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Forming a Company: Part 1 of 5 series for Carriers

Forming a Company: Part 1 of 5 series for Carriers

Even though Motor Carriers, just as with Brokers and Freight Forwarders have been subjected to profound regulatory changes since implementation of various elements of (A) the “Motor Carrier Act of 1980”, (B) “The Interstate Commerce Termination Act of 1995”, and (C) the omnibus transportation funding bill in 2012 under the short title “Moving Ahead in the 21st Century Act”, the nature of such changes applicable to Motor Carriers since full implementation of the 1980 Act alone, as perpetuated through subsequent ICC rule-making right up until that agency was unsettled through the 1995 Act, already had simplified the economic regulatory aspects of their operations to the extent  of full maturity prior to the impact of such further major legislative initiatives.  In other words, unlike both categories of transportation intermediaries characterized above yet to be subject to final economic rule-making by the Federal Motor Carrier Safety Administration (FMCSA) and Department of Transportation (DOT), Motor Carriers have yet to be subject to final rule-making by that agency, with respect to the full implementation of Electronic Logging Devices and other safety and environmental measures.

Nevertheless, given the regulations of such avenues of Brokers, Freight Brokers, and direct shipper interactions with Motor Carriers now facilitated by what have become vastly simplified “operating authority”, “bill of lading” (read “contract of carriage”), “rate confirmation”, and “insurance certification” forms and procedures, as implemented through the currently revised iteration of Parts 300 to 399 of the Code of Federal Regulations (“CFR”) whatever further accommodations to new safety regulations interstate Motor Carriers are still adjusting to the procedures for business entities seeking to patronize such transportation service providers remain straight forward and easily understandable.

Essentially, the number one requirement for a Broker, Freight Forwarder, or Shipper seeking the services of an FMCSA regulated “motor carrier” engaged In “for hire carrier”  within the meaning of 49 CFR 387.5, whether or not as an “exempt” interstate carrier with only a DOT registration number, for movements exempt from economic regulation in interstate commerce, or operating also as an “authorized carrier within the meaning of CFR 376.2 (a) with both a DOT and MC registration number, for movements subject to economic regulation in interstate, is to ensure must meet criteria as prescribed by laws passed by Congress and signed by the President.  Once again, all parties involved in such transactions would have access to the final fully implemented elements of such legal imparities as published in the currently revised iteration of CFR of CFR 49 Parts 300 to 399.

More particularly, it is critically important to Brokers, Freight Forwarders, or Shippers the true meaning of “Carrier Qualifications”. and how to read the FMCSA web site, and familiarize themselves with all of the requirements of a bona fide interstate Motor Carrier.  For example, to determine whether they’re dealing with a legitimate transportation service provider, or party seeking to verify such credentials may log onto the FMCSA website at www.safesys.org ( and click onto “Licensing and Insurance”).  This site allows a perspective user the opportunity to verify both Motor Carrier liability insurance and the filing of a BOC3 (“Residence filing”).  The www.safersys.org website facilitates the “Licensing and Insurance” site.  When you arrive at this site you are able to input their MC number, and it will bring up their profile.  This profile will indicate their status as either active, inactive, or pending authority.

Users may also click on “Active/Pending Insurance” on the FMCSA, which would display such a Motor Carrier’s insurance company, and if there is a cancellation date of such a Motor Carrier’s insurance.  To be sure, such a form also shows the amount of liability insurance that a Motor Carrier has on file.  The “www.safersys.org” site also reveals their business profile, the number of trucks they operate, their safety status, DOT number, and prospective user’s reference whether brokering or otherwise arranging. For movement of hazardous material, a prospective user must also ask for such a Motor Carrier’s Hazmat License issued by the DOT, and for any state, the carrier delivers to or transverse through.  Many states  require a (“HazMat”) filing in addition to the (“USDOT”).  Also, the driver must have a valid CDL with a HazMat filing endorsement on their license.

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Forming a Company – 5 of 5 in Starting a Logistics Operation – Brief History of the Brokers

Brief History of the Brokers

The transportation industry has changed drastically since the Interstate Commerce Commission “ICC Termination Act of 1995” which deregulated the trucking and the transportation industry.  Prior to 1980 there was only one authorized broker operating in the United States, but after 1995, there have been thousands of Property Brokers authorized to broker property.  Within the U.S. Brokering has become an integral part of the transportation mix.  Brokers perform an important function within the logistics and transportation industry.  Carriers rely on brokers to supply hem with freight, both as front haul as well as back-haul freight.

