This post is part of a series sponsored by IAT Insurance Group.
The Federal Motor Carrier Safety Administration (FMCSA) issued a final rule, effective January 16, that establishes new requirements in five areas of financial responsibility for brokers and carriers. The rules have been amended in the following categories: readily available assets, immediate stay, financial failure or insolvency, enforcement authority and trustee eligibility requirements.
The new rule stems from the Moving Ahead for Progress in the 21st Century Act (MAP-21 Act) of 2012, which was enacted to help FMCSA reduce the amount of regulation across multiple industries and improve compliance .
5 areas of financial responsibility with new regulations
New brokers and carriers established on or after January 16, 2024 must comply with all aspects of the new law from the outset. Brokers and carriers that existed prior to January 16, 2024 are within the scope of the Eligible Fiduciary and Readily Available Funds Act, but must immediately comply with the other three scope changes.
Here are the five trust fund areas affected by the new law:
- Readily Available Assets: Effective for new businesses: January 16, 2024; Valid for existing companies: January 16, 2026
Brokerage and carrier trust funds must have assets that are readily available and can be liquidated within seven calendar days if payment is required. For example, if an accident, damaged cargo, or lost container occurs and the broker or carrier does not respond to the claimant, the claimant can file the claim directly with the fiduciary financial institution. This regulation allows the applicant to request the refund directly from the financial institution.
- Immediate ban: Valid for all companies: January 16, 2024
The threshold for funds required to be invested in a trust has been increased from $25,000 to $75,000. If a trust falls below the $75,000 threshold, the broker/carrier has a seven-day grace period to replenish the account to the minimum allowable amount of $75,000 or face immediate suspension by the FMCSA.
- Financial failure or bankruptcy: Valid for all companies: January 16, 2024
If the broker/carrier fails to replenish sufficient funds, it will remain suspended and may face additional fines from the FMCSA, which did not have the authority to impose these consequences prior to this new decision. This rule requires fiduciaries to report brokers/carriers that experience financial failure or insolvency to the FMCSA.
- Enforcement authority: Valid for all companies: January 16, 2024
If a fiduciary fails to notify the FMCSA of a broker/carrier’s financial failure or insolvency after becoming aware of it, the fiduciary may be subject to penalties. Depending on the circumstances, penalties imposed by the FMCSA could include suspension of the trust fund provider’s authority and/or monetary penalties.
- Requirements for trustee authorization: Effective for new businesses: January 16, 2024; Valid for existing companies: January 16, 2026
Under the new law, credit and finance companies will no longer be allowed to act as trustees because these providers are not subject to the same strict standards as banks and insurance companies. Existing businesses using a loan or finance company have less than two years to replace their trustee with an approved or suitable provider such as a bank or insurance company.
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By Nancy Ross Anderson
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Agencies freight forwarding
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2024-04-29 04:55:43
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