Definitions of Broker and Bona Fide Agents, 39368-39373 [2023-13080]

Download as PDF 39368 Federal Register / Vol. 88, No. 116 / Friday, June 16, 2023 / Rules and Regulations the definition of ‘‘covered regulatory action’’ in section 2–202 of the Executive Order. This action is not subject to Executive Order 13045 because it does not impose additional requirements beyond those imposed by state law. H. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866. ddrumheller on DSK120RN23PROD with RULES1 I. National Technology Transfer and Advancement Act (NTTAA) Section 12(d) of the NTTAA directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. The EPA believes that this action is not subject to the requirements of section 12(d) of the NTTAA because application of those requirements would be inconsistent with the CAA. J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations Executive Order 12898 (Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, Feb. 16, 1994) directs Federal agencies to identify and address ‘‘disproportionately high and adverse human health or environmental effects’’ of their actions on minority populations and low-income populations to the greatest extent practicable and permitted by law. EPA defines environmental justice (EJ) as ‘‘the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.’’ EPA further defines the term fair treatment to mean that ‘‘no group of people should bear a disproportionate burden of environmental harms and risks, including those resulting from the negative environmental consequences of industrial, governmental, and commercial operations or programs and policies.’’ Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA’s role is to review state choices, and approve those choices if they meet VerDate Sep<11>2014 15:19 Jun 15, 2023 Jkt 259001 the minimum criteria of the Act. Accordingly, this final action is finalizing a limited approval and limited disapproval of MDAQMD Rule 1157 as meeting federal requirements and does not impose additional requirements beyond those imposed by state law. The State did not evaluate environmental justice considerations as part of its SIP submittal; the CAA and applicable implementing regulations neither prohibit nor require such an evaluation. EPA did not perform an EJ analysis and did not consider EJ in this action. Due to the nature of the action being taken here, this action is expected to have a neutral to positive impact on the air quality of the affected area. Consideration of EJ is not required as part of this action, and there is no information in the record inconsistent with the stated goal of E.O. 12898 of achieving environmental justice for people of color, low-income populations, and Indigenous peoples. K. Congressional Review Act (CRA) This action is subject to the CRA, and the EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action is not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). L. Petitions for Judicial Review Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by August 15, 2023. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements (see section 307(b)(2)). List of Subjects in 40 CFR Part 52 Environmental protection, Air pollution control, Carbon monoxide, Incorporation by reference, Intergovernmental relations, Nitrogen oxides, Ozone, Reporting and recordkeeping requirements. Dated: June 7, 2023. Martha Guzman Aceves, Regional Administrator, Region IX. For the reasons stated in the preamble, the Environmental Protection Agency amends part 52, chapter I, title 40 of the Code of Federal Regulations as follows: PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 PART 52—APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS 1. The authority citation for part 52 continues to read as follows: ■ Authority: 42 U.S.C. 7401 et seq. Subpart F—California 2. Section 52.220 is amended by adding paragraphs (c)(248)(i)(D)(2) and(c)(518)(i)(A)(10) to read as follows: ■ § 52.220 Identification of plan—in part. * * * * * (c) * * * (248) * * * (i) * * * (D) * * * (2) Previously approved on April 20, 1999, in paragraph (c)(248)(i)(D)(1) of this section and now deleted with replacement in paragraph (c)(518)(i)(A)(10): Rule 1157, amended May 19, 1997. * * * * * (518) * * * (i) * * * (A) * * * (10) Rule 1157, ‘‘Boilers and Process Heaters,’’ amended on January 22, 2018. * * * * * § 52.248 Identification of plan—conditional approval. 3. Section 52.248 is amended by removing and reserving paragraph (d)(1)(vii). ■ [FR Doc. 2023–12632 Filed 6–15–23; 8:45 am] BILLING CODE 6560–50–P DEPARTMENT OF TRANSPORTATION Federal Motor Carrier Safety Administration 49 CFR Part 371 [Docket No. FMCSA–2022–0134] Definitions of Broker and Bona Fide Agents Federal Motor Carrier Safety Administration (FMCSA), Department of Transportation (DOT). ACTION: Notification of final regulatory guidance. AGENCY: FMCSA issues final guidance, in response to a mandate in the Infrastructure Investment and Jobs Act (IIJA) 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 previously published a notice SUMMARY: E:\FR\FM\16JNR1.SGM 16JNR1 Federal Register / Vol. 88, No. 116 / Friday, June 16, 2023 / Rules and Regulations seeking public comment on the IIJA provision on June 9, 2022, and issued interim guidance on November 16, 2022. Today’s notice makes updates to November 2022 guidance in response to the public comments the Agency received. This updated guidance is applicable on June 16, 2023. DATES: Mr. Jeffrey Secrist, Registration, Licensing, and Insurance Division, Office of Registration, 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: FOR FURTHER INFORMATION CONTACT: I. Viewing Comments and Documents Viewing Documents and Comments To view documents related to this docket, go to https:// www.regulations.gov/docket/FMCSA2022-0134/document and choose the document to review. To view comments, visit the same website, then click ‘‘Browse All Comments.’’ If you do not have access to the internet, you may view the docket online by visiting Dockets Operations 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. ddrumheller on DSK120RN23PROD with RULES1 Privacy Act All comments the Agency received in response to the November 16, 2022, notice mentioned above were posted without change to https:// www.regulations.gov. Anyone may search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or of the person signing the comment, if submitted on behalf of an association, business, labor union, etc.). 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.transportation.gov/privacy. II. Background On November 15, 2021, the President signed the IIJA into law (Pub. L. 117–58, 135 Stat. 429). Section 23021 of the VerDate Sep<11>2014 15:19 Jun 15, 2023 Jkt 259001 IIJA 1 directed the Secretary (through 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 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 The notice and comment rulemaking procedures of the Administrative Procedure Act (APA) do not apply to interpretative rules and general statements of policy (commonly called ‘‘guidance’’) (5 U.S.C. 553(b)(A)). Accordingly, the APA did not specifically require FMCSA to solicit public comment, and most of the other statutes and executive orders that would be applicable if the opportunity for prior notice and public comment was required similarly do not apply. Nevertheless, in order to ensure that the guidance provides clear, useful, and relevant information for stakeholders, FMCSA solicited stakeholder input via a Federal Register notice published on June 9, 2022. (87 FR 35593). FMCSA then issued a Federal Register notice containing interim guidance. (87 FR 68635, Nov. 16, 2022). As part of the Consolidated Appropriations Act, 2023 (Pub. L. 117–328 (Dec. 29, 2022)), Congress directed FMCSA to finalize the guidance by June 16, 2023.3 While the interim guidance was effective immediately upon publication, FMCSA sought additional public comment to determine whether the guidance should be updated before being finalized. FMCSA also invited commenters to speak at a listening session during the Mid America Trucking Show (MATS) on March 31, 2023, but none of the commenters at the 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. 3 See Division L Joint Explanatory Statement to the Consolidated Appropriations Act, 2023. Staff of H.R. Comm. on Appropriations, 117th Cong. (Comm. Print 2023). PO 00000 Frm 00035 Fmt 4700 Sfmt 4700 39369 MATS session addressed this guidance. (87 FR 14439, Mar. 8, 2023). FMCSA also reopened the comment period for written comments, which were due by April 6, 2023. (87 FR 14322, Mar. 8, 2023). FMCSA now issues final guidance on the definitions of ‘‘broker’’ and ‘‘bona fide agent,’’ including guidance on the role and activities of entities referred to as ‘‘dispatch services’’ and the level of financial penalties for unauthorized brokerage services provided by such entities. 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. Stakeholder Comments FMCSA received 55 comments on the interim guidance, in addition to more than 80 comments received during the previous comment period, and the Agency appreciates the time and effort stakeholders took in submitting these comments. The commenters included individuals, trade associations, brokers, and dispatch services. 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. III. Compliance With IIJA A. Technology The IIJA required FMCSA to examine the impact of technological advances in the freight transportation industry. In the interim guidance, FMCSA recognized that freight brokerage has changed immeasurably due to technology, including moving from a phone-based system to one conducted mainly over the internet. (87 FR 68637). However, 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. Commenters on the interim guidance generally agreed with FMCSA’s position on the extent to which technology has changed the freight brokerage business and the impact of such changes. FMCSA does not believe there is any reason to revise its analysis for the final guidance. B. Bona Fide Agents The IIJA also required FMCSA to examine the role of bona fide agents in the freight transportation industry. Based upon previous stakeholder comments, FMCSA determined in the E:\FR\FM\16JNR1.SGM 16JNR1 39370 Federal Register / Vol. 88, No. 116 / Friday, June 16, 2023 / Rules and Regulations interim guidance that bona fide agents are generally considered to be individuals or entities that solicit business for a motor carrier. (87 FR 68638). In the recent comments, several commenters indicated that this statement may have made the relationship between a motor carrier and a bona fide agent seem too casual, when in reality a bona fide agent has a formalized and ongoing relationship with a particular motor carrier.4 FMCSA agrees that the regulatory definition of ‘‘bona fide agent’’ does not contemplate a casual relationship, as it requires the bona fide agent to be part of the motor carrier’s normal operations and to perform duties as directed by the motor carrier pursuant to a preexisting agreement which provides for a continuing relationship. 