Shippers look to brokers to fulfill the important function of supplying the many trucks required to meet their shipping needs.  The small fleets and owner-operators find that the broker can supply freight needed by the carrier, thereby, relieving the carrier. Thereby relieving the carrier need of hiring a sales force to find freight for their company.  Shippers on the other hand may need hundreds of trucks a day to move their freight.  Rather than calling carriers, the shippers can have one call, find one or one hundred trucks.

The modern day computer network provides the broker with a “virtual terminal” with thousands of trucks at their fingertips.  With the Internet , they can post the number of trucks, and type of equipment they will need to meet their shipping needs at a moment’s notice.  The tendency is to quote the lowest rate possible, but remember it is not always the lowest rate that gets the freight.  Having a following of owner operators who deliver on time and for a reasonable rate, is the best sales tool you possess.

In addition, a user-friendly web site is an important asset in the modern transportation market place.

Frequently Asked Questions:

 What is a Truck Broker?

The technical terminology for what is referred to as a “Truck Broker” is  reality, a “third part” logistics provider.  The Federal Motor Carrier Safety Administration (FMCSA) would classify it as a “Property Broker”.  The other type broker is referred to as a “Household Goods Broker”.

A third party logistics provider is rarely or if ever shown as a party to the Bill of Lading, which is the controlling document in the movement of freight in interstate commerce.  Therefore, a broker should have well written “rate agreement, linking you directly with the shipment.

What is Double Brokering?

The hotly debated issue in today’s transport industry is “double brokering”.  Although this practice is not spelled out as illegal practice in any of the FMCSA’s broker regulation, it is not a good practice, and many carriers will not accept any such shipment.  Most importantly delivering carriers will net get paid.  The underlying surety bond form, BMC 84 or trust agreement BMC 85 does not allow for payment to a broker, only payment to a regulated carrier or shipper.

What is a Truck Broker?

The technical terminology for what is referred to as a “truck broker” is in reality a third party to a transportation contract.  The broker is in fact a party inserted between a carrier and the shipper.

In essence, the property broker assumes the sales and the billing position for the carrier, and receives percentages of the truck rate for providing the services.  The carrier retains the responsibility for all regulatory, safety, liability insurance,

cargo insurance and all other legal responsibility for the transportation act.  Although the shipper pays the broker direct, technically he is paying for the transportation services only.

What is the role of a Property Broker in Interstate Commerce?

The essential duty of a broker in interstate commerce is to become a third party in a transportation transaction.  In a traditional movement of freight the shipper would contact a carrier and contract with him or her to deliver a sum of freight for a set amount of money (a rate).

When a broker enters the picture, the circumstances change drastically, no longer is the trucker the second party to the movement, but the “broker” becomes the second party, and the trucker becomes the “third party” to the transaction.

The broker assumes the responsibility of paying the trucker for the transportation charges.  In one sense, the transportation pie becomes smaller because the broker has inserted himself in the middle of the transaction, but assumes the reconcilability of paying the carrier and collecting from the shipper.  The carrier is assured of being paid, and is relieved of the duty of billing the shipper, and they can spend the time driving and dong what they do best.

In return, the carrier relives themselves of the problem of finding freight, and worrying about collecting their money from the shipper.  The shipper is in turn relieved of the responsibility of finding carriers and negotiating with each one what their rate will be.

The most important responsibility of the Property Broker is the selection of a “Bona Fide Carrier” authorized by the Federal Motor Carrier Safety Administration (FMCSA) to operate as a: Contract or Common Carrier in interstate commerce.

It is solely the duty of the authorized property broker to insure that the carrier they select has a valid Motor Carrier (MC) number, and US DOT number, and is in good standing with he FMCSA.  Th broker must be informed as to their cargo and liability insurance coverage before the shipper releases freight to the carrier.

Background and Experience

It would be virtually impossible to produce a “Transportation Guide” that would cover all aspects of freight brokering from the novice to the experienced broker agent.  Therefore, we attempted to produce a learning manual that would be user friendly to the complete novice as well as to the person with experience in the trucking and shipping industry.

It is a decided disadvantage for a complete novice entering the freight brokerage transportation industry.  The same would be true for a novice entering into  any other field of endeavor now to that person.

