factor 
which FMCSA finds highly persuasive.

Immediate Suspension of Broker/Freight Forwarder Operating Authority

    FMCSA proposes a new process for an immediate suspension of broker 
or freight forwarder operating authority. If there is an actual 
drawdown on a broker/freight forwarder surety bond or trust fund, FMCSA 
will provide notice to the broker or freight forwarder that it has 7 
business days to provide evidence to FMCSA that the surety or trust has 
been replenished. If it does not provide such notice, FMCSA will 
suspend that broker or freight forwarder's operating authority 
registration.
    A drawdown would be defined as a situation where one of the 
following occurs: (1) a broker or freight forwarder consents to the 
drawdown and the instrument value drops below $75,000; (2) a broker or 
freight forwarder does not respond to adequate notice of a claim by a 
surety or trust fund provider, the surety or trust provider pays the 
claim, and the instrument value drops below $75,000; or (3) a claim is 
reduced to a judgment, the surety or trust fund provider pays the 
judgment and the instrument value drops below $75,000.
    This proposal also requires that FMCSA provide the broker or 
freight forwarder notice of the pending suspension and give it 7 
business days to replenish the funds. If it does not replenish the 
funds, the broker's or freight forwarder's registration will be 
suspended via second notice. FMCSA believes that 7 business days gives 
the broker or freight forwarder reasonable time to replenish the surety 
bond or trust account, while also implementing Congress's mandate that 
broker or freight forwarder operating authority registration be 
immediately suspended in the event the broker/forwarder's financial 
security falls below $75,000.

Surety or Trust Responsibilities in Cases of Broker/Freight Forwarder 
Financial Failure or Insolvency

    FMCSA proposes to define financial failure or insolvency as a 
bankruptcy filing or State insolvency filing. If there is a financial 
failure or an insolvency of the broker or freight forwarder and the 
surety or trustee is notified of the bankruptcy or insolvency filing, 
then the surety or trustee must notify FMCSA of the filing and initiate 
cancellation of financial responsibility. After considering responses 
to the ANPRM, FMCSA more fully appreciates the value of an objective 
test of financial failure or insolvency such as a bankruptcy or 
insolvency filing.\8\ This approach will minimize disputes and allow 
for efficient implementation of this statutory provision. The agency 
also notes that Congress defined a similar term ``insolvent'' in the 
bankruptcy code at 11 U.S.C. 101(32). Given that similar

[[Page 848]]

term's placement in the Bankruptcy Code, it is appropriate to use 
bankruptcy law to define ``financial failure or insolvency'' in the 
implementation of the MAP-21 provisions.
---------------------------------------------------------------------------

    \8\ See comments of the Surety & Fidelity Association of 
America, available in the docket at https://www.regulations.gov/document/FMCSA-2016-0102-0022.
---------------------------------------------------------------------------

    Consistent with FMCSA's primary safety mandate, the agency seeks to 
implement this statute in a way that involves clear guidelines for 
surety and trust providers with minimal agency involvement is. FMCSA 
believes this proposal accomplishes that goal. To the extent that 
brokers, sureties, or trustees are concerned about the bankruptcy 
implications of this approach, FMCSA recognizes that those entities may 
need to seek relief from the bankruptcy court to take action on the 
BMC-84 or BMC-85 instruments in the event of a bankruptcy. Given that a 
formal bankruptcy or insolvency filing is required, FMCSA expects few 
instances where this portion of the NPRM will be triggered.
    Further, MAP-21 requires that sureties or trustees ``publicly 
advertise'' for claims in the event of a broker or freight forwarder 
financial failure or insolvency. FMCSA proposes that once the surety or 
trustee has notified FMCSA of the financial failure or insolvency, it 
will have met its statutory mandate to ``publicly advertise.'' FMCSA 
will help ensure that claimants are aware of the claims filing period 
by posting notice of the claims period on the FMCSA Register on its 
website. All claims will need to be filed directly with the surety or 
trustee.

Enforcement Authority

    FMCSA proposes to implement MAP-21's surety provider suspension 
authority provision by providing notice of suspension to the surety or 
trust fund provider, allowing 30 calendar days (extended to the next 
business day if the final day of the period falls on a weekend or 
Federal holiday) for the surety or trust provider to respond, before 
the agency makes a final decision.
    FMCSA proposes to add language to 49 CFR part 386 to address civil 
penalties authorized by 49 U.S.C. 13906(b) and (c) as well.

VIII. Section-by-Section Analysis

    This section includes a summary of the proposed changes to 49 CFR 
parts 386 and 387. The regulatory changes proposed are discussed in 
numerical order.

Appendix B to Part 386--Penalty Schedule: Violations and Monetary 
Penalties

    In Appendix B to part 386, a new paragraph (g)(24) would be added 
to highlight the monetary penalty for which a surety company or 
financial institution found in violation of 49 U.S.C. 13906 or Sec.  
387.307 would be liable.

