In a 90-minute online listening session Wednesday to have Federal Motor Carrier Safety Administration (FMCSA) leaders hear views about possible changes in current broker transparency regulations, one question regarding a possible rule change with potentially serious repercussions came up repeatedly: what about the shippers?
At issue are the major requests of the two petitioners to FMCSA, owned-operator trade group OOIDA and the Small Business in Transportation Coalition led by James Lamb. There is no proposed rule. But if FMCSA adopted what OOIDA and SBTC want, brokers would be required to automatically send to carriers documentation of the details of a transaction electronically, and to do it quickly.
FMCSA is seeking comments on a list of questions it released in August in response to the OOIDA and SBTC petitions. The listening session was part of the agency’s gathering of information.
Carriers can get information on transactions now under federal law but may need to physically show up at a broker’s office to do so — an effective impossibility.
In a session where several impacts of such a rule were discussed at length, the focus on shipper confidentiality requirements came up several times.
Larry Minor, FMCSA’s associate administrator for policy, asked a question of the listeners and commenters on the session: Given confidentiality agreements in the contracts between brokers and shippers, “are you as brokers in a situation where the contracts you have with shippers state you couldn’t provide information even if you wanted to?”
Jeff Tucker, the CEO of 3PL Tucker Worldwide, said during the comment period that shippers do not want information on what they are getting charged for shipping to “get down to the carrier level, because shippers don’t want their competitors to know what they’re paying for freight.”
A commenter named Justin Olsen said shippers “consistently” require nondisclosure agreements with brokers, and “brokers are bound to honor these requirements and are contractually bound to honor the requirement of nondisclosure.” Olsen said he also believed that the regulations under Section 371.3 of Title 49, which spells out the requirements for broker disclosure now, might be in conflict with other federal laws regarding disclosure.
As one commenter said, the information about what the broker is charging the shipper and other pieces of financial information are “none of the carrier’s business.” If the carriers don’t like it, “they can source their own shippers if they choose.”
But existing law effectively makes it their business, though with a lot of hurdles to get it done. What is at issue is the method of transmission of the information to carriers. The ability of the broker to get that information now, regardless of how difficult it might be, has essentially established that carriers have a right to see it.
The question of the confidentiality agreements could be moot if FMCSA does implement changes and bars such confidentiality agreements between shipper and broker. Instead, a confidentiality clause among all three parties could become part of the new rule, said Lamb, president of the SBTC. “Are you saying carriers can’t keep a secret?” Lamb added.
In the model contract for broker-carrier relationships, confidentiality is required, and he objected to accusations that carriers would “routinely breach this.”
Todd Spencer, the president of OOIDA, responding to Minor’s query, said shippers’ concerns about confidentiality could be “fully satisfied” with nondisclosure and noncompete clauses in broker-carrier contracts.
One of the questions FMCSA has published is what brokers would need to spend to comply: “How much profit reduction on a per-transaction basis would brokers experience, and what percentage of the costs would be passed through to shippers or motor carriers?”
Jason Craig, the director of government affairs at C.H. Robinson, said the cost would be significant and a challenge to calculate accurately. OOIDA and SBTC have not anticipated a “corresponding increase in costs solely in delays to payments the requested remedy will require, due to information required in 371.3a5 for rate accounting of non-brokerage services like fees and detention time.”
Craig said the current law harkens back to a time when carriers often paid a commission to a broker, so that the underlying amount of the load would need to be known for a fair accounting.
But Craig and other commenters noted that is no longer how the market works, and there’s plenty of rate transparency. Tucker said there is “incredible” transparency in the market, and rate information is available down to the granular level of a particular lane.
But he noted rates are also subject to Bell curve-type distributions. And it is at the tail end of those rates that spurred the actions by OOIDA and SBTC, when the historically low rates of April, in the middle of the pandemic, kicked off the protests that led to the groups’ respective petitions.
Chris Burroughs, the vice president of governmental operations at 3PL trade association Transportation Intermediates Association, questioned the need for a radical overhaul brought on by a temporary situation. “If this was a systematic problem, why were there no complaints before COVID-19?” he said.
But the other side of the argument is what one carrier said was the disadvantage that fleets would always face. “When we do not know what the shipper pays the broker, then we do not know how to negotiate the rate and we end up grossly shorted,” the carrier said. And it isn’t just the carrier side of the ledger, she said. “Shippers are grossly overcharged.”