The general public is completely unfamiliar with the world off freight transportation.  In fact, May 2016 I was invited as an “Expert Witness” to the FMCSA Round Table on Financial Responsibility as only one of two financial because of the recent law

That increased bonds/trust from $10,000 to $75,000 and they had concerns that financials under financed the bonds and would amass claims that they would be able to pay.  They were wrong, but the experience in listening to all of the major insurance companies

That provided BMC 84 Bonds provided me a new level of education. Being in a room filled with transportation professionals and attorneys was truly educational.

This is said not to demand the general public.  The same public could be true to any person entering a new field.  Anyone in a new field could be taken advantage of during the learning curve. This is why “Transportation Consultant and Attorneys must be utilized.

This is why the Transportation Guide designed with real cases of day to day operation has Questions and Answers that are comprehensively structured for carriers, freight brokers, freight forwarders, shippers, and intended to help the newcomer as well as the experienced veterans of the transportation wars.

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How to use a load board: DAT TruckersEdge

How to use a load board: DAT TruckersEdge

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The Learning Center

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Contract Permit Versus Common Carrier Certificate

Contract Permit Versus Common Carrier Certificate

A word of caution when contracting a common carrier, as common carriers authorized by the Public Law that sunset the Interstate Commerce Commission, an act entitled “ICC Termination Act of 1995).  Entering Into a contract with a common carrier can be risky since common carriers have published rates in addition to the “spot rate”

 

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Forming a Company – 3 of 5 in Starting a Logistics Operation

Companies that plan revenue opportunities that may exceed a million dollars in annual should consult an attorney,  and  a competent Certified Public Accountant (CPA).  A corporate structure is a must for motor carrier (trucking) from medium and up. There are numerous classification of corporation, so an attorney or/and CPA should be consulted.  Contracts of any kind is an agreement between two (2) parties, and a breach of contract may have dire consequence.

Once you know that you are ready to move forward through the Secretary of State, select a “Fictitious Name”, which is the official name of your business, and a “DBA”, Doing Business As. Create a positive presence, promote your services on the social media, i.e. Twitter, Facebook. your business.

You must contact the Internal Revenue Service “IRS” for your “Federal Identification Number”  for assistance in selecting the type of business you will own, and the pros and cons of each for filing your business and personal taxes.  They range from a Corporation…Partnership…Limited Liability “LLC”… S or C Corp.

The broker and carrier business can be risky when you factor in the moving a load.  The broker agrees to pay the carrier an agreed Dollar ($)  amount for moving a load with a small profit margin for the amount of money expended for fuel, permits, and travel time.

Scenario:  In an average movement, the broker agrees to pay the carrier am agreed amount to move the load from point “Origin” to point “Destination”.  It is assumed that the full amount of the debt or cost is to the carrier.

View Point:  When a shipper is unable to pay, particularly if the shipper is deeply indebted the broker may be liable to pay the carriers and the broker may be forced into bankruptcy. In many instances the broker’s commission is only 10 to 15%.  Just one (1) or (2) bad loads could cost a broker thousands of dollars.

The corporate shield protects personal and/or business assets from creditors, except when a principal signed as a “Personal Guarantor”.

Corporations:

  • Limited Liability Company or LLP are created and created and treated differently, because they represent different  liabilities issues generally requires an attorney.  Here are alternatives to these entities for a corporation with associated cost savings for its formation.
  • Fictitious Business Names (d/ba)-  The Business name is processed through the Secretary of State in each state.  There is no protection against bankruptcy.  A legal notice that in the local newspaper, an article be posted declaring the individuals involved in the formation of the company involved in the formation of the company and the place of business is required to open a business checking account.  Interstate transportation is not subject to state and local sales tax.

Always make a call if uncertain on what type of protection is required for your business.

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Start-up “ALL ABOUT YOU” Part 2 of 5 in a series of thoughts related to starting a transportation business

The Business Plan for “Starting” a logistics operation consist of a narrative and several financial worksheets.  The “Narrative” template is the body of the business plan, and serves as the Global Positioning System (GPS) because this is where the journey begins.  It contains more than 150 questions on how to proceed, and why.  Work through the business plan in any order except for the “Executive Summary” which must be completed last.  Skip any questions not applicable to your type of business.

Upon completion of your first draft, you will have a collection of small essays on various topics of your various i.e., what is your niche, who to do business with, what are the funding requirements, and what agencies can support you in setting up your logistics operation.  Edit these essays into a smooth flowing narrative.  This becomes a test of your knowledge of the career you’ve chosen, and what resources are available to equip you to meet those compliance requirements.

