Federal regulators have attempted to clarify differences between brokers, bona fide agents and dispatch services in new interim guidelines issued Tuesday by the Federal Motor Carrier Safety Administration.
Mandated by last year’s infrastructure bill, the guidelines are aimed at cracking down on companies that engage in truck brokering but without proper authority from FMCSA, an issue that brokers claim illegally undercuts their business.
While FMCSA acknowledged that dispatch services “can help to ensure the motor carrier has a steady stream of shipments” that allows them to focus on moving freight, the way in which dispatch services perform that function can mean the difference between being under FMCSA authority — including the requirement that they have a $75,000 bond to protect their motor carrier customers from nonpayment — or not.
To make that distinction, FMCSA listed six factors to help determine if a dispatch service needs broker authority. Such authority is needed if the dispatch service:
- Interacts or negotiates a shipment of freight directly with the shipper or a representative of the shipper.
- Accepts or takes compensation for a load from the broker or factoring company, or is involved in any part of the monetary transaction between any of those entities.
- Arranges for a shipment of freight for a motor carrier, with which there is no written legal contract with the motor carrier that meets the aforementioned criteria.
- Accepts a shipment without a truck/carrier then attempts to find a truck/carrier to move the shipment.
- Is a named party on the shipping contract.
- Is soliciting the open market of carriers for the purposes of transporting a freight shipment.
FMCSA’s guidelines clarify that dispatchers operating as an unauthorized broker carry civil penalties of up to $10,000 for each violation.
Congress also mandated that FMCSA clarify what defines a “broker” versus a “bona fide agent” that works specifically for or on behalf of a motor carrier. Because the view among most of those providing comments on the proposed guidelines saw no need to change the current definition of “broker,” however, the agency felt the need to make only one clarification: the relevance of handling funds in shipper-motor carrier transactions.
For example, the Transportation Intermediaries Association (TIA), which represents brokers and 3PLs, and the Owner Operator Independent Drivers Association viewed the handling of money had “at least some relevance as to whether one is brokering,” FMCSA stated.
However, while handling money exchanged between shippers and carriers “is a factor that strongly suggests the need for broker authority … it is not an absolute requirement for one to be considered a broker,” the agency stated.
As for the definition of a “bona fide agent,” FMCSA noted that multiple commenters, including TIA, the National Industrial Transportation League and the Small Business in Transportation Coalition contended that to be considered a bona fide agent one can represent only one carrier.
FMCSA disagrees, stating that “representing more than one motor carrier does not necessarily mean one is a broker rather than a bona fide agent.” In other words, a bona fide agent does not necessarily represent only one carrier.
But FMCSA also states: “Any determination will be highly fact specific and will entail determining whether the person or company is engaged in the allocation of traffic between motor carriers.”
In commenting on FMCSA’s guidelines, Chris Burroughs, TIA’s vice president of government affairs, said the agency incorporated several of the association’s suggestions on dispatch services.
“This is a positive first step, though TIA believes it should be the first and not final step as the number of unlawful brokerage activities continues to rise and these illicit dispatch services skirt registration and regulatory requirements,” Burroughs told FreightWaves. “TIA looks forward to continuing to work with the FMCSA on this important issue.”
FMCSA emphasized the interim guidelines do not have the force of law and are nonbinding. The public has 60 days to comment, with possible updated guidance from the agency based on comments received.
J V
Why are Brokers always looked at as if we have spent our hard earned money, which for some of us are fortunate enough to have the cash flow to pay our carriers prior to our “shipper” who we work for, for the purpose of seeking out and causing harm to all carriers. We pay large sums of dollars for our bonds and insurance. We spend years building our reputation and clientele. We really don’t work for a shipper or carrier. We find the means of transportation to move freight from point A to point B. We get double brokered upon without our knowledge and we are not involved in covert operations towards anyone, I understand the definition of a dispatcher and an agent. But what options does a broker have, who has worked hard building their shipper list which then requires more than 1 broker to maintain it? Why are there an abundance of great training programs and certifications if it is not for the purpose of assisting someone? Does FMSCA not hold a broker responsible for anyone speaking on their behalf? If persons are qualified and passed the necessary processes, why are they financially burdened further for the expense of insurance and or a license if they only wish to assist and not be an entrepreneur? I too believe this a step in the right direction and appreciate when we were told something would be coming out by the 15th that FMSCA did exactly that!
Sam
A dispatch service cannot represent one carrier unless that carrier has enough trucks to have their own dispatch.
The profit margin in trucking is thin. Nowadays razor thin. Those who need to utilize a dispatch service do so in effort to stay in business by making more money. Period.
Restricting dispatch services to one carrier is nothing more than yet another demonstration how the fmcsa is completely out of touch with what the industry they are supposed to regulate actually needs.
Their lack of understanding is restricting profitability and makes most problems worse for every carrier that works hard to stay honest and prosper on the merit of their commitment and hard work. Those ideals continue to erode away from the landscape of the freight industry. ELDs are another example. There is still no evidence for an ELD to be any safer in a truck. FMCSA blatantly refuse to acknowledge that.
Dispatch services are needed by many small carriers who benefit from a dedicated person scouring load boards and contacting brokers while owner operators operate and drivers drive. But drivers and owner operators can’t support that person or team with an entire income themselves unless they give up more of what it takes to keep a truck on the road.
