Federal auditors have once again uncovered serious compliance gaps in a state’s handling of non domiciled Commercial Driver Licenses, placing North Carolina at the center of a growing national concern. A recent enforcement action led by Transportation Secretary Sean Duffy highlights familiar violations that federal regulators say continue to undermine highway safety and regulatory integrity across multiple states.
On January 8, Duffy formally warned North Carolina that it could lose nearly $50 million in federal transportation funding due to significant failures in how the state issues commercial driver licenses to immigrant drivers. The warning followed an August audit conducted by the Federal Motor Carrier Safety Administration, which revealed that the North Carolina Division of Motor Vehicles had issued non domiciled CDLs and learner permits in direct conflict with federal requirements.
According to the audit findings, licenses were granted with validity periods extending beyond drivers’ lawful presence in the United States, a violation that federal law strictly prohibits. Regulators also found that commercial licenses were issued to Mexican citizens who are already authorized to operate commercial vehicles in the U.S. using credentials from their home country, making the additional U.S. issued CDLs improper. In multiple cases, the state failed to verify whether foreign drivers maintained lawful U.S. residence at all, raising serious questions about oversight and accountability.
These violations are not unique to North Carolina. Similar compliance failures have been documented in audits of several other states, many of which now face the same threat of losing millions in federal highway funds. What distinguishes the North Carolina case is the scale and severity of the findings.
In a detailed 13 page letter, FMCSA Administrator Derek Barrs described what he called “the gravity of the findings”, citing a systemic breakdown in the state’s licensing controls. The audit examined 50 sample licenses and determined that 54% failed to meet federal standards, a rate that places North Carolina among the worst-performing states reviewed to date. Barrs emphasized that the DMV lacked adequate management controls, failed to implement safeguards within its licensing systems, and could not demonstrate that it had effective mechanisms to prevent or detect errors.
At the time of the audit, North Carolina had issued 924 active non domiciled CDLs and permits. Some of those credentials remained valid for months or even years beyond a driver’s legal authorization to remain in the country. The affected drivers came from a wide range of countries, including Afghanistan, Colombia, Honduras, Russia, Senegal and Nicaragua, while residence verification failures involved drivers from El Salvador, Guatemala, Haiti, India, Ukraine, Venezuela and several other nations.
Barrs made clear that the findings were specific to non domiciled CDLs and permits, noting that additional compliance issues unrelated to immigrant licensing would be addressed separately. Still, he urged the state to act quickly, stating that the notice was issued with the expectation that North Carolina would move “expeditiously” toward substantial compliance. FMCSA officials have offered technical assistance, emphasizing that federal and state agencies share a common goal of protecting public safety.
The consequences of inaction are substantial. North Carolina risks losing up to $48.75 million in federal grants during fiscal year 2027 if corrective measures are not completed in a timely manner. Duffy did not mince words, stating that failure to follow federal CDL rules is not only irresponsible but dangerous, and calling on state leaders to immediately remove improperly licensed drivers from the road while repairing the system that allowed the violations to occur.
In response, North Carolina DMV officials acknowledged receipt of the FMCSA letter and stated that the agency is committed to maintaining the integrity of its licensing process. DMV leadership noted that it has been working closely with federal partners for months, adding that similar compliance challenges are affecting many states nationwide.
North Carolina now joins a growing list of states under FMCSA enforcement scrutiny, including California, New York, Pennsylvania, Colorado, Texas, South Dakota, Washington and Minnesota. Past audits show wide variation in compliance rates, with New York previously recording a 53% failure rate, while Pennsylvania posted one of the lowest at just over 5%. Every state cited has been ordered to implement corrective actions or face steep financial penalties.
So far, California remains the only state to permanently lose federal funding, after nearly $160 million was rescinded when officials failed to meet enforcement directives. Federal regulators have made it clear that North Carolina could face the same outcome if swift and meaningful reforms are not put in place.
For the trucking industry, these enforcement actions underscore a critical message: CDL compliance is no longer a paperwork issue it is a core safety and funding priority. As audits continue nationwide, states, carriers, and drivers alike are being reminded that adherence to federal licensing standards is essential to maintaining trust, safety, and the future stability of U.S. transportation infrastructure.