Section 387.307 Property Broker Surety Bond or Trust Fund

    In Sec.  387.307(b), a new standard for trust funds allowed under 
the section would be added. Existing paragraph (c)(7) would be removed 
and existing paragraph (c)(8) would be renumbered as paragraph (c)(7). 
New paragraphs (e), (f), and (g) would be added.
    Paragraph (e) would set out the triggers and procedures for 
immediate suspension of a broker. The paragraph would establish the 
role of the surety provider or financial institution, FMCSA, and the 
broker.
    Paragraph (f) would set out procedures and responsibilities for a 
surety company or a financial institution and FMCSA following financial 
failure or insolvency of a broker. A financial failure or insolvency of 
a broker would be defined as a filing related to the broker pursuant to 
Title 11 of the United States Code or a filing related to the broker 
under an insolvency or similar proceeding under State law.
    Paragraph (g) would set out procedures concerning suspension of a 
surety company or financial institution's ability to file evidence of 
financial responsibility with FMCSA and FMCSA's role in that action. 
Penalties for violation of the requirements of this section or 
subsection (b) of Title 49, section 13906 U.S.C. would be established.

IX. Regulatory Analyses

A. Executive Order (E.O.) 12866 (Regulatory Planning and Review), E.O. 
13563 (Improving Regulation and Regulatory Review), and DOT Regulatory 
Policies and Procedures

    The Office of Information and Regulatory Affairs (OIRA) determined 
that this rulemaking is not a significant regulatory action under 
section 3(f) of E.O. 12866 (58 FR 51735, Oct. 4, 1993), Regulatory 
Planning and Review, as supplemented by E.O. 13563 (76 FR 3821, Jan. 
21, 2011), Improving Regulation and Regulatory Review and does not 
require an assessment of potential costs and benefits under section 
6(a)(3) of that Order. This rule is also not significant within the 
meaning of DOT regulations (49 CFR 5.13(a)). Accordingly, the Office of 
Management and Budget has not reviewed it under these Orders. A draft 
regulatory impact analysis is available in the docket. That document:
     Identifies the problem targeted by this rulemaking, 
including a statement of the need for the action.
     Defines the scope and parameters of the analysis.
     Defines the baseline.
     Defines and evaluates the costs and benefits of the 
action.
    Copies of the full analysis are available in the docket or by 
contacting the person listed under FOR FURTHER INFORMATION CONTACT.
Summary of Estimated Costs
    Brokers and freight forwarders, surety bond and trust fund 
providers, and the Federal Government would incur costs for compliance 
and implementation. The quantified costs of the proposed rule include 
notification costs related to a drawdown on a surety bond or trust 
fund, and immediate suspension proceedings, FMCSA costs to hire new 
personnel, and costs associated with the development and maintenance of 
the BMC-84/85 Filing and Management IT System. FMCSA estimates that the 
10-year cost of the proposed rule would total $5.4 million on an 
undiscounted basis, $3.8 million discounted at 7 percent, and $4.6 
million discounted at 3 percent (all in 2020 dollars). The annualized 
cost of the rule would be $545,505 discounted at 7 percent and $542,343 
at 3 percent. Ninety-eight percent of the costs would be incurred by 
the Federal Government.
Summary of Estimated Benefits
    This proposed rule would result in benefits to motor carriers 
amounting to a decrease in the claims that go unpaid. FMCSA expects 
this result for a number of reasons. First, FMCSA proposes to 
immediately suspend brokers that do not respond following a drawdown on 
their financial security. This step should alleviate broker non-payment 
issues as financially insecure brokers would have less time to run up 
claims they may never pay, while operating lawfully. Building the BMC-
84/85 Filing Management System would efficiently exchange information 
between motor carriers, brokers, financial responsibility providers, 
and FMCSA, thereby reducing the information asymmetry concerns 
associated with broker and carrier transactions. Given a lack of data, 
FMCSA is unable to quantify benefits resulting from this rule, but 
qualitatively discusses benefits directly

[[Page 849]]

related to three provisions in the regulatory impact analysis.
    FMCSA cannot directly estimate an impact on safety resulting from 
the proposal. OOIDA \9\ contends that broker non-payment of claims 
causes smaller carriers to defer maintenance on their vehicles or ``run 
harder until they make up the shortfall,'' both resulting in unsafe 
driving practices.\10\ TIA contends that ``small carriers and owner-
operators often operate on thin financial margins and need the revenue 
from every load to maintain their equipment so that it meets 
roadworthiness and safety requirements. If they are not paid, necessary 
maintenance and repairs may be put off or ignored because of the 
reduced cash flow.'' If the proposal is finalized, carriers would have 
more information to avoid contracting with unscrupulous brokers and 
would also receive payment for work completed in a timelier manner, 
without use of interpleader proceedings. Both of these outcomes could 
lead to an increase in safety if motor carriers choose to use these 
resources to further their safety focus.
---------------------------------------------------------------------------

    \9\ This comment is available in the docket at https://www.regulations.gov/document/FMCSA-2016-0102-0076.
    \10\ TIA also references potential safety benefits of this 
rulemaking, available in the docket at https://www.regulations.gov/document/FMCSA-2016-0102-0032.
---------------------------------------------------------------------------

B. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801-808), the 
Office of Information and Regulatory Affairs (OIRA) designated this 
rule as not a ``major rule.'' \11\
---------------------------------------------------------------------------

