Truck services

Should independent dispatch services be treated like brokers?

Last month, the Federal Motor Carrier Safety Administration sought input from the trucking industry to help guide the agency in developing future guidance on the definitions of “broker” and “bona fide agent,” as required by the Infrastructure Investment and Employment Act (IIJA). ), legislation passed by Congress last year and signed into law by President Biden.

The FMCSA asked respondents to answer 13 specific questions related to brokers, bona fide agents, dispatch services and more. In the month the comment period was opened, the agency received 92 comments from various groups and individuals, including trucking groups, brokerage groups, and individual brokers and carriers.

One of the main topics of discussion among commentators was the definition of “dispatch services” and the role they play in trucking – and whether they should be required to obtain the broker’s authorization to operate.

In its comments, the Owner-Operator Independent Drivers Association said it may depend on what the dispatch service actually does for the carrier. OOIDA said that in general, if an intermediary handles money between the shipper and the motor carrier, then the intermediary is conducting a negotiated transaction and should have the operating authority of the broker. However, if an intermediary does not directly deliver money between a shipper and a carrier, it should not be considered a broker.

“If the shipping service is a party to the contract between the shipper and the carrier or plays a financial role directly between the shipper and the carrier, then it should need to obtain the authorization to operate from the broker”, said OOIDA. “If the shipping service presents itself as a contractor and a carrier can hire them to work for it as part of its normal organization by signing an agreement with an ongoing relationship whereby the carrier directs the tasks of the service shipment, then it must not need to obtain the operating authorization from the broker.

The Transportation Intermediaries Association group, representing brokers and freight forwarders, said there is currently a “dangerous loophole” in FMCSA regulations for companies that operate as dispatch services for more than one motor carrier.

“Many of these services operate illegally as unlicensed brokers,” TIA said. “These services handle freight payments but do not meet legal licensing or financial security requirements otherwise applicable to brokers.”

[Related: ‘You just lose’ when middlemen don’t pay: Broker reform eight years in the waiting]

The group added that a legal the dispatch service works on behalf of a motor carrier, where the dispatch service assists in booking loads and other services for a single carrier. These companies, TIA said, then receive a commission for their services — a very different model from brokers, in which a shipper pays a broker for the broker’s service, and the broker pays the carrier.

“The TIA believes that many dispatch services exploit a degree of ambiguity in the current definitions of brokers versus dispatch services and, as such, operate illegally as unlicensed brokers. The FMCSA should clarify the distinction between brokers and shipping services and prohibit these companies from offering such a service without a broker’s license.”

Load One LLC, a Michigan-based fleet of 450 trucks, didn’t mince words when it came to dispatch services in its comments. “‘Shipping services’ are brokers by all means and circumvent rules, regulations and insurance and liability requirements,” the company said. “People on social media [are] offering courses for a few hundred dollars to start your own dispatch service in days. It is illegal and must be suppressed as soon as possible.

Seeley Shipping Service and Sylvester Freight Logistics in their reviews provided information on how shipping services differ from brokers in their business models. The company said that the shipping services “do not connect shippers who need to move their goods with carriers capable of transporting them, therefore does not meet the criteria that correspond to the business model of the broker. The shipping services are also “known” for booking loads, however, in addition to planning truck movements, the model is completely different in every way.

Seeley and Sylvester Freight added that shipping services “under no circumstances” own money between carriers and shippers or brokers. “Holding money between shippers and motor carriers is a role outside the scope of the shipping services business model,” the company said. “Dispatch companies can help motor carriers prepare all the paperwork needed to submit payment, but they don’t handle cash.”

[Related: Yet another hand in the cookie jar: Counterpoints on independent dispatch]

When considering whether a dispatch service should be required to obtain broker authorization, Seeley and Sylvester said the FMCSA should consider whether the dispatch service works directly on behalf of shippers and arranges for freight to be transported by carriers, or works on behalf of carriers. to reserve loads offered by brokers.

“An authority should not be required, even when acting on behalf of multiple carriers, unless they arrange freight transport directly on behalf of shippers,” the company said. “An independent dispatcher is truly an independent contractor working on behalf of the carrier.”

Frank Donovan, owner of independent dispatch service Quality Dispatching Services, said dispatch services are hired by owner-operators to be a “good faith agent” working under the authority of the carrier to locate freight from brokers or shippers on behalf of the owner-operator.

Donovan concluded that brokers are not dispatchers and that dispatchers are not brokers: “Imposing the same financial and regulatory requirements for freight brokers on independent dispatchers is counter-intuitive and will impose an additional financial burden on our owners -operators at a time when we should be supporting hard-working truckers across the United States of America.

Yet TIA argued that dispatch services can only be categorized as bona fide agents if they act exclusively on behalf of a road carrier. This is one of the reasons why various stakeholders have argued for a new definition in regulatory language recognizing the role that dispatch services play, given that most work involves multiple motor carriers.

[Related: Time to account for independent dispatch services in regulation?]

But OOIDA and TIA said the FMCSA should use the current definition of “broker” to ultimately determine whether or not dispatch services need broker authority. This definition generally provides clear criteria for what constitutes a broker. OOIDA also noted that it is not the definition that is the problem, but rather how the companies themselves operate.

OOIDA argued that the complaints many carriers have about brokers are that existing regulations are not properly enforced. The group called on the FMCSA to update its broker transparency regulations to ensure carriers have access to transactional information.

In addition, OOIDA directed FMCSA to move forward with the development of the 2018 “Financial Liability of Brokers and Freight Forwarders” regulations, previously issued as an advisory. The rule would allow the FMCSA to immediately suspend a broker’s registration if available financial security (whether bond or trust) falls below the current required minimum of $75,000. Such a change could help combat the well-known “hit and move on” scam by various bad actors, establishing brokers only to move acquired cargo on board with no intention of ever paying a single carrier, before disappearing. with few consequences.

[Related: Critics say trust fund surety fails to protect truckers in claims against brokers]