When should a dispatch service be considered a bona fide agent? What role do bona fide agents play in the transportation of freight? The FMCSA is considering everything.
In a notice that is requesting comments and scheduled to be published in the federal register, the Federal Motor Carrier Safety Administration (FMCSA) is asking for help to inform future guidance on the definitions of broker and bona fide agents, while also clarifying the level of financial penalties for unauthorized brokerages.
Part of the problem is that there are differences in the definition of a broker in different sections of federal regulations.
Currently, 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.”
- “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.”
According to the notice, over the past decade, FMCSA has received numerous inquiries and several petitions related to the definition of a broker.
FMCSA stated that its new guidance is required by law to:
- Take into consideration the extent to which technology has changed the nature of freight brokerage, the role of bona fide agents and other aspects of the freight transportation industry.
- Examine the role of a dispatch service in the transportation industry.
- Examine the extent to which dispatch services could be considered brokers or bona fide agents.
- Clarify the level of financial penalties for unauthorized brokerage activities under 49 U.S.C. 14916, applicable to a dispatch service.
There are thirteen questions your can review and answer during the comment period, such as:
- What evaluation criteria should FMCSA use when determining whether a business model/entity meets the definition of a broker?
- What role should the possession of money exchanged between shippers and motor carriers in a brokered transaction play in determining whether one is conducting brokerage?
- Do dispatch services need to obtain a business license/employer identification number from the state in which they primarily conduct business?
- Electronic bulletin boards match shippers and carriers for a fee. The fee is a membership fee to have access to the bulletin board information. Should electronic bulletin boards be considered brokers and required to register with FMCSA to obtain broker operating authority? If so, when and why?
Go have your voice heard! Make a comment here.
What kind of insurance coverages do brokers need?
Today, brokers need a wider variety of protection that often includes:
- Truck/Freight Broker Auto, General Liability Coverage – Up to $5,000,000
- Professional (E&O) – Up to $1,000,000
- Contingent Cargo Liability – Up to $500,000
Truck Broker Liability is designed for truck brokers, along with trucking operations, that have brokerage authority. TBL is a hybrid primary liability policy that addresses the truck broker’s general liability arising out the ownership and use of a truck by the motor carrier of a brokered cargo move, in compliance with a written truck brokerage agreement.
It provides bodily injury and property damage liability coverage protecting the truck broker if legal action is taken because of a truck accident involving a motor carrier to whom they brokered a load.
General Liability is designed to respond to the liability a freight broker could assume other than liability to cargo or liability as result of a vehicle being driven. For example, a freight broker might be pulled into a lawsuit if third-party trucker or warehouse personnel was injured because of cargo being unloaded from their truck.
Errors and Omissions Insurance (E&O or professional liability) is designed to protect brokers from lawsuits that claim you made a mistake in your professional services and can help cover expensive court costs or settlements.
Contingent Cargo Legal Liability is designed to protect a transportation broker or freight forwarder against the liability assumed when deciding to move cargo for others. This provides coverage when a trucker’s primary motor truck cargo policy fails to assume the responsibility for cargo loss or damage.
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