It is essential to note the date of the acquisition or merger in driver files to explain the change in the motor carrier identified. However, it is crucial to be cautious as any deficiencies in the existing files will also be transferred.
In this article, we will cover:
- How to handle USDOT numbers during mergers,
- New legal entity means new safety history,
- How timing and compliance are critical, and
- Discuss transferring driver qualification files
With a tough freight market, small and medium fleets that are looking to grow and diversify their company often look to mergers and acquisitions.
However, motor carrier owners might not realize the time, energy, and processes involved in the merger and acquisition process.
The first place to start is having a clear objective for what you want the acquisition to achieve.
While obvious, this step is often overlooked.
For example, if you’re a dry-van carrier, it might be worth considering acquiring a flatbed or reefer carrier to fulfill a customer’s shipping needs with various options.
But, with any merger or acquisition of fleet assets, there are many critical DOT licensing and compliance to consider.
Let’s take a look at the most common fleet licensing items to consider.
Transferring USDOT numbers?
When it comes to mergers and acquisitions in the transportation industry, one of the critical aspects that DOT licensing and compliance experts focus on is the USDOT number.
Simply, understanding what happens to DOT numbers during an acquisition or merger is important.
According to the Federal Motor Carrier Safety Administration (FMCSA), USDOT numbers are not transferable but operating authorities, or MC numbers, are transferable.
The FMCSA’s policy is to assign a unique USDOT identification number to each person required to identify themself with FMCSA and remain assigned to that person forever under 49 U.S.C. 13902, 31134 and 49 C.F.R. 390.19T or 390.200T.
This means that a USDOT number, which serves as a unique identifier for tracking the safety history of a specific carrier, cannot be passed from one entity to another.
Transferring a USDOT number would erroneously transfer the entire safety history from one entity to another, leading to potential compliance and safety tracking issues.
The only time a company will need multiple DOT numbers is if they operate two or more separate commercial driving entities.
According to Adam Galante, a DOT compliance expert at Compliance Navigation Specialists, “What drives people to have multiple DOT numbers are the insurance rates, which are determined by their hauling classification. We see it a lot with farmers who do follow regulations, but haul different items and fall under multiple classifications.”
“A fertilizer hauler contacted us to get another DOT number and instantly we are trained to think they are a chameleon carrier, but that is not the case. He can have different entities, but he has to keep the equipment separate. It’s when you start sharing equipment that things can get ugly, unless there is a proper lease agreement to share it.”
Many others choose the route of having a single DOT number parent company where the parent company has the DOT number, appropriate insurance, and all subsidiaries are listed as per insurance regulations. They have corporate leases between the parent company and subsidiaries that cover the ownership of the equipment, addressing company vehicles only and not owner-operators.
Everything they have runs under the parent company regardless of which entity the equipment is registered to.
Whether you choose to get one or two DOT numbers, you do need to follow proper procedures so that you can operate your vehicle legally.
New legal entity, new USDOT number, new safety history
If a merger or acquisition results in the creation of a new legal entity, a new USDOT number will be required for the new entity.
Getting a new DOT number is going to increase insurance rates because there is naturally higher insurance for a new entrant who has no safety history associated with the DOT number.
This new entity will also have to go through the new entrant compliance process, ensuring that it meets all the necessary safety and operational standards from the start, within the first six to twelve months of operation.
The key to compliance with any audit is documentation, which is also required for a successful merger or acquisition of a company.
Well-maintained documentation and financials include thorough bookkeeping, legal documents, asset titles, driver qualification files, stock certificates, or customer contracts.
Navigating regulatory requirements is essential for a smooth transition and having this information readily available can reduce the burdens of both the acquisition and audit process.
Timing and compliance are critical
Okay, so a merger happens and you now need a USDOT number before you can operate your fleet legally.
The issue here is that there are no grace periods for compliance when it comes to operating with a USDOT number.
Carriers are prohibited from operating without an active USDOT number, and obtaining one can be a time-consuming process, especially if for-hire authority is required. The necessary filings, proof of insurance, and process agent designations must be in place, which can add to the time required to become compliant.
Here are some key steps in transitioning your fleet legally:
- Repainting Vehicles: Vehicles need to be repainted to reflect the new carrier’s name and USDOT number.
- Transferring Registrations: This includes obtaining state-specific registrations, permits, state specific huts and authorities, and updating insurance.
- Ensuring Driver Qualification: All drivers must be qualified under the new entity’s USDOT number.
- Creating ELD Accounts: Electronic Logging Device (ELD) accounts need to be set up for the new entity.
To manage these transitions smoothly, it might be beneficial to spread the process over a period of weeks or months. This phased approach allows for flexibility and minimizes disruptions.
However, this is not always possible.
When a change or go live date is set, they should begin the preparation of the transitions, create new accounts, begin to prepare the title transfers, source the preparation of as many credentials. A single hard go live date can and will be challenging because each agency and entity has difference processing timelines and not all provide a temporary.
Enlisting the help of highly trained DOT authority professionals can expedite the process.
Transferring driver qualification files
In some cases, driver qualification files from the merged or acquired entity can be transferred to the new entity, provided there is no break in the drivers’ employment.
This means drivers do not need to reapply for their roles at the new company, and their qualification files can be carried over.
It is essential to note the date of the acquisition or merger in the files to explain the change in the motor carrier identified.
However, it is crucial to be cautious as any deficiencies in the existing files will also be transferred.
That is why auditing the transferred files by a trained compliance specialist is highly recommended.
Handle your licenses, permits, ELD, and driver files all at once
The PSM Safety Director Program is perfect for company mergers and acquisitions.
CNS DOT experts handle everything from ensuring new drivers are being hired correctly to helping train those drivers to be safe and accountable on the road.
We assist in creating policies to protect your company and your drivers from potential risk exposures as well as manage your:
- Electronic Logging Device Management
- Driver Qualification File (DQF) Management
- Driver Training (4 per year)
- New Driver On-boarding
- CSA Score Management
- IFTA Taxes
- DOT Drug and Alcohol Consortium
- Full Licensing and Credential Services
- Vehicle Maintenance Program
- Initial Risk Analysis
- DOT Audit Support
- Policies and Handbooks
Managing everything on your own is overwhelming and missing any little detail can lead to audits, fines and other negative consequences.
Having a team of specialists working for your company that has your best interest in mind at all times can be a huge asset when it comes to ensuring long term success as a carrier.
If you have any questions, call (717)627.4334 or email at info@cnslicensing.com.
