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Operating Authority
The Federal Highway Administration (FHA) and its agencies is the regulatory authority for the trucking industry. A motor carrier must obtain an interstate operating authority from FHA before the carrier can engage in interstate trucking.
The truly independent trucker prefers to have his/her own operating authority; however, the start-up Owner-Operator may choose to use another carrier’s authority by leasing on to that carrier.
You find more information in our book “The Successful Truck Owner Operator”
If you are a relatively inexperienced Owner-Operator, leasing on will allow you to get you hands-on industry experience and a regular paycheck while the carrier handles the details of providing the operating permits, loads, a trailer, fuel cards, etc.
Carrier leases are governed by federal laws. You can locate the applicable statutes in Title 49 of the United States Code, 49 CFR Part 376, Lease and Interchange of Vehicles. Online search for “49CR376” at www.access. gpo.gov/nara/cfr.index.html. And recently a U.S. appeals court has ruled that Owner-Operators have the right to sue carriers that do not comply with federal leasing regulations.
Many trucking companies now offer lease programs for owner operators as well as lease-purchase programs. Most programs sound very good, but please be aware of unscrupulous carriers. They can cost you thousands of dollars and put you out of business.
If you consider leasing on, obtain copies of leases from several carriers that interest you and study them carefully. If a carrier does not want to provide you with a copy for your review, pass on it. Truth-in-leasing laws entitle you to a copy of the lease before you sign it. Make sure you understand the implications before you sign a lease, and never pick up a load before you read the lease.
Provisions a lease should contain and specify
It must clearly detail the responsibility of the carrier and the owner-operator with respect to cost such as fuel, fuel taxes, deadheading, tolls and permits, base plates and licenses, and what happens to any unused portions of these items. It must clearly specify who is responsible for loading and unloading, and who pays for lumping. The carrier must pay you for loads within 15 days of submission of the paperwork.
If you get paid on a percentage basis, you are entitled to a copy of a rated freight bill before or when you get paid for the load. Only items specified in the lease can be deducted from the settlement. The lease must state the amount of the escrow fund and to which items it may be applied. The carrier must provide an accounting of the escrow fund, either on the settlement form or once a month on a separate form.
The lease must give the owner-operator the right to ask for an account of the fund on demand. And while the carrier controls the fund, it must pay interest. All deductions from the escrow fund must be specified in the lease, and a final account of the fund must be provided and the balance be paid no later than 45 days from the owner-operator’s last day with the carrier.
Terminate your lease in writing and within any specified termination period. The carrier and you must sign an original and two copies of the lease. The carrier keeps the original and you must keep one copy in your truck. File the other copy with your business documents. Never sign a lease under pressure and in haste. Question everything you do not understand, because once your signature is on that document, it is a legally binding contract.
Avoid leases for specific periods of time such as three months or a year. Instead, opt for a month-to-month lease so you can give notice and terminate your lease within a reasonable time should things not work out. Always pay for your own base plate and fuel tax, because many carriers charge a flat rate and fail to give an accounting and refund of overpayments. Avoid unknown carriers and check an incorporated carrier’s status with the Corporation Commission. If the information on file with Corporation Commission is scant, avoid the carrier. Ask for references and talk to other Owner-Operators that are leased on to the company with which you are negotiating. If you get negative feedback, reconsider your choice.
The once complicated process of obtaining your own interstate operating authority has been simplified and you can even apply online.
Why should you get your own authority? The answer is simple: it will give you more independence to make decisions how to run your operation. You can find your own loads and negotiate the freight rates, or you can work with reputable brokers to find loads for you.
You will need to follow these steps to get your authority:
Application: Obtain an application for Motor Property Carrier & Broker Authority from the Federal Motor Carrier Safety Administration (FMCSA), either by mail or online at http://diy.dot.gov. The website also includes information about filing requirements. Liability Insurance: Obtain liability insurance. Federal regulations require all for-hire carriers to have liability insurance. The minimum coverage is $750,000, if you do not haul hazardous materials. Hazmat carriers must have $1 million to $5 million minimum coverage, depending on what they haul. In addition, common carriers need a minimum of $5,000 in cargo insurance. Your insurance company or agent must send the needed forms to FMCSA. They must be submitted within 90 days of application. Legal Process Agent: You need a legal process agent for each state in which you operate. If there are legal proceedings against you, the legal process agent is the person who will officially receive any papers served. Your insurance company may provide this service to you. If not, companies that offer compliance services are also legal process agents. Obtain DOT Number: Submitting a Motor Carrier Identification Report (Form MCS-150) and obtain a DOT number from FMCSA.
You must do this before you begin operations, and your DOT number along with your company name must appear on your vehicle(s). Obtain Single State Registration System (SSRS) You must register your authority and proof of insurance in every =state you operate, but Kentucky, New Mexico, New York and Oregon require additional road and mileage tax credentials. Obtain IRP License to register your truck in each state that you operate. Obtain IFTA License from your base state. (Please see Registration section for details about SSR, IRP and IFTA.)
