FMCSA Issues Guidance on When Dispatch Services Need Broker Authority

In November 2022, the Federal Motor Carrier Safety Administration (FMCSA) issued interim guidance explaining when freight dispatch services and others need broker operating authority. The guidance, published in the Federal Register on November 16, 2022, under docket FMCSA-2022-0134, took effect immediately. FMCSA also asked for comments by January 17, 2023, and said it might update the guidance if comments showed a need.

Why FMCSA issued it

Section 23021 of the Infrastructure Investment and Jobs Act, signed on November 15, 2021, directed FMCSA to issue guidance within a year clarifying the definitions of "broker" and "bona fide agents" in 49 CFR 371.2. Congress also told the agency to examine the role of dispatch services, how far they could be considered brokers or bona fide agents, and the penalties for unauthorized brokerage that would apply to them.

FMCSA requested comment on 13 specific questions on June 10, 2022, and more than 80 stakeholders responded, including individuals, trade associations, brokers and dispatch services.

The agency stressed that the guidance did not have the force and effect of law and was not meant to bind the public.

Brokers and money

Most commenters thought the existing definition of "broker" was adequate, so FMCSA clarified only one point: whether handling money matters. It said that handling money exchanged between shippers and motor carriers strongly suggested the need for broker authority, but was not an absolute requirement for being considered a broker. FMCSA noted that brokers must have a $75,000 bond or trust fund to protect carriers from non-payment.

The agency also said that entities that merely host an electronic platform where shippers and carriers connect directly, such as load boards, did not need broker authority, though each case had to be decided on its facts.

Bona fide agents and dispatchers

FMCSA said representing more than one motor carrier did not necessarily make someone a broker rather than a bona fide agent. The key question was whether the person or company was allocating traffic between carriers.

There was no agreed definition of a dispatch service, but FMCSA said such services generally worked only for carriers, found loads for them and provided other support. It concluded that a dispatch service that did not take part in arranging freight, or that represented only one carrier, was not a broker. A service that arranged transportation for multiple carriers and allocated traffic between them was not a bona fide agent and needed broker authority.

FMCSA listed factors suggesting a dispatcher did not need broker authority, including:

• a written contract appointing it as the carrier's agent and setting out insurance and liability responsibilities;
• working through brokers rather than soliciting shippers;
• being paid by the carrier, not by brokers, third-party logistics companies or factoring companies; and
• not reassigning loads to other carriers.

Factors pointing toward needing broker authority included negotiating directly with shippers, taking payment from brokers or factoring companies, accepting a load before having a truck to move it, being named on the shipping contract and soliciting the open market of carriers.

FMCSA said it did not believe Congress intended to eliminate dispatch services, which could help small carriers that could not afford a full-time dispatcher.

Penalties

A dispatch service found to be brokering without authority would face the penalties set out in federal law. FMCSA noted, however, that because of a statutory omission, it could not assess civil penalties for unauthorized brokerage itself, and could pursue them only through the Department of Justice in federal court.

Archive: this article describes rules and events as of November 2022. Regulations may have changed since, so check the current rule before relying on it.