FMCSA Finalizes Freight Brokerage Definitions

The Federal Motor Carrier Safety Administration has published final guidance on the definitions of “broker,” “bona fide agent” and “dispatch service.” These definitions are important in two ways:

First, they show the facts FMCSA looks at when considering the application of federal regulations to these businesses. As FMCSA ponders its proposed financial responsibility requirements for brokers and freight forwarders (see ICSA Regulatory Roundup of January 2023), the agency will apply this definition of broker. Second, they alert motor carriers as to when truckers may not be protected by those same regulations.

ICSA informed members about the interim guidance from FMCSA in The Landing Gear for November 2022. The FMCSA final guidance repeats those definitions, as listed below:

“Broker” is defined at 49 U.S.C. 13102(2) and at 49 CFR 371.2(a). In both places, a broker is a “person who, for compensation, arranges… the transportation of property by an authorized motor carrier.” Brokers, however, are not themselves motor carriers “or persons who are employees or bona fide agents of carriers.”

The distinguishing feature of “bona fide agents” under 49 CFR 371.2(a) is that they “are part of the normal organization” of the carrier, performing duties “under the carrier’s directions pursuant to a preexisting agreement” and do not have discretion “in allocating traffic between the carrier and others.”

In the final guidance, FMCSA adds examples of what “allocating traffic” means for bona fide agents. A bona fide agent may have more than one motor carrier as a client but cannot offer them conflicting services. For example, a bona fide agent may serve carrier clients in different geographic regions or may handle hazardous material loads for one carrier and general freight for another – no conflict.

A “dispatch service” is not defined in federal law. A dispatch service may perform duties for a motor carrier unrelated to securing loads. But when it comes to loads, FMCSA indicates that among the critical facts are:

• Whether there a written agreement between the motor carrier and the “dispatch service;”
• Whether the “dispatch service” is working exclusively in the interest of the motor carrier; and
• Does the motor carrier continue to handle the negotiations and financial arrangements with shippers?

As FMCSA notes, and as ICSA advised, these definitions are extremely fact-sensitive. Facts matter… and facts are often in your control. A written contract, for example, can define the precise role a “dispatch service” performs for a motor carrier. That contract might prevent the “dispatch service” from serving multiple carriers or negotiating directly with a shipper – facts that FMCSA says may indicate “unauthorized brokerage activities,” by law subjecting the “dispatch service” to financial penalties and leaving the motor carrier without the protection of a broker’s bond.