Are you working with a broker, a bona fide agent, or a dispatch service? As a motor carrier, who you choose as a business partner can have legal and financial repercussions. That, in part, motivated the Federal Motor Carrier Safety Administration (FMCSA) to issue its final guidance on the definitions appropriate to those entities.

Under federal law, 49 CFR 371.2(a), a broker is the person you, as a motor carrier, pay as an intermediary with a shipper when arranging for loads. Brokers are not themselves motor carriers or directly employed by carriers. They are independent entities. To protect your legal and financial interests, the law requires that brokers must be licensed by FMCSA, keep an accounting of the transactions they perform, and carry a $75,000 bond.

Bona fide agents under federal law, 49 CFR 371.2(b), become part of a motor carrier’s own organization, working under contract to perform duties which often include the procurement of loads.

Brokers may field offers from many motor carriers for the same load and coordinate between carriers and the shipper to match prices and service. Bona fide agents, by contrast, do not have discretion “in allocating traffic between the carrier and others.” The FMCSA final guidance clarifies that cumbersome phrase.

While a bona fide agent may have more than one motor carrier as a client, it cannot pick and choose which load goes to which carrier. The guidance offers examples of how bona fide agents can avoid “allocating traffic.” A bona fide agent, for example, may serve carrier clients in different geographic regions or handle hazardous material loads for one carrier and general freight for another. That distinction removes any conflict in the service the bona fide agent provides to each motor carrier.

Federal law does not require Bona fide agents to carry a bond. The written contract with the motor carrier should spell out how it protects the motor carrier’s legal and financial interests.

Dispatch service remains an outlier, even with FMCSA’s final guidance. Dispatch service does not have a statutory or regulatory definition. So, proceed with caution when dealing with a dispatch service. Motor carriers, and FMCSA itself, must carefully look at the facts to see if the dispatch service is operating more like a broker or more like a bona fide agent. The FMCSA final guidance lists multiple factors indicating whether a dispatch service must have broker authority. Federal penalties apply if a dispatch service functions as a broker without obtaining broker authority and carrying the $75,000 bond.

FMCSA has twice sought public input on what facts it should consider in applying these definitions – and what facts motor carriers should likewise consider when doing business with these entities. Because this guidance does not amount to a formal rulemaking, FMCSA was not legally required to seek that public input. But in the complex relationships among transportation partners, all clarification is welcome.

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