The Federal Motor Carrier Safety Administration has put out a long-awaited proposal on broker transparency that, among other things, would require brokers to keep records in electronic form.

The proposal is a result of petitions by the Owner-Operator Independent Drivers Association and the Small Business in Transportation Coalition filed with the agency more than four years ago.

Those 2020 petitions asked that the FMCSA change regulations to require brokers to disclose (when requested by the carrier), among other items, amounts paid by the shipper to the broker for a shipment. 

In August 2020, FMCSA asked for public comment on the petitions to address the transparency of broker rates.

Why Are Changes to Broker Transparency Needed?

Despite regulations that require it, motor carriers don’t have transparency into what shippers are actually paying brokers, according to critics.

OOIDA said brokers often find ways of avoiding federal regulations requiring them to keep records of transactions and make them available to motor carriers. 

One way that happens is that the broker contracts signed by motor carriers, including owner-operators, waive the requirements. OOIDA said the practice is so common that truckers often have no other choice if they want to haul a brokered load.

Another tactic is that brokers require a carrier to come to the broker’s office to see the records. If the broker’s in Ohio and the truck owner is in California, that’s not realistic.

“Four years ago we asked FMCSA to improve broker transparency, and we welcome this overdue Notice of Proposed Rulemaking,” said OOIDA President Todd Spencer in a statement.

“We appreciate that FMCSA incorporated input from our petition, including a requirement to make records available electronically and emphasizing that brokers have a duty to comply with regulations.

“As FMCSA noted, broker transparency is necessary for a fair, efficient transportation system and is especially important to help carriers defend themselves against alleged claims on a shipment.”

The Brokers' Point of View

Brokers, however, oppose the proposal.

The Transportation Intermediaries Association said in a statement that the proposal "represents a misguided focus on outdated and unnecessary regulations... while failing to address the far more pressing issue of freight fraud."

TIA contends that the current broker transparency rules are an archaic regulation that dates back to trucking deregulation in the 1980s, calling it "obsolete and un-American. 

"Originally implemented in an era following trucking deregulation when brokers acted as commissioned sales agents for motor carriers, this rule has no place in today’s highly transparent marketplace. Any attempts to expand or enhance these outdated provisions should be shelved, and the FMCSA should redirect its attention to fulfilling its primary mission — ensuring safety on our highways and addressing rampant freight fraud."

The association pointed out that during the COVID-19 pandemic, when broker transparency was last debated, the National Consumer Complaint Database recorded zero complaints related to this issue. But there were 80,000 complaints related to freight fraud and unlawful brokerage activities. 

"This stark disparity highlights the misaligned priorities of the FMCSA under the current administration."

In addition, much of the information the owner-operator groups want access to is proprietary shipper information, which shippers want to keep private, the Transportation Intermediaries Association told HDT in 2020.

As the transportation attorneys at Scopelitis, Garvin, Light, Hanson & Feary noted in an email alert, “The proposal significantly impacts the confidentiality of economic relationships between shippers, brokers, and carriers."

This is not the only regulatory action the FMCSA has taken regarding brokers in the past few years. A year ago, it published a final rule targeting fraudulent and insolvent freight brokers. However, a recent announcement has delayed that from going into full effect until January 2026.

FMCSA’s Proposed Broker Transparency Rule Would:

1. Require brokers to maintain records electronically so they would be easier to share. In its notice of proposed rulemaking the agency said it believes that many brokers already maintain their records in an electronic format.

2. Revise the required contents of brokers’ records, including all charges and payments connected with the shipment, including a description, the amount, the date, and any claims associated with the shipment such as cargo damage.

3. Require brokers to provide records upon request. The current regulation frames the broker transparency requirement as a right to review the records. The proposed amendment would reframe it as a regulatory duty imposed on brokers.

4. Require brokers to provide the records within 48 hours when a party to the transaction requests those records. "This provision is intended to ensure that the requesting party receives the records in a timely manner, to support the resolution of issues around service or payment," explained the agency.

Would Broker Transparency Affect Freight Rates?

Some motor carriers believe that increased broker transparency would have a material effect on negotiated freight rates, FMCSA said in its notice.

“The agency believes that other market factors, rather than the availability of additional information through broker transparency, are likely dominant in setting freight rates. 

"However, the agency has not ruled out the possibility that motor carriers and shippers could negotiate for better rates over time using the broker transparency information. The agency seeks further comment on this issue.”

The proposal lists eight specific questions on which the agency is seeking input:

1. What impact, if any, would the proposed rule have on freight rates?

2. How common is electronic recordkeeping among household goods brokers? 

3. How much time would a broker spend creating an electronic record from paper documents for the mandated records? What would be the costs for a broker to create an electronic record per transaction?

4. Do you believe that the 48-hour timeframe would create a substantial burden for brokers? 

5. If this proposal effectively reduced instances of illegal brokering, through carrier policing with transparency information, would the brokers engaged in illegal practices exit the market, resulting in the transfer of illicit profits to legally operating motor carriers and/or brokers?

6. Should freight brokers and household goods brokers be subject to the same recordkeeping requirements under Section 371.3? 

7. Should parties requesting records be required to submit their request in writing? Should they be required to submit their request electronically? Would requiring a specific format impose a cost on the parties or otherwise deter requests for transparency? 

8. Would the proposal that records be provided electronically make broker transparency more likely, as compared to not specifying a method of provided the records? Should the agency be more specific in requiring a particular format for records?

FMCSA is accepting comments on its proposed broker transparency rule, scheduled for publication in the Federal Register for Nov. 20, for a period of 60 days from publication. 

Updated 11:45 a.m. EST Nov 20, 2024, to add statement from TIA.