New HHG Carrier Regulations

The Federal Motor Carrier Safety Administration has proposed a new rule requiring interstate household goods carriers to submit reports on a quarterly basis summarizing a list of information concerning claims and claim inquiries filed with the carrier. The general public, including yourself, has until April 21, 2008 to file comments or objections to the proposed rule. For the reasons stated in this post, you may wish to file comments or objections.

Under the proposal, any carrier holding interstate authority to transport household goods will be required to file a report on a quarterly basis. The report may be filed in paper or on the web. That part is fine.

The report will require each carrier to provide a list of information about the company itself and then a summary of complaint information for the quarter, such as number of shipments handled, number of oral complaints, number of written complaints, rates or charges, a description of the services, how claims are handled, number of claims for loss or damage in excess of $500, number of claims for loss or damage in excess of $500 settled during the reporting period, number of claims in excess of $500 declined and the number of claims in excess of $500 still pending.

Under this rule, carriers are subject to a minimum penalty of $650 for each violation and for each day the violation continues. There is also a maximum penalty of $6,500 for failing to file a report or failing to file a report within thirty days from the due date, failing to make the report in the manner required, falsifying a report, making a false or incomplete entry, or failing to preserve records as required in the rule.

I have several concerns. I suggest you consider the following:

A. There is no minimum volume of interstate shipments required. Any carrier authorized to transport household goods in interstate commerce will be required to file quarterly. Therefore, if a carrier holds interstate authority but transports no shipments in a quarter, it is still required to file.

B. The rule itself is not clear. I would expect a rule of this nature to read that these claim statistics apply only to interstate shipments. However, under the proposal, the reporting requirements extend to both interstate and intrastate shipments. Therefore a carrier will be required to report each and every shipment and each and every claim, whether interstate or intrastate.

C. The potential fines are significant. The proposed penalties for failing to file start at a minimum of $650 for each violation and go up to a maximum penalty of $6,500. There are so many requirements under the certification a carrier will need to make each quarter, that even minor errors may result in violations and significant penalties.

It appears to me that this rule is ill conceived. It also appears to me that the purpose for enacting the rule is to target carriers who have claims filed. Finally, it appears to me that the true purpose of this rule is to raise revenues for the Federal Motor Carrier Safety Administration. I feel the rule is so poorly written that a carrier trying to comply is going to be subject to jeopardy on a quarterly basis, for any reporting error.

I suggest that anyone involved considers a response or objection. Please keep in mind that the response must be filed so that it is received by April 21, 2008.

More On Transportation Related Taxes

Last week, I wrote about the impact of the new Michigan Service Tax on transportation companies, the exemption for those providing freight transportation and the taxes on warehouse and courier services. Well, even though there is talk about repealing the tax (the political battle continues), the law is the law until or unless it is repealed. Under the law as it now stands, here is one more item to consider.

Every business that has added the words "logistics" to its name, or provides transportation consulting of any nature, will also need to examine this new law. Consulting Services as described in NAICS industry code 5416 are taxable services. Do you know what that covers? You would not without checking the definition section 5416.

The section 5416 definitions include: logistics management; inventory planning and control; freight rate consulting and auditing; efficiency management; customs consulting: and consulting for each of these categories. This is a summary, not a complete list.

Once again, the new regulations have not been written interpreting this law or telling us how the tax will be enforced. As with my comments on warehousing, it will be important to carefully define the services your business provides and for the description of these services to be carefully written in contracts and purchase orders. The descriptions you use may determine whether your activities are subject to this new tax, or not.

Businesses that may be taxed need to consider how to change their billing processes, and to look at their purchase orders, bill descriptions and contracts now, in order to determine what needs to be changed or amended before the December 1 effective date.

New Tax on All Warehousing and Some Transportation

On October 1, 2007, a series of new tax laws were passed in Michigan, including a new "Tax on Services". Assuming that all of the bills passed by the Michigan Legislature are signed into law, warehousing, courier, messenger and limousine services will be taxed, but trucking services will be excluded (House Bill No 5198).

