FMCSA revising guidance on freight brokers and agents

The list of questions to be asked to test whether freight broker functions are being satisfied is interesting.

An important controversy is whether load boards are performing broker services. Usually these boards provide load choices for truckers for a membership fee. The actual transaction is between the shipper and and the carrier, and the freight payment is not processed by the load board.

Conventional brokers perform these matching services but collect the fees for each deal, paying the carrier directly using the money collected from the shipper, and deducting their brokerage fee.

The load board service is in some ways similar, and in some ways different. So there are arguments to be made on both sides. A study is required to see if the FMCSA should weigh in to make definitions differently and impose any rules changes.

The main requirements for brokers are to register with the FMCSA, and to file a bond to cover cases when the broker and the other parties cannot agree on the settled amounts of a transaction, or the resolution of claims when the broker goes out of business.

To what extent should load boards be required to do these things? Or is a different type of registry required, to be sure that load boards follow established business principles?

There’s a similar scenario in US government regulation: the FMC’s regulation of ocean freight forwarders or brokers and non-vessel-owning common carriers (NVOCCs). While the differences between the two are not similar to the truck broker case, the pattern of having two registration entities is the same.

It will be useful to see if the FMCSA can find any specific performance reasons why load boards or matching services should be subject to specific regulations.

I suspect that there should be some controls on their practices. But the controls required may not be well covered by making them freight brokers, as the rules are currently framed.

Truckers probably need some protection if a load board goes out of business or fails to deliver load contracts as they promise. And there should be some regulations to speak to the nature of contracts offered and their fine print that might be unfair to either the trucker or the shipper. But these shouldn’t be more severe or more far-reaching than those imposed on true brokers.

Truckers certainly have much more freedom to use a load board or not, and to accept contracts generated or not, and this is an advantage for them individually. They can select the kind of service relation they would like to provide.

John Gallagher Thursday, June 9, 2022

FMCSA revising guidance on freight brokers and agents – FreightWaves

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