49 CFR 371.2(b). ddrumheller on DSK120RN23PROD with RULES1 C. Other Aspects of the Freight Transportation Industry Another topic the IIJA requires FMCSA to consider when issuing this guidance is ‘‘other aspects of the freight transportation industry.’’ Numerous drivers and motor carriers raised concerns about economic pressures negatively affecting the industry.5 A group of commenters also sought action regarding allegations of fraud, supply chain abuse, theft of cargo, double brokering, and misappropriation of funds occurring in the industry.6 In response, FMCSA notes that ‘‘double brokering’’ is not a term defined by statute or regulation, and commenters use the term to refer to several different activities. However, it appears most commenters concerned with double brokering are referring to ways in which some entities act as brokers without proper authority. FMCSA also notes that approximately 24 comments received in this docket asked the Agency to take actions beyond the scope of the guidance required by the IIJA, specifically regarding issues of transparency and fairness in transactions between motor carriers and brokers.7 4 See comments of PES, American Trucking Associations Moving & Storage Conference (ATA M&SC) at 3 FN6, and joint submission from MoveRescue, Mayflower Transit, LLC, and United Van Lines, LLC (MM&U) at 6. 5 See comments of PES, Hans Witt, Kadence Logistics Dispatching, and multiple anonymous commenters. 6 See two comments from Henry Seaton, on behalf of multiple stakeholders. 7 On March 17, 2023, FMCSA granted petitions from the Owner-Operator Independent Drivers Association (OOIDA) and the Small Business in Transportation Coalition (SBTC) to initiate a rulemaking on issues of transparency in brokered transactions. These comments appear to be related to this future rulemaking, and do not raise issues VerDate Sep<11>2014 15:19 Jun 15, 2023 Jkt 259001 While the guidance contained in this notice is limited to the issues Congress required FMCSA to examine with the enactment of IIJA, FMCSA nevertheless 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 its interpretation of its regulations and related matters. While the guidance may be relevant to stakeholder compliance with FMCSA’s regulations, any changes to FMCSA’s regulations, and consequently to a stakeholder’s compliance responsibilities, would need to be made through a rulemaking proceeding. IV. Final Guidance The interim guidance concerned six main areas: (1) the definition of broker; (2) the definition of bona fide agent; (3) the role of dispatch services in the transportation industry; (4) how to determine whether a dispatch service is acting as a broker or as a bona fide agent; (5) services dispatchers may provide without broker authority; and (6) services for which dispatchers must obtain broker authority in order to provide. The guidance also clarified the level of financial penalties for unauthorized brokerage activities under 49 U.S.C. 14916. FMCSA has considered the comments received and has made several updates to the guidance, discussed further below, and now issues final guidance on these topics. A. Definition of Broker Final Guidance: FMCSA has determined that the definition of ‘‘broker’’ at 49 CFR 371.2(a) is adequate. Handling money exchanged between shippers and motor carriers is one factor that strongly suggests the need for broker authority, but it is not an essential requirement for one to be considered a broker. Discussion: As explained in the interim guidance, FMCSA is unable to change the statutory definition of ‘‘broker’’ at 49 U.S.C. 13102(2). (87 FR 68637). Nor is it able to change the regulatory definition of ‘‘broker’’ at 49 CFR 371.2(a) without going through the rulemaking process. However, FMCSA did clarify in the interim guidance that, although handling money exchanged between shippers and motor carriers strongly suggests the need for broker authority, it is only one factor of the related to the guidance presented here. However, FMCSA will solicit public comment regarding transparency issues at the appropriate time. PO 00000 Frm 00036 Fmt 4700 Sfmt 4700 analysis and is not, standing alone, determinative. (87 FR 68638). Stakeholder reactions to FMCSA’s interim guidance were mainly supportive.8 Stakeholders asked FMCSA to clarify whether internet-based load matching services and load boards are considered brokers.9 While this topic garnered few comments, those that addressed it agreed that these services should not be considered brokers.10 However, some commenters expressed concerns about motor