Business plan concepts on green chalk board

The real value in creating a business plan is not to have a finished plan in hand, rather, the process of researching, and thinking about your business in a systematic way.  The Army has a slogan that clearly defines planning called the five P’s , “Prior Planning Prevents Piss Poor Performance”.   Planning and due diligence helps you to think through thoroughly all of your ideas critically to avoid costly, disastrous mistakes later.  Always contact transportation consultants, and attorneys to be certain that your decisions are made with the best information.

The business plan is generic for any business, but specific in transportation because we are experts, and can serve as your GPS.  However, modify the business plan to suit your particular business needs, teview yhe section titled “Refining the Plan” found at the end. It suggests emphasizing certain areas depending on your type of  business, freight movement, sales, auto transporting, retail or service.  It also provide valuable insight on fine-tuning your plan for an effective presentation for venture capitalist.  Pay attention to your writing style or seek assistance through professional proposal writers.  You will be judged by the quality and appearance of your presentation, as well as your ideas.  Generally, you want get a second chance to make a first impression.

It typically takes several weeks to complete a good business plan.  Most of that time is spent researching, and thinking of your ideas, assumptions, and the value of processes.  Take he time, make a call, and  do the “Business Plan” properly because that is “THE” guide to determine the success of your logistics operation.  Those that prepare business plans never regret the efforts.

There is a famous proverb that states” Consider the cost”.  His could be taken several ways, not just the dollar amount because funding is part of the plan.  You may consider a home-based business and the effect it may have on the family.

If you are a motor carrier or broker finding freight is difficult without the right resources. The truck is never where he load is, so time and ravel must be considered as well as vetting carriers qualification, confirming rates, and tracking shipments.

A well-thought out “Business Plan” determines the size of your investment, number of employees, and return of your investment.  As a home-based owner-operator your family can be trained to find freight,  and you can get two (2) authorities, One (1) as a motor carrier (trucker) and one (1) as a broker to employees other carrier as loads are secured from load boards.

Remember, that TFS has the best transportation professionals in the industry working as a cohesive unit to meet all of your transportation needs at a cost-effective and timely manner.

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I don’t want to be him and call my boss!

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7 Required Elements of an Enforceable Contract

By: Bernadette A. Safrath

A contract is a legal document between two parties. In order to be enforceable, the contract must contain seven elements. While more specific requirements may differ by state, the basics of contract law require that these seven elements exist regardless of where the contract is formed. If even one is missing, a contract may be voided and the parties will be excused from any obligations.

7 Required Elements of an Enforceable Contract

Offer

An offer is the beginning of a contract. One party must propose an arrangement to the other, including definite terms. For example, if the proposal is an offer to purchase shirts, it must include quantity, price and a delivery date. When the offer is communicated to the other party, he has the right to accept, reject or amend the offer. If he rejects it, the offer dies. If he amends the offer, the original offer dies and his amendments become a new counteroffer that the other party can accept or reject.

Acceptance

An offer can be accepted in writing, in person or over the phone. The acceptance must simply be communicated to the offering party, with an obvious declaration that the accepting party intends to be bound by the buyer’s terms. Under the “Mailbox Rule” used in most states, an offer is deemed accepted when the accepting party places it in a mailbox or sends an email, even if the offering party never actually receives it.

Consideration

Consideration is something of value that the parties are contracting to exchange. Generally, one party exchanges money for property or services, but the parties can both exchange property or services, as long as a court would find that each party’s consideration has sufficient value.

Competence/Capacity

Competence, also called legal capacity, is a party’s ability to enter into a contract. The most common reason for incompetence is age. A party must be at least 18 years old to enter into a contract. If a minor signs a contract, she has the right to cancel it. Another reason for incapacity is mental illness. A person incapacitated by a disease or disability, who does not understand the terms of a contract he entered, has the right to rescind his acceptance of an offer, voiding the contract. Lastly, a person under the influence of drugs or alcohol may be considered incompetent if the other party knew or should have known that the person’s impairment affected his ability to understand and freely consent to the contract.

Mutual Consent

Generally, the law assumes that a competent party freely consents to a contract. However, if consent was obtained on the basis of frayed, due to duress or because of the exercise of undue influence, a party’s consent is considered involuntary and the contract is void.

Legality

A contract is only enforceable if the activity in the contract is legal. For example, a person cannot contract with someone to commit assault, murder or another criminal act. Additionally, contracts to split lottery winnings in states where gambling is illegal have been delayed unenforceable.

