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.
Jack
I have been the carrier, shipper and now I am a broker. I had to comment because thinking something or believing something to be true doesn’t help anyone.
Let me start with if want that load direct and not from a broker, go sell to customers and provide a better price, literally no one is stopping you. I know I know, it’s easier to just complain and come up with fantasy scenarios in which you make tons of money.
Brokers provide a service you don’t have to use, you can go find your own customers. Sharpen your pencil on that rate is my friendly advice, you are going to be shocked to find out it’s a lot lower margin then you are thinking.
You anger is directed at the wrong party in this equation. Honestly, it needs to be pointed at you. You made the decision to be a driver, OO. You bought that truck not bothering to figure out how much it would cost to run. You are not out there selling your service directly to customers. When I ran trucks I didn’t sit there all day waiting for someone to call me to keep the wheels turning, I went and found loads, broker or customer. By the way a broker IS your customer, they pay you!
Last but not least, you are in for good news, that magical website that hooks up carriers with customers exist! There are tons of them, find one, sign up. Oh yeah, the website charges a fee, you know, like a broker.
Marcus Mcclendon
I agree with most of what’s being said from a driver’s prospective because many of us smaller carriers are getting pushed out of business due to the high fuel cost and the prices that these brokers are giving us. There should be legislation passed to off set the prices that we are seeing in should a high market of fuel. There has to be a regulatory system placed on the brokers and their prices and that needs to happen now. I’m running weekly loads and seeing pennies which will soon run many of us out of business fast! We as independent drivers need leverage for our loads and fast.
Travis McGee
Where is the focus on treating the Drivers better and respecting their time?
Also when is their going to be someone standing up for smaller companies that make a difference in freight being moved?
A lot pessimistic moves toward the industry!
Where is the optimistic moves for the people trying to build something. Which that “Something” is the actual thing that keeps America moving!
Fabian Casas
I believe who ever it is getting the loads they need to increase the pay for the reson of fuel cost sky rocking so high because Broker are really trying to nickel and dieming us truck drivers and we are out there trying to keep are heads above water to survive so whatever the outcome please help us truckers out here to keep our company’s going
Dmitriy B
Regulate the broker where they can keep let’s just say 15% from what the shipper is paying. We’ve had drivers should be able to see that amount what is shipper pay. Find the brokers of $10,000 for first fence and up through the 50,000 for the third offense for the violation.
Dmitriy B
Instead of doing nonsense regulations what they really need to be doing is regulating the brokers cut $$. We the drivers should be able to see what is carrier paying through the broker and what broker is taking from that amount which needs to be regulated just like every other broker in real estate business.
They need to be regulated where they Take a certain percentage let’s just say it be 15% from what the Shipper pays in weeded drivers should be able to see that on the paper. If the broker violates that first violation should be a $10,000 fine second $25,000 fine and third $50,000 fine otherwise they need to lose their license and not be able to open up another brokerage company or due to nonpayment of the fee for the penalty
preston.johnson@live.com
Motor Carriers can deal directly with shippers, but a lot of people that actually drive the trucks do not have the skill set or do not care to make the calls necessary to gain contacts the shippers.
That is where dispatchers/account managers come into play, they are either W2 or contracted employees of the Motor Carrier. That allows them to represent the company as an authorized representative to handle company’s business! They will also be on the payroll of the Motor Carrier, earning income on every pay cycle!
Not everybody that works for brokers have broker licenses, but they perform the duties of the broker. They cannot sign off on the rate cons, so they pass that duty over to the broker, but they are the contact person between the driver, shipper, and the receiver! By rule the brokerage firms that has employees like this should be subject to the same $10,009.00 fine as the dispatch service companies.
Acegarthie
Lack of transparency on brokers cut and them controlling $$ is the death of trucking right now. Eliminate the brokers or let them be hired or subcontracted by drivers and we (drivers) deal directly with shippers.