    \11\ A ``major rule'' means any rule that the OMB finds has 
resulted in or is likely to result in (a) an annual effect on the 
economy of $100 million or more; (b) a major increase in costs or 
prices for consumers, individual industries, geographic regions, 
Federal, State, or local government agencies; or (c) significant 
adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
enterprises to compete with foreign-based enterprises in domestic 
and export markets (49 CFR 389.3).
---------------------------------------------------------------------------

C. Advance Notice of Proposed Rulemaking

    Under 49 U.S.C. 31136(g), FMCSA is required to publish an ANPRM or 
proceed with a negotiated rulemaking, if a proposed rule is likely to 
lead to the promulgation of a major rule. However, this requirement 
does not extend to rulemakings promulgated under the agency's 
jurisdiction pursuant to 49 U.S.C. 13501 or 13531, which are the basis 
of this rulemaking. Nonetheless, on September 27, 2018, FMCSA 
voluntarily published an ANPRM (83 FR 48779).

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980, Public Law 96-354, 94 Stat. 
1164 (5 U.S.C. 601-612), as amended by the Small Business Regulatory 
Enforcement Fairness Act of 1996 (Pub. L. 104-121, 110 Stat. 857, Mar. 
29, 1996) and the Small Business Jobs Act of 2010 (Pub. L. 111-240, 124 
Stat. 2504, Sept. 27, 2010), requires Federal agencies to consider the 
effects of the regulatory action on small business and other small 
entities and to minimize any significant economic impact. The term 
``small entities'' comprises small businesses and not-for-profit 
organizations that are independently owned and operated and are not 
dominant in their fields, and governmental jurisdictions with 
populations of less than 50,000. Accordingly, DOT policy requires an 
analysis of the impact of all regulations on small entities, and 
mandates that agencies strive to lessen any adverse effects on these 
businesses. FMCSA has not determined whether this proposed rule would 
have a significant economic impact on a substantial number of small 
entities. Therefore, FMCSA is publishing this initial regulatory 
flexibility analysis (IRFA) to aid the public in commenting on the 
potential small business impacts of the proposals in this NPRM. We 
invite all interested parties to submit data and information regarding 
the potential economic impact that would result from adoption of the 
proposals in this NPRM. We will consider all comments received in the 
public comment process when making a determination in the Final 
Regulatory Flexibility Assessment.
    An IRFA must contain the following:
    1. A description of the reasons why the action by the agency is 
being considered;
    2. A succinct statement of the objective of, and legal basis for, 
the proposed rule;
    3. A description of and, where feasible, an estimate of the number 
of small entities to which the proposed rule will apply;
    4. A description of the projected reporting, recordkeeping, and 
other compliance requirements of the proposed rule, including an 
estimate of the classes of small entities which will be subject to the 
requirement and the type of professional skills necessary for 
preparation of the report or record;
    5. An identification, to the extent practicable, of all relevant 
Federal rules that may duplicate, overlap, or conflict with the 
proposed rule; and
    6. A description of any significant alternatives to the proposed 
rule which accomplish the stated objectives of applicable statutes and 
which minimize any significant economic impact of the proposed rule on 
small entities.
Why the Action by the Agency Is Being Considered
    In 2012, Congress enacted MAP-21, specifically, section 32918, 
which contained requirements for the financial security of brokers and 
freight forwarders that amended 49 U.S.C. 13906. FMCSA proposes 
modifications to broker and freight forwarder financial responsibility 
requirements in accordance with the MAP-21 mandate. On September 27, 
2018, FMCSA published an ANPRM (83 FR 48779) saying that the agency was 
considering changes or additions to eight separate areas: Group surety 
bonds/trust funds, assets readily available, immediate suspension of 
broker/freight forwarder operating authority, surety or trust 
responsibilities in cases of broker/freight forwarder financial failure 
or insolvency, enforcement authority, entities eligible to provide 
trust funds for form BMC-85 trust fund filings, Form BMC-84 and BMC-85 
trust fund revisions, and HHG.
The Objectives of and Legal Basis for the Proposed Rule
    In 2012, Congress enacted section 32918 of MAP-21, which contained 
requirements for the financial security of brokers and freight 
forwarders, amending 49 U.S.C. 13906. Congress mandated that the agency 
issue a rulemaking to implement the new statutory requirements MAP-21 
section 32918(b). Congress mandated that FMCSA conduct rulemaking to 
implement the statutory changes. The objective of this rulemaking is to 
complete the implementation of Congress's directive and to help ensure 
that motor carriers are paid for the services they provide for brokers 
and freight forwarders.
A Description of, and Where Feasible an Estimate of, the Number of 
Small Entities to Which the Proposed Rule Will Apply
    Small entity is defined in 5 U.S.C. 601. Section 601(3) as having 
the same meaning as small business concern under Section 3 of the Small 
Business Act. This includes any small business concern that is 
independently owned and operated and is not dominant in its field of 
operation. Section 601(4) includes within the definition of small 
entities not-for-profit enterprises that are independently owned and 
operated and are not dominant in their fields of operation. In 
addition, Section 601(5)

