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Definitions of Broker and Bona Fide Agents Publication: Federal Register Agency: Federal Motor Carrier Safety Administration Byline: Robin Hutcheson Date: 16 November 2022 Subjects: American Government  , Trucking
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[Federal Register Volume 87, Number 220 (Wednesday, November 16, 2022)]
[Rules and Regulations]
[Pages 68635-68640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24923]
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DEPARTMENT OF TRANSPORTATION
Federal Motor Carrier Safety Administration
49 CFR Part 371
[Docket No. FMCSA-2022-0134]
Definitions of Broker and Bona Fide Agents
AGENCY: Federal Motor Carrier Safety Administration (FMCSA), Department
of Transportation (DOT).
ACTION: Notification of interim guidance; request for comments.
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SUMMARY: FMCSA is issuing this interim guidance to inform the public
and regulated entities about FMCSA's interpretation of the definitions
of ``broker'' and ``bona fide agents'' as it relates to all brokers of
transportation by motor vehicle. FMCSA is taking this action to better
define the terms in response to a mandate in the Infrastructure
Investment and Jobs Act (IIJA). After consideration of public comments
received, FMCSA is providing clarification on its interpretation of the
definitions of ``broker'' and ``bona fide agents,'' in addition to
meeting other criteria
[[Page 68636]]
required by the IIJA. While this interim guidance is effective
immediately, FMCSA is also seeking comments in response to this interim
guidance and may issue updated guidance if comments demonstrate a need.
DATES:
Effective date: This updated guidance is effective November 16,
2022.
Comment date: Comments must be received on or before January 17,
2023.
FOR FURTHER INFORMATION CONTACT: Mr. Jeff Secrist, Registration,
Licensing, and Insurance Division, Office of Registration and Safety
Information, FMCSA, 1200 New Jersey Avenue SE, Washington, DC 20590-
0001, (202) 385-2367, jeff.secrist@dot.gov. If you have questions on
viewing or submitting material to the docket, contact Dockets
Operations, (202) 366-9826.
SUPPLEMENTARY INFORMATION:
I. Public Participation and Request for Comments
A. Request for Public Comments
FMCSA requests public comment on its regulatory guidance and the
factors the Agency will use in its interpretation of the definitions of
``broker'' and ``bona fide agents.''
Docket: For access to the docket to read background documents or
comments, go to www.regulations.gov at any time or visit Room W12-140
on the ground level of the West Building, DOT, 1200 New Jersey Avenue
SE, Washington, DC, between 9 a.m. and 5 p.m., ET, Monday through
Friday, except Federal holidays. If you want acknowledgment that we
received your comments, please include a self-addressed, stamped
envelope or postcard or print the acknowledgement page that appears
after submitting comments online.
Privacy: In accordance with 5 U.S.C. 553(c), DOT solicits comments
from the public to better inform its guidance process. DOT posts these
comments, without edit, including any personal information the
commenter provides, to www.regulations.gov, as described in the system
of records notice (DOT/ALL-14 FDMS), which can be reviewed at
www.dot.gov/privacy.
B. Submitting Comments
If you submit a comment, please include the docket number for this
notice (FMCSA-2022-0134), indicate the specific section of this
document to which your comment applies, and provide a reason for each
suggestion or recommendation. You may submit your comments and material
online or by fax, mail, or hand delivery, but please use only one of
these means. FMCSA recommends that you include your name and a mailing
address, an email address, or a phone number in the body of your
document so FMCSA can contact you if there are questions regarding your
submission.
To submit your comment online, go to https://www.regulations.gov/docket/FMCSA-2022-0134/document, click on this notice, click
``Comment,'' and type your comment into the text box on the following
screen.
If you submit your comments by mail or hand delivery, submit them
in an unbound format, no larger than 8\1/2\ by 11 inches, suitable for
copying and electronic filing. If you submit comments by mail and would
like to know that they reached the facility, please enclose a stamped,
self-addressed postcard or envelope.
C. Confidential Business Information (CBI)
CBI is commercial or financial information that is both customarily
and actually treated as private by its owner. Under the Freedom of
Information Act (5 U.S.C. 552), CBI is exempt from public disclosure.
