Today, I was asked if the bonding company for a freight broker could refuse to honor a claim against the bond. In this situation, the answer was yes.
The question made me believe that it is a good time to remind everyone of categories of freight shipments exempt from bond claims. While there are many exemptions, there are two basic exemptions most carriers will deal with on a recurring basis.
Intrastate – Intrastate shipments do not come under the authority of the DOT/FMCSA and are therefore not subject to the freight broker bond requirements. Intrastate shipments are those which are not defined as interstate. Interstate shipments are defined as:
- between a place in a State and a place outside of such State (including a place outside of the United States),
- between two places in a State through another State or a place outside of the United States, or
- between two places in a State as part of trade, traffic, or transportation originating or terminating outside the State or the United States.
Exempt Commodities/Cargo – There are generally two type of cargo, exempt and non-exempt. If you are hauling non-exempt cargo, then the DOT/FMCSA rules apply and the cargo is subject to freight broker bonding rules. The rules for exempt and non-exempt cargo are generally cover by 49 U.S.C. §13506(a)(6). Exempt cargo is generally agriculture in nature, but include some odd items, such as, telephone poles (not creosoted) or sawdust from lumber mills. Administrative Ruling 119 contains a partial list of exempt and non-exempt commodities. The list can be found on the FMCSA website and provides for some interesting reading for those of us who deal in transportation:
Please note – even if you are hauling non-exempt cargo, your claim may not be paid in full. Claims maybe paid on a first come basis until the bond is exhausted, or like most broker bond claims, on a pro-rata percentage of all claims filed after the broker has ceased operations.