[[Page 850]]

defines small entities as governments of cities, counties, towns, 
townships, villages, school districts, or special districts with 
populations less than 50,000.
    This proposed rule would affect financial responsibility providers, 
brokers, and freight forwarders.
    The financial responsibility providers that would be affected by 
this proposed rule operate under many different North American Industry 
Classification System \12\ (NAICS) codes with differing size standards. 
Additionally, the financial responsibility providers that would be 
affected by the rule are a subset of the entities within these codes. 
Many of the entities operating under these NAICS codes have various 
functions that do not include providing financial responsibility to 
brokers or freight forwarders. In providing a wide range of NAICS codes 
in the finance and insurance sectors, FMCSA believes it captures 
financial responsibility providers who perform various other functions. 
Table 2, below, shows the Small Business Administration (SBA) size 
standards for finance and insurance, which ranges from $8 million in 
revenue per year for insurance agencies and brokerages, to $600 million 
in revenue per year for commercial banking.
---------------------------------------------------------------------------

    \12\ More information about NAICS is available at: (accessed 
June 29, 2022).
---------------------------------------------------------------------------

    Brokers and freight forwarders operate in the transportation sector 
under the NAICS code 48851. As shown in Table 2, the SBA size standard 
for freight transportation arrangement is $16.5 million in revenue.

           Table 2--SBA Size Standards for Selected Industries
                         [In millions of 2019$]
------------------------------------------------------------------------
                                                             SBA size
        NAICS code           NAICS industry description      standard
------------------------------------------------------------------------
       Subsector 522--Credit Intermediation and Related Activities
------------------------------------------------------------------------
52211....................  Commercial Banking...........            $600
52229....................  All Other Nondepository                  41.5
                            Credit Intermediation.
------------------------------------------------------------------------
   Subsector 523--Securities, Commodity Contracts, and Other Financial
                   Investments and Related Activities
------------------------------------------------------------------------
52312....................  Securities Brokerage.........            41.5
52313....................  Commodity Contracts Dealing..            41.5
52314....................  Commodity Contracts Brokerage            41.5
52321....................  Securities and Commodity                 41.5
                            Exchanges.
52391....................  Miscellaneous Intermediation.            41.5
------------------------------------------------------------------------
        Subsector 524--Insurance Carriers and Related Activities
------------------------------------------------------------------------
524126...................  Direct Property and Casualty             41.5
                            Insurance Carriers.
524127...................  Direct Title Insurance                   41.5
                            Carriers.
524128...................  Other Direct Insurance                   41.5
                            (except life, health, and
                            medical) Carriers.
52413....................  Reinsurance Carriers.........            41.5
52421....................  Insurance Agencies and                      8
                            Brokerages.
524292...................  Third Party Administration of              35
                            Insurance and Pension Funds.
------------------------------------------------------------------------
          Subsector 488--Support Activities for Transportation
------------------------------------------------------------------------
48851....................  Freight Transportation                   16.5
                            Arrangement.
------------------------------------------------------------------------

    FMCSA examined data from the 2017 Economic Census, the most recent 
Census for which data were available, to determine the percentage of 
firms that have revenue at or below SBA's thresholds within each of the 
NAICS industries.\13\ Boundaries for the revenue categories used in the 
Economic Census do not exactly coincide with the SBA thresholds. 
Instead, the SBA threshold generally falls between two different 
revenue categories. However, FMCSA was able to make reasonable 
estimates as to the percent of small entities within each NAICS 
industry group.
---------------------------------------------------------------------------

    \13\ U.S. Census Bureau. 2017 Economic Census. Available at: 
https://data.census.gov/cedsci/table?q=EC1700&n=48-49&tid=ECNSIZE2017.EC1700SIZEREVEST&hidePreview=true (accessed Apr. 
20, 2022).
---------------------------------------------------------------------------

    The commercial banking industry group has a revenue size standard 
of $600 million. The largest Economic Census revenue category is $100 
million or more. As such, FMCSA could not determine the percent of 
entities within this NAICS industry group that would be considered 
small, and conservatively estimates that all commercial banking 
entities are small entities as defined by the SBA.
    For Other Nondepository Credit Intermediation, the $41.5 million 
SBA threshold falls between two Economic Census revenue categories, $25 
million and $100 million. The percentages of Other Nondepository Credit 
Intermediates with revenue less than these amounts were 50 percent and 
54 percent, respectively. Because the SBA threshold is closer to the 
lower of these two boundaries, FMCSA has assumed that the percent of 
these entities that are small will be closer to 50 percent and is using 
that figure.
    The Securities Brokerage industry group focuses on underwriting 
securities issues and/or making markets for securities and commodities. 
The SBA size standard for this industry group is $41.5 million. The 
$41.5 million SBA threshold falls between two Economic Census revenue 
categories, $25 million and $100 million. The percentages of Securities 
Brokerages with revenue less than these amounts were 97 percent and 98 
percent, respectively. Because the SBA threshold is closer to the lower 
of these two boundaries, FMCSA has assumed that the percent of 
securities brokerages that are small will be closer to 97 percent and 
is using that figure.
    The Commodity Contracts Dealing industry group focuses on acting as

