June 4, 2020

The identity crisis of a non-rated motor carrier

Motor carrier safety ratings are a big deal, and they should be. Safety has become the industry’s top concern as compensatory payments and increased insurance premiums stemming from accidents have increased annually. With that being said, it’s understandable for a shipper to preferably contract with the highest-rated carriers.

Safety ratings, however, don’t often paint an accurate picture of the current performance of a company. Worse, obtaining a satisfactory rating has become an almost impossible feat, as noted by John Seidl, vice president or risk services at Reliance Partners. The current rating system has limited many upstanding carriers to a non-rated distinction, leaving it up to the company to clear its own name in the hopes of landing top contracts with shippers, receivers and brokers.

“There’s a stigma in the industry that carriers with satisfactory ratings are better than those labeled non-rated,” Seidl said. “Though in some cases with the current rating structure, it is the non-rated carriers that are better.”

As Seidl explained, the Federal Motor Carrier Safety Administration (FMCSA) used to conduct full compliance reviews under SafeStat, wherein inspectors gave motor carriers a rating of unsatisfactory, conditional or satisfactory based on a thorough on-site inspection.

The process by which inspection reviews are conducted has changed though. Seidl noted that after the FMCSA introduced the Compliance, Safety, Accountability (CSA) initiative in 2010, it shifted primarily to conducting focused reviews, which inspect only a handful of factors determining compliance.

While its inspection processes have evolved, the rating system outlined in 49 CFR Part 385 hasn’t changed. Undergoing a full review remains the only way to receive a satisfactory rating. But with the introduction of focused reviews, now only carriers with a considerable number of safety violations can qualify for a full review. As a result, only poor-performing companies and those that have received a full review at any point in their history have a chance at obtaining a satisfactory rating.

“For the most part, in order to qualify for a full review you’ve got to be a severely low performing carrier,” Seidl said.

This has become problematic for above average and exceptional carriers looking to obtain satisfactory status. Even those who’ve just started a trucking company and have scored exceptionally well on their focus review will only warrant a non-rating; anything less results in either a conditional or unsatisfactory rating.

Seidl said the only way to evade an unsatisfactory or conditional rating is to file a 49 CFR 385.17 Corrective Action Plan (CAP) upgrade request. However, only carriers that have completed a full review will be able to retain their satisfactory status, all other carriers are awarded the non-rated classification. Carriers must file a CAP request within a time-frame of 60 days (45 days for those hauling hazardous materials) to show they’ve corrected their violations or be subject to a FMCSA Out-of-Service Order.

“Let’s say, for example, Company A has had a history of problems, having undergone multiple full reviews back in the day, but it has since earned a satisfactory rating,” Seidl noted. “Company B has been in business for the same number of years but has never undergone any review, thus remaining non-rated.”

He continued, “Who would you rather hire? The non-rated company that has been around for 20 years and has never done anything to warrant a review, or the company that gets a visit from the Feds every year or so but has retained its satisfactory rating because it passed a full review years ago?”

The recent COVID-19 pandemic has further complicated things, as the government has almost exclusively switched from performing on-site to off-site focused reviews nationwide. Seidl noted that off-site focused reviews are short-sampled and require a less-than thorough inspection of a company’s record. Because of its inability to fully gauge performance, off-site focused reviews will not result in unsatisfactory ratings.

In addition, even if inspectors find a motor carrier to be non-compliant with acute and critical regulations during an off-site review, they won’t be able to flip it to an on-site or full review due to COVID-19 restrictions.

“During the pandemic, the FMCSA is refusing to look at carriers that are the worst of the worst because of their inability to issue adverse ratings in addition to being unable to conduct on-site inspections,” Seidl said. “Once the pandemic is over, they’ll go back to looking at the companies with the lowest performance records.”

Seidl urges shippers and brokers to shake the notion that carriers with a satisfactory rating are superior to those with the non-rated label. They should understand that many carriers deemed non-rated have a much better safety record and may be more reliable than some of their satisfactory counterparts. Oftentimes the trucking companies with this exclusive rating aren’t in as tiptop shape as one would expect.