FACTORING BLOG

Intra-State: Intra-Risk

At this point, we are all familiar with the Federal Motor Carrier Safety Administration (FMSCA). Their purpose is to monitor, regulate, and improve commerce transportation. As a professional in the industry, they are responsible for offering protections – generally in the form of surety bond filings. However, the keyword in that title is “Federal,” which brings us to the distinction of intrastate loads vs. interstate loads. Simply put, those protections can only be offered on work that crosses state lines.

Earlier this year, we experienced a situation where a credit-worthy brokerage began booking an influx of loads with one of our carrier clients, all of which were loads within the same state. These two companies had worked together in the past (and with other clients for as long as three years) with no issues, but once this flood of invoices started coming in, their pay trends began to falter. The A/R team had to double efforts to get payments before the 50-day mark on a historically 25-day payer. Once balances started going over 60 days, the carrier declined Scale’s advice to move work elsewhere since, on paper, the brokerage appeared healthy. It wasn’t until the brokerage’s insurance came due for renewal that a former employee gave the heads up that the brokerage had no intent on renewing. Scale immediately informed the carrier to file on their bond.

Unfortunately, since all the work was intrastate, the FMCSA denied the claim, leaving the carrier in a precarious situation, with approximately half of their company’s total balance at risk. This incident serves as a stark reminder of the potential risks involved in handling intrastate loads. It’s a cautionary tale that underscores the need for vigilance and a thorough understanding of the industry’s legal and financial implications. It also highlights the importance of exercising caution when dealing with new companies, as they may not always have the best intentions.

Now, of course, this is not to say that you should never haul an intrastate load. We have several long-standing clients who work almost exclusively within state lines. This is just a real-world example of the importance of knowing your rights and protections as a carrier. It’s a lesson in diversifying, like the euphemism for eggs in your basket. It reminds us that understanding our industry’s legal and financial implications can be the difference between success and potential loss. It’s a lesson in the old euphemism about the eggs in your basket.

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