[[Page 851]]

agents between buyers and sellers of securities and commodities 
(52313). The SBA size standard for this industry group is $41.5 
million. The $41.5 million SBA threshold falls between two Economic 
Census revenue categories, $25 million and $100 million. The 
percentages of commodity contracts dealers with revenue less than these 
amounts were 75 percent and 81 percent. Because the SBA threshold is 
closer to the lower of these two boundaries, FMCSA has assumed that the 
percent of commodity contracts dealers that are small will be closer to 
75 percent and is using that figure.
    The Commodity Contracts Brokerage industry group focuses on 
providing securities and commodity exchange services (52314). The SBA 
size standard for this industry group is $41.5 million. The $41.5 
million SBA threshold falls between two Economic Census revenue 
categories, $25 million and $100 million. The percentages of commodity 
contracts brokers with revenue less than these amounts were 84 percent 
and 86 percent. Because the SBA threshold is closer to the lower of 
these two boundaries, FMCSA has assumed that the percent of commodity 
contracts brokers that are small will be closer to 84 percent and is 
using that figure.
    The Securities and Commodity Exchanges industry group provides 
marketplaces and mechanisms for the purpose of facilitating the buying 
and selling of stocks, stock options, bonds or commodity contracts 
(52321). The SBA size standard for this industry group is $41.5 
million. The $41.5 million SBA threshold falls between two Economic 
Census revenue categories, $25 million and $100 million. There are 13 
total firms that operated for the entire year under the securities and 
commodity exchanges industry group, but the Census has redacted the 
number of firms with revenue less than $100 million. The Census reports 
that there are four firms with revenue of $100 million or greater, 
which leads FMCSA to estimate that there are nine firms with revenue 
below $100 million. FMCSA conservatively estimates that all nine firms 
with revenue below $100 million (69 percent of the industry group) are 
considered small.
    The Miscellaneous Intermediation industry group primarily engages 
in acting as principals in buying or selling of financial contracts 
(52391). The SBA size standard for this industry group is $41.5 
million. The $41.5 million SBA threshold falls between two Economic 
Census revenue categories, $25 million and $100 million. The 
percentages of miscellaneous intermediation firms with revenue less 
than these amounts were 97 percent and 99.6 percent, respectively. 
Because the SBA threshold is closer to the lower of these two 
boundaries, FMCSA has assumed that the percent of miscellaneous 
intermediates that are small will be closer to 97 percent and is using 
that figure.
    The Direct Property and Casualty Insurance Carriers industry group 
primarily engages in initially underwriting insurance policies 
(524126). The SBA size standard for this industry group is $41.5 
million. The $41.5 million SBA threshold falls between two Economic 
Census revenue categories, $25 million and $100 million. The 
percentages of direct property and casualty insurance carrier firms 
with revenue less than these amounts were 81 percent and 88 percent. 
Because the SBA threshold is closer to the lower of these two 
boundaries, FMCSA has assumed that the percent of direct property and 
casualty insurers that are small will be closer to 81 percent and is 
using that figure.
    The Direct Title Insurance Carriers industry group primarily 
engages in initially underwriting title insurance policies (524127). 
The SBA size standard for this industry group is $41.5 million. The 
$41.5 million SBA threshold falls between two Economic Census revenue 
categories, $25 million and $100 million. The percentages of direct 
title insurers with revenue less than these amounts were 66 percent and 
67 percent, respectively. Because the SBA threshold is closer to the 
lower of these two boundaries, FMCSA has assumed that the percent of 
direct title insurers that are small will be closer to 66 percent and 
is using that figure.
    The Other Direct Insurance Carriers industry group primarily 
engages in initially underwriting insurance policies (524128). The SBA 
size standard for this industry group is $41.5 million. The $41.5 
million SBA threshold falls between two Economic Census revenue 
categories, $25 million and $100 million. The percentages of other 
direct insurance carriers with revenue less than these amounts were 58 
percent and 63 percent, respectively. Because the SBA threshold is 
closer to the lower of these two boundaries, FMCSA has assumed that the 
percent of other direct insurance carriers that are small will be 
closer to 58 percent and is using that figure.
    The Reinsurance Carriers industry group primarily engages in 
assuming all or part of the risk associated with insurance policies 
originally underwritten by a different provider (52413). The SBA size 
standard for this industry group is $41.5 million. The $41.5 million 
SBA threshold falls between two Economic Census revenue categories, $10 
million and $100 million. The percentages of reinsurance carriers with 
revenue less than these amounts were 49 percent and 60 percent, 
respectively. The SBA threshold is not near either of these revenue 
categories, FMCSA conservatively estimates that the percent of 
reinsurance carrier firms that are small will be closer to 60 percent 
and is using that figure.
    The Insurance Agencies and Brokerages industry group primarily 
engages in selling insurance (52421). The SBA size standard for this 
industry group is $8 million. The $8 million SBA threshold falls 
between two Economic Census revenue categories, $5 million and $10 
million. The percentages of insurance agencies and brokerages with 
revenue less than these amounts were 98 percent and 99 percent, 
respectively. Because the SBA threshold is closer to the higher of 
these two boundaries, FMCSA has assumed that the percent of insurance 
agencies and brokerages that are small will be closer to 99 percent and 
is using that figure.
    The Third Party Administration of Insurance and Pension Funds 
industry group primarily engages in providing third-party 
administrative services of insurance (524292). The SBA size standard 
for this industry group is $35 million. The $35 million SBA threshold 
falls between two Economic Census revenue categories, $25 million and 
$100 million. The percentages of firms with revenue less than these 
amounts were 92 percent and 97 percent, respectively. Because the SBA 
threshold is closer to the lower of these two boundaries, FMCSA has 
assumed that the percent of firms that are small will be closer to 92 
percent and is using that figure.
    The Freight Transportation Arrangement industry group primarily 
engages in arranging the transportation of freight between shippers and 
carriers (48851). The SBA size standard for this industry group is 
$16.5 million. The $16.5 million SBA threshold falls between two 
Economic Census revenue categories, $10 million and $25 million. The 
percentages of firms with revenue less than these amounts were 93 
percent and 97 percent, respectively. Because the SBA threshold is 
closer to the lower of these two boundaries, FMCSA has assumed that the 
percent of firms that are small will be closer to 93 percent and is 
using that figure.
    Table 3 below shows the complete estimates of the number of small 
entities within the NAICS industry groups that