The other complaint, which has spurred part of the petitioners’ requests, is that asking to see the data that is now guaranteed in the law brings negative consequences for carriers. “The brokers are bullies if you ask too many questions,” the unidentified carrier said. “You will be blackballed and put on a ‘do not use’ list.”
The docket for taking comments on the FMCSA questions is open through Nov. 18.
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Paul Wendel
Hear! Hear! Mr. Holtz!
Lot Lizard
when will carriers be forced to carry $75k+ bonds so all of the claims that happen in their possession will be paid?
when will the carriers be forced to implement GPS tracking on every single truck/trailer and give open access to the market?
when will carriers open their books and tell us what they actually pay the drivers and what their overhead costs are?
when will the FMCSA crack down on the SoCal illegal double brokering scam and freight being put on rail?
when will it become illegal for shippers to ‘force’ brokers to assume liability as a motor carrier?
when will shippers/receivers be held accountable for their roles in delays (detention), claims, OS&D, cancellations etc?
and the list goes on and on and on….
Lamin
You must not have anything better to do but troll truckers 👎👎
Dennis Ford
This a bigger problem than you are saying.
First there should not one person or company who doesn’t have any equipment trucks or trailers allowed to solicit or control any shipping of freight.
Except for the shipper owning the freight.
C H Robinson
Uber
Uship
These companies are example of who I am talking about.
As a owner operator leased to a company there has become way to many 3pls .
We do the work take the risk and are not being compensate for our job.
Now looking at it from the shippers view yes he is trying to control there cost.
But they also are not very transparent in there business.
Lots will make money off shipping.
They build in a price for the product plus shipping.
Then when shipping comes in less they pocket the profit.
So it’s got many layers to scams.
Paul Benfer
Amen Mr. Holtz.
Baljinder Singh
Brokers should be on commessioned based, Truckers should know how much middle man is charging, Some of the brokers r rude n like to bullying around, 2 days ago when I told A broker God Bless u after he tried to give me a load for $600 which has 15 average of $1250 he responded by saying ” Why r u being As..le”, and I been in trucking for 20 years, Time is now for Govt to act. Thanks
Rodolfo Bueno
Get rid of brokers we dont need thos blood suckers
Lot Lizard
but customers need brokers because they dont want to work directly with idiots like you
Greg Holtz
I am a small carrier. Brokers just like owner ops and carriers should be free to make whatever they can on the freight they haul or service. Capping profit would go both ways. The problem is driver and carriers are not disciplined nor competent business people to effectively run their businesses. I for one had to work 10 times harder during Covid but knew because drivers were taking low freight rates they would be out of business. If I could hold on to 3Q20 I would be on the other end of rates (HIGH). I am currently making high DAT rates on all loads and do not want to be capped on what profit i can make per load. Just like the brokers who made multiple times profit on the loads during Covid. The problem is small carriers aren’t disciplined to run their business in a profitable manner. I do not care what the broker makes. I know what I need to make or I do not haul the load. I surely do not want to be told what I can make profit wise on a load either. Run your business like a business we aren’t owed anything with regards to the brokers profit just like they aren’t owed anything on how I profit on a load.
William Boahn
BROKERS SHOULD GET 5% MAX
Lot Lizard
You can have 100% after you build a sales team and infrastructure to manage your own customers
John Turner
Take the money out of the brokers hands first and you will get compliance you are missing the problem. When brokers make 50% truckers go broke don’t forget the suit case of rules for truckers. Retired trucker with 45 years experience.
Lot Lizzard
LMAO!
Paul
I can guarantee that I have never made 50% off of any load! The bottom line is that a broker negotiates a rate with the trucker, the trucker has 100% of the option of taking the load for the amount agreed, or he can go look for another load. The trucker has the option of also hiring their own sales people to go out and find their own customers, I have cultivated and worked with my customers for 28 years now, why should I have to divulge how much I make on a load, I wonder what the head of Wal-Mart or Costco would say if I asked them how much they make on their product? I know, none of your damn business.
DCM
I’m a carrier and I agree whole heartedly, this whole transparency argument is nonsense. I think it’s an excuse to blame poor financial management skills on someone or something. I’ve always found this transparency argument lame, when I hear owner ops talk like that, I already know they have no idea how economics truly works, especially in a government regulated capitalist system. Know what your bottom line is to make a profit, knowing what a broker makes on a load is irrelevant to that fact…