June 15, 2023

FMCSA issues final guidance to expose illegal brokers


WASHINGTON — Final guidelines issued Thursday by the Federal Motor Carrier Safety Administration clarifying the agency’s interpretation of truck brokerages could help reverse a growing trend of illegal brokers and dispatchers infiltrating the industry, according to a group representing small-business truckers.

The new guidance, created in response to a mandate in the 2021 Infrastructure Investment and Jobs Act, updated interim guidelines issued by FMCSA in November based on public comments the agency received since then.

Key to the updated guidelines, contends the trucking group Small Business in Transportation Coalition (SBTC), is a further explanation by FMCSA of how it interprets “allocation of traffic” as it pertains to brokers, dispatchers and agents.

“FMCSA intended this term to mean any exercise of discretion, choice, or decision-making on the agent’s part about which motor carrier to assign a load,” the agency stated.

“If a bona fide agent represents only one motor carrier, it will assign all loads it sources to that particular carrier and thus, no exercise of discretion is necessary, and there is no dispute that the agent is not a broker.

“However, an agent representing multiple carriers should be careful to structure its agreements to avoid the possibility of allocating traffic. The scope of these agreements and the agent’s compliance with the terms of the agreements are key factors in the analysis of whether such an agent may qualify as a bona fide agent under the regulatory definition,” the agency noted.

Even more helpful in helping expose illegal third-party businesses, SBTC contends, are examples of brokered loads included in the new guidance that FMCSA would consider to be legal.

The first is where the third party represents motor carriers that require the agent to source loads originating in different geographic areas whereby the selected carriers will not pick up freight in the other carriers’ locations.

Another example FMCSA highlighted is where a third party has agreements with multiple carriers to source specific types of loads but the carriers’ services do not overlap, such as trucking companies specializing in hazardous materials in tankers or refrigerated freight in reefer vans.

“However, if the agent’s agreements require it to source the same type of loads for both carriers without geographic restrictions as described above, it could not represent both carriers without registering for broker authority, because any load assignments would necessarily require the entity to choose between carriers and would therefore constitute an allocation of traffic,” the agency stated.

FMCSA emphasized that the guidance “does not have the force and effect of law and is not meant to bind the public in any way.”

But SBTC asserted that by FMCSA making clear that entities holding themselves out as dispatchers cannot avoid having to obtain a broker’s license unless they work under the geographic and commodity principles the agency outlined, “this is effectively a death blow for unlicensed brokers calling themselves dispatchers,” the group stated.

“While there is still no effective enforcement arm within FMCSA to police FMCSA’s distinctions, this guidance now opens the door for complaints to [the U.S. Department of Transportation’s inspector general] and will help immensely in private right of actions against dispatchers operating outside the scope and parameters of the FMCSA guidance.”

SBTC urged Congress to follow FMCSA’s lead by codifying into law the definition “dispatcher,” which the group has proposed to lawmakers.

OOIDA, TIA: Guidelines come up short

The Owner-Operator Independent Drivers Association and the Transportation Intermediaries Association – which have also been seeking better oversight and enforcement of illegal brokering – believed the guidelines did not go far enough.

“We are encouraged by the FMCSA’s guidance and believe it is a step in the right direction,” OOIDA said in a statement. “However, we will continue to pursue other changes to ensure better business practices in brokering and transportation.”

TIA likewise considers the final guidelines a “positive first step.” But the group, which represents brokers, had recommended that the agency make clear that all dispatch services be required to register with the FMCSA either as a broker or – under a new class of licensed entities – as a dispatch service.

The group also pushed for requiring dispatch services to maintain the same bond as a broker, depending on how the service operated. Such a requirement, TIA noted in its interim comments, “reduces the exposure to shippers and motor carriers that would otherwise be created through the use of a dispatch service.”

Without those recommendations incorporated in the final guidance, TIA “will now strategize how to improve on it so that it creates a level-playing field for licensed entities that are doing business the right way,” TIA told FreightWaves.

Click for more FreightWaves articles by John Gallagher.

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