Effective December 1, it will be necessary to account for this service tax on any of the "taxable" activities in Michigan, whether you are providing it or paying for it. From the wording of the bill, freight transportation including charges for stops in transit should be exempt from the tax.

Since new regulations have not yet been written defining or interpreting these new laws, it will be important to carefully define the services a business provides, or pays for, and for the description of these services to be carefully written in contracts and purchase orders. The descriptions you use may determine whether your activities are subject to this new tax, or not.

Return of the SSR

The transportation industry thought the Single State Registration System (SSR) was dead and gone. We are now viewing a resurrection.

Effective January 1, 2007, the federal government “killed” the SSR system under which motor carriers were required to register their vehicles and insurance in the 37 participating states. At the same time, the Feds created the Unified Carrier Registration System (UCRS). However, the UCRS regulators never got it running. As the result of this failure, the 37 participating states lost all the revenues they expected to receive from some registration system and those of you in the motor carrier industry saved the registration fees and the time needed to comply. Intellectually, I think we all knew the good times would end.

Congress sent President Bush a bill on August 2, which he is expected to sign immediately, reinstating the SSR effective and retroactive to January 1, 2007 if the UCRS system is not running by October 1. The UCR Board does not feel it is possible to get ready by this time. The only question remaining is how long the states will give their regulated interstate carriers to register and get the proper identification in and on their vehicles. The states are desperate to replace the lost income. Therefore, it is reasonable to believe this will happen very quickly.

It is also reasonable to believe that this registration process will create some chaos, since the state regulators are not set up for handling these registrations. For example, carriers based in Michigan will need to register with the Michigan Public Service Commission. The commission cut back staff this year and is struggling to handle the work it expected without these resurrected filings.

Whatever happens on October 1, all regulated carriers should be prepared to pay the fees and file some type of registration forms early this fall for the year 2007, and then again later this year for the year 2008. Right now, there are no forms available for either registration system. If you are a client of my office and you want to prepare in advance, I can send you the SSR forms for 2006, which will allow you to comply when the formal announcement is made.

Commercial Vehicle Safety Alliance Roadcheck

Following up on the posting earlier this week regarding increased attention at the Michigan/Ontario border, here is another alert for transportation companies - even more inspections are on the way:

The annual Commercial Vehicle Safety Alliance International Roadcheck will occur from June 5-7 throughout Canada, Mexico and the United States. About 10,000 CVSA inspectors will be deployed along major highways with roving patrols on other roadways. This year's enforcement and educational event will focus on Level I inspections (driver and vehicle) and also highlight the importance of safety belts and motor coach safety. A level one inspection is described as:

An inspection that includes examination of driver's license; medical examiner's certificate and Skill Performance Evaluation (SPE) Certificate (if applicable); alcohol and drugs; driver's record of duty status as required; hours of service; seat belt; vehicle inspection report (if applicable); brake systems; coupling devices; exhaust systems; frame; fuel systems; lighting devices (turn signals, brake lamps, tail lamps, head lamps and lamps/flags on projecting loads); safe loading; steering mechanism; suspension; tires; van and open-top trailer bodies; wheels and rims; windshield wipers; emergency exits for buses; HM requirements as applicable. HM required inspection items will be inspected by certified HM inspectors.

Common sense says that your HR and Safety Departments, as well as you drivers, should be alerted. There is no reason to be caught unaware and subject to unnecessary citations. Further, your dispatch staff and possibly your customers should be aware that possible added delays could occur on those dates.

All Eyes On The Ontario Border

A hole was created in the Michigan state budget when the federal government discontinued the Single State Registration Program on January 1, 2007. In order to fill that hole, a safety enforcement program was created and funded. The State is taking advantage of that funding.

