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Authority - What is it and How Do you get your own authority?
By Jeff Jensen
Apr 15, 2001 - 3:39:00 PM

By definition, an expediter is also an entrepreneur; a businessperson who invests his/her money and time in obtaining equipment and startinghis/her own business.

In conventional expediting the Owner/Operatorwill usually lease the equipment(truck) to an expediting company that will procure the freight, dispatch the loads, pay for certain permits, take care of the settlements, etc., for a percentage of the freight's tariff.

For many expediters, this arrangement has worked very well over the years, eliminating many of the paperwork hassles and the legwork and salesworkinvolved in securing the shippers' accounts. There is a great deal to be said in having the backing of a large company, and for most Owner/Operators in this business, it's the only way to go.

However, over the last few years, a number of independent-minded entrepreneurs in expediting have turned increasingly towards managing their business entirely by obtaining their own trucking authority and accounts.

It has to be said at the outset that this path is not for all expediters, particularly those new to the industry. As with any business startup, it means long hours and little money at first, with no guaranteed return on the investment.

It means that the Owner/Operator is responsible for all the paperwork,permitting, insurance, in short, anything that the expediting company takes their percentage for doing. It also puts the truck owner in what may be an uncomfortable and unaccustomed role, that of the salesperson.

The freight accounts have to come from somewhere, and it's up to the independent Owner/Operator to find that freight to fill his truck(s). In developing his sales skills, the expediter with own authority may discover that those accounts are harder to find than he expected, and that it's difficult to compete on matters of price and availability, especially with a one-truck fleet.

Some expediting companies will allow an Owner/Operator leased to them,but with his own authority, to "trip lease." This enables the O/O to haul freight under his own authority, but the expediting company's signs must be covered, he must provide his own insurance, etc. It has to be said however, that the companies do not really encourage this practice; after all, it takes one of their units out of service.

In conventional trucking, the practice of an Owner/Operator with own authority has been around for many years and is a standard method of doing business. In full truckload shipping however, there are literally millions of loads being shipped on any given day, all across North America.

Given the time-sensitive nature of the just-in-time freight in expediting and the relative newness of the industry, the daily load count of "hot" freight is only a small fraction of tractor-trailer trucking. With fewer loads and fewer shippers with a need to pay the usually higher tariffs of expediting, finding the accounts and maintaining them could beproblematic.

Having said that, there are expediters who have found success by procuring their own authority and operating their business completely independent of expediting companies, or in some cases, in conjunction with the companies. The first step towards this is securing the authority, or determining if this is the route the entrepreneurial expediter wishes to take.

A Word of Advice

A man with many years in the trucking and transportation industry is Gary Green, the head of Business Services for the Owner Operator Independent Drivers Association (OOIDA) in Grain Valley, MO.

Gary has some words of wisdom for the independent businessperson in expediting: "I would advise Owner/Operators in the expediting field that before they secure their own authority, they have their own accounts lined up. They should do their homework to ensure that their customer base is present."

Gary also tells us, "The O/O has to be able to sell his services and develop his own niche. Providing that niche service is what makes a small business succeed; everybody's got trucks, but you have to have the service. Being a small business person, you can respond to the customers needs quickly, with a minimum of delay. Response time is the very lifeblood of expediting."

What is "authority?"

Formerly called ICC Authority, operating authority (actually registration) is now granted by the Federal Motor Carrier Safety Administration(FMCSA). Trucking and expediting companies that operate for hire and haul interstate are required under federal law to have operating authority.

The FMCSA acts as a clearinghouse which ensures that applicants have met the standards set by the Department of Transportation and have the proper insurance coverage.

Three types of authority are available:

  • Common authority - This authority is necessary to haul directly for most shippers. This is the type of authority required for expediters.
  • Contract authority - This type of authority is required to work through brokers.
  • Property Broker authority - Necessary to operate in a freight broker capacity. Note: See the accompanying glossary of terms related to this subject under: "Trucking Definitions"

The DOT has it's own set of guidelines for compliance that must be met completely before the FMCSA will grant authority. These DOT requirements are extensive, covering areas such as driver safety training, driver orientation, hazardous materials qualification, vehicle maintenance and other topics.

Every applicant for authority is required to establish a system of process agents for each state where operations occur. This means an actual person must be available in every state served who will act as a legal representative for receiving documents pertaining to that state. An individual can utilize a system of existing process agents across the country.

