A Threat For Trucking Companies

Newly proposed legislature could create a major loss in competition for shippers and put smaller trucking companies out of business according to this article, A Threat to Mom & Pop Trucking Companies by Timothy B in the Small Motor Carriers Business Community on LinkedIn.  I recommend everyone read this and click the link below to petition the legislature.

Here is the exact wording of the area of greatest concern within the proposed legislation: “Minimum financial security. — Broker subject to the requirements of this section of H.R. 7 shall provide financial security of $100,000, regardless of the number of branch offices or sales agents of the broker.”

Can you provide a bit more detail?

What this says is, regardless of the size of the freight broker, its bond will be $100,000. As an example, a small mom and pop trucking operation which has a freight brokerage to move excess freight from their customer base, will need to secure the same $100,000 Surety Bond as a company the size of C.H. Robinson Worldwide, Inc. FYI. During the year ended December 31, 2010, CHR handled approximately 9.2 million shipments for more than 36,000 customers. It operates through a network of 231 offices. (Public, NASDAQ:CHRW).

So in other words a small trucking operation with just one or two trucks that want to broker out freight will have to secure the same size Bond as a broker the size of CH Robinson World wide Incorporated handling 9.2 million shipments a year?

Under the provisions of H.R. 7, C.H. Robinson with 231 offices will be required to secure a single bond in the amount of $100,000. A small mom & pop trucking company with one office inside their truck will be required to secure a bond for the same $100,000.

What should it be to be equitable under what’s currently in the legislation?

If this is going to be fair and equitable, shouldn’t C. H. Robinson (CHR) have to secure a bond for each one of their 231 offices separately? As we learned with the failure of Lehman Brothers (NYSE ticker symbol LEH), no company or enterprise is too big to fail. CHR should be minimally required to post a $23,100,000 bond to make the law fair and equitable.

So what needs to be done to protect the trucker and not put honest, small mom & pop businesses out of business?

First ,I think there needs to be a differentiation between asset based carriers with freight brokering authority and a straight freight property broker. The Bond on the carrier/broker needs to take into account the size of the operation and it’s gross annual revenue derived from freight brokering.

What about a freight broker without any trucks?

They should be required to post a bond based on a percentage their gross revenue not a one size fits all amount as in the current legislation.

Provide your idea on how this should work.

If it’s going to be fair and equitable, the bond should be based on 25% of the annual freight brokerage revenue of the broker, starting with a minimum bond of $100,000 for all freight brokers, with the exception of carriers who have freight broker authority along with their highway authority. Their bond would start at $25,000 as a minimum.

Just out of curiosity if CH Robinson had to post a bond based on this formula what would it be?

Because every office of a broker should be required to have a bond, C.H. Robinson, would have a bond for all of their offices based on the overall revenue produced by the company divided by 231. Based on CHR’s 2011 annual truck brokerage operations revenue of $1,236,611,000, each office would post a bond of $1.3 million (rounded up).

What would a small freight broker need to post as a bond?

The minimum bond for any freight broker who doesn’t have trucks or highway authority would be $100,000 to start and once their gross revenue topped $400,000 the bond amount would be 25% of that gross.

What about the micro or small trucking company with a freight brokering authority?

A mom & pop trucking operation with a brokerage operation annual revenue of $100,000 would post a $25,000 bond. And they would need to gross $400,000 before their bond would increase to the $100,000 range.

I recommend that everyone take a minute to petition this legislature before it's too late. 

To: United States Congress & the Federal Motor Carrier Safety Administration ("FMCSA") This is a PETITION to the United States Congress & FMCSA from and by the members of the Transportation Industry listed below, representing...