If your comments to this notice contain commercial or financial
information that is customarily treated as private, that you actually
treat as private, and that is relevant or responsive to the notice, it
is important that you clearly designate the submitted comments as CBI.
Please mark each page of your submission that constitutes CBI as
``PROPIN'' to indicate it contains proprietary information. FMCSA will
treat such marked submissions as confidential under the Freedom of
Information Act, and they will not be placed in the public docket for
this notice. Submissions containing CBI should be sent to Mr. Brian
Dahlin, Chief, Regulatory Evaluation Division, Office of Policy, FMCSA,
1200 New Jersey Avenue SE, Washington, DC 20590-0001. Any comments
FMCSA receives not specifically designated as CBI will be placed in the
public docket for this proceeding.
D. Viewing Comments and Documents
To view any documents mentioned as being available in the docket,
go to https://www.regulations.gov/docket/FMCSA-2022-0134/document and
choose the document to review. To view comments, click this notice,
then click ``Browse Comments.'' If you do not have access to the
internet, you may view the docket online by visiting Dockets Operations
in Room W12-140 on the ground floor of the DOT West Building, 1200 New
Jersey Avenue SE, Washington, DC 20590-0001, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. To be sure someone is
there to help you, please call (202) 366-9317 or (202) 366-9826 before
visiting Dockets Operations.
E. Privacy Act
In accordance with 49 U.S.C. 31315(b), DOT solicits comments from
the public to better inform its decision-making process DOT posts these
comments, without edit, including any personal information the
commenter provides, to www.regulations.gov. As described in the system
of records notice DOT/ALL 14--FDMS, which can be reviewed at https://www.transportation.gov/privacy, the comments are searchable by the name
of the submitter.
II. Background
Broker is defined in 49 U.S.C. 13102(2) as a ``person, other than a
motor carrier or an employee or agent of a motor carrier, that as a
principal or agent sells, offers for sale, negotiates for, or holds
itself out by solicitation, advertisement, or otherwise as selling,
providing, or arranging for, transportation by motor carrier for
compensation.'' It is also defined in 49 CFR 371.2(a) as a ``person
who, for compensation, arranges, or offers to arrange, the
transportation of property by an authorized motor carrier. Motor
carriers, or persons who are employees or bona fide agents of carriers,
are not brokers within the meaning of this section when they arrange or
offer to arrange the transportation of shipments which they are
authorized to transport and which they have accepted and legally bound
themselves to transport.'' In that same section, bona fide agents are
defined as ``persons who are part of the normal organization of a motor
carrier and perform duties under the carrier's directions pursuant to a
preexisting agreement which provides for a continuing relationship,
precluding the exercise of discretion on the part of the agent in
allocating traffic between the carrier and others.'' 49 CFR 371.2(b).
On November 15, 2021, the President signed the IIJA into law (Pub.
L. 117-58, 135 Stat. 429). Section 23021 of the IIJA \1\ directed the
Secretary (FMCSA) to issue guidance, within one year of the date of
enactment of the IIJA, clarifying the definitions of the terms
``broker'' and ``bona fide agents'' in 49 CFR 371.2. The guidance must
take into consideration the extent to which technology has changed the
nature of freight brokerage, the role of bona fide
[[Page 68637]]
agents, and other aspects of the freight transportation industry.
Additionally, when issuing the guidance, FMCSA must, at a minimum: (1)
examine the role of a dispatch service in the transportation industry;
(2) examine the extent to which dispatch services could be considered
brokers or bona fide agents; and (3) clarify the level of financial
penalties for unauthorized brokerage activities under 49 U.S.C. 14916,
applicable to a dispatch service.\2\
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\1\ The full text is available at congress.gov/117/plaws/publ58/PLAW-117publ58.pdf.
\2\ Due to a statutory omission, FMCSA is unable to assess civil
penalties for violations of 49 U.S.C. 14916 and may pursue such
penalties only through the Department of Justice in federal court.
Congress has indicated interest in FMCSA's statutory authority in a
recent House Appropriations Committee Report.
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In an effort to obtain and consider stakeholder input in the
development of its guidance, FMCSA issued a Federal Register notice on
June 10, 2022, seeking comment in 13 specific areas. 87 FR 35593.
Stakeholder Comments
FMCSA appreciates the robust response to our request for comment.
