Validating Freight Carrier is Operating Legally: How-to & Why Important
Why Validating Your Freight Carrier's Operating Authority and Saftey Rating is Important
Hiring a motor carrier to operate for a shipper or freight broker is more than an exercise of sorting a spreadsheet to determine the lowest price freight service provider.
The topics of cargo insurance, general business insurance, safety rating and a valid MC number from the FMCSA (Federal Motor Carrier Safety Administration) should all be part of a rigorous vetting process to onboard a carrier before giving an asset motor carrier the first piece of freight.
The importance of vetting the motor carriers in a company’s logistics operations cannot be understated.
Mountains of case law precedent places the full liability of road accidents where a person(s) are killed or paralyzed on the company that chose the carrier to move their freight because they are the company hiring them to move freight over-the-road. The thought is if the shipper did not hire the motor carrier to move the load, the carrier would not be on the road.
When opting to use a freight broker or other non-asset logistics service provider (LSP), it is important they too have the proper insurance and an active authorized MC number. As part of selecting a non-asset logistics provider one should also vett they validate their carrier pool.
The vetting of the motor carriers used within a company’s logistics team is not a one time activity. The best freight brokers and LSP’s validate the legality of their carrier base a minimum of once a day, with some validating their carriers every hour through an outside service.
The entire process can be exhausting in the truckload market because its highly fragmented nature. According to the US Department of Transportation, there are over 700,000 registered motor carriers, with 91.0% operating 6 or fewer trucks and 97.3% operating fewer than 20 trucks.
How to Validate Freight Provider Has a Valid Operating Authority & Operating Safely
To validate whether freight carrier has a valid operating authority can be done by logging into the Federal Motor Carrier Safety Administration (FMCSA) site and inputting their MC number.
This website will validate whether the carrier is operating legally and give a full history of any changes that have occurred since its MC number was authorized.
Items to review with a carriers MC number:
- Is the MC number valid?
- How long has the carrier been in operation?
- Has the carrier’s operating authority been revoked at any time in its history and for what reason?
The next step in vetting the carrier after reviewing the MC number has been validated is to check on the safety rating of the carrier, which can be accomplished via Safety and Fitness Electronic Records (SAFER) System website.
Shippers can validate the safety records of the carriers they employ to run their freight. Keep in mind a clean safety record may indicate an issue, so do the homework. For example, if a carrier has been in business for a while and there are no inspections it may indicating they are fronting the business as an asset motor carrier, but then broker all the loads out.
A possible red flag when reviewing the safety records is when a carrier has a high out of service rate. This could indicate they are getting stopped at every scale for further scrutiny by the Department of Transportation (DOT) because of past transgressions.
After the FMCSA records have been reviewed, make sure to receive the certificate of insurance (COI) for their general insurance coverage. Validate insurance policy dates, coverages and deductibles.
Again, the freight provider vetting process needs to be assembled in a way that it is a normal part of business operations and repeated on a regular interval to ensure the carriers one is employing continues to maintain the high levels of scrutiny that got them in the door the first time around.
In some cases, the best approach some companies have chosen is to hire a freight broker or logistics service provider (LSP) for all freight freight moves to ensure the carrier pool is constantly under review through industry best practices to protect its customer base. In some cases this is through a managed transportation service solution or using the non-asset providers as they would use an asset motor carrier.
For more articles of interest:
- Differences Between LSPs and Motor Carriers
- Top 20 Freight Brokerage Companies in 2019 (& How to Choose The Best)
- 2019 Best Truckload Companies (And How to Choose)
- 2019 Best LTL Companies (And How to Choose)