WASHINGTON — The Federal Motor Carrier Safety Administration (FMCSA) issued regulatory guidance clarifying the definitions of “broker” and “bona fide agents” in a final ruling issued on Friday, June 16.
The ruling is designed to help stop illegal brokers and dispatchers from operating.
FMCSA issued the guidance in response to a mandate in the Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Law, and the Fiscal Year 2023 Appropriations Act. The guidance clarifies the definitions in the Code of Federal Regulations, with an eye toward efficiency and defining financial responsibilities. FMCSA issued interim guidance in November 2022.
“This final guidance arms freight brokers and entities operating as bona fide agents or dispatch services in the trucking industry with information needed to help make appropriate decisions for their operations,” said FMCSA Administrator Robin Hutcheson. “It also helps clarify for regulated carriers whether they should work with entities that do not have broker authority and associated financial responsibility.”
The guidance offers clarification for brokers, dispatch services, trade associations and other stakeholders across the trucking industry, according to the FMCSA.
FMCSA reviewed more than 130 comments filed during multiple comment periods for this guidance and considered them as part of the agency’s decision-making. FMCSA also sought comment on the guidance at a broker listening session it conducted during a major trucking show earlier this year.
James Lamb, president of The Small Business in Transportation Coalition (SBTC), said he “applauds FMCSA in reeling in unlicensed brokers through its final guidance.”
“By detailing that entities calling themselves ‘dispatchers,’ a term FMCSA acknowledges does not exist is law, cannot lawfully avoid the broker license as bona fide agents unless they separate their motor carrier principals by geographic area or commodity type, they have effectively gutted the dispatcher industry,” Lamb said.
Lamb added that while there is still no effective enforcement arm within FMCSA to police FMCSA’s distinctions, “this guidance now opens the door for complaints to DOT IG and will help immensely in private right of actions against dispatchers operating outside the scope and parameters of the FMCSA guidance.”
Lamb said that Congress “should recognize this as a plea by the agency to define dispatcher in the law, something SBTC’s proposed Transportation Intermediaries Accountability Act would do.”
Lamb called the FMCSA’s ruling “effectively a death blow for unlicensed brokers calling themselves dispatchers. The SBTC advises dispatchers to immediately get broker licenses or face lawsuits for illegal brokerage activity.”
In a statement, the Owner-Operator Independent Drivers Association said it is encouraged by the FMCSA’s guidance and believes it is a step in the right direction.
“However,” the statement continued, “we will continue to pursue other changes to ensure better business practices in brokering and transportation.”
Definition of broker
FMCSA has determined that the definition of “broker” is adequate. Handling money exchanged between shippers and motor carriers is one factor that strongly suggests the need for broker authority, but it is not an essential requirement for one to be considered a broker.
Definition of bona fide agent
According to the FMCSA, a bona fide agent may be either an employee of a motor carrier or a contractor but must perform its duties as specified in a preexisting agreement between the parties. While FMCSA has determined that the definition of “bona fide agent” is adequate, FMCSA clarifies that the term “allocating traffic,” which appears in the definition, means any exercise of discretion on an agent’s part when assigning a load to a motor carrier. If an entity representing more than one carrier exercises such discretion, it would not meet the definition of “bona fide agent.”
Role of dispatch services
There is no statutory or regulatory definition of a dispatch service, nor is there a commonly accepted definition of such a service, according to the FMCSA. Some features of dispatch services include working exclusively for motor carriers, not for shippers; sourcing loads for motor carriers; and performing additional services for motor carriers that are unrelated to sourcing shipments. FMCSA does not have statutory authority to regulate dispatch services unless such entities also meet the criteria for registration as brokers, freight forwarders, and/or motor carriers.
Dispatch service: Broker or bona fide agent
Dispatch services may be classified as either brokers or bona fide agents, depending on the nature and scope of their activities, according to the FMCSA. This requires a fact-specific analysis of whether the dispatch service’s activities meet the criteria set out in the statutory and regulatory definitions of “broker” or “bona fide agent.” While no single factor is paramount in assessing the business relationship between a dispatch service and a motor carrier, the extent of a motor carrier’s control is relevant because the greater control a carrier has over a dispatcher’s actions, the less likely the dispatcher is to exercise independent discretion in sourcing and allocating loads and hence need broker authority.
Factors indicating broker authority is not required
A dispatch service that meets the following criteria would generally be considered a bona fide agent and would not require broker authority, according to the FMCSA, which notes that “this list is not exclusive, and a dispatch service does not necessarily have to meet every listed factor, depending on its specific activities.”
The dispatch service has a written legal contractual relationship with a motor carrier that clearly reflects the motor carrier is appointing the dispatch service as a licensed agent for the motor carrier. This is often a long-term contractual relationship. The written legal contract should specify the insurance and liability responsibilities of the dispatch service and motor carrier.
The dispatch service complies with all state licensing requirements, if applicable.
The dispatch service goes through a broker to arrange for the transportation of shipments for the motor carrier and does not seek or solicit shippers for freight.
The dispatch service does not provide billing or accept compensation from the broker, third-party logistics company, or factoring company, but instead receives compensation from the motor carrier(s) based on the pre-determined written legal contractual agreement.
The dispatch service is not an intermediary or involved in the financial transaction between a broker and motor carrier.
The dispatch service is an IRS 1099 recipient from the motor carrier, or a W2 employee of the motor carrier as specified in the legal written contract agreement.
The dispatch service discloses that they are a dispatch service operating under an agreement with a specific motor carrier, and the shipment is arranged for that motor carrier only.
The dispatch service does not subsequently assign or arrange for the load to be carried/moved by another motor carrier.
A dispatch service does not provide their “services” for a motor carrier unless that motor carrier specifically appointed the dispatch service as their agent in accordance with the aforementioned requirements.
Factors indicating broker authority is required
The following factors indicate the dispatch service should obtain broker authority, according to the FMCSA, which notes that “this list is not exclusive, and a dispatch service does not necessarily have to meet every listed factor, depending on the on its specific activities.”
The dispatch service interacts with or negotiates any shipment of freight directly with the shipper, or a representative of the shipper.
The dispatch service 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.
The dispatch service arranges for a shipment of freight for a motor carrier and there is no written legal contract with the motor carrier that meets Section IV.E.1 of the Guidance above.
The dispatch service accepts a shipment without a truck/carrier, then attempts to find a truck/carrier to move the shipment.
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.
The dispatch service is a named party on the shipping contract.
The dispatch service is soliciting to the open market of carriers for the purposes of transporting a freight shipment.
The Trucker News Staff produces engaging content for not only TheTrucker.com, but also The Trucker Newspaper, which has been serving the trucking industry for more than 30 years. With a focus on drivers, the Trucker News Staff aims to provide relevant, objective content pertaining to the trucking segment of the transportation industry. The Trucker News Staff is based in Little Rock, Arkansas.