Over 80 stakeholders filed comments in the public docket, including
individuals, trade associations, brokers, and dispatch services.\3\
While the Agency does not specifically reference all comments in this
guidance, the Agency would like to assure stakeholders it has reviewed
and considered all comments filed.
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\3\ FMCSA appreciates commenters that provided submissions by
the July 11 deadline for comment submission. A number of commenters
submitted comments after the deadline. While FMCSA reminds
stakeholders of the importance of submitting timely comments, in
this particular proceeding, FMCSA will consider the late-filed
comments in the interest of developing a complete record. While
FMCSA accepted the comments in this proceeding, it may not consider
late-filed comments in future proceedings.
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III. Compliance With the IIJA
A. Technology
As an initial matter, commenters were nearly unanimous that while
technology has changed freight brokerage, such changes have not
affected the fundamental nature of freight brokerage, nor are they
relevant for the issuance of this guidance.\4\ One commenter did note
that the technological changes have exacerbated fraud problems.\5\
Accordingly, while the Agency recognizes that brokerage has changed
immeasurably due to technology, including moving from a phone based
system to one based on the internet, such changes do not impact the
fundamental nature of brokerage, which involves arranging
transportation for compensation, and hence do not have a significant
impact on this guidance.
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\4\ See comments of Truckstop.com, at 5; Mode Transportation
(Mode), at 8; Transportation Intermediaries Association (TIA), at
10; National Industrial Transportation League (NITL), at 2; Small
business in Transportation Coalition (SBTC), at 14; England
Logistics (England), at 8; and Uship, at 3.
\5\ See Comments of 13 stakeholders (13 Stakeholder comments),
at 12-13. The 13 stakeholders include the Air & Expedited Motor
Carriers Association, Airforwarders Association, Alliance for Safe,
Efficient, and Competitive Truck Transportation (ASECTT), Auto
Haulers Association of America, American Home Furnishings Alliance,
Apex Capital Corp, National Association of Small Trucking Companies
(NASTC), PFA Transportation Insurance & Surety Services, Sompo
International, Transportation & Logistics Council, Specialized
Furniture Carriers, The Expedite Association of North America,
Transportation Loss Prevention and Security Association.
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B. Bona Fide Agents
Stakeholders provided FMCSA with useful information on the role of
bona fide agents. Commenters have described bona fide agents as
advocates or a sales force for a single motor carrier,\6\ an outside
sales force that acquires freight for an employer,\7\ a dispatch
service used in lieu of motor carrier employees,\8\ people who look for
freight for a motor carrier,\9\ a service that allows motor carriers to
outsource operations instead of having employees handle them,\10\ a
sales force from acquired motor carriers that big motor carriers
use,\11\ and an operation where people work for one motor carrier and
have no discretion to allocate traffic.\12\ Based upon stakeholder
comments, it appears that bona fide agents are generally considered
individuals/entities that solicit business for a motor carrier.
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\6\ See Mode comments, at 7.
\7\ See comment of AWM Associates, LLC (AWM), at 4.
\8\ See TIA comments, at 9.
\9\ See comments of the Owner-Operator Independent Drivers
Association (OOIDA), at 5.
\10\ See comments of the Intermodal Association of North America
(IANA), at 5.
\11\ See 13 Stakeholder comments, at 10-11.
\12\ See comments of the American Trucking Associations Moving
and Storage Conference (MSC), at 5.
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C. Other Aspects of the Freight Transportation Industry
Finally, stakeholders provided input, albeit more limited, on other
aspects of the freight transportation industry. A broker indicated that
other aspects of the transportation industry do not need to be
considered.\13\ A managing general agency and program administrator for
insurance companies focused on transportation indicated that FMCSA
should issue guidance that is consistent with the Motor Carrier Safety
Improvement Act of 1999 and the Moving Ahead for Progress in the 21st
Century Act (MAP-21).\14\ A truck safety advocacy group indicated that
FMCSA must issue a clear definition of broker that enables
enforcement.\15\ And, a coalition of stakeholders noted the significant
ramifications of being considered a broker or not.\16\
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\13\ See comments of Mode, at 8.
\14\ See comments of Greenwich Transportation Underwriters, at
2.
