Thursday, March 1, 2012

Why SMS methodology is not the law and should not become the law

In order to make a substantial change in existing regulations, an administrative agency is required to go through “rulemaking”. Under the Administrative Procedure Act, this requires the issuance of a Notice of Proposed Rulemaking, giving everyone in the industry an opportunity to make comments which then must be considered by the Agency before a final rule can be issued. This Administrative Procedure Act requirement has ancillary statutes including the Regulatory Flexibility Act and the Paperwork Reduction Act in particular, which require the Agency to consider the effect of any proposed rule on private industry and small carriers in particular. In addition, the National Transportation Policy which is a transportation statute, requires the FMCSA to consider the effect of any proposed rule on efficiency, competition and small businesses. The Agency has failed to comply with these Acts.

You will recall that CSA/SMS methodology was originally entitled “Comprehensive Safety Analysis 2010” (CSA 2010). When the Agency could not get its act together and issue a rule suitable for its use by the magic date, it indicated to Congress that it intended to go “public” with the methodology, substituting it for SafeStat without actually implementing the new methodology to replace the existing requirements that the Agency certifies safety only after a full blown compliance review. When it became clear that the Agency was hijacking the program to shift the burden of certifying carriers as safe to shippers and brokers, the three associations complained and told the Agency that publication of the data would result in shippers and brokers barring carriers from use. The Agency disavowed any responsibility or concern over the consequences to carriers which would result, and took the position that shippers and brokers had some “unspecified risk”. Under the guise of “transparency and accountability,” they indicated their intent to publish the data notwithstanding our concerns.

The result was the lawsuit and their quick settlement with the language affirming their sole duty to credential carriers, pointing out that the methodology was intended for their limited purposes of prioritizing carriers for the full blown audit required by statute. We have been awaiting rulemaking ever since.

The systemic flaws in the system have become readily apparent, the system has not been approved for the Agency’s use, but unfortunately, those selling monitoring services, carriers seeking competitive advantage, and the Agency itself, have continued to convince the shipper and broker community that SMS methodology is fit for use and must be used in order to avoid vicarious liability or negligent selection suits. Growing out of the opposition of the three trade associations is ASECTT, a combination of brokers, carriers and shippers who are committed to (1) stopping the use of publication of SMS methodology to heighten shipper and broker liability and brand half of the motor carriers measured by the system as unsafe to use; (2) challenge through the rulemaking process any suggestion that the methodology accurately does or can measure carrier fitness for use; and (3) ultimately affirm that shippers and brokers can rely upon the regulators to credential safety so that no shipper or broker has to second guess the Agency or run the risk of being sued under state law causes of action when it uses a carrier it confirms is licensed, authorized and insured by the Agency.

Unfortunately, this is about as simply as I can state the problem. Correctly seen, SMS methodology with its current thresholds and the Agency’s pronouncement that if you exceed one you are the equivalent of an unsatisfactory carrier, threatens half of the authorized motor carriers and all small carriers in particular with wildly fluctuating scores. If shippers and brokers feel compelled to use the methodology, they will lose half of their existing capacity and as the Agency “raises the bar of safety” after the first half is gone, the second half will be eliminated. Many of the 600,000 small businesses will lose financing, customers, the ability to obtain insurance and will be forced into bankruptcy. Shippers and brokers will not know from one month to the next which carrier is “fit to use” as new scores are published and choice and competition will be severely compromised.


  1. This change will help to clarify who the responsible party is for the violations, either the motor carrier or the Inter-modal Equipment Provider.

  2. This change will help to clarify who the responsible party is for the violations, either the motor carrier or the Inter-modal Equipment Provider.


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