OCTOBER 1ST BROKER BOND UPDATE
(as of 1PM Sept 30th Eastern time)

Note: The following message is from AIPBA founder, James Lamb who has initiated a law suit (along with the help of many of you) against the FMCSA, regarding the Oct 1 deadline for the new $75K bond/fund. Some minor edits have been made.

"As of 15 minutes ago (Monday afternoon, Sept 30), it appears AIPBA and DOJ are going to agree to mutually move to transfer the matter to the 11th Circuit US Court of Appeals in Atlanta under the Hobbs Act. An injunction will therefore not be in place before October 1st.

However, we note brokers are still covered under the 60 day phase in period in terms of their license being in full force and effect through November without a $75k bond in place.

Remember, FMCSA's Legal Affairs office has advised us via the US Attorney's office that it is NOT requiring that bonds purchased after Oct 1st be backdated to Oct 1st. So ignore those bonding companies telling you the sky is falling today and you have to act now.

However, it also appears there will be a stay on the case put into place by the Federal court at the request of the US Attorney due to what appears to be an imminent federal government shut down. FMCSA's non-essential staff will be affected if the shut down happens.

Unless they go into the active insurance field and look for a $75K instrument, anyone checking your license on the details summary page in the SAFER system will see you are in compliance with the FMCSA's current financial security requirements and that you remain actively licensed as long as you have at least $10k as of midnight tonight (September 30, 2013).

So, hang on, folks. Justice is slow. And this Obamacare monkey wrench is not helping matters".


''Revised Plans & Pricing for your BMC-85 Surety with Pacific Financial Association, Inc.''

New Plan Descriptions
Plan 1: Cash Plan
You may elect to place $75,000 cash into your trust held with Pacific Financial.

Benefit: no annual administrate fee for the life of your account.

Plan 2: External Letter of Credit
You can arrange with your bank or credit union to issue an Irrevocable Standby Letter of Credit naming Pacific Financial as the beneficiary in the amount of $75,000 or place some funds in trust with the balance backed by an LOC. If your bank requires the funds to be held with them in a secured instrument, you may find it more cost effective to place the funds directly into the trust with Pacific Financial to avoid any annual administrative fee as a 'Cash Plan'. (A sample LOC can be provided upon request.)

$75,000 LOC
Quarterly Payment ............................$ 400
Annual Payment ...............................$ 1,500

$65,000 LOC & $10,000 in trust
Quarterly Payment ...........................$ 275
Annual Payment ..............................$ 1,000

Plan 3: Internal Letter of Credit
This option was expressly created to comply with the new legislation. Pacific Financial will obtain a Letter of Credit from a third party Financial Institution on your behalf. You will be obligated by an indemnity agreement to reimburse the third party if the LOC is ever drawn upon by the beneficiary. As an added benefit within this option, you may decide to add additional funds toward your own dedicated trust fund to offset your annual fee.

Funds in trust:
$0 to $9,999 ---------- Quarterly Payment . $995 . or . Annual Payment . $3,500
$10,000 to $24,999 - Quarterly Payment . $695 ..or ..Annual Payment ..$2,500
$25,000 to $74,999 - Quarterly Payment . $495 ..or ..Annual Payment . $1,500

* Notice: Having funds in trust gives you a 28 per cent discount on the annual fee! You would have to earn a $1,000 in interest on those same funds to break even. You can’t beat that with any bank or CD! As of May 6, 2013, the FDIC reports that the current National Rate for a 12-month CD is only 0.21 per cent! As always, if you have any questions or concerns please feel free to contact us at 800-595-2615 or for quicker response email us at trustdepartment@pac-fin.com.


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Recent Communication between
the AIPBA and the FMCSA

AIPBA Question Number 1. Given that they (FMCSA) have announced this 60 day 'phase-in' period, will there be a moratorium on enforcement between Oct 1 and Dec 1?

FMCSA: No. The statute provides that the $75,000 bond requirement is effective October 1, 2013, so we do not have discretion with regard to the timing. See MAP 21, Pub. L. 112-141 §§ 3, 32918(c).

AIPBA Response: This appears to contradict the Guidance, in part, which states they will issue a Warning Letter on Nov 1st and they will not revoke licenses until 30 days later (Dec 1st). The issue seems to be a matter of what constitutes 'enforcement'.

AIPBA Question Number 2. If so, in the instance where a broker has already been notified that his $10K bond has been cancelled effective Oct 1st, will he be able to operate with no bond in place until Dec 1st or will his license be revoked on November 1st as is usual in these instances?

FMCSA: No. Brokers whose bonds lapse after 10/1 will receive notices of revocation. They would then be subject to the new $75,000 requirement and would have the usual 30 days to cure the deficiency.

AIPBA Response: This helps clarifies what they mean by enforcement, in part, to the extent that brokers need to have SOME form of continuing financial security in place.

AIPBA Question Number 3. Can a broker whose $10k bond has been cancelled as of Oct 1st file a new $10k interim bond between now and Oct 1st so as to be in compliance at the $10k level through November 30th before a license revocation order is issued; that is, essentially secure an interim instrument that stays in effect until Dec 1st to avoid a Nov 1st revocation?

FMCSA: No. The Agency's IT systems will be set up to allow and require only $75k bond filings after 10/1.

AIPBA Response: This is not responsive to the question. The question goes to before October 1st. The answer infers that $10,000 bonds will be accepted until Oct 1st, which opens the door to a 'patch' bond.

AIPBA Question Number 4. If a broker secures a $75K bond, say, on November 15th after receiving the Nov 1 warning letter, and that bond is made effective Nov 15th, will FMCSA accept the filing (Yes) or must the filing be backdated to Oct 1st? No. One BMC 84 surety bond supplier is saying they cannot backdate more than 30 days and would not be able to offer a bond after Nov 1st if the bond must be backdated to Oct 1st. We note the guidance does not mandate a need to backdate and it appears to be the intent of FMCSA to allow a broker to comply after Nov 1st.

FMCSA: FMCSA will not require 'backdating.'

AIPBA Response: This rebuts claims from bonding companies alleging they would be required to back date bonds to Oct 1st. Existing Brokers who are currently licensed ('active' in SAFER) should feel confident that they could secure a bond at the end of November and not be in danger of being revoked or have to supply cash collateral to the bonding company.

AIPBA Question Number 5. Is FMCSA aware that AIPBA has submitted an application for a categorical exemption for all brokers and forwarders to the Secretary under his exemption authority? If so, is that matter being delegated to FMCSA for publication of the exemption.

Yes. If so, when will this happen?

FMCSA: FMCSA is reviewing the exemption request and will respond shortly.

AIPBA Response: It is unclear whether FMCSA will act on the exemption request before Oct. 1st. It therefore appears we will have to apply to the court for an injunction.


Transportation Lawyers Association
Letter to FMCSA

Go here to read this timely letter asking for clarification and more:
Click here now.


Note: In our 1-on-1 training over the telephone and Internet OR with the live training here in El Paso, I will help complete and submit the various applications for your broker authority. It only takes about an hour IF you know what you are doing.

John Thomas
Atex Freight Broker Training, Inc.

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