No. 35129 (SUB-NO. 5)

ADOPTION OF A UNIFORM ANNUAL FINANCIAL REPORT FOR CLASS III COMMON AND CONTRACT MOTOR CARRIERS OF PROPERTY SUITABLE TO THE INTERSTATE COMMERCE COMMISSION AND STATE REGULATORY COMMISSIONS

Decided January 5, 1976

Upon investigation and consideration of views, arguments and representations of parties, an Annual Financial Report for Class III Common and Contract Motor Carriers of Property, (49 CFR 1249), is adopted to be effective for the year ending December 31, 1976.

Carl E. McDowell for Inland Marine Underwriters Association.
Richard J. Morrison for Commercial Warehouse Company.
L. K. Buchanan for Buchanan Auto Freight.

L. P. Sauers for A. J. Goodale Ltd.

William D. Talbott for the Florida Public Service Commission. Fay Ginther for Hamilton's Transports, Inc.

Thomas R. Kingsley for Movers Round Table.

Leland B. Curtis for the Public Service Commission of the State of Missouri.

Warren Wells for Wells Express Inc.

H. L. Chase for Chase The Mover.

M. R. Wooten for North Carolina Utilities Commission.

REPORT OF THE COMMISSION

BY THE COMMISSION:

By notice of proposed rulemaking dated May 27, 1975, served June 11, 1975, and published in the Federal Register on June 16, 1975 (40 F.R. 25493), we announced that we had under consideration the adoption of an Annual Financial Report for Class III Common and Contract Motor Carriers of Property that could serve the needs of this Commission and the various States where such carriers file reports. All interested parties were given the opportunity to submit their views and comments in writing by July 18, 1975.

BACKGROUND

A survey conducted by our Bureau of Accounts revealed that similar disclosures were required by State regulatory commissions and this Commission in the annual reports of class III motor carriers of property. As a result, we proposed adoption of an annual report to serve the needs of State regulatory commissions and the Commission.

The disclosures required in the annual report are based on the needs of the majority of State regulatory commissions and this Commission. This report provides State regulatory commissions the option of developing and inserting appendixes to obtain detailed or specialized information. This report also relieves the reporting burden on smaller carriers by exempting carriers with operating revenues of $100,000 or less from completing the balance sheet, income statement and other detailed disclosures. A $50,000 revenue exemption guideline was previously used.

REPRESENTATIONS

The notice of proposed rulemaking provided that any person desiring to participate could do so by filing, within a prescribed time, written statements of facts, views or arguments. Comments were received from 11 participants and are summarized below: Inland Marine Underwriters Association (IMUA) opposed the provision which exempted carriers with operating revenues of $100,000 or less from completing certain sections of the annual report. Insurers are required by this Commission to enclose certain endorsements and certificates to their cargo policies of insurance. Filing these documents makes the insurer a financial guarantor of a carrier's ability to pay losses not covered by the policy.

IMUA contends the increased exemption will be detrimental to insurers because they will lose their source of financial information for class III carriers. IMUA indicated insurers may hesitate to issue cargo policies or file the required endorsements and certificates without this information.

Hamilton's Transport, Inc., A. J. Goodale Limited, Wells Express, Inc. and Chase The Mover opposed the detailed disclosure requirements in the proposed report. They contend small businesses are burdened with filing reports and forms for Federal, State and city agencies. Most small businesses are forced to rely on the accounting or legal profession to meet these requirements and incur

considerable costs in the process. The respondents believe small businesses should not be burdened with additional costs under these trying economic conditions.

Buchanan Auto Freight requested the development of a uniform system of accounts to facilitate the preparation of the annual report. This would simplify bookkeeping and report preparation and insure consistency in reporting.

Missouri Public Service Commission and the North Carolina Utilities Commission contend the proposed report is significantly different from their State annual reports and does not provide the information needed to fulfill their regulatory needs. Therefore, they cannot adopt the proposed report.

The Florida Public Service Commission unequivocally supports the adoption of the proposed report.

Movers Round Table and Commercial Warehouse Company oppose the adoption of the proposed report. They contend the economies in printing costs are far outweighed by the burden of detailed disclosure. They believe the additional disclosures are not necessary for Commission regulatory purposes since they were not previously required. They further contend the Commission is requiring excessive and burdensome reporting to accommodate State taxing authorities, and that reporting requirements of this nature are unlawful under part II, section 202(b)(2) of the Interstate Commerce Act.

DISCUSSION AND CONCLUSIONS

The following discussion is arranged according to subject matters raised by the parties.

Increase in revenue exemption guideline.-The annual report proposed in the notice of proposed rulemaking provided relief from detailed financial disclosure for carriers with operating revenues of $100,000 or less. The exemption guideline applied to carriers with annual operating revenues of $50,000 or less in prior annual reports. We studied present and projected rates of inflation and concluded that the $50,000 exemption guideline was totally obsolete. To ease the reporting burden on the same class III carriers as originally intended, an increase in the exemption guideline was needed. The $50,000 guideline was originally established in 1957.

Using the Current Business Survey GNP price deflator published by the U.S. Department of Commerce, we calculated a revised

revenue exemption guideline of $100,000 or less. We concluded the revised guideline would not result in the loss of any data essential to our decisionmaking.

IMUA opposed the increase in the revenue exemption guideline for reasons previously mentioned. The interests of the insurers should not be detrimentally affected by the revised guideline nor should modification to the financial reporting regulations directly affect the insurability of carriers.

Maintaining a $50,000 guideline would defeat the objectives of establishing such a guideline. The smallest class III carriers would be subject to reporting burdens and insignificant data would be accumulated.

We recognize the information needs of insurers, however, their needs are far outweighed by the added paperwork burden that would be placed upon smaller carriers if the $100,000 exemption guideline was not adopted. Insurers needing financial information to verify the financial strength of certain exempt carriers should request information directly from carriers.

Conflict with State annual reports.-The Missouri and North Carolina State Regulatory Commissions contend the proposed report will not fulfill their regulatory needs. Both States require significant detail in the areas of intrastate revenues, operating statistics, State taxes and employee data. These disclosures are not relative to our information needs. We encourage these States to reconsider using the proposed report and insert appendixes to satisfy specific information requirements. The benefits to be derived from the adoption of a uniform annual report are dependent on State participation.

The proposed report incorporates the basic disclosures of all State class III annual reports. Detailed disclosures cannot be provided for without creating an unnecessary reporting burden. Annual report instructions, filing requirements and detailed disclosures vary significantly between States; therefore, the States have the option of developing and inserting appendixes to satisfy their specific information needs.

Uniform system of accounts. We are aware of the benefits derived from prescribing a uniform system of accounts. A uniform system of accounts is prescribed for all carriers under our jurisdiction except where compliance with prescribed accounting rules will be burdensome or create an undue hardship.

The personnel and financial structure of class III carriers does not warrant a sophisticated accounting system. Complying with a