On June 15, 2023, the Federal Motor Carrier Safety Administration (“FMCSA”) issued final guidance regarding its “interpretation of the definitions of ‘broker’ and ‘bona fide agents’ as it relates to all brokers of transportation by motor vehicle.” However, if you were hoping for actual clarity with respect to whether a “dispatch service” is, on the one hand, required to maintain brokerage authority and comply with the requirements that accompany such operating authority or, on the other, able to operate freely without authority or risk of violating the unlawful brokering regulations of 49 USC 14916 as a bona fide agent, you were likely disappointed to learn that this Notification of Final Regulatory Guidance did nothing more than shrug and say, “it depends” and leave the determination of such status clearly on the fence.
49 CFR 371.2(b) defines Bona Fide Agents 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.” After referencing this definition, Section IV(B) of the FMCSA’s guidance dove into the meaning “allocating traffic” and set forth two examples detailing how a dispatch service can avoid being found to have allocated traffic. Those examples state:
“The first example is where a bona fide agent represents motor carriers that require the agent to source loads originating in different geographic areas and selected motor carriers will not pick up freight in the other carriers’ locations. For instance, if the agreement between the bona fide agent and Carrier A requires the agent to source loads originating only in Maine, New Hampshire, Vermont, or Massachusetts, and its agreement with Carrier B requires it to source loads originating only in Florida, Georgia, or Alabama, the entity would not need to exercise discretion because all loads originating in a particular geographic location would necessarily be assigned to the relevant carrier.
A second example is if the bona fide agent has agreements with multiple carriers to source specific types of loads and these services do not overlap. For instance, if the agent’s agreement with Carrier A requires the agent to source only hazardous materials loads, and the agreement with Carrier B requires it to exclude hazardous material loads, the agent would not have to exercise discretion as to which carrier to assign a load to, because the carriers are not willing or able to haul the same loads if sourced by the bona fide agent. Similarly, if Carrier A operates refrigerated trucks while Carrier B operates flatbed trucks, a bona fide agent may be able to represent both carriers without engaging in allocation of traffic.”
In reading these two examples, a reasonable person would recognize that dispatch services would only be able to fill their book of business by contracting with carriers where no two carriers overlap on all of the following parameters: (i) geographic scope, (ii) truck type, and (iii) commodity type. If the FMCSA had just stopped there, it would be easy for any neighbor to see which side of the fence a dispatch service was on using those three criteria from the two examples.
Unfortunately, the FMCSA did not stop there. Instead, in Section IV(F), in setting forth a factor test for determining whether a dispatch service is required to obtain broker authority, the FMCSA sets forth seven factors…with Factor 5 putting dispatch services right back on the fence. In Factor 5, where the allocation of traffic would be used to require a dispatch service to obtain broker authority, the FMCSA, intentionally or not, potentially limits the ability to determine a dispatch service is acting as a broker when it states:
“(5) The dispatch service engages in allocation of traffic by accepting a shipment that could be transported by more than one carrier with which it has agreements and assigns it to one of those carriers.”
In reading Factor 5, the FMCSA contradicts its earlier examples focused on (i) geographic scope, (ii) truck type, and (iii) commodity type, and instead adopts a position in the actual test that places the onus on whether a shipment “could be transported by more than one carrier.” As written, this Factor 5 seems to suggest that even if a dispatch service has two carriers under contract that operate within the same geographic scope, using the same truck types, and hauling the same commodities, if only one of those carriers can transport that specific shipment due to HOS or truck availability, then it is still not brokering, and no authority is necessary.
By way of example, if a temperature controlled shipment is offered in Miami, FL for pickup today, and the shipper closes in one hour, the fact that the dispatch service has two carrier clients operating reefer trailers in the greater Miami area transporting the same type of cargo may not be of any importance if only one of those carriers is able to get to the shipper prior to closing…as such shipment could only be transported by one carrier. Despite this apparent contradiction guidance, it is not likely we will gain any further clarity on this matter in the near future.