New Highway Bill Ends the Practice of Motor Carriers Subcontracting Shipments to Other Motor Carriers

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A common practice among motor carriers for decades is about to end according to the recent Highway Bill passed by Congress and signed into law by President Obama in July of this year - motor carriers can no longer subcontract shipments to other motor carriers. Below is an in-depth interpretation of the new bill by the San Mateo based law firm - Chauvel & Descalso, LLP.

Attorneys at Chauvel & Descalso, LLP

Attorneys at Chauvel & Descalso, LLP

Many motor carriers have created separate entities to provide broker service due to the liability distinctions between brokers and carriers.

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A common practice among motor carriers for decades is about to end according to the recent Highway Bill passed by Congress and signed into law by President Obama in July of this year - motor carriers can no longer subcontract shipments to other motor carriers.

Section 32916 of S. 1813 (the recently enacted Highway Bill – 112 Public Law 141) changes present law to provide that motor carriers “may only provide transportation of property with self-propelled motor vehicles owned or leased by the motor carrier…” A limited scope of interchange exception exists.

Thus, motor carriers will have to obtain freight forwarder or broker authority in order to subcontract loads or arrange for transportation of shipments by others.

In addition, the criteria for obtaining motor carrier, broker or freight forwarder authority has also become more stringent under different provisions of the Highway Bill, Section 32917 of S. 1813.

Lastly, Section 32919 increases the surety bond requirement for brokers seven times, from $10,000 to $75,000. Many smaller brokers are likely to be eliminated as a result.

Therefore, for those motor carriers that have in the past subcontracted out large numbers of shipments, they will have to obtain the broker authority to properly comply with the new law which goes into effect next July 2013.

“Many motor carriers have created separate entities to provide broker service due to the liability distinctions between brokers and carriers” said Ronald Chauvel, a renowned transportation attorney in California. He also advised trucking companies, freight forwarders and brokers to consult their legal representatives further on this matter before continuing their common practices.

As an aside, there is some chance that a Technical Corrections bill may be passed to amend, at least in part, the subcontracting prohibitions set forth above. We are watching for any amendments to the Highway Bill which would impact the provisions summarized above.

For additional information on the latest legal news and in-depth interpretation by experienced attorneys, please visit Chauvel News or contact the law offices of Chauvel & Descalso, LLP
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About Chauvel & Descalso, LLP
Chauvel & Descalso, LLP is a San Mateo, CA based law firm that has been providing legal services for more than 23 years and specialize in the fields of business and real estate transactions, civil litigation, estate planning/probate, transportation law, and intellectual property. Current managing partners are Ronald Chauvel, and Michael Descalso.

Contact:
Chauvel & Descalso, LLP
155 Bovet Road
Suite 780
San Mateo, CA 94402
Tel: (650) 573-9500
Fax: (650) 573-9689
Email:contactus(at)chauvellaw(dot)com

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Elle Zhang
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