Navigating Compliance in the Modern Supply Chain

Part 1: Safety rating rules and regulations

As in every industry, safety is paramount to the effective functioning of LTL shipping. But while this safety mandate may be common sense, staying compliant with Federal Motor Carrier Safety Administration (FMCSA) standards is a complicated undertaking for any carrier looking to keep their trucks on the road.

SMC³ recently hosted a webinar with Rob Moseley and Fred Marcinak, partners at Moseley Marcinak Law Group and experts on the ins and outs of transportation laws and regulations. This article provides an overview of the topics they covered, namely: the FMCSA safety rating system and tips for navigating a conditional or unsatisfactory safety rating.

Establishing a safety rating

The FMCSA assesses performance across six safety factors to assign a company’s safety rating:

• Driver – issues related to license validity and medical fitness to drive a commercial motor vehicle
• Operational – issues related to operational safety, such as responsible driving practices (abiding by speed limits, using seatbelts, etc.)
• Vehicle – issues related to proper vehicle maintenance (brakes, lights, making repairs in a timely manner, etc.)
• HazMat – issues related to the proper handling of hazardous materials (no leaking containers, appropriate signage, etc.)
• Accidents – measured in accidents per million miles
• General – miscellaneous issues that impact safety, such as proper logbooks, etc.

In order to receive an official rating, companies must be evaluated on all six of these criteria. Incomplete evaluations will result in “unrated” status. When evaluating companies on these six criteria, the FMCSA uses a point system designed to filter violations into different categories and provide one of three overall safety ratings:

• Satisfactory – The company successfully meets all minimum safety requirements.
• Conditional – The company does not meet FMCSA safety standards. This probationary rating means that a corrective action plan must be put in place before returning to a satisfactory rating (more on that in the next section).
• Unsatisfactory – The company does not meet FMCSA safety standards. This rating has the potential to completely halt company operations.

Violations generally fall into two categories. Acute violations are especially serious; just one acute violation can bump a company from satisfactory to conditional status. Common examples of acute violations include utilizing a driver with a suspended or revoked license, failing to test drivers for drugs and alcohol, or allowing a driver with multiple licenses to drive a CMV. Critical violations, though less serious than acute violations, still carry the potential to knock a company’s safety rating down a peg. Critical violations assess patterns of unsafe behavior, such as failing to properly record hours of service and failing to properly file inquiries into driver behavior.

Establishing and maintaining a strong FMSCA safety rating is critically important to LTL motor carriers. Poor ratings have a negative effect on insurance rates and make finding reliable drivers more difficult. Even worse, a conditional or unsatisfactory rating damages a company’s brand, which can have wide-ranging consequences, including the loss of business.

Appealing scores

More than half of companies that undergo the FMCSA rating process come out with a rating of conditional or unsatisfactory. In these cases, carriers have 60 days before this information becomes public to their customers. To improve these scores, the companies can appeal their rating in several ways.

OPTION #1: Petition for administrative review

This process functions as a simple appeal wherein a carrier seeks to prove that the agency simply made a mistake in evaluating its safety practices. These petitions are due within 90 days of the proposed or final rating. However, if a carrier files their petition within 15 days of receiving their ranking, the FMCSA will guarantee a decision on the appeal before the lowered rating becomes effective, and carriers can move to stay a rating while the appeal is pending.

OPTION #2: Request for upgrade

This option is based on corrective action. If a carrier fixes the problems that earned them a conditional or unsatisfactory rating, they can submit proof of improved safety practices to prompt a reevaluation of the rating. Depending on the violation(s) involved, this proof might include a demonstrated period of safe driving practices, hiring a safety consultant, improved audit processes, investing in new technology (like cameras inside trucks or speed-tracking mechanisms), etc.

OPTION #3: Informal negotiations

Generally used in combination with other methods, this option involves communicating with the FMCSA (either directly or through a legal intermediary) to figure out a) what the real root of the safety problems is, and b) what corrective actions are necessary to reinstate a satisfactory rating.

OPTION #4: Consent order

Within a consent order, a carrier acknowledges safety shortcomings and works with the FMCSA to create a probationary structure for addressing them. Generally, this involves establishing specific benchmarks to accomplish over the course of 1 or 2 years before a satisfactory rating can be reestablished.

Civil penalties

In the event of acute or critical violations, the FMCSA may also impose civil penalties in the form of fines. These penalties can be significant (>$20,000) and are therefore worth avoiding. Often, these fines simply result in a carrier having to pay the full amount, but there are a few options that carriers should explore within the 30-day deadline. They can contest and request the administrative adjudication of the penalty or request binding arbitration. In some cases, a negotiated settlement or payment plan is advisable. Carriers should consult their legal counsel for more detail in the event of incurring a civil penalty.

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