Transportation businesses, whether carriers, brokers, or freight forwarders, have a unique and complex set of federal regulations they must abide by to stay in compliance. While many of these regulations and their accompanying filings reflect similar requirements for non-transportation businesses, they exist completely separately and are overseen by a separate department of the US government.
In addition to handling entity management and corporate filings for non-transportation businesses in all 50 states, Legalinc is uniquely capable of being a filing and entity management partner for transportation businesses.
In this blog, we’re going to discuss the four most important transportation filings we handle, why they exist, how they compare to non-transportation business filings, and the consequences of ignoring these critical federal regulations.
Simply put, all companies operating commercial vehicles in interstate commerce, whether hauling passengers or cargo, must have a USDOT Number. It doesn’t matter if the commercial vehicle is being used to haul a company’s own goods or acting as a for-hire carrier; a USDOT Number is still required.
Similar to not establishing your business as a legal entity with the state, choosing to forgo a USDOT Number can result in large fines, even for a first violation. Not complying with these guidelines can also be used against a party during a lawsuit.
The purpose of the USDOT Number, in the words of the Federal Motor Carrier Safety Administration, is to serve as a “unique identifier when collecting and monitoring a company’s safety information acquired during audits, compliance reviews, crash investigations, and inspections.”
While we mentioned earlier that USDOT Numbers are designed for interstate carriers, there are certain situations in which an intrastate carrier may be required to obtain a USDOT Number. Specifically, carriers hauling certain hazardous materials in intrastate commerce, as outlined by 49 CFR 385.403, are required to secure their USDOT Number.
These regulations apply to all companies using commercial vehicles interstate, but the majority of states, regardless of cargo, require intrastate commercial motor vehicles to register with a USDOT Number. The shortlist of states that do not require this intrastate registration are: Arkansas, Delaware, Hawaii, Illinois, Louisiana, Mississippi, New Jersey, New Hampshire, New Mexico, North Dakota, South Dakota, Tennessee, Vermont, and Virginia.
For-hire transportation companies must also obtain an Operating Authority Number to transport goods or passengers within state limits, as well as from state to state. Additionally, Operating Authority Numbers are required for all carriers transporting or arranging for the transport of passengers or federally-regulated commodities in intrastate commerce, regardless of whether the company in question is for hire.
The three key types of Operating Authority Numbers are MC, MX, and FF numbers, and it’s possible that one company will require multiple designations. Some companies will require more unique MC numbers, such as HHG if you are transporting general freight. In that case, you would need two MC numbers. The definitions of each core designation are listed below:
That previous point is critical to understand. Many transportation businesses make the mistake of only obtaining an MC Number when they also need an FF or MX Number.
Depending on the operations your business is running and the cargo you are carrying, there is a strong possibility that you will need multiple Operating Authority Numbers. In fact, some carriers require all three types.
For example, a company providing interstate transportation services and freight forwarding with some vehicles domiciled in Mexico would require MC, FF, and MX Numbers to operate within current regulations.
The purpose of an Operating Authority Number is a bit different from a USDOT Number. The goal of Operating Authority regulations is to ensure that for-hire carriers have enough financial coverage to compensate for liability arising from personal injury, property damage, property broker defaults, or cargo damage. As such, they help dictate the level of insurance and financial responsibility a company must maintain. Choosing to forgo an Operating Authority Number could result in heavy fines and the carrier being labeled “Out of Service” by the federal government.
A BOC-3 filing is the transportation industry equivalent of Registered Agent filing. BOC-3, which stands for Blanket of Coverage, is a form required by the federal government that shows proof that a transportation company has identified a legal agent to whom Service of Process documents may be served.
Just as a business must have a Registered Agent in any US territory where they conduct commerce, a transportation carrier must have a BOC-3 Process Agent in any state they pass through for business purposes, as well as the District of Columbia. Failure to designate a Process Agent in a state where a carrier travels could result in serious fines and falling out of compliance with the state itself.
Whether a motor carrier, broker, or freight forwarder, all transportation businesses must have a BOC-3 in states where they operate vehicles. An important note: a PO box is not acceptable as a Process Agent’s address. At Legalinc, we provide automated BOC-3 filing services and also act as a Process Agent in all 50 states and Washington D.C.
UCR regulations correspond directly to the UCR Agreement, which is housed inside a piece of 2005 federal legislation called The UCR Act. The UCR Act itself is found within the larger federal highway reauthorization bill known as the Safe, Flexible, Efficient Transportation Equity Act. The goal of this robust federal law is to better fund surface transportation across the United States, including highways, railways, and much more. The UCR Agreement is designed to fund state highway motor carrier registration and safety programs specifically.
So, how does this impact carriers? Following the implementation of these regulations, carriers had the new obligation of paying fees based on fleet size to supplement funding for the federal government’s transportation endeavors. There are six total fee brackets based on fleet size, ranging from 0-2 vehicles up to 1,001+. As of 2019, Bracket 1 carriers are required to pay $62 annually, while Bracket 6 carriers are required to pay $59,689 annually.
While the overwhelming majority of states have opted into The UCR Agreement, there are nine holdout states. These are: Arizona, Florida, Hawaii, Maryland, Nevada, New Jersey, Oregon, Vermont, and Wyoming. It’s important to note, however, that carriers in non-participating states are still required to register with a neighboring state that is participating in the agreement. Click here to learn more about The UCR Act.
While this overview is far from comprehensive and shouldn’t be used as a substitute for corporate legal counsel, we do hope it clarified these key regulations and illuminated the complexity of staying compliant in the transportation industry. If you’re ready to submit the required filings for your transportation business, click here to get started.
On the other hand, if you’re in need of consultation before digitally managing the compliance side of your transportation business, we have US DOT regulation specialists standing by ready to help. They can be reached through our contact form or by calling (833)-605-0322.