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MATS Discussion - Broker and Dispatch Guidelines

In recent months, federal regulators have been attempting to clarify the differences between brokers, bona fide agents and dispatch services with their new interim guidelines issued by the Federal Motor Carrier Safety Administration (FMCSA).

Mandated by the infrastructure bill of 2021, these guidelines are aimed at cracking down on companies that engage in truck brokering but without maintaining their proper authority from FMCSA. Which is an issue that many brokers claim will illegally undercut their business.

FMCSA acknowledges that dispatch services “can help to ensure that the motor carrier has a steady stream of shipments” which allows them to focus on moving freight. However, the way in which dispatch services perform that function can mean the difference between being under FMCSA authority or not.

Dispatch Broker Factors

In order to help make such a distinction, and to clarify muddy waters, FMCSA listed six factors that assist in determining if a dispatch service needs to have their broker authority. Such authority is required if the dispatch service:

• Is a named party on the shipping contract.
• Interacts or negotiates a shipment of freight directly with the shipper or a representative of the shipper.
• Arranges for a shipment of freight for a motor carrier, with which there is no written legal contract with the motor carrier that meets the aforementioned criteria.
• Accepts or takes compensation for a load from the broker or factoring company or is involved in any part of the monetary transaction between any of those entities.
• Is soliciting the open market of carriers for the purposes of transporting a freight shipment.
• Accepts a shipment without a truck/carrier then attempts to find a truck/carrier to move the shipment.

FMCSA’s guidelines also clarify that dispatchers operating as an unauthorized broker can/will carry civil penalties of up to $10,000 for each violation.

Clarification Equals Understanding

Congress also mandated that FMCSA must clarify what defines a “broker” versus a “bona fide agent” that works specifically for a motor carrier, or on the carrier’s behalf. Most of those providing comments on the proposed guidelines expressed zero need to change the current definition of “broker.” Although, the agency felt the need to make a very specific clarification: the relevance of handling funds in shipper/motor carrier transactions.

For example, the Transportation Intermediaries Association (TIA), which represents brokers and 3PLs, and the Owner Operator Independent Drivers Association (OOIDA), view the handling of money as having at least “some relevance as to whether one is brokering.”

However, while handling money that’s being exchanged between shippers and carriers is “a factor that strongly suggests the need for a broker authority, it is not an absolute requirement for one to be considered a broker,” FMSCA states.

Regarding the definition of a “bona fide agent,” FMCSA notes that multiple commenters, including TIA, the National Industrial Transportation League and the Small Business in Transportation Coalition contend that to be considered a “bona fide agent” one can only represent one carrier.

FMCSA disagrees, stating that “representing more than one motor carrier does not necessarily mean one is a broker as opposed to a bona fide agent.” Meaning, a “bona fide agent” does not necessarily have to represent only one carrier.

However, FMCSA also declares that: “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.”

FMCSA has emphasized that these interim guidelines do not have the full force of the law and are currently nonbinding.

Next Step in the Process

Last fall, FMCSA noted that it must evaluate how technology has changed freight brokerage, the roles of bona fide agents, and other parts of the freight transportation industry. After initial consideration of public comments received, FMCSA provided further clarification on its interpretation of the definitions of broker and bona fide agents, in addition to meeting other criteria required by the 2021 infrastructure law. 

While the interim guidance was effective immediately upon its publication, FMCSA has sought additional comments on the interim guidance and said it would issue final guidance by June 16. FMCSA is reopening the comment period in anticipation of hosting its public listening session during MATS, which will commence at 10 a.m. on March 31st. For anyone wishing to attend this session, click here to register.