Is that “dispatch service” helping a motor carrier secure new business operating as a “bona fide agent” of the carrier or is it a “broker”? An important distinction when the latter comes with the required broker authority and a $75,000 bond or trust fund.
In the Infrastructure Investment and Jobs Act (IIJA), Congress directed the Federal Motor Carrier Safety Administration (FMCSA) to clarify these three terms and discuss whether advancements in technology call for a change in regulatory definitions.
FMCSA conducted an initial review of the terminology in June 2022. Trucking industry comments concurred that using the internet to operate freight brokerages has not changed the essential nature of the business. So, FMCSA has not initiated a rulemaking to adjust the existing definitions of “broker” and “bona fide agent.”
Now FMCSA has published “interim guidance” on the three terms, with a particular focus on “dispatch service,” a term not defined in regulation. While the guidance does not have the force of law, as would a regulation, it clarifies FMCSA’s approach to a topic. Here, FMCSA underscores, facts are central to determining which term applies to an actor in the freight brokerage sector. The “interim guidance” reviews the facts FMCSA looks for.
Because this is “interim” guidance, you can submit comments through Jan. 17, 2023.
Why is this guidance important? Because there are financial consequences for getting it wrong. A “dispatch service” may perform many functions for a motor carrier, which can be very helpful to a smaller carrier without a large staff. But if the “dispatch service” also secures loads for the carrier — and perhaps does so for other carriers, as well – and in doing so negotiates with shippers, then FMCSA says those facts says may indicate “unauthorized brokerage activities.” That would subject the “dispatch service” to financial penalties under law, leaving the motor carrier without the protection of the $75,000 bond an authorized broker must carry.
The regulatory definitions of “broker” and “bona fide agent” highlight the factual differences FMCSA considers. Under federal law, a broker is a “person who, for compensation, arranges… the transportation of property by an authorized motor carrier.” Brokers, however, are not themselves motor carriers “or persons who are employees or bona fide agents of carriers.”
By contrast, “bona fide agents” under federal law “are part of the normal organization” of the carrier, performing duties “under the carrier’s directions pursuant to a preexisting agreement” and do not have discretion “in allocating traffic between the carrier and others.”
A motor carrier retaining a “dispatch service” can control the facts FMCSA examines by using a time-honored mechanism – the written contract. That contract can lay out exactly the functions to be performed by the “dispatch service.” It can say, when it comes to securing loads, the “dispatch service” is working exclusively for the hiring motor carrier and cannot negotiate with shippers or handle the finances. In other words, the contract can position the “dispatch service” closer to the definition of a “bona fide agent.”
There is nothing wrong with a motor carrier doing business with a reputable freight broker and gaining the protection of the $75,000 bond. But if the performance of multiple tasks, possibly at a lower cost, is desired, a “dispatch service” may be the route to go – under a well-defined contract.
The PrePass blog and podcasts are published as a public service of PrePass®, the most reliable and technologically advanced weigh station bypass and electronic trucking toll payment platform in North America. PrePass also includes INFORM™ Safety and Tolling software for improving truck safety scores and lowering toll costs.
