Looking Both Ways

Building a Foundation for Your New Trucking Business - Part 3

Building a Foundation for Your New Trucking Business

Authority Type Selection, Insurance Filings, Obtaining Process Agents, and Your US DOT Number

Now that we’ve given the new business foundation concrete sufficient time to dry and harden, it’s time to start really building the new business. Let’s attach the first floor by selecting the Authority type(s) for the new business. Just like foundation flooring there are choices available for the materials to be used. You have to make a decision on the type of Authority you want your new business to operate under. The choices are simple – Common Carrier and/or Contract Carrier. For additional coverage to better service your customers you could also add Broker or Freight Forwarder Authorities. After these, you may also have the need to obtain Intra-state Authority for some states. Confused? Don’t be, here are definitions of each.

The Federal Motor Carrier Safety Administration defines Common and Contract Carriers as:

A Contract Carrier is a for-hire interstate operator or carrier which offers transportation services to certain shippers under contracts.

A Common Carrier is a for-hire carrier that holds itself out to serve the general public at reasonable rates and without discrimination.

Differences are that a common carrier holds itself out to provide service to the general public without discrimination for the "public convenience and necessity". A common carrier must further demonstrate to the regulator that it is "fit, willing, and able" to provide those services for which it is granted authority. Common carriers typically transport persons or goods according to defined and published routes, time schedules, and rate tables upon the approval of regulators. Public airlines, railroads, bus lines, taxicab companies, cruise ship lines, motor carriers (i.e., trucking companies), and other freight companies generally operate as common carriers. Under US law, an ocean freight forwarder cannot act as a common carrier.

FMCSA issues a “Certificate” for Common Carrier authority and issues a “Permit” for Contract Carrier authority.

Broker Authority

Freight brokerages assist the shipping industry by acting as third party connections between shippers and freight (trucking) companies. Freight brokerage businesses are licensed as “property brokers” by the Federal Motor Carrier Safety Administration. You can apply for your Broker authority using the same OP-1 form that is used to request common or contract carrier authority. If operating with multiple authorities having common ownership, you may wish to consult with an attorney regarding the various exposures to liability and risk management. Many companies choose to separate the authorities into individual companies to limit the exposure to liability.

In addition to the $300 filing fee and process agents, a surety bond or trust fund agreement is required to obtain Broker authority. The bond or trust fund agreement act as insurance to guarantee that the trucking or shipping companies actually moving the freight will be paid for their services. A freight broker must have a surety bond or trust fund worth $75,000 or more. File the surety bond or trust fund agreement with the FMCSA using form BMC-84 or BMC-85. Since the Broker is not physically hauling the freight, brokers are not required to carry primary liability insurance like common or contract carriers, and generally not responsible for the loss or damage to the cargo.

FMCSA issues a “License” for broker authority.

Freight Forwarders

Freight forwarders arrange transportation of goods by FMCSA-licensed carriers. Freight forwarders issue bills of lading to shippers and are responsible for the loss of or damage to the goods. Like common and contract carriers, freight forwarders are required to register on the Op-1 form (OP-1FF), have process agents, file proof of insurance, and that $300 fee.

Private Carriers

Private carriers are companies that use their own fleet of trucks to haul only their company owned products and are not required to obtain operating authority to do so. Should a private carrier decide to use their fleet to haul property for others, they must first obtain operating authority to do so.

Your business can have more than one authority type active at the same time. FMCSA charges $300 for each type of Authority requested. In addition to paying the fees, when applying for authority, you will need to have a Process Agent company file a listing of Process Agents (BOC-3) with FMCSA on your behalf. You should also contact your insurance company and request they make specific insurance filings (Forms BMC 91 or BMC 91X) with FMCSA at the same time.

Process Agents

A process agent is a representative upon whom court papers may be served in any proceeding brought against a motor carrier, broker, or freight forwarder. Every motor carrier (of property or passengers) shall make a designation for each State in which it is authorized to operate and for each State traversed during such operations. Process agents are crucial to your business should your company be named in a lawsuit. Courts will submit papers directly to the process agent who will in turn notify the process agent company, who will provide the process agent with correct mailing information to get those papers to you and your business. The process agent company will usually also contact you via phone to make you aware the papers are being served. Not receiving papers involving a lawsuit could result in a default judgment against you and your company.

For additional information on process agents visit:

http://www.legalprocessagents.com/

The link to the website to obtain your Operating Authority and have access to Frequently Asked Questions regarding authority is:

http://www.fmcsa.dot.gov/registration/get-mc-number-authority-operate

The application for authority is an OP-1 form.

You will also be obtaining your US DOT Number at the same time from the above website.

The application form for a US DOT Number and the required biennial updates is a MCS-150.

When applying online you will also be issued a PIN number which is used when logging into the federal website in the future. Please keep this PIN number in a safe place. I would suggest that you begin recording Account numbers, permit numbers, websites and your login information in one, safe, secure location. Keep paper files of all original Certificates, Permits and the like also.

So, how long does it take for FMCSA to process the authority application(s)? If you have completed the applications correctly, and if your Process Agents are on file, and if your insurance company made the appropriate insurance filings:

• Online Property carrier applications may take 20-25 business days. (This is most likely what you filed for as an Expediter or trucking company).

• US Mail Property carrier applications may take 45-60 business days.

To check your authority application status once you have filed:

• Go to the SAFER website

http://www.safer.fmcsa.dot.gov/

• See bold heading “FMCSA Searches”

• Click on “Licensing & Insurance”

• Enter MC Number or USDOT Number in the appropriate box and click “search”

• Click “HTML”

• Scroll to bottom and click on “Authority History.” This page will display the granted date of the operating authority. You will also be able to see if your Process Agents and required insurance forms are on file with FMCSA.

Normally, operating authority documents are sent out within 3-4 business days after number has been granted. If 10 or more business days have passed since the grant date and you have not yet received the operating authority document, call 800-832-5660 between 8:00 a.m. and 8:00 p.m. Eastern Time for assistance.

You can also monitor the Federal Motor Carrier Register to view progress of your authority application, though it will list all the other applications from other motor carriers by date.

http://li-public.fmcsa.dot.gov/LIVIEW/pkg_menu.prc_menu

Intra-state Authority

Intra-state Authority requirements vary by state. Some states regulate intra state movements and some states do not. Intra state moves are loads that pick up and deliver within the same state. FMCSA (DOT) only regulates Interstate movements or those loads that cross state lines. Each state that does regulate intra-state movements within their state has unique requirements for registering to do such moves. Typically the Public Utilities Commission in each state, or the state’s Commerce Commission will oversee intrastate movements. You will need to contact any state individually for which you are interested in operating intrastate to obtain specific requirements.

Your authority may not be the only permit or license you may need to legally operate. If you are a (common or contract) carrier your trucks may need additional permits and registrations to legally operate in some states.

In addition to permits, holders of any type of authority should file and pay for Unified Carrier Registration to your base state.

Disclaimer: This blog is NOT intended to give legal advice, nor be a substitute for any training required by the Regulations.

Till the next blog,Thank you drivers for all you do! Please be safe!

Read: Building a Foundation for Your New Trucking Business - Part 4

John Mueller, CDS

[email protected]