carriers, brokers, and dispatch services perpetrating fraud through the use of load boards.11 In response, FMCSA has determined that merely making information about potential shippers publicly available, regardless of whether a fee is charged, does not require an entity to obtain broker authority as long as the entity making the leads available is not otherwise involved in any transaction between the shipper and a motor carrier. B. Definition of Bona Fide Agent Final Guidance: A bona fide agent may be either an employee of a motor carrier or a contractor but must perform its duties as specified in a preexisting agreement between the parties. While FMCSA has determined that the definition of ‘‘bona fide agent’’ in 49 CFR 371.2(b) is adequate, FMCSA clarifies that the term ‘‘allocating traffic,’’ which appears in the definition, means any exercise of discretion on an agent’s part when assigning a load to a motor carrier. If an entity representing more than one carrier exercises such discretion, it would not meet the definition of ‘‘bona fide agent.’’ Discussion: The regulations define ‘‘bona fide’’ agents 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). FMCSA cannot change this definition absent a rulemaking. In the interim guidance, FMCSA determined that representing more than one motor carrier does not necessarily mean one is a broker rather than a bona fide agent. (87 FR 68638). Any 8 See, e.g., comments of SBTC at 1, ATA M&SC at 2–3 and ATA MS&C Supplemental Comment at 1, MM&U at 4–5, and Transportation Intermediaries Association (TIA) at 3. 9 See comments of ATA M&SC at 3. 10 See comments of ATA M&SC at 3 and ATA M&SC Supplemental Comment at 1; SBTC at 2. 11 See comments of Hans Witt and Robert Bradley. E:\FR\FM\16JNR1.SGM 16JNR1 ddrumheller on DSK120RN23PROD with RULES1 Federal Register / Vol. 88, No. 116 / Friday, June 16, 2023 / Rules and Regulations 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. Several commenters requested more clarity on the meaning of ‘‘allocation of traffic.’’ 12 FMCSA intended this term to mean any exercise of discretion, choice, or decision-making on the agent’s part about which motor carrier to assign a load. If a bona fide agent represents only one motor carrier, it will assign all loads it sources to that particular carrier and thus, no exercise of discretion is necessary, and there is no dispute that the agent is not a broker. However, an agent representing multiple carriers should be careful to structure its agreements to avoid the possibility of allocating traffic. The scope of these agreements and the agent’s compliance with the terms of the agreements are key factors in the analysis of whether such an agent may qualify as a bona fide agent under the regulatory definition at 49 CFR 371.2(b). To illustrate, FMCSA presents two examples of situations where a bona fide agent may be able to represent multiple motor carriers without engaging in allocation of traffic. The first example is where a bona fide agent represents motor carriers that require the agent to source loads originating in different geographic areas and selected motor carriers will not pick up freight in the other carriers’ locations. For instance, if the agreement between the bona fide agent and Carrier A requires the agent to source loads originating only in Maine, New Hampshire, Vermont, or Massachusetts, and its agreement with Carrier B requires it to source loads originating only in Florida, Georgia, or Alabama, the entity would not need to exercise discretion because all loads originating in a particular geographic location would necessarily be assigned to the relevant carrier. A second example is if the bona fide agent has agreements with multiple carriers to source specific types of loads and these services do not overlap. For instance, if the agent’s agreement with Carrier A requires the agent to source only hazardous materials loads, and the agreement with Carrier B requires it to exclude hazardous material loads, the agent would not have to exercise discretion as to which carrier to assign a load to, because the carriers are not willing or able to haul the same loads if sourced by the bona fide agent. Similarly, if Carrier A operates refrigerated trucks while Carrier B operates flatbed trucks, a bona fide agent may be able to represent both carriers without engaging in allocation of traffic. However, if the agent’s agreements require it to source the same type of loads for both carriers without geographic restrictions as described above, it could not represent both carriers without registering for broker authority, because any load assignments would necessarily require the entity to choose between carriers and would therefore constitute an allocation of traffic. Several commenters operating in the household goods industry also asked FMCSA to clarify whether this guidance applies to ‘‘household goods agents,’’ as that term is defined at 49 U.S.C. 13907 and 49 CFR 375.205.13 FMCSA initially determined it would address issues previously raised by the household goods industry in a separate proceeding. (87 FR 68638 at FN20). However, the stakeholders believe this would be unnecessary and asked FMCSA to address their concerns in this final guidance.14 FMCSA agrees with the stakeholders and, consequently, is issuing guidance here. FMCSA recognizes that entities operating in the household goods transportation industry are subject to additional regulations. ‘‘Household goods broker’’ is defined in 49 CFR 371.103 as ‘‘a person, other than a motor carrier or an employee or bona fide 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 of household goods by motor carrier for compensation.’’ Moreover, 49 CFR 375.205 permits household goods motor carriers engaged in interstate transportation of household goods to have agents and provides that a ‘‘prime agent,’’ a type of household good agent, ‘‘does not include a household goods broker or freight forwarder.’’ Thus, to the extent a person or company is operating as a prime agent in the household goods sector, this guidance would not be applicable to such person or company. C. Role of Dispatch Services Final Guidance: There is no statutory or regulatory definition of a dispatch service, nor is there a commonly accepted definition of such a service. 13 See comments of ATA M&SC at 3, MM&U 12 See comments of SBTC at 2–5, ATA M&SC at 4, and an anonymous commenter. VerDate Sep<11>2014 15:19 Jun 15, 2023 Jkt 259001 14 See comments of ATA M&SC at 3, MM&U at 6. PO 00000 Some features of dispatch services include working exclusively for motor carriers, not for shippers; sourcing loads for motor carriers; and performing additional services for motor carriers that are unrelated to sourcing shipments. FMCSA does not have statutory authority to regulate dispatch services unless such entities also meet the criteria for registration as brokers, freight forwarders, and/or motor carriers. Discussion: 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. However, Congress did not define the term ‘‘dispatch service’’ in the IIJA provision mandating this guidance, and the comments FMCSA received prior to issuing the interim guidance made clear that there is no universally accepted definition of the term. Thus, FMCSA attempted to determine what constitutes a ‘‘dispatch service’’ by examining the role such entities play in the transportation industry and set out several common features of dispatch services in the interim guidance. (87 FR 68639). TIA suggested that FMCSA should require all dispatch services to register with FMCSA, either as brokers or as a new class of licensed entity.15 Freight Girlz also asked FMCSA to develop and issue a certificate of compliance to ‘‘legitimate dispatch companies’’ and suggested numerous criteria for obtaining such a certificate.16 However, FMCSA cannot define a new class of operating authority in this guidance. The existing registration statutes do not authorize FMCSA to regulate any entity in the transportation industry other than motor carriers, brokers, and freight forwarders. If a dispatch service or other entity does not meet the criteria for inclusion in one of these categories, FMCSA is unable to require registration or otherwise regulate that entity. Some commenters on the interim guidance indicated that dispatch services are more attuned than brokers are to a carrier’s needs and a specific driver’s preferences, location, and other data.17 However, relatively few comments specifically addressed this portion of the interim guidance, as most commenters were concerned with the issue of how to determine whether a dispatch service is acting as a broker or as a bona fide agent. 15 See comment of TIA at 3. comment of Freight Girlz. 17 See comments of Project Freight, LLC, Michael White, OOIDA and several anonymous commenters. 16 See at 6. Frm 00037 Fmt 4700 Sfmt 4700 39371 E:\FR\FM\16JNR1.SGM 16JNR1 39372 Federal Register / Vol. 88, No. 116 / Friday, June 16, 2023 / Rules and Regulations ddrumheller on DSK120RN23PROD with RULES1 After reviewing the comments, FMCSA has determined that the interim guidance is appropriate and has not made any significant changes in the final guidance. D. Dispatch Service: Broker or Bona Fide Agent Final Guidance: Dispatch services may be classified as either brokers or bona fide agents, depending on the nature and scope of their activities. This requires a fact-specific analysis of whether the dispatch service’s activities meet the criteria set out in the statutory and regulatory definitions of ‘‘broker’’ or ‘‘bona fide agent.’’ 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 is relevant because the greater control a carrier has over a dispatcher’s actions, the less likely the dispatcher is to exercise independent discretion in sourcing and allocating loads and hence need broker authority. Discussion: 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. Approximately 20 commenters addressed this topic, and many of these comments indicated continuing uncertainty about how to properly categorize dispatch services. In response, FMCSA provides additional clarification in the final guidance and has reorganized the factors in the following sections indicating either the ability to perform services without broker authority or the need to obtain broker authority. FMCSA does not believe it is the intent of Congress to eliminate the use of dispatch services in the freight transportation