The Professionals

For most expediting owner/operators, the application is a one-time proposition. It can be a daunting task however; filling out governmental forms can be confusing and any serious errors could result in delaying approval, in some cases the entire process might have to be repeated.

It could be a wise choice for an expediter O/O to engage a professional service company. One such company is Schroeder and Associates in San Antonio, Texas.

"We have 27 years in this business," owner Jeff Schroeder, a licensed practitioner before the former ICC, FMCSA and Surface Transportation Board tells us, "and this process requires 'crossing the T's and dotting the I's' correctly to ensure a timely approval. The applicant can do it himself, but having a licensed professional working for you can eliminate a lot of the headaches and hassles involved."

Jeff says that sometimes the details of the application process must be addressed on a daily basis and that's just one of the advantages of employing the services of a professional trained in this field.

He also says, "It may take six weeks or more before the applicant receives the authority approval and that's if everything is correct to begin with. The FMCSA receives over a thousand applications on a daily basis, creating quite a backlog."

Gary Green, OOIDA, adds, "Use of an experienced professional to secure the authority can be very beneficial, such as the services which OOIDA provides to it's members. The professionals in this area can expedite the whole regulatory process and eliminate many of the mistakes the driver might make if he tried it on his own."

Gary says that the price of errors on the paperwork and applications couldbe costly for the O/O trying it on his own, "The $300.00 fee for each type of authority,(which by the way, is rumored to be raised in 200l), is a NON-REFUNDABLE fee. It's easy to see that mistakes on the applications which will result in re-application could add up to some serious money."

Now we come to even more acronyms and regulations to remember:

IFTA (International Fuel Tax Agreement) - This handles the allocation of fuel taxes.

IRP (International Registration Plan) - Regulatory body for vehicle registration*All 48 states in the continental US are part of both IFTA and IRP

SSRS (Single State Registration System) - This handles registration of federal authority and insurance.

Filing for the above systems is made through the state of the base plate. Unfortunately there are only thirty-eight states that are part of the SSRS so an Owner/Operator may find it necessary to register a truck in other tates to comply with the SSRS.

To complicate matters further, another class of taxes called Third Structure Taxes are in effect in Kentucky, Arizona, New Mexico, Oklahoma and a few other states. This again, is where the experienced professional can be of real value in advising the O/O and assisting with compliance.

Working in partnership with Schroeder and Associates, is another firm with a long history in the transportation regulatory field, JJ Keller and Associates, Inc. Located in Neenah, WI, this company coordinates and manages the state regulatory credential process.

Once those state's accounts (IFTA, IRP, SSRS) are established, the ongoing regulatory requirements of fuel tax and mileage reporting apply. This process requires accurate record keeping as well as reporting to the state agencies on a monthly/quarterly basis and serves as the basis for tax calculation and payment.

This is important for a sound management process in this area as the level of data integrity determines the level of fuel tax audit liability and exposure for a period of four plus years.

John Vosters, the Senior Tax and Safety Sales Manager with JJ Keller tells us, "JJ Keller and Associates, in conjunction with Schroeder and Associates, provides a complimentary approach for clients to enter the transportation market and maintain compliant and cost efficient operations.

A solution-based philosophy to design a tailored program ensures that our client receive the services most applicable to contribute to legal and profitable operations. Combining our forty-seven years of compliance experience and expertise with Schroeder and Associates' many years in this business ensures a practical, cost-effective solution to transportation challenges."

Gary Green of OOIDA has some additional thoughts, "Unfortunately, some Owner/Operators believe that getting their own authority and establishing their own small business means less work for more money; actually the O/O is trading paid miles for the administrative duties of the business; Fuel taxes, Sales work, administrating driver's files and maintaining compliance with DOT regs, such as drug testing.

A drug testing program is mandatory, a lot of new authority holders miss that area of compliance. There are companies available for this testing to ensure that you're in compliance, including OOIDA's own drug testing consortium."

Expediting Specific Authority. The authority process for expediting is basically the same as for conventional trucking with the addition of a few items:

  • * In most cases, the expediting Owner/Operator will come under the guidelines of Common Carrier Authority. This carries with it the "common carrier obligation" which holds the carrier responsible for damage or destruction of the cargo. It requires both cargo liability insurance and property damageliability insurance.
  • * Vans (vehicles under 10,001 lbs.) in many cases are exempt from certain Federal and State regulations, i.e., scales, logging, etc., however, any CDLholder must comply with appropriate requirements, such as drug testing, etc.

