FMCSA Issues Interim Guidance on Freight Brokers, Other Roles

The October Regulatory Roundup article on broker transparency caught the attention of many members, so we want to update you on interim guidance posted just yesterday by the Federal Motor Carrier Safety Administration in advance of possible rulemaking. FMCSA intends the guidance to help define key roles in the transport of goods. Is that company or person you hired to help you find loads truly the “dispatch service” they claim to be? Are they your “bona fide agent” serving your individual motor carrier needs? Have you actually engaged the services of a “broker,” one required under law to have broker authority, to post a $75,000 bond, and to obey federal regulations such as disclose load information including the broker’s compensation?

FMCSA’s interim guidance is intended to help carriers better define and understand these three roles in the trucking industry. Three quick things you need to know:

1. This is FMCSA “guidance.” It does not have the effect of regulation or law. FMCSA is saying, here is how we look at facts when determining what rules may apply. Because this is “interim” guidance, FMCSA is asking carriers if the agency got this right. You can submit your comments by January 17, 2023.
2. Determining exactly what role a party plays in a transaction, FMCSA emphasizes, is intensely fact-specific. True, the terms “broker” and “bona fide agent” are already defined in regulation – it would require a separate rulemaking to change those definitions – but there is always the question of whether the facts of a situation fit the definition. The term “dispatch service,” on the other hand, is not defined in regulation. Only facts can determine what rules may apply to a “dispatch service.”
3. Facts matter… and facts are often in your control. A written contract, FMCSA notes, 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.

In the Infrastructure Investment and Jobs Act (IIJA), Congress directed FMCSA to clarify these three terms and discuss whether today’s technology calls for a formal change in the regulatory definitions of “broker” and “bona fide agent.” FMCSA did an initial review in June 2022. Commenters at that time agreed that the fact brokerage activities are now conducted on the Internet rather than over the telephone does not change the nature of the business. So, FMCSA has not initiated a rulemaking to adjust those definitions.

“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.”

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:

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

Once again, comments on the FMCSA interim guidance are due by January 17, 2023.