FMCSA demands New York revoke disputed non-domiciled CDL or withhold $73.5M federal funds

The Federal Motor Carrier Safety Administration (FMCSA) has initiated the process to withhold $73,502,543 in federal funds from New York State for road programs after the state, according to the regulator, failed to implement prescribed corrective measures for the issuance of 'non-domiciled' commercial driver's licenses (CDL). The decision was publicly announced by Transportation Secretary Sean Duffy; he stated that New York has 30 days to comply, or the funds will be withheld. This was reported by media outlets, including a publication by Fox News and an industry analysis by FreightWaves.

The dispute centers around compliance with federal rules for issuing CDL to drivers who are not state residents (non-domiciled). According to data cited by FreightWaves, a federal audit sample revealed a high level of non-compliance: out of 200 records checked, 107 cases, or 53%, were found to be issued in violation of requirements. The publication notes that this is not a 'new interpretation' of rules but long-standing regulations that the state, according to FMCSA, has systematically failed to comply with.

The key issue identified by auditors, as described in the materials, relates to how the state DMV system assigned license validity periods. According to the federal side, the program logic led to the issuance of regular (non-REAL ID) CDL for up to eight years even when documents proving lawful presence and/or work authorization were valid for significantly less time. FreightWaves provides examples where the validity of authorization documents was 60 days or expired in 2025, yet the license was issued until 2032; cases are also mentioned where expired supporting documents could have been the basis for issuance.

Duffy publicly described the situation as the issuance of CDL 'illegally' and linked it to insufficient oversight by the previous administration, while emphasizing that the federal level will now seek compliance through financial measures. The wording and tone of the statements are conveyed in the Fox News material, which also mentions the 30-day period for bringing the program into compliance.

New York State responded publicly. DMV spokesperson Walter McClure stated that CDL issuance is regulated at the federal level and that the state complies with federal rules, with each issuance undergoing a check of the applicant's lawful status. He called Duffy's actions a 'stunt' and rejected the claim of 'illegal' issuance of licenses. These words are quoted by Fox News. Meanwhile, in the FreightWaves account, the federal side insists that the issue is not limited to procedural remarks and requires concrete actions to 'clean up' the array of already issued documents.

According to FreightWaves, FMCSA insists that New York has not completed the set of prescribed corrective measures, including mandatory rescissions — the actual annulment/revocation of licenses that the regulator considers issued in violation. The refusal or delay in such revocations is described in the material as the trigger for moving to withhold funding.

The $73.5 million sum in question is tied to federal road allocations and, as noted in FreightWaves, is roughly equivalent to about 4% of the state's total funds across two programs — the National Highway Performance Program and the Surface Transportation Block Grant. In publications, including Fox News, the amount is often rounded to '$73 million', but the industry material provides the exact figure — $73,502,543.

A separate line of discussion is the scale of the 'non-domiciled' base itself. FreightWaves reports on 32,606 active non-domiciled CDL in the state. The publication also provides an arithmetic estimate: if the non-compliance rate from the audit sample were representative, it could involve tens of thousands of licenses with potential defects. This is an estimate, not a regulator's conclusion, but it explains why FMCSA demands not just point corrections 'at the entry', but retrospective work on already issued documents.

In addition to the financial leverage, the materials describe a more stringent enforcement scenario. FreightWaves indicates that if the dispute continues, FMCSA may initiate a 'decertification' procedure under 49 U.S.C. § 31312 and regulations 49 CFR Part 384, Subpart E (including § 384.405). In practical terms, this would mean prohibiting the state from conducting any CLP/CDL operations — not just in the non-domiciled segment, but also in the issuance, renewal, transfer, and upgrade of licenses in general. In current publications, this is marked as a possible next step, but the confirmed fact is the initiation of the fund withholding mechanism and the 30-day 'window' for the state's response.

For companies that verify driver documents through standard hiring processes and DQ files, the news focuses on another risk: the validity of the license in the state system and the 'formal' validity of the card do not eliminate questions if the federal regulator qualifies the issuance procedure as non-compliant with rules. FreightWaves directly links the situation to the carrier's obligations to allow only properly licensed drivers to operate under 49 CFR Part 391, emphasizing that claims may arise even in the absence of company knowledge about the issuance procedure defect.

The public exchange of statements at this stage boils down to two positions. The federal side, in the interpretation of FreightWaves and according to quotes in Fox News, believes that the state had ample time for adjustment, but the necessary actions — including the revocation of incorrectly issued non-domiciled CDL — have not been completed. New York's DMV, on its part, insists that lawful status checks are conducted, and the minister's claims are a politicized attack.