\15\ See comments of the Truck Safety Coalition (TSC), at 3.
FMCSA reminds stakeholders that guidance is not enforceable, in
contrast to statutes and regulations, which are.
\16\ See 13 Stakeholder comments, at 4-6.
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While stakeholders did not provide FMCSA with specific information
related to the requirement that the Agency must consider ``other
aspects of the freight transportation industry'' in issuing the
guidance, FMCSA recognizes that its guidance is operating in a broader
context and has impacts beyond the immediate focus of this guidance. In
today's notice, FMCSA has worked to avoid creating unintended
consequences, in issuing guidance on its interpretation of its
regulations and related matters. While guidance may be relevant to
stakeholder compliance with FMCSA's regulations, any changes to FMCSA's
regulations and hence compliance responsibilities would need to be
enacted in a separate rulemaking proceeding.\17\
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\17\ FMCSA notes and appreciates SBTC's Petition for rulemaking
regarding the definition of ``dispatcher.'' As noted in its response
to SBTC, FMCSA is continuing to review SBTC's petition. Today's
notice is not to be interpreted as a decision on SBTC's petition.
Other stakeholders are free to file petitions for rulemaking related
to the issues covered in today's notice as well.
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IV. Interim Guidance
With the aforementioned consideration of factors as background,
FMCSA now turns to the core IIJA mandate: the issuance of guidance
pertaining to the definition of broker and bona fide agents, the
examination of the role of dispatch services in the transportation
industry, the extent to which dispatch services could be considered
brokers or bona fide agents, and the level of financial penalties for
unauthorized brokerage activities under 49 U.S.C. 14916 applicable to a
dispatch service. This document does not have the force and effect of
law and is not meant to bind the public in any way, and the document is
intended only to provide information to the public regarding existing
requirements under the law or agency policies
A. Definition of Broker
While FMCSA is unable to change the definition of ``broker'' absent
a rulemaking, it is able to provide clarification here. As an initial
matter,
[[Page 68638]]
there was a split amongst stakeholders on whether the current
definition of broker was adequate. A majority of stakeholders believed
that the current definition of broker was adequate,\18\ while others
proposed some changes. A safety advocacy group recommended amendment of
the definition of ``broker.'' \19\ A stakeholder representing the
household goods (HHG) motor carrier industry asked FMCSA to clarify
that merely selling leads does not require an entity to obtain broker
authority.\20\ One broker believed that FMCSA should amend the
definition of ``broker'' to comport with changes in MAP-21 that
required motor carriers and hence their agents to obtain broker
operating authority.\21\ Additionally, internet based load matching
services have requested that FMCSA consider electronic load boards to
not be considered brokers.\22\
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\18\ See comments of Mode, at 3-4; TIA, at 3; OOIDA, at 2; NITL,
at 2; IANA, at 2; MSC, at 2-3; Agricultural and Food Transporters
Conference of ATA and multiple state trucking associations (AFTC),
at 2; 13 Stakeholder comments, at 4; Larry Walker.
\19\ TSC comments, at 2. In order for FMCSA to consider such a
change, TSC would need to file a petition for rulemaking.
\20\ See comments of MSC, at 4. FMCSA appreciates MSC's comments
and recognizes that they have raised the issue with the Agency for
quite some time. In order to give stakeholders a chance to comment
in this area, FMCSA will treat MSC's comments as a request for
guidance on the definition of HHG broker and issue guidance in a
separate proceeding.
\21\ See Comments of England, at 1-4. FMCSA recognizes this
issue but does not believe that this is the appropriate forum to
resolve it. England would need to file a petition for rulemaking
with the Agency for a change in the definition of ``broker.''
However, as England notes, Congress did not change the definition of
``broker'' in 49 U.S.C. 13102(2). In order for FMCSA to change the
definition of broker in its regulations as England suggests, the
Agency would have to carefully consider its authority to make such a
change given that Congress specifically left the prior definition of
``broker'' in place in MAP-21.