Writing

Not all contracts need to be in writing, but under the Statute of Frauds, certain contracts must be in writing in order to be enforceable. A written contract is required for all transactions involving real estate (i.e., lease or sale of a home), any promises to marry, any agreements to pay a third party’s debt and any transaction in which performance cannot be completed within one year of the contract signing.

https://www.sapling.com/11368503/7-required-elements-enforceable-contract

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Info and Fleet Owner – Technology – Autonomous Vehicles

Info and Fleet Owner – Technology – Autonomous Vehicles

Neil Abt | Jul 17, 2019

https://www.fleetowner.com/autonomous-vehicles/peloton-outlines-plan-platoons-driverless-following-truck

Six fleets are using PlatoonPro in real-world conditions, Peloton said.

Peloton outlines plan for platoons with driverless following truck

As company works on Level 4 technology for the future, CEO Switkes says fleets reporting strong fuel efficiency gains with existing PlatoonPro system.

Peloton Technology has unveiled plans to develop Level 4 automated following technology that would allow one truck driver to safely operate two tractor-trailers in a platoon.

“We want to leverage the skill and experience of the lead driver,” Josh Switkes, founder and CEO of Peloton, told Fleet Owner in an interview. “That helps in a variety of ways make this type of automation dramatically simpler than a stand-alone driverless truck.”

Switkes spoke publicly of Peloton’s plans for first time on July 17 at the 2019 Automated Vehicle Symposium in Orlando, FL.

Currently, the company is rolling out its Level 1 PlatoonPro system, which has a driver in both the lead and follow trucks. The driver in the second truck steers, but the system controls the powertrain and brakes to manage the following distance.

PlatoonPro is being used by six fleet customers in real-world conditions, with numerous other customer trials underway. Switkes said the system has a perfect safety record, and customers are achieving fuel savings averaging more than 7%. In some cases, miles per day have exceeded 700 per truck, resulting in projected fuel savings of up to $7,000-10,000 per truck, per year.

Switkes declined to provide specific details on any of the fleets using PlatoonPro, but hinted much of the activity has taken place in Texas. He emphasized one takeaway thus far is how infrequently other vehicles cut into an established platoon, which critics have pointed to as a safety risk and a reason the suggested fuel economy benefits would not be as high in real-world conditions.

Addressing another frequently cited concern, Switkes noted it is rare for significant “hard braking” events to occur. However, the company has spent “a huge amount of time” understanding and measuring braking capabilities to ensure the system will work properly every time, regardless of the circumstances.

As Peloton works today to further deploy PlatoonPro, Switkes said there is no exact timetable for its Level 4 system, stressing that safety testing and validation takes time. But he was confident this technology would prove attractive to an industry struggling with finding enough truckers.

“We see the drivers as the world’s best sensors, and we are leveraging this to enable today’s drivers to be more productive through automated following platoons,” said Switkes.

Peloton’s advanced platooning system will use vehicle-to-vehicle (V2V) technology, which allows the human-driven truck to guide the steering, acceleration and braking of the follow truck. Switkes said he believes the ability to double the productivity of the driver by controlling two vehicles through the platoon will prove attractive to fleets.

He also said the highest skilled drivers will likely operate these future platoons, and could receive higher compensation for their efforts.

Peloton said this will result in “improved work for drivers through better routes, schedules, and compensation, as well as better quality of life through expanding hub-to-hub and relay-style operations that allow drivers to be home with their families every night.”

Separately, a report released on July 17 from the Competitive Enterprise Institute (CEI) found that only 20 U.S. states have thus far authorized commercial automated vehicle platooning. The first start to do so was Utah back in 2015.

CEI said “with the coming advent of automated vehicles, numerous sections of state motor vehicle codes likely will need revision if we are to take advantage of the full range of benefits offered by vehicle automation technology.”

For platooning, the legislative hurdle generally surrounds minimum following distances on the highway. The group made two recommendations for altering these regulations while maintaining safety.

First is a “strong amendment,” which would preclude agencies from promulgating any regulations restricting automated vehicle platoons. Next is a “weak amendment,” which would grant motor vehicle authorities discretion in how to promulgate platooning rules.

CEI’s report, “Authorizing Automated Vehicle Platooning: A Guide for State Legislators” is a nationwide inventory of state “following too closely” rules that offers specific, state-by-state fixes to amend statutes in a way that exempts speed-coordinated vehicle platooning from those laws.

“The economic, safety, and environmental benefits of platooning should prompt other states to update their laws,” said Marc Scribner, CEI senior fellow and author of the report.

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