industry. It is also clear, based on feedback from stakeholders, that both small and large motor carriers believe dispatch services play an important role in their operations. In particular, small motor carriers who cannot afford a fulltime employee may rely on dispatch services to perform various functions, including ensuring the motor carrier has a steady stream of shipments, while allowing the motor carrier to focus on its core business of transporting freight. FMCSA clarifies that, to determine whether a dispatch service is a bona fide agent, one must analyze whether the services the dispatcher is providing fall within the definition of bona fide agent in 49 CFR 371.2(b). If a dispatch service arranges transportation on behalf of multiple motor carriers and engages in the allocation of traffic, pursuant to 49 CFR 371.2, it is not a bona fide agent VerDate Sep<11>2014 15:19 Jun 15, 2023 Jkt 259001 and must obtain broker operating authority registration. Ultimately, this analysis requires careful consideration of the nature and scope of the relationship between the dispatch service and the motor carrier, the number and type of carriers the dispatch service represents, and the specific services the dispatcher performs. FMCSA understands that dispatch services may not be able to operate a successful business if they only work for a single, small carrier. Thus, the Agency has attempted in this guidance to describe the maximum flexibility permissible under applicable law. However, FMCSA also recognizes that some dispatch services currently operating without broker authority may determine, based on the guidance, that their activities require them to either reduce the number of carriers they represent or apply for broker authority. To help dispatch services determine whether their activities require them to apply for broker authority or not, FMCSA provides additional guidance in the following sections regarding specific activities that dispatch services may engage in without obtaining broker authority, and those that require broker authority. E. Factors Indicating Broker Authority Is Not Required Final Guidance: A dispatch service that meets the following criteria would generally be considered a bona fide agent and would not require broker authority. This list is not exclusive, and a dispatch service does not necessarily have to meet every listed factor, depending on its specific activities. (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. The written legal contract should specify the insurance and liability responsibilities of the dispatch service and motor carrier. (2) The dispatch service complies with all state licensing requirements, if applicable. (3) The dispatch service goes through a broker to arrange for the transportation of shipments for the motor carrier and does not seek or solicit shippers for freight. (4) The dispatch service does not provide billing or accept compensation from the broker, third-party logistics company, or factoring company, but instead receives compensation from the motor carrier(s) based on the pre- PO 00000 Frm 00038 Fmt 4700 Sfmt 4700 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 an agreement with 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. (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. Factors Indicating Broker Authority Is Required The following factors indicate the dispatch service should obtain broker authority. This list is not exclusive, and a dispatch service does not necessarily have to meet every listed factor, depending on its specific activities. (1) The dispatch service interacts with or negotiates any 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 and there is no written legal contract with the motor carrier that meets Section IV.E.1 of the Guidance above. (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 engages in allocation of traffic by accepting a shipment that could be transported by more than one carrier with which it has agreements and assigns it to one of those carriers. (6) The dispatch service is a named party on the shipping contract. (7) The dispatch service is soliciting to the open market of carriers for the purposes of transporting a freight shipment. G. Financial Penalties Finally, the IIJA required FMCSA to clarify the level of penalties for E:\FR\FM\16JNR1.SGM 16JNR1 Federal Register / Vol. 88, No. 116 / Friday, June 16, 2023 / Rules and Regulations ddrumheller on DSK120RN23PROD with RULES1 unauthorized brokerage applicable to dispatch services. In the interim guidance, FMCSA determined that this assessment is straightforward. If the dispatch service is deemed to be providing unauthorized brokerage services pursuant to 49 U.S.C. 14916, VerDate Sep<11>2014 15:19 Jun 15, 2023 Jkt 259001 the service will be subject to applicable penalties. If no finding of unauthorized brokerage is made, it will not be subject to such penalties. After reviewing the public comments, FMCSA has determined that the interim PO 00000 Frm 00039 Fmt 4700 Sfmt 9990 39373 guidance is appropriate and adopts the same analysis in the final guidance. Robin Hutcheson, Administrator. [FR Doc. 2023–13080 Filed 6–15–23; 8:45 am] BILLING CODE 4910–EX–P E:\FR\FM\16JNR1.SGM 16JNR1

