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Ask the USDOT Practitioner - September/October

"JAMES P. LAMB, USDOT PRACTITIONER"
 

Q. What is a Level One Inspection?

A. This is an official (not to mention extensive) USDOT safety inspection often conducted by state law enforcement on the side of the road. During a Level One, authorities look at both the truck driver’s compliance with FMCSA Safety Regulations and the vehicle’s fitness in terms of maintenance. They will examine your CDL, medical card and ask to see your driver’s log to check to see that you are not driving, for instance, more than 11 hours, following 10 consecutive hours of off-duty time and not driving after having been on duty for 14 hours.  They will also check the equipment against CVSA “out-of-service” criteria and make sure the vehicle is safe to continue on its way. According to the most recent FMCSA data (for 2003) published at www.safersys.org, about 23% of all vehicles stopped are not safe and are placed “out-of-service”. The most toned-down version of this is a Level Three, in which only the driver is examined. Similarly, about 8% of all truck drivers are not in compliance to the point that they, too, are shut down. My favorite was when I would do a Level Three Inspection and the driver of an 80,000 pound semi that would pull into the weigh station was 19 years old with no CDL, medical card or driver’s log. Then we had some real fun!

Wanna learn more about Safety Inspections? Call Vanessa in my office toll free at (888) 414-1874 and sign up for a trucking success safety workshop.

Q Do I need authority if I operate only a cargo van interstate?

A. Well, as a practitioner, I have never been able to find a  federal statute that enables FMCSA to require MC registration for vehicles under 10,000 pounds. In fact, a reading of federal law suggests the exact opposite. FMCSA acknowledges they cannot require a USDOT Number for vehicles under 10,000 pounds but their licensing application system does require van-sized carriers to get authority. They tell carrier applicants to just secure $300,000 in vehicle insurance to protect the public against bodily injury and property damage instead of the usual $750,000 commercial transportation liability insurance.

Incidentally, I wrote FMCSA’s Legal Department some time ago inquiring as to their position on their legal authority to regulate vehicles under 10,000 and they did not respond. My position is they do not have the authority. But they advise the public they have the authority to regulate and that motor carrier authority is required to transport regulated, non-hazmat commodities for-hire across state lines in cargo vans. This is something that apparently will not be resolved until and unless a carrier takes the FMCSA to court. So, if you operate cargo vans or very small straight trucks, call DOTAuthority.com toll free at (888) 414-1874 and we’ll help you get your authority.

Q. What is a tax id number?

A. Much like we each have a Social Security number issued by the government, which is used, in part, to keep track of our income tax payments to the Internal Revenue Service (“IRS”), businesses, too, need to have a tax account with the IRS. A “Tax ID Number”, also commonly referred to as an “EIN” or “FEIN”, is a number that is needed for a motor carrier or freight brokerage that operates under the legal structure of corporation or limited liability company. You must tell FMCSA your EIN at the time you make application for authority or a freight broker’s license, along with the exact legal name of your business entity. DOTAuthority.com can help you secure an EIN in just 10-15 minutes. Call our tax unit toll free: (800) 450-7516.

Q. What is a Trust Fund Agreement?

A. This pertains to the financial security of freight brokers. Freight brokers, because they are third party intermediaries in between shippers and carriers—matchmaker middlemen, if you will, do not need insurance to get a license from FMCSA (some shippers ask brokers for contingency cargo insurance but we’ll save that for another day…or better yet, come to my 1 day freight broker training seminar offered nationwide—call Lori in my office toll free at 888-414-1874 to sign up!); that is, freight brokers do not take possession of the freight so they are not normally liable for the freight. However, they do have a financial security requirement imposed on them to ensure they meet their obligations and financial responsibilities to shippers and carriers. They have to have either a surety bond or trust fund agreement in place to get licensed. If the shipper pays the broker but he keeps the money rather than pay his carrier, the carrier can seek recourse through the broker’s bond. By the way, legally, brokers have to pay carriers they hire regardless of whether they collect from shippers or not!

The trust fund is an alternative to the traditional bond. We recommend the trust fund option to our freight broker clients and we endorse the financial institution Pacific Financial Association, Inc. because of their flexible cash and credit plans, their policy of allowing brokers to dispute claims, and their practice of returning collateral at the end of the broker’s business within 30-60 days rather than make him or her wait 6 months. To fill out a PFAI Trust Fund Agreement quote request form, click here.

Q. I’m an owner-operator. How much insurance will I need if I get my ICC rights?

A. There are actually two answers to this question; that is, what the government requires and what the Industry expects. In order to transport regulated commodities for-hire across state lines under federal authority, you must maintain a minimum of $750,000 commercial trucking liability insurance. You probably have bobtail now so you will have to upgrade. This assumes you are not transporting hazmat. If you do, then the requirement is $1mm or $5mm, depending on the nature of the hazmat you will haul. Turpentine, for instance, would be the former and explosives, the latter.

Now, that doesn’t mean that you should run out and procure only $750,000. In fact, the Industry usually requires that you maintain $1mm. So, if you will do business with “Fortune 500” shippers and/or freight brokers then be prepared to present evidence of the full $1mm. Also, freight brokers and some shippers will usually want to see $100,000 in cargo insurance for general commodities even though the government requirement for common carriers is less. Expect to be asked for even higher cargo insurance if the commodity being transported is of high value like, say, Rolls Royces and Bentleys. I gotta get me one of them.

By the way, if you do get the $1mm, make sure your insurance broker properly files the full $1mm with FMCSA --not just the bare minimum of $750,000-- or freight brokers may think you are underinsured for their purposes and may pass on calling you, which will cost you business!

Click here to check out our Quick Quotes program to get a free quote from a member insurance broker!


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