\22\ See comments of DAT, at 1; Truckstop.com, at 1-5; and
Uship, at 4. Comments filed by representatives of the HHG motor
carrier industry do not believe a carveout from the broker
definition for load boards is appropriate. See comments of Unigroup/
Mayflower/MoveRescue, at 3. While whether an entity requires broker
operating authority must be determined on a case by case basis,
FMCSA does not believe that where entities merely host an electronic
platform for shippers and motor carriers to connect directly that
broker operating authority registration is required. This position
is consistent with a 2000 letter from FMCSA that has been placed in
the docket. See Letter from Judith Rutledge, FMCSA Acting Chief
Counsel, to Andrew K. Light, Esq.
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Given the prevailing view among commenters that the current
definition of ``broker'' is adequate, the Agency feels the need to
clarify it in only one area: the relevance of an entity's handling of
funds in a transaction between shippers and motor carrier. FMCSA
appreciates the robust input it received on this issue. Some commenters
believed that whether one handles funds is irrelevant to whether one is
a broker.\23\ A coalition of stakeholders believed the handling of
money is not determinative in the broker determination.\24\ Other
stakeholders felt that the handling of money had at least some
relevance as to whether one is brokering.\25\
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\23\ See comments of SBTC, at 6; England, at 5; TSC, at 2.
\24\ See 13 Stakeholder comments, at 6-7.
\25\ See comments of TIA, at 7; OOIDA, at 4; MSC, at 4; Cox
Automotive, at 1-2.
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After consideration of the stakeholder comments and the important
role of financial responsibility in broker regulation,\26\ FMCSA wishes
to clarify that handling money exchanged between shippers and motor
carriers is a factor that strongly suggests the need for broker
authority, but it is not an absolute requirement for one to be
considered a broker.
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\26\ One of the most significant broker regulations is the
requirement that brokers have a $75,000 bond or trust fund to
protect motor carriers from non-payment. Where a shipper pays a fee
to third party that then takes a profit and remits the balance to a
motor carrier, the third party is clearly required to have broker
authority. FMCSA will soon be issuing a Notice of Proposed
Rulemaking on broker and freight forwarder financial responsibility,
which will further clarify related duties.
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B. Definition of Bona Fide Agent
Next, FMCSA is mandated to clarify the definition of ``bona fide
agents'' in 49 CFR 371.2. Stakeholders provided feedback on this point.
A HHG motor carrier trade association thought the current definition
was ``clear as to what entities fall within that term.'' \27\ A broker
indicated that the definition should be eliminated due to MAP-21
requiring motor carriers, and hence their agents, to have broker
authority.\28\ And multiple entities believe that in order to be deemed
a ``bona fide agent'' one can represent only one motor carrier.\29\
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\27\ See comments of the MSC, at 5.
\28\ See comments of England, at 1-4. As noted above, any such
change would require rulemaking in accordance with the APA and
statutory authority concerns would need to be addressed.
\29\ See comments of TIA, at 8; NITL, at 2; SBTC, at 9.
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After careful consideration, FMCSA has determined that representing
more than one motor carrier does not necessarily mean one is a broker
rather than a bona fide agent. Any determination will be highly fact
specific and will entail determining whether the person or company is
engaged in the allocation of traffic between motor carriers.
C. Role of Dispatch Services
Next, the IIJA required the agency to examine the role of dispatch
services in the transportation industry and the extent to which such
services could be considered brokers or bona fide agents.
Stakeholder comments make clear that there is no universally
accepted definition of ``dispatch service,'' nor did Congress define
the term in the IIJA provision mandating this guidance.\30\ One broker
trade association characterized it is as a vague term,\31\ while a
coalition of stakeholders said it is an invented term.\32\ According to
a self-identified dispatch service, dispatchers represent motor
carriers, they don't connect shippers and motor carriers, they don't
handle money, but they do provide carrier support services.\33\
Additional commenters stated that dispatchers perform back office
operations for motor carriers; \34\ they book freight and perform other
tasks; \35\ they perform many administrative duties and basic
accounting for small carriers; \36\ and they are paid a percentage of
the freight charges from a motor carrier.\37\ Other stakeholders
indicate that dispatch services find loads for motor carriers, handle
administrative tasks and assist with compliance,\38\ source shipments,
and allocate shipments between motor carriers.\39\ According to a
shipper trade association, dispatch services would be expected to be
like an in-house truck dispatcher, but in reality many are operating
more like brokers.\40\ A broker commenter indicated that dispatch
services have multiple motor carriers in their client base, they seek
freight and obtain freight for motor carriers, and they are paid by
motor carriers.\41\
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\30\ See comments of England, at 5-7.