[[Page 852]]

may be affected by this rule. FMCSA notes that there are approximately 
375 entities providing financial responsibility services (i.e., 
entities that have filed BMC-84s or BMC-85s with FMCSA on behalf of 
brokers), which is a small subset of the firms identified in the 
commercial industry groups below.

                                 Table 3--Estimates of Numbers of Small Entities
----------------------------------------------------------------------------------------------------------------
                                                                   Total number      Number of    Percent of all
          NAICS code                      Description                of firms     small entities       firms
----------------------------------------------------------------------------------------------------------------
52211........................  Commercial Banking...............           4,804           4,804             100
52229........................  All Other Nondepository Credit             10,411           5,255              50
                                Intermediation.
52312........................  Securities Brokerage.............           6,009           5,832              97
52313........................  Commodity Contracts Dealing......             493             368              75
52314........................  Commodity Contracts Brokerage....             728             608              84
52321........................  Securities and Commodity                       13               9              69
                                Exchanges.
52391........................  Miscellaneous Intermediation.....           6,912           6,715              97
524126.......................  Direct Property and Casualty                2,079           1,675              81
                                Insurance Carriers.
524127.......................  Direct Title Insurance Carriers..             662             438              66
524128.......................  Other Direct Insurance (except                285             166              58
                                life, health, and medical)
                                Carriers.
52413........................  Reinsurance Carriers.............             129              77              60
52421........................  Insurance Agencies and Brokerages         106,260         105,056              99
524292.......................  Third Party Administration of               2,498           2,306              92
                                Insurance and Pension Funds.
48851........................  Freight Transportation                     13,252          12,332              93
                                Arrangement.
----------------------------------------------------------------------------------------------------------------

A Description of the Proposed Reporting, Recordkeeping and Other 
Compliance Requirements of the Proposed Rule, Including an Estimate of 
the Classes of Small Entities Which Will Be Subject to the Requirement 
and the Type of Professional Skills Necessary for Preparation of the 
Report or Record
    This NPRM would include recordkeeping requirements pertaining to 
small financial responsibility providers and brokers. These entities 
would be required to provide notification to FMCSA of specific activity 
on a broker bond or trust fund. FMCSA anticipates that these 
notifications can be completed by office clerks.
A Description of Any Significant Alternatives to the Proposed Rule 
Which Accomplish the Stated Objectives of Applicable Statutes and Which 
Minimize Any Significant Economic Impact of the Proposed Rule on Small 
Entities
    FMCSA attempted to draft a proposed rule that would minimize any 
significant economic impact on small entities. FMCSA is proposing a 3-
year compliance date in an effort to allow ample time for small 
entities to meet the requirements of the rule. This compliance date 
takes into account the resources available to small entities. FMCSA is 
not aware of any significant alternatives that would meet the intent of 
our statutory requirements but nevertheless requests comment on any 
alternatives that would meet the intent of the statute and prove cost 
beneficial for small entities.
Description of Steps Taken by a Covered Agency To Minimize Costs of 
Credit for Small Entities
    FMCSA is not a covered agency as defined in section 609(d)(2) of 
the Regulatory Flexibility Act and has taken no steps to minimize the 
additional cost of credit for small entities.
Requests for Comment To Assist Regulatory Flexibility Analysis
    FMCSA requests comments on all aspects of this initial regulatory 
flexibility analysis.

E. Assistance for Small Entities

    In accordance with section 213(a) of the Small Business Regulatory 
Enforcement Fairness Act of 1996,\14\ FMCSA wants to assist small 
entities in understanding this proposed rule so they can better 
evaluate its effects on themselves and participate in the rulemaking 
initiative. If the proposed rule would affect your small business, 
organization, or governmental jurisdiction and you have questions 
concerning its provisions or options for compliance, please consult the 
person listed under FOR FURTHER INFORMATION CONTACT.
---------------------------------------------------------------------------

    \14\ Public Law 104-121, 110 Stat. 857, (Mar. 29, 1996).
---------------------------------------------------------------------------

    Small businesses may send comments on the actions of Federal 
employees who enforce or otherwise determine compliance with Federal 
regulations to the Small Business Administration's Small Business and 
Agriculture Regulatory Enforcement Ombudsman (Office of the National 
Ombudsman, see https://www.sba.gov/about-sba/oversight-advocacy/office-national-ombudsman) and the Regional Small Business Regulatory Fairness 
Boards. The Ombudsman evaluates these actions annually and rates each 
agency's responsiveness to small business. If you wish to comment on 
actions by employees of FMCSA, call 1-888-REG-FAIR (1-888-734-3247). 
DOT has a policy regarding the rights of small entities to regulatory 
enforcement fairness and an explicit policy against retaliation for 
exercising these rights.

F. Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
(UMRA) requires Federal agencies to assess the effects of their 
discretionary regulatory actions. The Act addresses actions that may 
result in the expenditure by a State, local, or Tribal government, in 
the aggregate, or by the private sector of $178 million (which is the 
value equivalent of $100 million in 1995, adjusted for inflation to 
2021 levels) or more in any 1 year. Though this NPRM would not result 
in such an expenditure, and the analytical requirements of UMRA do not 
apply as a result, the agency discusses the effects of this proposed 
rule elsewhere in this preamble and in the regulatory impact analysis 
available in the docket.

G. Paperwork Reduction Act

    This proposed rule does not propose new information collection 
requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520). The agency is not proposing any changes to Forms BMC-84 and BMC-
85 at this time but will consider whether it needs to modify Forms BMC-
84 and BMC-85 after reviewing the comments on this NPRM. Should 
revisions to the

[[Page 853]]

forms be deemed necessary, the agency will seek approval of revised 
forms from OIRA during the 3-year compliance period we propose for 
portions of this rule.

H. E.O. 13132 (Federalism)

    A rule has implications for federalism under section 1(a) of E.O. 
13132 if it has ``substantial direct effects on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.''
    FMCSA has determined that this rule would not have substantial 
direct costs on or for States, nor would it limit the policymaking 
discretion of States. Nothing in this document preempts any State law 
or regulation. Therefore, this rule does not have sufficient federalism 
implications to warrant the preparation of a Federalism Impact 
Statement.

I. Privacy

    The Consolidated Appropriations Act, 2005,\15\ requires the agency 
to assess the privacy impact of a regulation that will affect the 
privacy of individuals. This NPRM would not require the collection of 
personally identifiable information (PII). The Privacy Act (5 U.S.C. 
552a) applies only to Federal agencies and any non-Federal agency that 
receives records contained in a system of records from a Federal agency 
for use in a matching program.
---------------------------------------------------------------------------

    \15\ Public Law. 108-447, 118 Stat. 2809, 3268, note following 5 
U.S.C. 552a (Dec. 4, 2014).
---------------------------------------------------------------------------

    The E-Government Act of 2002,\16\ requires Federal agencies to 
conduct a Privacy Impact Assessment (PIA) for new or substantially 
changed technology that collects, maintains, or disseminates 
information in an identifiable form.
---------------------------------------------------------------------------

    \16\ Public Law 107-347, sec. 208, 116 Stat. 2899, 2921 (Dec. 
17, 2002).
---------------------------------------------------------------------------

    No new or substantially changed technology would collect, maintain, 
or disseminate information as a result of this rule. Accordingly, FMCSA 
has not conducted a PIA.
    In addition, the agency submitted a Privacy Threshold Assessment to 
evaluate the risks and effects the proposed rulemaking might have on 
collecting, storing, and sharing personally identifiable information. 
The DOT Privacy Office has determined that this rulemaking does not 
create privacy risk.

J. E.O. 13175 (Indian Tribal Governments)

    This rule does not have Tribal implications under E.O. 13175, 
Consultation and Coordination with Indian Tribal Governments, because 
it does not have a substantial direct effect on one or more Indian 
Tribes, on the relationship between the Federal Government and Indian 
Tribes, or on the distribution of power and responsibilities between 
the Federal Government and Indian Tribes.

K. National Environmental Policy Act of 1969

    FMCSA analyzed this proposed rule pursuant to the National 
Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.) and 
determined this action is categorically excluded from further analysis 
and documentation in an environmental assessment or environmental 
impact statement under FMCSA Order 5610.1 (69 FR 9680), Appendix 2, 
paragraphs 6.k and 6.q. The categorical exclusions (CEs) in paragraph 
6.k and 6.q cover broker activities and implementation of record 
preservation. The proposed requirements in this rule are covered by 
these CEs and do not have any effect on the quality of the environment.

List of Subjects

49 CFR Part 386

    Administrative practice and procedure, Brokers, Freight forwarders, 
Hazardous materials transportation, Highway safety, Motor carriers, 
Motor vehicle safety, Penalties.

49 CFR Part 387

    Buses, Freight, Freight forwarders, Hazardous materials 
transportation, Highway safety, Insurance, Intergovernmental relations, 
Motor carriers, Motor vehicle safety, Moving of household goods, 
Penalties, Reporting and recordkeeping requirements, Surety bonds.

