For those living under a rock or missed the last four years, a fight over the ability for carriers to see how much brokerages make is inching closer to a showdown.
The Federal Motor Carrier Safety Administration (FMCSA) has proposed sweeping changes to broker transparency regulations, potentially reshaping how freight transactions are documented and shared within the industry.
The latest escalation came on Nov. 20, when the FMCSA published a Notice of Proposed Rulemaking (NPRM) titled “Transparency in Property Broker Transactions,” aiming to modernize and strengthen the existing regulations under 49 CFR 371.3. While 49 CFR 371.3 already gives carriers the “right to review the record of the transaction,” the FMCSA’s rulemaking notice pointed out that carriers rarely exercise that right due to contractual barriers imposed by brokers.
The current rules, which date back to the Motor Carrier Act of 1980, have been criticized by carriers for their lack of enforceability and the ease with which they can be circumvented through contractual waivers. Often freight brokers put waivers in the carrier onboarding packet, forcing carriers to sign away their rights to book a load.
Fast forward to May 2020 when the Owner-Operator Independent Drivers Association (OOIDA) and the Small Business in Transportation Coalition (SBTC) petitioned the FMCSA to weigh in on broker transparency.
What a broker sees may not be what a carrier gets
The NPRM that OOIDA and SBTC petitioned outlines four primary amendments to the current regulations:
Electronic Recordkeeping: Brokers would be required to maintain transaction records in an electronic format, facilitating easier access and review by carriers and shippers.
Comprehensive Content Requirements: The proposal mandates that records contain detailed information on all charges and payments related to each shipment, including descriptions, amounts, and dates.
Regulatory Duty vs. Right to Review: In a significant shift, the FMCSA proposes to reframe transparency as a “regulatory duty” imposed on brokers rather than a “right” given to carriers. This change aims to strengthen compliance and reduce the use of contractual waivers.
Timely Disclosure: Brokers would be obligated to provide requested records within 48 hours.
These proposed changes have ignited a fierce debate within the industry, with stakeholders divided on their potential impact and necessity.
Industry Reactions, ‘Yes, No, Maybe’
Proponents of the new rules, including OOIDA and SBTC, argue that enhanced transparency is crucial for fairness in the freight market.
During an FMCSA listening session last year at the Mid-America Trucking Show OOIDA Executive Vice President Lewie Pugh argued problems with broker transparency are brought up by their members every week. “One big broker, in particular, is guilty of this but from others as well. Our guys are getting chargebacks after they go to a customer and get a clean bill of lading and leave. A week or two later, they get a bill saying there’s a claim, and they always charge an even number like $500 or $1,000 … Because they don’t have broker transparency, they don’t even have to tell what the charge is for … ” adds Pugh.
Owner-operators like Daniel Koors challenged the FMCSA during the listening session, “You have the power to change this. You have the power to tell these brokers they have to follow the guidelines. That’s what we’re asking for.”
Freight brokers have voiced strong opposition to the proposed changes. The Transportation Intermediaries Association (TIA) has vowed to fight the rulemaking, arguing that it imposes unnecessary burdens and fails to address more pressing issues in the industry.
“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,” Chris Burroughs, former VP of government affairs and now president and CEO of the TIA said. “Instead, they want to initiate a rulemaking that involves private commercial contract negotiations. We’re kind of dumbfounded.”
Burroughs adds there are privacy concerns, as many brokers fear a carrier will use the information to back door or steal their customer. Burroughs adds, “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,”
For those who help brokers and carriers find each other, Ken Adamo, chief of analytics at DAT, took a deep dive and discovered that while many carriers think brokers are extorting them, the actual margins are not enough to fill every parking spot with brand new Mercedes G-Wagons. In a nine-page report, Adamo told Overdrive, “When looking at margin percentages by equipment type,” according to the published paper, “flatbed (F) comes in on top with a mean margin of 15.14%, followed by refrigerated (R) at 13.82%, with dry van (V) at the lowest margin” at 13.01%. The mean (average) margin reported among all the loads in the sample was 13.47%.”
That has not done much to dissuade drivers who believe freight brokers are taking an unfair amount of money from their pockets via margin. Other drivers feel freight brokers short-change them over cargo claims and other accessorials.
One brokerage in particular, Cincinnati-based Total Quality Logistics (TQL) came under fire from the National Owner Operators Association (NOOA) when driver Gabriel Scott drove his truck to TQL’s headquarters with his reefer trailer spray painted, “TQL PAY ME MY $8000 I GOT BILLS TO PAY.”
Overdrive’s Alex Lockie interviewed Scott, who began his five-month crusade against TQL after a cargo claim was placed on a $2000 shipment. For Scott, he didn’t find out until after the fact. “I went to send the documents to my factoring company, and in my email the next day TQL said there’s a claim on the load,” Scott told Lockie. “The driver said the customer never said anything, so I called TQL and they said the customer claimed there’s a hole in my trailer the size an eagle can fly through.”
Scott sent photos and documentation to exonerate his driver but told Overdrive that TQL went radio silent. Scott added, “If it would have just been a $2,000 load, I probably wouldn’t have gone to TQL’s office,” he said. But “according to them, it’s the policy of TQL to not release owed money pertaining to the carrier until all claims are solved.”
Ironically for freight brokers, driver groups like NOOA who organize boycotts against brokers and fight for higher spot rates were accidentally helped by brokerage incompetence. Mike Boston president and CEO of NOOA started with a private Facebook Group called NOOA/Owner Operators/No Authority/New Authority after getting lowballed on rates.
Matt Cole of Overdrive recounts the story, writing, “That idea took hold in the last few weeks after conversations with representatives from J.B. Hunt’s Power-Only Carriers program, which Boston said was offering rates too low for him to move his trucks. An email thread between Boston and a J.B. Hunt rep featuring, discussions to that effect was inadvertently sent by the rep to his full carrier list — many of the unwitting recipients jumped quickly to Boston’s defense.”
Boston’s NOOA/Owner Operators/No Authority/New Authority Facebook group now has over 44,000 members at the time of writing.
Regarding potential impacts, “It depends.”
For trucking and carriers, the proposed rules could provide a stronger foundation for rate negotiations and help reduce instances of fraudulent practices or mistaken chargebacks. The increased transparency might allow carriers to make more informed decisions about which loads to accept and at what price.
Avery Vise, vice president of trucking for FTR wasn’t as optimistic. Vise told Overdrive that getting access to brokers’ financial agreements could result in a marginal upward pressure in spot rates but doubts that, “it would make a significant difference.”
Vise adds “No level of transparency trumps market conditions when it comes to rate setting. If carriers have low utilization, they will take loads at lower rates than they would prefer. Ultimately, brokers will pay the rates needed to get capacity when and where they need it, and if they do not need to pay more, they won’t.”
The impact on shippers remains a point of contention. FreightWaves’ John Kingston wrote, “Jeff Tucker, the CEO of 3PL Tucker Worldwide, said during the comment period that shippers do not want information on what they are getting charged for shipping to ‘get down to the carrier level, because shippers don’t want their competitors to know what they’re paying for freight.’”
The economic implications of the proposed rule are still being debated. While FMCSA believes that the cost of implementing these changes would be minimal for most brokers who already maintain electronic records, industry representatives argue that the administrative burden could be substantial.
For everyone else, the FMCSA encourages stakeholders across the industry to submit their feedback before the public comment period ends on January 21, 2025. Make your voice heard. Go to Regulations.gov and search for the docket number FMCSA-2023-0257 to find the specific rulemaking on broker transparency. You can then follow the instructions to submit your comment online.
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