FMCSA issues guidance on definition of ‘broker’

The Federal Motor Carrier Safety Administration is issuing interim guidance regarding the agency’s interpretation of the definitions of “broker” and “bona fide agents.”

According to the interim guidance, FMCSA clarified only one area of the definition of a broker: the relevance of an entity’s handling of funds in a transaction between shippers and motor carriers.

“After consideration of the stakeholder comments and the important role of financial responsibility in broker regulation, FMCSA wishes to clarify that handling money exchanged between shippers and motor carriers is a factor that strongly suggests the need for broker authority, but it is not an absolute requirement for one to be considered a broker,” the agency states.

The Owner-Operator Independent Drivers Association has said the definition of a broker is not the source of the problem.

“In our opinion, the current definition provides sufficient clarity to distinguish between brokers, bona fide agents, and dispatch services,” OOIDA wrote in comments. “It is not the definition of a broker that constitutes potential problems but rather how the business itself operates.”

Regarding the definition of a bona fide agent, FMCSA “determined that representing more than one motor carrier does not necessarily mean one is a broker rather than a bona fide agent. 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.”

OOIDA contends that FMCSA needs to enforce regulations that already exist.

“For years, small-business truckers have expressed frustration that regulations designed to provide fairness and transparency between motor carriers and brokers have been routinely evaded by brokers or simply not enforced by FMCSA,” the Owner-Operator Independent Drivers Association wrote in comments filed in July. “As the agency gathers information to direct upcoming guidance on the definitions of ‘broker’ and ‘bona fide agents,’ we believe many of the underlying issues could be solved through better compliance and enforcement of current regulations as well as finally implementing legislative provisions enacted years ago to prohibit dishonest brokers from conducting business within the trucking industry.”

Dispatch Services

FMCSA was also tasked to examine the role of dispatch services in the transportation industry and the extent to which such services could be considered brokers or bona fide agents. The agency determined that although there is no commonly accepted definition of a dispatch service, there are common features.

“First, they work exclusively for motor carriers, not for shippers,” FMCSA states. “Second, they source loads for motor carriers. And third, they perform additional services for motor carriers that are unrelated to sourcing shipments.”

FMCSA states that when a dispatch service does not participate in the arrangement of freight, or when it represents only one motor carrier, it is not a broker.

“If a dispatch service arranges transportation on behalf of multiple motor carriers and engages in the allocation of traffic, however, then pursuant to 49 CFR 371.2, it is not a bona fide agent and must obtain broker operating authority registration,” the agency states.

FMCSA is accepting comments on the interim guidance for 60 days beginning Nov. 16. To submit comments, click here.

Senior Editor Mark Schremmer contributed to this report.