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[Federal Register Volume 88, Number 116 (Friday, June 16, 2023)]
[Rules and Regulations]
[Pages 39368-39373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-13080]


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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 final regulatory guidance.

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SUMMARY: FMCSA issues final guidance, in response to a mandate in the 
Infrastructure Investment and Jobs Act (IIJA) 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 previously published a notice

[[Page 39369]]

seeking public comment on the IIJA provision on June 9, 2022, and 
issued interim guidance on November 16, 2022. Today's notice makes 
updates to November 2022 guidance in response to the public comments 
the Agency received.

DATES: This updated guidance is applicable on June 16, 2023.

FOR FURTHER INFORMATION CONTACT: Mr. Jeffrey Secrist, Registration, 
Licensing, and Insurance Division, Office of Registration, FMCSA, 1200 
New Jersey Avenue SE, Washington, DC 20590-0001, (202) 385-2367, 
[email protected]. If you have questions on viewing or submitting 
material to the docket, contact Dockets Operations, (202) 366-9826.

SUPPLEMENTARY INFORMATION: 

I. Viewing Comments and Documents

Viewing Documents and Comments

    To view documents related to this docket, go to https://www.regulations.gov/docket/FMCSA-2022-0134/document and choose the 
document to review. To view comments, visit the same website, then 
click ``Browse All Comments.'' If you do not have access to the 
internet, you may view the docket online by visiting Dockets Operations 
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.