An interesting requirement is that owners of vehicles under 10,001 lbs. must certify that they are aware of the regulations, while owners of vehicles over 10,001 lbs. must certify that they meet the regulations. Note: Expediting applicants must file authority as a Haz-Mat carrier if they will be transporting that type of freight.

We hope we've been able to give at least the basic information about securing authority. It would seem to be an area that requires the advice of the experts and the expediter considering this route would be well served to consult with the professionals. It might save some money and headaches.

Expediters Online would like to thank the various contributors to this article for their invaluable assistance in preparing this piece.

Schroeder and AssociatesJeff Schroeder, ownerwww.fleetpermits.com

Gary Green, Business ServicesOOIDAwww.ooida.com

John VostersSenior Tax and Safety Sales ManagerJJ Keller and Associateswww.jjkeller.com

Trucking Definitions

In government language what most people call a "trucker" or a "trucking company" is called a "motor carrier" or sometimes "carrier." If you are trying to decide what kind of trucking activities you are, the following simplified definitions may be helpful.

MOTOR CARRIER - A company that provides truck transportation. here are two types of motor carriers; private carriers and for-hire carriers. To operate as an interstate motor carrier, either as a private or as a for-hire carrier, a company must register with FHWA(now FMCSA) by filing for a USDOT number. This filing is separate from obtaining operating authority.

PRIVATE CARRIER - A company that provides truck transportation of its own cargo, usually as a part of a business produces, uses, sells and/or buys the cargo being hauled.

FOR-HIRE CARRIER - A company that provides truck transportation of cargo belonging to others and is paid for doing so. To operate as aninterstate for-hire carrier, a company must also register with FHWA(now FMCSA) and obtain operating authority. There are two types of for-hire carriers, private carriers, common carriers and contract carriers.

A for-hire carrier may be both a common and a contract carrier, but must file separate registrations to obtain both licenses.

COMMON CARRIER - Before January 1, 1996, this was a company that provided for-hire truck transportation to the general public.

The services offered and the prices charged were published in a public tariff and these were the only prices the common carrier could charge. After 1996 they are required to provide rules, regulations and rates to their shippers on request but no longer file tariffs.

CONTRACT CARRIER - Before January 1, 1996, this was a company that provided for-hire truck transportation to specific individual shippers based upon private contracts between the carrier and each shipper, stipulating the services offered and the price charged to each.

Selecting "Common" or "Contract": The application process requires an applicant to designate whether it is registering as a "common carrier" or a contract carrier." The historical difference between these two types isreflected in the definitions immediately above.

The ICC Termination Act of 1995 defines contract carriage as trucktransportation provided under a contract, but, effective January 1, 1996,it no longer distinguishes between common or contract carriers. However, the Act specifically authorizes FHWA(now FMCSA) to continue registering applicants as either common or contract carriers.

The current principal distinction between the two types is that common carrier applicants must file proof of cargo insurance while contract carrier applicants are not required to do so.

In general, property brokers will use contract carriers and shippers like touse common carriers. This however is changing. More and more brokers are using common carriers, however there a few that do not.

FREIGHT FORWARDER - A company that arranges for the truck transportation of cargo belonging to others, utiilizing for-hire carriers to provide the actual truck transportation.

The Forwarder does assume responsibility for the cargo from origin to destination and usually does take possession of the cargo at some point during the transportation. Forwarders typically assemble and consolidate less-than-truckloads(LTL) shipments into truckload shipments at origin and disassemble and deliver LTL shipments at destination. Forwarders must register with FHWA(now FMCSA) and obtain operating authority.

PROPERTY BROKER - Also a company that arranges for the truck transportation of cargo belonging to others, utilizing for-hire carriers toprovide the actual truck transportation.

However, the Broker does not assume responsibility for the cargo and usually does not take possession of the cargo. Brokers must registerwith FHWA(now FMCSA) and obtain operating authority.

These trucking definitions are simplified for easier understanding bythe persons considering operating authority. Legally acceptable definitions of these activities would be longer, more complex, and supported by the results of many administrative proceedings,court decisions and judicial opinions. If there is any question about the applicability of these simplified definitions, a legal authority should be consulted.

Web Information
Schroeder and Associates Homepage
OOIDA Homepage
JJ Keller and Associates Homepage


 
 
       
 



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