FMCSA Issues Interim Guidance on When Dispatch Services Need Broker Authority

In November 2022, the Federal Motor Carrier Safety Administration issued interim guidance clarifying what makes a company a freight broker, who counts as a "bona fide agent" of a motor carrier, and when a truck dispatch service crosses the line into brokering. The guidance was published in the Federal Register on November 16, 2022.

Congress required the guidance in the Infrastructure Investment and Jobs Act. According to Transport Topics, the law directed FMCSA to consider how technology had changed freight brokerage and to examine the role of dispatch services.

Brokers and bona fide agents

FMCSA kept the existing regulatory definition of a broker. The agency said most commenters considered it adequate. It clarified one point: handling the money that passes between shippers and carriers. According to FreightWaves, FMCSA said handling funds "strongly suggests the need for broker authority" but is not an absolute requirement.

On bona fide agents, FMCSA disagreed with commenters who argued that an agent could represent only one carrier. The agency said representing more than one carrier "does not necessarily mean one is a broker rather than a bona fide agent." The deciding question was whether the person was allocating traffic between carriers.

The dispatch service test

FMCSA said dispatch services typically work only for motor carriers, find loads for them and provide other services unrelated to sourcing shipments. The agency said a dispatch service that does not take part in arranging freight, or represents only one carrier, is not a broker. A service that arranges transportation for multiple carriers and allocates traffic among them must obtain broker authority.

FreightWaves reported that the guidance listed six factors indicating a dispatch service needs broker authority. Those factors included:

• Negotiating directly with a shipper
• Accepting compensation from a broker or factoring company, or being involved in the payment
• Arranging freight for a carrier without a written contract
• Accepting a load before having a truck to haul it
• Being named on the shipping contract
• Soliciting the open market of carriers to move a load

Broker authority comes with a $75,000 financial security requirement. FreightWaves reported that unauthorized brokering carries civil penalties of up to $10,000 per violation.

Reaction

The Transportation Intermediaries Association called the guidance a positive first step. "Our members have been talking about carriers who were double-brokering freight and not having authority to do that," TIA's Chris Burroughs told Transport Topics.

FMCSA said the interim guidance was nonbinding. The public had 60 days to comment, and the agency could update the guidance afterward.

What it means for drivers and fleets

Owner-operators who used a dispatch service had reason to check how that service operated. If it negotiated with shippers, took payments or shopped loads across many carriers, it might need broker authority it did not have.

Dispatch services themselves had to decide whether to register as brokers or narrow their operations.