Friday, June 21, 2024

FMCSA shuts door on brokers in rate transparency dispute

WASHINGTON — The Federal Motor Carrier Safety Administration has denied a rulemaking petition by the Transportation Intermediaries Association (TIA) to remove a requirement that freight brokers disclose to carriers transaction records between brokers and shippers.

FMCSA’s denial, published Friday, was issued just a day after the agency agreed to initiate a formal rulemaking by two groups representing small-business truckers – the Owner-Operator Independent Drivers Association and the Small Business in Transportation Coalition (SBTC) – requesting that brokers be prohibited from denying carriers the ability to access such records.

All three petitions (FMCSA combined the OOIDA and SBTC petitions into a single rulemaking procedure) were filed in 2020.

“After careful consideration, FMCSA has determined that TIA’s petition does not contain adequate justification to initiate rulemaking,” the agency wrote to TIA Vice President of government affairs Chris Burroughs. FMCSA noted that it had reviewed all comments on TIA’s request and held a public listening session on it as well.

“FMCSA believes that elimination of the records disclosure provision would be contrary to the stated transportation policy goals in 49 USC 13101, including promotion of fairness and efficiency in the transportation industry,” FMCSA stated. “Therefore, FMCSA is denying TIA’s petition for rulemaking.”

Asked to comment, Burroughs said TIA is “extremely disappointed the agency is taking this route,” he told FreightWaves.

“We’ve got a situation where hundreds of millions of dollars of freight is being stolen by fraudulent companies in the trucking market, the [National Highway Traffic Safety Administration] is telling us that truck crashes are up 10%, a majority of the trucks on the road go without a [safety] rating – it’s a complete failure by the FMCSA when it comes to safety,” Burroughs said. “Instead, they want to initiate a rulemaking that involves private commercial contract negotiations. We’re kind of dumbfounded.”

At issue, as laid out in the OOIDA and SBTC petitions, is whether a provision requiring a driver or other counterparty to a broker-managed transaction be able to obtain and review documentation on the deal from the broker — which is the current law [49 CFR 371.3(c)] — can be turned into a rule that the counterparties must get that documentation if requested.

Quoting from SBTC’s petition, FMCSA noted that the group explained how freight rates at the time had “dropped drastically and that motor carriers have reported instances of brokers engaging in ‘profiteering, price gouging and low-balling tactics’.”

FMCSA also underscored SBTC’s claims at the time that brokers, in some instances, were receiving commissions of up to 65% on loads due to the sudden freight shortage in the early days of the pandemic, combined with overcapacity in the trucking markets.

“To evade regulations, some brokers have resorted to requiring carriers, as parties to broker transactions, to waive their rights to obtain documents that show the amount the shipper is paying the broker,” FMCSA stated, referring to SBTC’s petition. “SBTC further states that [49 CFR 371.3] should be strengthened to stop this abuse.”

In addition to strengthening the broker transparency provision in the regulation, OOIDA also wants FMCSA to require that brokers provide an electronic copy of each transaction record automatically within 48 hours after the contractual service has been completed.

“Our problem with electronic submission of data from our members is that this is our customers’ information, and we’re not confident this information will be kept confidential,” Burroughs countered.

“Certain brokers have to include contract language so that proprietary shipper information is not disclosed, and these groups want to make it illegal. No one is forcing carriers to sign these contracts or even to work with a broker.”

He added that, whenever there is a downturn as in the current market, “the freight rates are driven down by supply and demand – but our guys always look like the villains.”

On the same day FMCSA agreed to initiate the rulemaking, OOIDA President and CEO Todd Spencer wrote to FMCSA Administrator Robin Hutcheson to emphasize that more regulatory oversight on the issue will not only protect carriers from unscrupulous brokers, “it helps to protect the public by providing a marketplace in which each party behaves in a clear and transparent manner and will also give motor carriers better protections when there are claims or disagreements with brokers,” he asserted. 

Related articles:

Broker trade group renews double-brokering debate with new white paper

FMCSA poses questions on broker reporting requirements

Trucker rally for fair rates gets White House attention

Click for more FreightWaves articles by John Gallagher.

The post FMCSA shuts door on brokers in rate transparency dispute appeared first on FreightWaves.

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