Two groups representing small-business truckers should know by early next year whether federal regulators will grant their requests for more transparency in freight transactions involving brokers.
Petitions by the Owner Operator Independent Drivers Association and the Small Business in Trucking Coalition (SBTC) seeking more oversight of broker transaction records were published in August 2020 by the Federal Motor Carrier Safety Administration, seeking comment on the two requests.
OOIDA sent a letter to FMCSA in September pointing out that it has been over two years since the group submitted its original petition. “We believe an update is warranted on where the agency stands on our outstanding petition and related comments from motor carriers,” stated OOIDA President and CEO Todd Spencer.
FMCSA “has been considering the issues raised by OOIDA’s petition for rulemaking and based on that work is targeting early 2023 to issue a decision,” the agency stated when asked to comment on the groups’ rulemaking request.
“When assessing possible broker transparency rulemaking, FMCSA’s role is to remain within the bounds of our statutory authorities and also takes into account whether and how additional rulemaking will effectively and efficiently resolve the issues identified,” FMCSA added.
Specifically, OOIDA requested that regulations on broker records (49 CFR 371.3) be amended to require brokers to provide an electronic copy of each transaction record automatically within 48 hours after the contractual service has been completed. It also requested that FMCSA prohibit brokers from including contract provisions requiring carriers to waive their rights to access their transaction records.
“OOIDA’s recommendations to enhance compliance … are not attempts to control rates or impose burdensome requirements, but would simply ensure that motor carriers have access to documents they have the right to view,” Spencer stated.
Such documents are supposed to include the amount the broker received for its service and the name of the payer, as well as the amount of any freight charge collected by the broker and the date it was paid to the carrier.
SBTC’s petition similarly asks that FMCSA prohibit brokers “from coercing or otherwise requiring parties to brokers’ transactions to waive their right to review the record of the transaction as a condition for doing business,” FMCSA stated in the petition notice.
Months after FMCSA’s comment request on OOIDA and SBTC’s petitions, the agency issued a notice and comment period for an opposing petition by the Transportation Intermediaries Association (TIA) — which represents truck brokers — asking that FMCSA repeal the current provision in the regulations that gives carriers the right to review the broker transaction record.
“TIA believes that 49 CFR 371.3(2) should be eliminated because it hinders supply chain functionality as well as a free, open, and competitive marketplace,” a TIA spokesperson told FreightWaves. “The regulation is outdated, unnecessary and will continue to be used as a tool to try to re-regulate the industry, which runs contrary to the intent of the Interstate Commerce Commission’s rules back when they were enacted in 1980.”
FMCSA confirmed it is still considering the issues raised in TIA’s petition, with a target date of early 2023 for a decision on whether to publish a rulemaking on their request as well.
OOIDA and SBTC filed their petitions at the beginning of the COVID-19 pandemic amid accusations that brokers were colluding on prices. The allegations were repeated by then-President Donald Trump but were rejected by Robert Voltmann, TIA’s president at the time, who stated that there was simply not enough freight to support the amount of truck capacity in the market.
Accusations of wrongdoing receded as freight rates and demand for capacity surged over the past two years, but that could change as capacity loosens and spot rates continue to trend down.
“As conditions in the trucking industry change, and more carriers face challenges, we can assure you that FMCSA and others in the federal government will continue to hear about the lack of broker transparency from small-business truckers,” Spencer stated in his letter to FMCSA.
Johanny
I think that the system is very abusive to carrier, truck drivers ,is usa wants truck driver on the road, pay them their 💰. The truck driver risk their lives on the road, far from family and some broker just by a click of a mouse or phone call can get away with it,.$. Listen very simple,if you have nothing to hide transparency is the keys to carrier so it can be fair. A broker should not make more that 12% of the total ,from the loaf to be fair. Carrier has all the responsibility and weight on all. IF THEY DONT DO NOTHING ABOUT IT BROKER GOING TO DO THE LOAD ON THEIR CAR. SIMPLE. We as carrier not even making the money it goes in diesel,driver and insurance and the money is not enough to paid for all licenses, so please help us to make a living so you can have access to your food everyday. Iam about to close down because I cannot afford it a $2 a mile advg, . Ridiculous, so pleaezzzeee do something about it.
