Is that ā€œdispatch serviceā€ helping a motor carrier secure new business operating as a ā€œbona fide agentā€ of the carrier or is it a ā€œbrokerā€? 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 ā€œbrokerā€ and ā€œbona fide agent.ā€

Now FMCSA has published ā€œinterim guidanceā€ on the three terms, with a particular focus on ā€œdispatch service,ā€ 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 ā€œinterim guidanceā€ reviews the facts FMCSA looks for.

Because this is ā€œinterimā€ guidance, you can submit comments through Jan. 17, 2023.

Why is this guidance important? Ā Because there are financial consequences for getting it wrong. A ā€œdispatch serviceā€ may perform many functions for a motor carrier, which can be very helpful to a smaller carrier without a large staff. But if the ā€œdispatch serviceā€ 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 ā€œunauthorized brokerage activities.ā€ That would subject the ā€œdispatch serviceā€ 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 ā€œbrokerā€ and ā€œbona fide agentā€ highlight the factual differences FMCSA considers. Under federal law, a broker is a ā€œperson who, for compensation, arranges… the transportation of property by an authorized motor carrier.ā€ Brokers, however, are not themselves motor carriers ā€œor persons who are employees or bona fide agents of carriers.ā€

By contrast, ā€œbona fide agentsā€ under federal law ā€œare part of the normal organizationā€ of the carrier, performing duties ā€œunder the carrier’s directions pursuant to a preexisting agreementā€ and do not have discretion ā€œin allocating traffic between the carrier and others.ā€

A motor carrier retaining a ā€œdispatch serviceā€ 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 ā€œdispatch service.ā€ It can say, when it comes to securing loads, the ā€œdispatch serviceā€ 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 ā€œdispatch serviceā€ closer to the definition of a ā€œbona fide agent.ā€

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 ā€œdispatch serviceā€ may be the route to go – under a well-defined contract.

The PrePass blog and podcasts are published as a public service of PrePassĀ®, the most reliable and technologically advanced weigh station bypass and electronic trucking toll payment platform in North America. PrePass also includes INFORMā„¢ Safety and Tolling software for improving truck safety scores and lowering toll costs.