    For the reasons set forth in the preamble, FMCSA proposes to amend 
49 CFR parts 386 and 387 as follows:

PART 386--RULES OF PRACTICE FOR FMCSA PROCEEDINGS

0
1. The authority citation for part 386 continues to read as follows:

    Authority:  28 U.S.C. 2461 note; 49 U.S.C. 113, 1301 note, 
31306a; 49 U.S.C. chapters 5, 51, 131-141, 145-149, 311, 313, and 
315; and 49 CFR 1.81, 1.87.

0
2. Amend Appendix B by adding paragraph (g)(24) to read as follows:

Appendix B to Part 386--Penalty Schedule: Violations and Monetary 
Penalties

* * * * *
    (g) * * *

    (24) A surety company or financial institution for a broker or 
freight forwarder pursuant to Sec. Sec.  387.307 or 387.403T and 
violates subsection (b) or (c) of Title 49 of the United States 
Code, Section 13906 or Sec.  387.307, is liable to the United States 
for a penalty of $10,000 for each violation.
* * * * *

PART 387--MINIMUM LEVELS OF FINANCIAL RESPONSIBILITY FOR MOTOR 
CARRIERS

0
3. The authority citation continues to read as follows:

    Authority:  49 U.S.C. 13101, 13301, 13906, 13908, 14701, 31138, 
31139; sec. 204(a), Pub. L. 104-88, 109 Stat. 803, 941; and 49 CFR 
1.87.

0
4. Amend Sec.  387.307 by:
0
a. Revising paragraph (b) to read as set forth below;
0
b. In paragraph (c)(6), adding the phrase ``or'' after the semicolon;
0
c. Removing paragraph (c)(8);
0
d. Redesignating paragraph (c)(8) as paragraph (c)(7); and
0
e. Adding paragraphs (e), (f), and (g) to read as set forth below.
    The revision and additions read as follows:

Sec.  387.307  Property broker surety bond or trust fund.

* * * * *
    (b) Evidence of Security. Trust funds under this section must 
contain assets aggregating to $75,000 that can be liquidated to cash 
within 7 business days. Assets included in any trust fund filed under 
this section shall not include interests in real property, 
intercorporate agreements or guarantees, internal letters of credit, 
illiquid assets (such as second trust deeds, personal property and 
vehicles), bonds that have not received the highest rating from a 
nationally recognized statistical rating organization registered with 
the Securities and Exchange Commission, or any other asset the broker 
cannot certify on Form BMC-85 is convertible to cash within 7 business 
days.
* * * * *
    (e) Immediate suspension. (1) If a surety company issuing a Form 
BMC-84 or a financial institution issuing a Form BMC-85 makes a payment 
from the surety bond or trust fund for a claim from a shipper or motor 
carrier as described in paragraph (b) of this section: (1) with the 
consent of the broker; (2) when the broker fails to respond to notice 
of a claim within 14 calendar days of notice by the surety company or 
financial institution; or (3) when there is a judgment against the 
broker, the surety company or financial institution shall notify FMCSA 
of the

[[Page 854]]

payment and its amount. The surety company or financial institution 
shall provide written notice of such payment to FMCSA via electronic 
means.
    (2) Upon notification by the surety company or financial 
institution in accordance with paragraph (e)(1) of this section, FMCSA 
shall provide written notice to the broker that its operating authority 
issued pursuant to part 365 will be suspended within 7 business days of 
the date of the notice unless the broker provides written evidence to 
FMCSA that the surety bond or trust fund has been restored to the 
$75,000 amount required by this section. FMCSA will provide a second 
written notice to the broker of any suspension.
    (f) Financial failure or insolvency of the broker. (1) If a surety 
company or financial institution is notified of the financial failure 
or insolvency of a broker, such surety company or financial institution 
shall initiate cancellation of the Form BMC-84 or Form BMC-85 pursuant 
to paragraph (d)(2)(i) of this section. A financial failure or 
insolvency of a broker is defined as a filing related to the broker 
pursuant to Title 11 of the United States Code or a filing related to 
the broker under an insolvency or similar proceeding under State law.
    (2) Upon notification by the surety or financial institution, FMCSA 
shall immediately provide written notice of the cancellation in the 
FMCSA Register on its public website. The surety or financial 
institution shall accept claims against the BMC-84 surety bond or BMC-
85 trust fund for 60 calendar days (extended to the next business day 
if the final day of the period falls on a weekend or Federal holiday) 
following FMCSA's public notification of the financial failure or 
insolvency in the FMCSA Register.
    (g) Suspension of surety company or financial institution. (1) If a 
surety company or financial institution violates the requirements of 
this section or subsection (b) of Title 49, section 13906 of the United 
States Code, FMCSA may suspend the authorization of such surety company 
or financial institution to have its instruments filed as evidence of 
financial responsibility pursuant to Sec.  387.307 for 3 years.
    (2) If FMCSA initiates a suspension action pursuant to paragraph 
(g)(1) of this section it shall provide written notice to the surety 
company or financial institution, provide 30 calendar days (extended to 
the next business day if the final day of the period falls on a weekend 
or Federal holiday) for the surety company or financial institution to 
provide evidence contesting such proposed suspension, and then render a 
final decision in writing.
    Issued under authority delegated in 49 CFR 1.87.

Robin Hutcheson,
Administrator.
[FR Doc. 2022-28259 Filed 1-4-23; 8:45 am]
BILLING CODE 4910-EX-P