In new interim guidelines released Tuesday by the Federal Motor Carrier Safety Administration, federal officials sought to clarify the distinctions between brokers, bona fide agents, and dispatch services.
While the FMCSA acknowledged that dispatch services “can help to ensure the motor carrier has a steady stream of shipments” that allow them to concentrate on moving freight, how they carry out that duty can determine whether they fall under FMCSA authority and are therefore required to have a $75,000 bond to safeguard their motor carrier customers from nonpayment.
To distinguish between the two, FMCSA provided a list of six criteria to help assess whether a dispatch service needs broker authority.
This kind of power is required if the dispatch service :
- directly with the shipper or a representative of the shipper to interact or negotiate a shipment of freight.
- accepts or receives payment from a broker or factoring company for cargo, or participates in any aspect of the exchange of money between any of those parties.
- arranges for a consignment of freight to be transported by a motor carrier without first entering into a documented legal contract that satisfies the aforementioned requirements.
- receives a shipment without a truck or carrier and makes an effort to acquire one so that the shipment can be moved.
- is listed as a party to the shipping agreement.
- is the act of looking for transportation for a consignment of freight on the open market.
According to FMCSA regulations, brokers who act as dispatchers may be liable for civil fines of up to $10,000 per offense.
Additionally, the FMCSA was required by Congress to define the difference between a “broker” and a “bona fide agent,” who only represents or works for a motor carrier. However, the agency only felt the need to make one clarification because the majority of those who commented on the proposed guidelines did not believe that the current definition of “broker” needed to be changed. This clarification relates to the importance of handling funds in shipper-motor carrier transactions.
For instance, according to the Owner-Operator Independent Drivers Association and the Transportation Intermediaries Association (TIA), which represents brokers and 3PLs, handling money has “at least some relevance as to whether one is brokering,” FMCSA claimed.
Although handling the money transferred between shippers and transporters “clearly supports the requirement for broker power… It is not a prerequisite in order to be regarded as a broker, the organization said.
Regarding the meaning of “bona fide agent,” FMCSA observed that numerous commentators, including TIA, the National Industrial Transportation League, and the Small Business in Transportation Coalition, argued that one may only represent one carrier and still be deemed a bona fide agency.
Representing more than one motor carrier does not necessarily entail that one is a broker as opposed to a bona fide agent, according to FMCSA, which disagrees. In other words, a legitimate agent is not required to represent a single carrier.
In addition, the FMCSA adds, “Any finding will be extremely fact specific and will require establishing whether the individual or corporation is engaging in the allocation of traffic amongst motor carriers.”
Chris Burroughs, vice president of government affairs for TIA, commented on the FMCSA regulations and claimed that the organization had taken a number of the association’s recommendations about dispatch services into consideration.
Given the surge in illegal brokerage activities and the fact that these illegal dispatch services avoid registration and regulatory requirements, Burroughs said, “This is a welcome first move, while TIA feels it should be the first and not the final step.” “TIA looks forward to working with the FMCSA on this crucial topic going forward.”
The FMCSA highlighted that the temporary regulations are non-binding and do not have legal standing. The public has 60 days to submit comments, after which the agency may revise its recommendations in light of the feedback it receives.