A story in Today's Trucking Online referring to a press release originating in Toronto, states that from now until October 1, the Michigan State Police will be giving increased attention to Ontario-Michigan commercial border crossings as well as the corridors leading to those crossings. Through the funding provided for the enforcement program and the fines generated by the tickets, the state will recover some of the lost revenues. Cross-border carriers beware.

By the way, on October 1, 2007, the UCRA (which replaces the Single State Registration) and the fees for the UCRA program, become effective. At that time, everyone in the transportation industry should pay attention.

UCRA Replaces SSRS And It Will Affect You

Congress dipped into the alphabet soup of federal motor carrier law and came out with a new acronym – “UCRA”, which stands for the Unified Carrier Registration Agreement. UCRA, which was established as part the “Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users” (“SAFETEA-LU”), replaces the Single State Registration System (“SSRS”) and, if you are a private, for-hire or exempt carrier, or if you are a broker, freight forwarder or leasing company, the UCRA will affect YOU.

RIP SSRS

“SSRS” was a program that was designed to ensure that interstate motor carriers maintained appropriate liability insurance. Regulated for-hire motor carriers were required to register their authority and proof of insurance with their base state and fees, calculated based on a per-truck and per-state basis, were collected by the base state and then transmitted to the other states.

However, effective January 1, 2007, Congress repealed the SSRS and replaced it with …nothing. You may not long for the days of SSRS, but the states that previously participated in the program surely do, as the abolishment of the system also meant the disappearance of the substantial state revenue, including approximately 2.6 million dollars per year for Michigan.

This was not the intent of Congress, but the new program simply was not ready on time. Though UCRA, the program designed to replace SSRS, is not complete, there are guidelines that give a good indication how the new program will work. It is not too soon to consider how these guidelines will impact you.

Life under UCRA

The concept for UCRA is to have a more streamlined system of collecting fees. Under SSRS, carriers paid fees on a per-state, per-commercial motor vehicle basis, and each state established a different per vehicle charge. Under UCRA, the fee will be per carrier, based on carrier size, and the fee will be the same for all states. Carriers will no longer pick and choose states. Instead, one fee structure will be used for every state.

A recently proposed fee schedule ranges from an annual fee of $39 for carriers with 0-2 commercial motor vehicles, to $37,500 annually for carriers with over 1,000 vehicles. The Board of Directors, who are empowered to establish the UCRA, have stated that they hope to have a fee structure in place by June of 2007.

Another significant change is that more companies will be subject to the requirements of the UCRA than under the old SSRS. Although only regulated for-hire motor carriers were subject to the SSRS, the UCRA will also govern: (1) private carriers, (2) exempt carriers, (3) brokers, (4) freight forwarders, and (5) leasing companies. The fees for companies that do not operate commercial motor vehicles (such as brokers, freight forwarders, and leasing companies) are expected to be levied at the same rate as the smallest motor carriers.

When Will The UCRA Take Effect

The answer to “when” the UCRA will take effect is unclear, although some commentators project that the system will be implement by the summer of 2007.

What Does It All Mean

We do not know all of the requirements you will face under the UCRA, but we do know that it will cover many more companies than were subject to the old SSRS. The best advice is to watch for future developments in order to give yourself time to prepare for the new regulations. There will be fees you have not yet paid this year. There will be new forms and regulations. It will take time for everyone to understand and comply with these rules and we expect there will be penalties if you do not comply.

A Board of Representatives is currently developing the UCRA requirements and you can monitor the developments at the following website:

http://www.naruc.org/displaycommon.cfm?an=1&subarticlenbr=499

The web address is lengthy, but it is worth the effort as it provides helpful information including who is on the Board, notes from board meetings and a downloadable question and answer sheet.

Be aware that change is coming, and the changes under UCRA will be broader than the specific topics addressed in this article. Most important, remember that the burden is on you to know and comply with the law, even as the law is evolving. If you have any questions about how it will impact your business, contact me or your transportation attorney.