FMCSA updates guidelines for brokers and shipping services

Federal regulators have attempted to clarify differences between brokers, bona fide agents and shipping services in new interim guidance issued Tuesday by the Federal Motor Carrier Safety Administration.

The guidelines, mandated by last year’s Infrastructure Act, aim to crack down on companies that engage in truck brokerage but without the appropriate approval from the FMCSA, an issue brokers claim makes their business illegal undermines.

While the FMCSA acknowledged that shipping services “can help ensure the carrier has a steady stream of shipments,” allowing them to focus on moving cargo, the way shipping services can fulfill that function , make the difference between being subject to FMCSA authority — including requiring them to have a $75,000 bond to protect their auto shipping customers from defaults — or not.

To make this distinction, the FMCSA listed six factors to determine whether a shipping service requires broker authority. Such power of attorney is required when the carrier:

  • Interacts or negotiates a freight shipment directly with the shipper or a shipper’s representative.
  • Accepts or receives compensation for a load from the broker or factoring company, or is involved in any part of the monetary transaction between these companies.
  • Arranges a freight shipment for a car carrier that does not have a written legal contract with the car carrier that meets the above criteria.
  • Accepts a shipment without a truck/carrier and then attempts to find a truck/carrier to transport the shipment.
  • Is a named party in the shipping contract.
  • Solicits the free market of carriers for the purpose of transporting a shipment of cargo.

FMCSA guidelines clarify that dispatchers acting as unauthorized brokers face civil penalties of up to $10,000 for each violation.

Congress also ordered that the FMCSA clarify what defines a “broker” versus a “good faith agent” working specifically for or on behalf of a transit company. Since the opinion of most commenters on the proposed guidance saw no need to change the current definition of ‘broker’, the Agency felt it necessary to make only one clarification: the relevance of the handling of funds in ship-motor carrier transactions.

For example, the Transportation Intermediaries Association (TIA), which represents brokers and 3PLs, and the Owner Operator Independent Drivers Association saw that how money is handled “has at least some relevance to whether you broker,” stated FMCSA.

However, the handling of funds exchanged between shippers and carriers “is a factor that strongly suggests the need for a broker’s authority…however, being considered a broker is not an absolute requirement,” the agency explained.

Regarding the definition of a “bona fide agent,” the FMCSA noted that several commentators, including TIA, the National Industrial Transportation League, and the Small Business in Transportation Coalition, contended that one can only represent a carrier to qualify as a bona fide agent are valid.

The FMCSA disagrees, stating that “representing more than one auto transport company does not necessarily mean one is a broker rather than a true agent.” In other words, a bona fide agent does not necessarily represent only one carrier.

But the FMCSA also states, “Any determination will be very fact-specific and will include determining whether the person or entity is involved in the allocation of traffic between auto carriers.”

Commenting on the FMCSA guidelines, Chris Burroughs, TIA’s vice president of government affairs, said the agency has adopted several of the association’s proposals on shipping services.

“This is a positive first step, although TIA believes this should be the first step, not the last, as illegal brokering activity continues to increase and these illegal shipping services circumvent registration and regulatory requirements,” Burroughs told FreightWaves. “TIA looks forward to continuing to work with the FMCSA on this important topic.”

FMCSA emphasized that the interim guidelines do not have the force of law and are not binding. The public has 60 days to comment, with possible updated agency guidance based on comments received.

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