Are all carriers with multiple DOT numbers trying to cheat the system? The short answer is no.
Over the years, the Department of Transportation has been cracking down on carriers or drivers from dropping a bad DOT Number for a new clean record. These carriers are called “chameleon carriers” because they try to blend into new surroundings, hiding themselves from their past negative record.
Another frequently used term is “reincarnated carriers.” They are technically different as they are groups of companies that move assets around to prevent fees or compliance issues, whereas chameleon carriers shut down and start new companies to try and prevent fees and compliance issues.
Chameleon carriers are bad for the trucking industry because many are unsafe operators who disregard hours of service compliance, vehicle or truck maintenance, and/or customer service. There are companies who sometimes use cardboard signs to quickly swap their DOT number and company name while on the road to prevent roadside enforcement.
It has been estimated that chameleon carriers are involved in nearly three times the rate of new carrier severe crashes, which has led the DOT and other organizations to the prevention of reincarnated or chameleon carriers.
But are all carriers with multiple DOT numbers trying to cheat the system? The short answer is no.
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.”
“For instance, the fertilizer hauler may want two DOT numbers. One for when he picks up fertilizer for his farm operation and another for picking up and delivering fertilizer to other distributors. So, if he is picking it up for his own farm use as well as delivering to other distributors needing fertilizer, he would need to separate the entities because they would own a private property farm as one entity and a commercial operation as another entity. This is significant because a farm and a commercial operation wouldn’t operate the same and insurance rates would be different as well.”
When is it legal to have two or more DOT numbers?
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.
According to the DOT, “a person includes an individual, corporation, partnership, or other business organization as authorized by state law. Each separate and distinct person must have separate registration.”
For corporations, partnerships, and other business organizations, the USDOT number will remain the same when there is a change in company officials, address or other demographic information, and the corporation, partnership, or other business organization will continue operations as the same legal person/entity.
The only time a company will need multiple DOT numbers is if they operate two or more separate commercial driving entities.
In other words, the company needs to have separate entities but have familial ownership. This can happen due to a company acquisition or a large company that has multiple divisions.
“For example, there is a company who has one tractor trailer, bus transportation, and a pickup to haul empty containers from the ports,” said Adam Galante of CNS. “These are considered three completely different operations. You do not want to put these on the same insurance policy, which is why we separate them as separate entities.”
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, 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.
Are USDOT numbers transferable?
According to a recent Transport Topics article, “the rise in acquisitions ultimately is good since it gives small fleet owners a way out besides bankruptcy and puts their business in a position to scale up with another company.” This trend is likely to continue given the rise in insurance costs.
However, understanding what happens to DOT numbers during an acquisition or merger is important.
To answer the question, no, USDOT numbers are not transferable but operating authorities, or MC numbers, are transferable. This is because USDOT numbers are a unique identifier to track the safety history of a specific carrier. Transferring a USDOT number would have the effect of transferring the entire safety history of one entity to another separate entity.
This means that if a merger or acquisition creates a new legal entity, a new USDOT number will be required as well.
Questions about multiple DOT numbers can come up here because there is safety history and experience associated to the DOT number, which lowers insurance rates. When the companies merge and get a new DOT number, this is going to increase insurance rates because there is naturally higher insurance for a new entrant who has no safety history associated to the DOT number.
In some cases, you may be able to transfer the drivers’ qualification files (DQ files) from the merged or acquired entity to the gaining or new entity.
If drivers do not need to apply for a role at the new company, the DQ files from the previous DOT number can be accepted. However, a note should be put into the DQ file specifying the date of the acquisition or merger to indicate why the DQ files have a different motor carrier identified.
It is also important to note that the transferred DQ files should be audited by a trained DOT compliance expert to make sure the transferred files meet the DOT requirements, as this new entity is also required to have a new entrant audit in the next 6-18 months of operation.