\31\ See TIA comments, at 7.
\32\ See 13 stakeholder comments, at 7.
\33\ See comments of Seeley & Sylvester. LLC, at 2-4; See also
comments of A1 Express, at 2 (stating that dispatch services ``are
and should be a carrier support service.'') Note that a number of
individuals submitted identical comments which are cited as A1
Express.
\34\ See Mode comments, at 5; See also comments from Shelley
Smith (stating that ``a dispatcher should be categorized as a back
office assistant because that is truly a power dispatcher.'').
\35\ See comments of Quality Dispatching, at 5.
\36\ See comments of WCF Freight Transport.
\37\ See comments of AWM Associates LLC, at 2.
\38\ See comments of OOIDA, at 4.
\39\ See comments of IANA, at 3-4.
\40\ See comments of the Transportation and Logistics Council,
Inc., at 2.
\41\ See comments of England, at 5-7.
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After consideration of the public comments, while it is clear that
there is no commonly accepted definition of a dispatch service, such
services appear to have certain common features. First,
[[Page 68639]]
they work exclusively for motor carriers, not for shippers. Second,
they source loads for motor carriers. And third, they perform
additional services for motor carriers that are unrelated to sourcing
shipments.
D. Dispatch Service: Broker or Bona Fide Agent
Further, the IIJA mandated that FMCSA examine when a dispatch
service could be considered a broker and when it could be considered a
bona fide agent. Stakeholders provided significant input on these
points.
A trade association indicated that when a dispatch service
represents one motor carrier it is a bona fide agent, but when it
represents more than one it is a broker.\42\ A broker thought that when
a dispatch service only performed back office operations, it was not a
broker, but if it arranges loads it is.\43\ A dispatch service
indicated that dispatch services are bona fide agents, as they are
merely agents to locate freight and are paid a flat fee or a
percentage.\44\ Another dispatch service also believes that a dispatch
service is a bona fide agent and not a broker because dispatch services
do not connect shippers with carriers that can transport their loads,
and therefore do not meet the broker business model.\45\ A consulting
firm believes that dispatch services are bona fide agents if they are
employees per IRS regulations, but not if they represent more than one
motor carrier.\46\ Several trade organizations believe that if a
dispatch service represents more than one motor carrier it is a broker,
and that the handling of funds warrants a finding of brokerage.\47\ A
coalition of 13 stakeholders believes that representing more than one
motor carrier renders a dispatch service a broker, and a broker
believes that representing more than one motor carrier takes one
outside of the definition of ``bona fide agent.'' \48\ Finally, a
dispatch service indicated that broker authority should be required
only when arranging transportation on behalf of shippers.\49\
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\42\ See comments of IANA, at 4.
\43\ See comments of Mode, at 5.
\44\ See comments of Quality Dispatching, at 4-5.
\45\ See comments of A1 Express, at 2.
\46\ See comments of AWM, at 4.
\47\ See comments of TIA, at 7; and OOIDA, at 4.
\48\ See comments of 13 stakeholders, at 10; England, at 8.
\49\ See comments of Seeley & Sylvester LLC, at 4.
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After careful consideration, FMCSA clarifies that when a dispatch
service does not participate in the arrangement of freight, or when it
represents only one motor carrier, it is not a broker. If a dispatch
service arranges transportation on behalf of multiple motor carriers
and engages in the allocation of traffic, however, then pursuant to 49
CFR 371.2, it is not a bona fide agent and must obtain broker operating
authority registration. Ultimately, the analysis of whether a person or
entity requires broker authority is often highly fact specific and must
be made on a case-by-case basis.
Regarding whether a dispatch service is a bona fide agent, one must
analyze whether the service falls within the definition of bona fide
agent in 49 CFR 371.2(b). However, if the dispatch service allocates
traffic between two motor carriers, it cannot be a bona fide agent by
definition.
