A new Federal Motor Carrier Safety Administration rule establishes procedures for issuing out-of-service orders to “reincarnated” motor carriers in order to ensure that carriers who have a proven history of unsafe operations are not able to evade regulation by simply forming a new company or obtaining new registration.
The rule establishes procedures that will provide for an administrative review of carriers that have a history of failing to comply with statutory or regulatory requirements before an out-of-service order takes effect and establishes a process for consolidating FMCSA records of reincarnated companies with their predecessor entities.
The rule is in response to the discovery by FMCSA that a number of motor carriers were submitting new applications for registration, often under a new name, in order to continue operating after having been placed out of service for safety-related reasons, to avoid paying civil penalties or to otherwise avoid a negative compliance history, FMCSA said.
“Other motor carriers attempt to avoid enforcement or other consequences associated with a negative compliance history by creating or using an affiliated company under common operational control. They then shift customers, vehicles, drivers, and other operational activities to that affiliated company when FMCSA places one of the commonly controlled companies out of service,” it said.
Although FMCSA established a more comprehensive vetting program to deal with the problem that it said is a “significant improvement to the operating authority review process,” that program is “not a complete solution to the reincarnation problem. Accordingly, in this rule FMCSA establishes new procedures to prohibit reincarnated or affiliated carriers from successfully evading accountability for their compliance history,” FMCSA said.
The main change with the new rule is that now carriers cannot unilaterally terminate an enforcement proceeding by making full payment of the civil penalties levied without an admission of liability.
“Allowing unilateral termination of a proceeding by a respondent without an admission (of liability) would permit carriers with abundant financial resources to repeatedly violate the (FMCSA’s) regulations without facing escalating civil penalties despite a history of noncompliance with the regulations,” FMCSA reasoned.
‘‘Unless objected to in writing, payment of the full amount (of the civil penalty) … constitutes an admission by the respondent of all facts alleged in the notice of claim. Payment waives respondent’s opportunity to further contest the claim, and will result in the notice of claim becoming the final agency order,’’ FMCSA said.
And while the new rule allows FMCSA to continue to issue out-of- service orders to motor carriers, intermodal equipment providers, brokers and freight forwarders determined to be reincarnated or operating as affiliates to avoid enforcement action or a negative compliance history, it also now provides a mechanism for administrative review of such orders and establishes procedures to consolidate the compliance records of reincarnated or affiliated companies.
“These procedures more fully implement the agency’s current authority to prohibit unsafe entities from operating while, at the same time, providing due process for companies that seek to challenge a finding that they are reincarnated,” FMCSA said.
The rule is effective May 29, 2012.