FMCSA is seeking comments on petition to eliminate freight broker transparency regulation

The Federal Motor Carrier Safety Administration (FMCSA) is currently accepting public comment on a petition regarding broker transparency filed by the largest trade group representing freight brokers in the U.S.

From now through January 25, 2021, the FMCSA is accepting public comment on a petition filed by the Transportation Intermediaries Association (TIA).

The TIA petition asks for the FMCSA to eliminate 49 CFR 371.3(c), which is the current regulation requiring freight brokers to keep and share transaction records with motor carriers.

The petition argues that “motor carrier transportation on the spot market is one of the most transparent market places in the world. Load boards, the internet, and rate quotes in person-to-person communications within the industry provide the rate transparency that was intended by 49 CFR 371.3 when commissions paid by carriers to brokers were common. Motor carriers have sufficient access to current market rates without inspecting brokers’ shipment records to find out what the brokers’ gross margins are on a load-by-load basis.”

The TIA petition also asks for FMCSA’s “regulatory guidance [to] ensure that interested parties can distinguish between a dispatch service and an authorized broker.”

From FMCSA documents describing the TIA petition:

TIA believes that some “dispatch services” are essentially unlicensed brokers that handle financial transactions for freight transportation services but do not meet the statutory licensing or financial security requirements applicable to brokers registered with FMCSA. TIA describes dispatch services as entities that provide a service on behalf of a motor carrier, where they assist on booking loads and other services.

TIA believes the Agency should publish regulatory guidance explaining that the legal duties of a dispatch service allow them to be an agent for one motor carrier, and that anything further requires a brokerage license and compliance with the financial responsibility requirements applicable to brokers. TIA believes this is especially necessary when the dispatch service is handling payment from the shipper and then making payment to the motor carrier. According to TIA, this guidance would ultimately enable private legal action to be taken for violations, which would allow the public and the Agency both to enforce the provisions of this regulation.

The FMCSA is particularly asking commenters to respond to the following seven questions.

1. To what extent would brokers’ disclosure of the records of individual transactions to individual motor carriers under 49 CFR 371.3(c) place brokers and their shipper clients at risk of having proprietary information concerning freight descriptions, transportation rates and routes disclosed to their competitors?

2. For authorized brokers, how often do motor carriers exercise their right under 49 CFR 371.3(c) to review the record of the transaction, and are there motor carriers who make requests on such a frequent basis that they could, if working with other motor carriers, learn certain proprietary information concerning shippers’ rates and routes?

3. In the absence of 49 CFR 371.3(c), what information concerning brokered transactions would authorized brokers share with the shippers and for-hire carriers?

4. To what extent do shippers engage in discussions with brokers about the rates the authorized motor carriers will be paid?

5. How often do shippers enter into negotiations about interstate transportation services with an entity that is neither an interstate motor carrier registered with FMCSA nor a broker registered with FMCSA?

6. Would the issuance of regulatory guidance concerning “dispatch services” provide an effective deterrent to unauthorized brokerage services, or would additional actions by FMCSA be required to address the challenges described by TIA?

7. Is there sufficient clarity in the current definitions of “broker,” “bona fide agents,” and “brokerage or brokerage service” under 49 CFR 371.2 to enable interested parties to identify dispatch services that are actually carrying out the functions of a registered broker and to file a complaint with FMCSA for subsequent investigation?

You can click here to submit your comments