Deadline for Response July 11

By: John Marchione and Alyssa Milby

The Federal Motor Carrier Safety Administration (“FMCSA”) has requested public comments on the growing question of what makes a broker a broker. The FMCSA breaks it down into a series of questions. The intent of the FMCSA is to publish future on the definitions of “brokers” and of “bona fide agents.” The FMCSA has indicated they will also be providing guidance on dispatch service providers and digital brokering. The guidance will cover penalties for unauthorized brokering. At this time, the FMCSA is not proposing new administrative rulemaking, although it is possible that comments to this request could trigger proposed rulemaking.

Responses to this notice, and the future FMCSA guidance on the issue, is expected to have a major impact on the industry, which presently operates with near silence from the FMCSA on interpretation and nuances in the regulations. The FMCSA is required to issue this guidance by November 15, 2022, in response to the Infrastructure Investment and Jobs Act (“IIJA”) enacted a year prior on November 15, 2021.

The FMCSA’s request gives the transportation industry a unique opportunity to share its voice on the regulation of brokers. Taylor Johnson is presently advising clients on this issue and preparing comments for those who wish to participate.

Under current federal law, the term “broker” is defined in two places.

First, 49 U.S.C. 13102(2) defines a “broker” as a “person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation.”

Next, 49 CFR 371.2(a) defines a “broker” as a “person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.”

While those definitions are similar, 49 CFR 371.2 adds certain people who are not brokers.

Included among the regulations “non-brokers” are “bona fide agents.” 49 CFR 371.2(b) defines them as “persons who are part of the normal organization of a motor carrier and perform duties under the carrier’s directions pursuant to a preexisting agreement which provides for a continuing relationship, precluding the exercise of discretion on the part of the agent in allocating traffic between the carrier and others.”

Under the IIJA, the FMCSA’s guidance must: (1) clarify the definitions of the terms “broker” and “bona fide agent” in 49 CFR 371.2; (2) take into consideration the extent to which technology has changed the nature of freight brokerage; (3) examine the role of dispatch service in the transportation industry; (4) examine the extent to which dispatch services could be considered broker or bona fide agents; and (5) clarify the level of financial penalties for unauthorized brokerage activities under 49 U.S.C. 14916, applicable to dispatch service.

To enable its guidance, the FMCSA is requesting comment on the following specific questions:

1. What evaluation criteria should FMCSA use when determining whether a business model/entity meets the definition of a broker?
2. Provide examples of operations that meet the definition of broker in 49 CFR 371.2 and examples of operations that do not meet the definition in 49 CFR 371.2.
3. What role should the possession of money exchanged between shippers and motor carriers in a brokered transaction play in determining whether one is conducting brokerage or not?
4. How would you define the term dispatch service? Is there a commonly accepted definition? What role do dispatch services play in the transportation industry?
5. To the best of your knowledge, do dispatch services need to obtain a business license/Employer Identification Number from the State in which they primarily conduct business?
6. Some “dispatch services” cite 49 CFR 371.2(b) as the reason they do not obtain FMCSA brokerage authority registration in order to conduct their operations. As noted above, section 371.2(b) states that bona fide agents are “persons who are part of the normal organization of a motor carrier and perform duties under the carrier’s directions pursuant to a pre-existing agreement which provides for a continuing relationship, precluding the exercise of discretion on the part of the agent in allocating traffic between the carrier and others.” Some dispatch services interpret this regulation as allowing them to represent more than one carrier yet not obtain broker operating authority registration. Others interpret this regulation to argue that a dispatch service can only represent one carrier without obtaining broker authority. What should FMCSA consider when determining if a dispatch service needs to obtain broker operating authority?
7. If a dispatch service represents more than one carrier, does this in and of itself make it a broker operating without authority?
8. When should a dispatch service be considered a bona fide agent?
9. What role do bona fide agents play in the transportation of freight?
10. Electronic bulletin boards match shippers and carriers for a fee. The fee is a membership fee to have access to the bulletin board information. Should electronic bulletin boards be considered brokers and required to register with FMCSA to obtain broker operating authority? If so, when and why?
11. How has technology changed the nature of freight brokerage, and how should these changes be reflected, if at all, in FMCSA’s guidance?
12. Are there other business models/services, other than dispatch services and electronic bulletin boards, that should be considered when clarifying the definition of broker?
13. Are there other aspects of the freight transportation industry that FMCSA should consider in issuing guidance pertaining to the definitions of Broker and bona fide agents?

The deadline for comments is July 11, 2022. The public can submit comments online with the FMCSA here, or by, fax, mail, or hand delivery. Given the critical role that brokers and bona fide agents play in the transportation industry, the FMCSA’s forthcoming guidance will be impactful. We would encourage any transportation entity with an interest in these topics to seize this opportunity to have your voice heard.