The definitions of freight “broker” and “bona fide agents” of freight brokers are being rethought by the Federal Motor Carrier Safety Administration. On Nov. 16, the agency issued a Notification of Interim Guidance to help it “better define the terms in response to a mandate in the Infrastructure Investment and Jobs Act (IIJA).” FMCSA will also meet other criteria required by IIJA.
While the interim guidance is now effective, the agency is also seeking public comments in response to this notification and said it may issue updated guidance if comments demonstrate a need. Comments on the Nov. 16 notification must be received on or before Jan. 17, 2023.
Specifically, Section 23021 of IIJA directed FMCSA to issue guidance clarifying the definitions of the terms broker and bona fide agents in 49 CFR 371.2 of the Code of Federal Guidelines. The guidance must take into consideration the extent to which technology has changed the nature of freight brokerage, the role of bona fide agents, and other aspects of the freight transportation industry.
Additionally, when issuing the guidance, the law specified that FMCSA must, at minimum meet these three requirements:
- Examine the role of a dispatch service in the transportation industry.
- Examine the extent to which dispatch services could be considered brokers or bona fide agents.
- Clarify the level of financial penalties for unauthorized brokerage activities under 49 U.S.C. 14916, applicable to a dispatch service.
Impact of Comments
The agency had requested comment on this issue via a June 10 Federal Register notice that sought to address 13 specific areas. FMCSA stated that although it cannot change the definition of “broker” absent a rulemaking, it is able to provide clarification within this guidance. After sifting through comments to the June 10 notice, FMCSA determined that its current definition of “broker” is adequate.
However, the agency said it "feels the need to clarify it in only one area: the relevance of an entity's handling of funds in a transaction between shippers and motor carrier.” The upshot of this is FMCSA “wishes to clarify that handling money exchanged between shippers and motor carriers is a factor that strongly suggests the need for broker authority, but it is not an absolute requirement for one to be considered a broker.”
As to the definition of “bona fide agents,” FMCSA now holds that representing more than one motor carrier does not necessarily mean one is a broker, rather than a bona fide agent. “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,” the agency stated.
Much Ado About Dispatch Services
This latest notice also delves into how FMCSA examines various aspects of the role of “dispatch services” in trucking and the extent to which such services could be considered brokers or bona fide agents.
The agency stated that when a dispatch service “does not participate in the arrangement of freight, or when it represents only one motor carrier, it is not a broker. If a dispatch service arranges transportation on behalf of multiple motor carriers and engages in the allocation of traffic, however, then… it is not a bona fide agent and must obtain broker operating authority registration."
However, if the dispatch service allocates traffic between two motor carriers, it cannot be a bona fide agent by definition.
A news alert issued on Nov. 16 by the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary contends that this guidance “begs multiple questions, including what does FMCSA mean by ‘participate in the arrangement of freight.’ For instance, would FMCSA consider identifying a load, negotiating the rate, and communicating regarding pickup and delivery times as participating in the arrangement of freight?
“It also begs the question of what is meant by ‘engages in the allocation of traffic.’ Say, for instance, a dispatch service identifies a load that would be a good fit for multiple motor carriers that it represents, and either carrier would be required to enter into a new contract with the shipper to move the freight — is the dispatch service allocating freight by communicating its existence to each carrier?”
The Transportation Intermediaries Association, the trade association for brokers and 3PLs, also weighed in on the guidance on Nov. 16. TIA noted that its members continue to see a “rise in the amount of unlawful brokerage activities and an increase of dispatch services that illegally broker freight by handling ‘traffic allocation’ for multiple motor carriers without the proper registration and regulatory requirements.” Therefore, this mandate is an issue that TIA has advocated for to members of the House and Senate.
TIA pointed out that the guidance proposes conditions that would require brokerage authority for dispatch services, as well as other conditions that would not require brokerage authority. And the agency outlined that if dispatch services handle the exchange of money between shippers and motor carriers, then broker authority would likely be required. Additionally, dispatch services will need brokerage authority if they do business with more than one entity if they handle traffic allocation.
“TIA applauds the agency for releasing this interim guidance promptly to address a serious concern of the brokerage industry,” said TIA President and CEO Anne Reinke. She said FMCSA had listened to TIA’s concerns and incorporated several of its suggestions on dispatch services.
“This is a positive first step, but TIA believes it should not be the final step,” Reinke said. “The number of unlawful brokerage activities continues to rise, and these illicit dispatch services skirt registration and regulatory requirements. TIA looks forward to continuing to work with the FMCSA on this important issue.”