So that dispatch service needs to service several carriers in a satisfactory fashion in order to pull a commission and stay in business. Why is that a problem? Give it a barrier to entry if it needs regulated. Give dispatch services a carrier limit if you need to stifle their growth. But for heavans sake, don’t make it so it’s impossible to legally be in business and make any money at all.
Sometimes I wonder if the intention of some things the fmcsa gets up to is to prevent profitability rather than keep us safe and the wheels turning. Like it or not fmcsa, that is all you are needed for. Nothing more. We workers are the ones out here carrying the us economy on our backs. How bout you remember that and start serving us as you were meant to.
Nizar lalani
The broker make more money then the dispatch and the dispatch job is to find the load for the carrier and they try to negotiate with the broker but the broker don’t care about the carrier and dispatch just like fmcsa they changed the rules when ever they want but they never drove a truck in there Life to understand how hard is for the driver to risque he life on the road for small amount of money they are making as today date and the carrier to not making enough money if I may say we all are working as a slave to make rich people more rich and no freedom to all people who work hard there life so how can we solve the problem anybody who has the answer please explain.
MJ
In my opinion, I think the FMCSA got it right. Real dispatch services shouldn’t have a problem with the guidance. A dispatch service should have the carrier under contract before looking for a load. If you have the freight first, then it is brokering or double brokering. A dispatch service that wants to have the freight first should be required to be bonded just like every other broker.
It is ignorant to make the statement that a dispatch service can get 10 to 25 percent more on a load using the same tools a carrier can use themselves. A youtube class doesn’t make someone a better negotiator than someone with years of experience. As a broker, we are paying what we have to pay to get the load moved, same as it was before all the pop up dispatch services. The only way a dispatch service makes more, is if their carrier can’t negotiate and has no clue what the market rate is. The market dictates the rate, not the dispatcher, carrier or broker. Supply and demand. Not one broker is paying 10 to 25 percent more because a dispatcher is the one calling. Some of us brokers will pay more if we deal with the one truck owner operator and receive excellent personal service. Talking directly to the driver instead of going back and forth on the phone saves time.
Ivan
Good to hear some body is finally thinking about carriers as many things are happening in the market and the one who has no protection and who does all the hard work is the carrier. Need to address these following issues:-
1. Time/Miles limits set for carriers but no protection for carriers from the shippers and the brokers. They make carriers wait for as many hour as they want to and carriers can do nothing about it, Carriers are paid only $150 for wasting a whole day which doesn’t pay for the driver pay and other taxes. Even for detention/Layovers every broker have a cap of max $150-$170 means they can make carriers wait for a whole day and the max they have to pay to the carrier is $150 which should be at-least be $500 in today’s market.
2. Dispatch service is a necessity for a carrier who owns multiple equipment as they cannot book loads for all the trucks as the shippers cant find trucks for all the shipments but dispatch services shouldn’t be allowed to work as a broker by booking directly with the Shippers.
Rana Omer
What i am learning (in my view)from my recent brokers behaviors. Seems like they are selling loads to different brokers or dispatching companies. From where the gross revenue start shrinking and small companies can’t get the good rates per miles. Also, they did not address the issue of detention and lay overs as well. Which is big issue for a small fleet.
RS
I totally dissagree with an above statement that dispatch is a rip off. Devin I dont think you know what a double brokering is. If you are making calls and getting info about a certain load/loads and then offer it to your carrier its not a double B, both parties are aware that you are in the equation. FMCSA is not making this right.Blocking new entrepreneurs and getting dispatchers bonded casue they are working with more than one carrier forcing them to pay for an unnecessary insurance is just ludacris and makes me wonder who is pulling the strings there , the insurance companies will make more $ from it. Broker is a shipper representative . Dispatcher is the carrier representative. Brokers are creating their own apps and loadboards to get as many carriers as possible to generate the most revenue they can. The right dispatcher should increase carrier revenue by at least %10- 25 by utilising all those apps and loadboards. They are definitely on the carrier side. Broker companies are not. If we could go back in time I bet the same thing has been said about the broker companies.
Devin Singleton
Simplest terms are always the best for description of business and law’s, in my opinion. A broker is a agent who is bonded and licensed by the F.M.C.S.A. to find Carrier’s freight through Shippers. A broker’s duties also results in the broker giving the Carrier’s all the information and details for a specific load or specific loads, which includes pick up destination and pick up time, what a carrier is loading and weight, and delivery destination and delivery time, and pay of the load. A bona fide agent, by definition should be a person who works solely for one company and then translates the brokers information to drivers for the carrier. A dispatch service is a rip off service, that F.M.C.S.A. should not allow, who is basically double brokering loads, because if you read my definition of a broker, they have to legally do everything this so called dispatching service is supposed to do, and the Carrier is licensed to do as well, so what is dispatchers role in all of this, to scheme money from the load, bottom line. Come on F.M.C.S.A. make sense of what is going on here, Carrier’s have it hard enough, with just trying to survive the freight market, simplified solutions are always good solutions. For what reason’s do we need dispatching services again, the reality is they can only do what a broker has to do legally. I am glad the F.M.C.S.A. leaves public opinion comments open for the public, I do hope my input is helpful to the F.M.C.S.A. and the trucking industry as a whole. I have spent a majority of my life in the industry and it needs the right changes to balance out the industry, and the fact that the F.M.C.S.A. is looking into these issues is definitely a step in the right direction.
M.B.A./Minor in Supply Chain Management