E. Dispatch Services That Would Not Require Broker Authority
Generally, the factors relevant to whether a dispatch service is
not required to obtain broker authority are stated below:
(1) The dispatch service has a written legal contractual
relationship with a motor carrier that clearly reflects the motor
carrier is appointing the dispatch service as a licensed agent for the
motor carrier. This is often a long-term contractual relationship;
(2) The written legal contract specifies the insurance and
liability responsibilities of the dispatch service and motor carrier.
The dispatch service must also meet all state licensing requirements;
(3) The dispatch service goes through a broker to arrange for the
transportation of shipments for the motor carrier. The dispatch service
may not seek or solicit shippers for freight;
(4) The dispatch service does not provide billing nor accept
compensation from the broker, 3PL (third-party logistics company), or
factoring company, but instead receives compensation from the motor
carrier(s) based on the pre-determined written legal contractual
agreement;
(5) The dispatch service is not an intermediary or involved in the
financial transaction between a broker and motor carrier;
(6) The dispatch service is an IRS 1099 recipient from the motor
carrier, or a W2 employee of the motor carrier as specified in the
legal written contract agreement;
(7) The dispatch service discloses that they are a dispatch service
operating under the authority of a specific motor carrier, and the
shipment is arranged for that motor carrier only;
(8) The dispatch service does not subsequently assign or arrange
for the load to be carried/moved by another motor carrier; or
(9) A dispatch service does not provide their ``services'' for a
motor carrier unless that motor carrier specifically appointed the
dispatch service as their agent in accordance with the aforementioned
requirements.
F. Dispatch Services That Require Broker Authority
The following factors would indicate the dispatch service should
obtain broker authority:
(1) The dispatch service interacts or negotiates a shipment of
freight directly with the shipper, or a representative of the shipper;
(2) The dispatch service accepts or takes compensation for a load
from the broker, or factoring company, or is involved in any part of
the monetary transaction between any of those entities;
(3) The dispatch service arranges for a shipment of freight for a
motor carrier, with which there is no written legal contract with the
motor carrier that meets the aforementioned criteria;
(4) The dispatch service accepts a shipment without a truck/
carrier, then attempts to find a truck/carrier to move the shipment;
(5) The dispatch service is a named party on the shipping contract;
or
(6) The dispatch service is soliciting to the open market of
carriers for the purposes of transporting a freight shipment.
It is clear based on feedback from industry that there is a need
and desire for dispatch services, among large and small motor carriers.
A beneficial role that a dispatch service may provide is the
outsourcing of resources for small motor carriers who cannot afford a
full-time employee to perform these functions. The dispatch service can
help to ensure the motor carrier has a steady stream of shipments while
allowing the motor carrier to focus on its core business of safely
transporting freight. FMCSA does not believe it is the intent of
Congress to eliminate the services that dispatch services provide.
While no single factor is paramount in assessing the business
relationship between a dispatch service and a motor carrier, the extent
of a motor carrier's control over the individual(s) performing the
dispatch services is highly significant, i.e., the dispatch service
works on behalf of the motor carrier and makes decisions based on the
motor carrier's guidance and direction. As noted, FMCSA determines
whether a dispatcher is conducting broker operations on a case-by-case
basis, utilizing factors including those above.
[[Page 68640]]
G. Financial Penalties
Finally, FMCSA must clarify the level of penalties for unauthorized
brokerage applicable to dispatch services. Such an assessment is
straightforward. If the dispatch service is deemed to be providing
unauthorized brokerage services pursuant to 49 U.S.C. 14916, the
service will be subject to applicable penalties.\50\ If no finding of
unauthorized brokerage is made, it will not be subject to such
penalties.
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\50\ Penalties for violations of section 14916 are provided in
49 U.S.C. 14916(c)(1),(d).
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V. Request for Public Comment
FMCSA requests public comment on its regulatory guidance and the
factors the Agency will use in its interpretation of the definitions of
``broker'' and ``bona fide agent.'' The Agency welcomes comments from
stakeholders that are relevant to identifying a dispatch service that
engages in actions that would require broker authority compared with
actions that don't require broker authority. Additionally, FMCSA
welcomes comments concerning the potential impact of this guidance on
dispatch services upon which the broker rules would be considered
applicable.
Robin Hutcheson,
Administrator.
[FR Doc. 2022-24923 Filed 11-15-22; 8:45 am]
BILLING CODE 4910-EX-P