Recent surety bond cost increases were set to reduce fraud in the freight business. While the Federal Highway Bill is designed to protect industry leaders and act as a kind of insurance, the new laws affect small businesses in a serious way. Here are the facts you need to know about the changes the bill made to the industry and how different the trucking business game is as a result.
The Transportation Bill passed in the summer of 2012, and it raised the cost of surety bonds from $10,000 to $75,000. Furthermore, it expanded who is required to hold a bond in the industry. All freight brokers and forwarders are now required to carry at least $75,000 worth of coverage. In the first 6 months of its introduction, 7,500 active brokers lost their viability and were forced to shut down. In the wake of the 2008 recession, this 2012-2014 crunch weighed heavily on the industry’s small businesses.
In theory, passing the bill provides the federal government with more oversight in the transportation industry, which should decrease trucker non-compliance and fraud. In reality, however, it is constricting the number of players in the industry. Large companies are mostly unaffected, while small and medium businesses have to tighten their belts if they want to cover the costs of the bonds at all.
The Transportation Bill makes it illegal for trucking carriers to accept freight and then broker that freight to another carrier without providing the shipper with adequate information. Brokers and forwarders must hold a specific level of training or experience, and electronic on-board recorders (EOBRs) are now required for all interstate commerce.
Increased regulation and oversight have led to liability confusion. Some companies that offer a number of services may operate under several authorities. As a result, some partnering companies may assume authority. The bill’s registration and bond requirements were supposed to increase transparency between companies, but this confusion is leading to lawsuits regarding proper disclosure and liability.
Because the bill allows for more government oversight, every company needs to ensure they are properly licensed and registered as a brokerage or forwarding service. By the end of March 2015, even shippers will experience the difference that the new bill will make in the industry. For example, it is now possible for the transportation industry to increase the authority of the Federal Motor Carrier Safety Administration to oversee shippers, too. Landmark legislation could eradicate driver coercion by shipping companies, so every company in the supply chain may be affected financially and operationally by the new pursuits stemming from the Transportation Bill.
While the landscape is changing every day, logistics software and individual company oversight can both improve the impact of the bill on business. Software can enhance the overall management of a service, while company oversight ensures regulatory compliance. Look for surety bond providers that offer reasonable rates designed to help small and midsized businesses remain competitive while meeting federal government demands. For more information about securing logistics software to help maintain accurate regulatory compliance and transparency, check out our comprehensive software solutions here.