James Lamb
Brokers, Shippers, Investors, oh, my!
Many of you have been watching the year-long fight among SBTC, OOIDA and TIA over “broker transparency” (if you have followed me for a while then you will remember that my battles with TIA go back more than a decade to when I first created the AIPBA in July of 2010 before we merged it into the SBTC four years ago).
In its latest effort, TIA is trying to convince the FMCSA to repeal the 40 year old 49 CFR 371.3c transparency rule on the basis that freight brokers are not really brokers any more… they are actually shippers. Yet in the same breath, the TIA calls for “dispatch services” to be required to get broker licenses because when you arrange motor carrier transportation for hire, guess what: you’re a broker (we have actually been saying this for six years now)! If you think the transportation industry has suddenly gone full on crazy, you’re absolutely right. Here is why…
The regulations (49 CFR 371) state you are a broker when you are:
“…a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.”
And, the regulations state bona fide agents are:
“…persons who are part of the normal organization of a motor carrier and perform duties under the carrier’s directions pursuant to a preexisting agreement which provides for a continuing relationship, precluding the exercise of discretion on the part of the agent in allocating traffic between the carrier and others.”
Now, you can’t be an agent of two competing motor carriers at the same time because an agent has a “fiduciary duty to principal” and a person calling themselves an agent of two competing carriers violates this duty the moment he chooses to give a load to one carrier over another. So, “dispatch services” are essentially illegal brokers. We have spent 6 years trying to convince FMCSA, TIA, and the rest of the industry this is so and it looks like, with the departure of Bob Voltmann, TIA is finally ready to acknowledge we are right.
But disappointingly, the TIA is doing a little ‘song and dance’ around the concept of broker as it attempts to fight the SBTC and OOIDA proposals to strengthen transparency (we contend it is a matter of closing a loophole and enforcing the rule and evasion of regulation statute; OOIDA wants to increase regulations on brokers). For folks outside the transportation industry, when they hear the term “broker” they immediately think in terms of stock broker or real estate broker. Let’s compare freight broker with the latter…
If I were to tell you that I am in the business of bringing together a shipper and carrier, you would agree with me that I am a third-party intermediary called a “broker.” Because that is what “brokers” do. They bring together buyers of transportation services (shippers) with sellers of such services (motor carriers). Likewise, if I were to tell you that I am a real estate professional who brings together someone who wants to buy a house and someone who wants to sell a house, you would call me a real estate broker. But what if I told you I am in the business of buying houses and then turning around and selling them? You would say I am not a broker but an investor in the business of “flipping houses.” This is the nature of the cake that TIA is trying to have and eat too.
In the house-flipping example, usually there is a certain amount of time that goes by after I buy a house and flip it. In fact, I might buy a house in bad shape, fix it up after closing, and give it a new coat of paint. Then 6 months later I list it (through an actual licensed real estate broker) and sell it for a higher price. In the stock market, there is a term that covers this but it is done without the time lapse. That term is called “arbitrage.”
Cambridge Dictionary defines arbitrage as:
“the practice of buying something, such as shares or currency, in one place and selling them in another where you can get a higher price at the same time.”
This is what freight brokers have begun to do and this is the TIA’s rationale for why its members should not have to be transparent. For big brokers, they internally finance the buying of transportation until they get the payoff from their sale to the shipper. For smaller brokers –including those represented by the SBTC, they do this often with the help of a financier we call a “factor”. That is, as soon as the invoice to the shipper is generated, it is a tangible asset that can be sold and assigned to yet another third party factoring company (for a fee). So, why isn’t TIA just saying their members are not actually “brokers” per se but are freight flipper investors engaged in arbitrage? Because of the competition factor (sorry for the pun, folks).
Anyone following the regulatory petition comments and the discussions during the October 28th Broker Listening Session, including the FMCSA, hopefully, can see there is an inconsistency, here, and serious holes in the TIA’s argument. Especially, when they start saying brokers are really shippers on the one hand but then argue, in the next breath, that independent dispatchers need to be licensed brokers.
