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.
AJ Pharaoh
I’m just waiting for the to look into the other unethical practices of the brokers..like paying dimes on the dollar..there’s no shortage of truckers.. the brokers are putting us out of business
PETER HALJEAN
I AM A BROKER AND CARRIER. I PAY INS,BOND,AND XTRA INS FOR BEING A BROKER. WHY SHOULD IHAVE A PRO AGENDA FOR DISPATCHER SERVICES THAT DONT PAY A DIME FOR ANYTHING. IF A DISPATCH SERVICE PERSON IS GETTING FREIGHT OFF ANY LOAD BOARD, THAT MEANS THEY ARE ALSO BEING DECEPTIVE BECAUSE THEY WOULD HAVE TO USE ANOTHER CARRIERS LOG IN TO THAT SITE. ALL LOAD BOARDS REQUIRE AN MC# TO TAKE PART ON THAT BOARD. SO LOT OF CHEATING GOING ON ALL AROUND.
Truth
@Quinyawna
Your statement is very true.
Here is the biggest issue with this industry. You have a collection of people (illegal people) purchasing a brokers authority and misusing it, which it states this behavior will be fined up to $10,000 if found guilty now. When I say misusing the authority here is an example, a broker booking a load with a third part motor carrier’s mc and then reposting it (for less because they took their cut) under their broker’s mc. Or having a broker’s license and motor carriers mc number, then booking the load under this fake mc# and reposting under their broker’s mc for less so you can take a portion of the rate. These brokers need to be qualified beyond a piece of paper because America has shown it’s not difficult to become a freight broker. Brokers should have to provide 3-5 references (carriers they’ve worked with) with paperwork of the load and providing proof of payment, because there are some big name companies like Landstar who does not pay the factoring company’s or drivers. Also, the carriers that are listed as references need to be checked and qualified as well. There is a lot of money in this industry, and it is clear dispatchers are to help the carriers with paperwork. Even protecting carriers from fake brokers when they double broker a load. I have reached out to DAT and other companies with lists of these bad brokers who just get a new broker’s authority once you’ve figured them out.
There needs to be a real change in this industry now! It is time to remove these bugs that’s destroying the logistics industry for America!!! We would have more people on the road driving if these bad brokers were not standing in between the carrier/dispatcher from the real broker. It is said is they are now making more money than the brokers because they are taking so much from the rate, which is preventing the driver/owner operator from making any proceeds. We need to have a legit MINIMUM Rate Per Mile (#RPM) for the drivers. With the shipper wanting to spend less to move the freight, then brokers take their portion, and now you have the bad brokers who is standing in between you and the real broker because they’re pretending to be the carrier/driver to the real broker. Yet they turn around and act as if they are the real brokers to the carrier/dispatcher.
Drivers are barely making any money which can have an effect on the economy if products aren’t being shipped around the world. Someone has to be on the ground to get the product from point A to B. If anyone is interested in the list of Bad Brokers feel free to email truthlogisticscorp@gmail.com
Steven
I’m sick of getting phone calls from India every single day with dispatch services.
It should be 100% illegal for letting any service to be provided from abroad into this country….we need jobs here at home as well.
License and legal representation is USA should be normal and nothing else.
Kenny Long
Please read the guidance again. I believe you misinterpreted for this article.
They said that handling money IS a factor to being a broker, but not the ONLY factor. In other words, you are defiantly a broker if you handle the money, but you may also be a broker if you do not handle the money. Handling the funds is not the ONLY factor that defines a broker.
Quinyawna
The focus should be on other things. Dispatchers are here to help the carriers so the carriers can focus on the safety of transporting the load. Broker’s are focused on earning more from the load. Dispatchers are just trying to keep drivers driving.
Laszlo Almasi
And for the record people, brokers revenue is indeed regulated already but not by the government. Brokerage revenue is regulated by the market rates, supply/demand and their own quotes in RFPs/RFQs. If a broker quotes too high then they do not get the lanes so brokers do not have free reign over what they charge. Brokers know their rates need to be realistic and reasonable otherwise they will not get the loads….just as when a carrier over bids on a particular load and is told to pack sand.
Laszlo Almasi
If you want them to regulate the income of one side (brokers) then you are also going to have to be content with regulations regarding what you can be paid to actually move the freight on the carrier side. Neither is going to happen so stop beating that same drum. Instead, focus on your own trucks, quotes and limit your expenses like dispatch services and factoring companies. If you’re using a factoring company “and” a dispatch service then you are just throwing money away.