Brokers should not need to be transparent, TIA suggests, because it is nobody’s business how much they bought the truck for and it is nobody’s business how much they sold the truck for to their shipper client. They will say the shipper wants them to be confidential… but in reality, it is really all about hiding their own “margins”. Next, we have to distinguish between “margins” and “commissions”…
First, note that these are all service based businesses. This is not the buying and selling of a product. Second, real estate brokers do not have “margins.” Real estate brokers earn “commissions” as a result of providing a service of bringing together the buyer and the seller. Usually, this is a percentage of the house sale price. In some instances in business, this might be called a “finder’s fee” but the amount or percentage awarded for doing the finding is always discussed and agreed upon in advance contractually.
Interestingly, so do these illegal broker “dispatch services” earn a commission. We would suggest that so do freight brokers no matter how you slice it… even if freight brokers advance the money to the carrier contractually before the shipper pays the broker what is essentially freight charges plus brokerage commission. No one would ever support real estate brokers not revealing what percentage they charge to do the brokerage service. The real estate industry is regulated in terms of transparency and ethics and when you contract with a realtor to sell your house, you know how much it will cost you from the onset. It is not hidden from you. As anyone who has ever bought a house knows, the realtor’s cut is always made clear to all parties and documented at closing. Imagine if your stock broker tried to convince you the cost of his service is none of your business…
TIA does not make the “arbitrage” argument outright because it would be an argument essentially for the deregulation of brokers and would open up their members to more competition. Remember, not too long ago, they wrote a bill that they got attached to the 2012 MAP-21 highway bill to raise the broker bond from $10,000 to $75,000 (and they would have gotten away with $100,000 but not for the AIPBA and Factoring Association). To make it difficult to become a broker. So, TIA just explains how their members are ‘brokers’ when it comes to their members holding a license and bond (to keep the bar to entry intact) but their members are really shippers when it comes to whether we should keep a rule that requires they be transparent like brokers in every other industry.
It is time for TIA to pick one already. Either have your cake, or eat it. But please do not insult the intelligence of the industry and regulatory authorities with what you call your members. We assume you will chose to be brokers. Because that will help you keep a high bond in place to fight competition– I mean “fraud.” But then you need to give up this ridiculous illogical attempt to make us all believe that you have a right not to be transparent and release your records upon request that reveal what your actual commissions are when you arrange transportation between buyer and seller.
I encourage independent truckers and small carriers to echo these points and comment against the repeal of the broker transparency rule, which is grounded in 71 years of regulatory wisdom, on the FMCSA Docket.
Genice Dixon
These brokers act as if they are delivering the loads and doesn’t want to pay drivers fairly they purchased the fuel and the time but now they want you to go from point A to point B and then bring the trailer back to point A which makes no sense because the driver loses money and fuel . So now you’re running to Loads for the price of one at two dollars a mile or less really this is ridiculous!!!! Look at convoys Power Only board.
Terence B
It’s a simple fix, just get shippers or receivers to publish what the load paid the brokers for that week or the week before, updating every other week. Carriers will be able to negotiate their own rates based on the published rates of the past weeks load rate
Paul Anderson
What do carriers feel is a fair compensation to a broker?
A
Buddy Trucker
If you can’t understand the difference between stockbroker and freight broker outside of having “broker” in the name, then that’s your problem.
Buddy Trucker
What I don’t understand is this, stock brokers are regulated, Forex Brokers are regulated and options and you get what I’m saying. Why do freight brokers feel like they should not disclose the amount??
Good thing is that they are not running the stock exchange. Set a fee and then go from there. What leverage are you talking about? You acting like you didn’t make no money is the past 2 years. There is no accountability when it come to freight brokers. Detention/Tonu are still from the 80s.
A
Kevin Spencer
Nice incoherent rant and made up story of what could happen.
You have no idea how the logistics world works obviously and are just acting based off pure emotion.
If the broker just has to make 1 phone to get a taker on the freight, then the freight is desirable.
If you don’t want to the freight, don’t take it, no one is forcing you to do anything. Go get your own customers.