Privacy Act

    All comments the Agency received in response to the November 16, 
2022, notice mentioned above were posted without change to https://www.regulations.gov. Anyone may search the electronic form of all 
comments received into any of our dockets by the name of the individual 
submitting the comment (or of the person signing the comment, if 
submitted on behalf of an association, business, labor union, etc.). 
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.transportation.gov/privacy.

II. Background

    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 (through 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 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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    The notice and comment rulemaking procedures of the Administrative 
Procedure Act (APA) do not apply to interpretative rules and general 
statements of policy (commonly called ``guidance'') (5 U.S.C. 
553(b)(A)). Accordingly, the APA did not specifically require FMCSA to 
solicit public comment, and most of the other statutes and executive 
orders that would be applicable if the opportunity for prior notice and 
public comment was required similarly do not apply. Nevertheless, in 
order to ensure that the guidance provides clear, useful, and relevant 
information for stakeholders, FMCSA solicited stakeholder input via a 
Federal Register notice published on June 9, 2022. (87 FR 35593). FMCSA 
then issued a Federal Register notice containing interim guidance. (87 
FR 68635, Nov. 16, 2022). As part of the Consolidated Appropriations 
Act, 2023 (Pub. L. 117-328 (Dec. 29, 2022)), Congress directed FMCSA to 
finalize the guidance by June 16, 2023.\3\
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    \3\ See Division L Joint Explanatory Statement to the 
Consolidated Appropriations Act, 2023. Staff of H.R. Comm. on 
Appropriations, 117th Cong. (Comm. Print 2023).
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    While the interim guidance was effective immediately upon 
publication, FMCSA sought additional public comment to determine 
whether the guidance should be updated before being finalized. FMCSA 
also invited commenters to speak at a listening session during the Mid 
America Trucking Show (MATS) on March 31, 2023, but none of the 
commenters at the MATS session addressed this guidance. (87 FR 14439, 
Mar. 8, 2023). FMCSA also reopened the comment period for written 
comments, which were due by April 6, 2023. (87 FR 14322, Mar. 8, 2023).
    FMCSA now issues final guidance on the definitions of ``broker'' 
and ``bona fide agent,'' including guidance on the role and activities 
of entities referred to as ``dispatch services'' and the level of 
financial penalties for unauthorized brokerage services provided by 
such entities. 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.

Stakeholder Comments

    FMCSA received 55 comments on the interim guidance, in addition to 
more than 80 comments received during the previous comment period, and 
the Agency appreciates the time and effort stakeholders took in 
submitting these comments. The commenters included individuals, trade 
associations, brokers, and dispatch services. 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.

III. Compliance With IIJA

A. Technology

    The IIJA required FMCSA to examine the impact of technological 
advances in the freight transportation industry. In the interim 
guidance, FMCSA recognized that freight brokerage has changed 
immeasurably due to technology, including moving from a phone-based 
system to one conducted mainly over the internet. (87 FR 68637). 
However, 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.
    Commenters on the interim guidance generally agreed with FMCSA's 
position on the extent to which technology has changed the freight 
brokerage business and the impact of such changes. FMCSA does not 
believe there is any reason to revise its analysis for the final 
guidance.

B. Bona Fide Agents

    The IIJA also required FMCSA to examine the role of bona fide 
agents in the freight transportation industry. Based upon previous 
stakeholder comments, FMCSA determined in the

[[Page 39370]]

interim guidance that bona fide agents are generally considered to be 
individuals or entities that solicit business for a motor carrier. (87 
FR 68638). In the recent comments, several commenters indicated that 
this statement may have made the relationship between a motor carrier 
and a bona fide agent seem too casual, when in reality a bona fide 
agent has a formalized and ongoing relationship with a particular motor 
carrier.\4\ FMCSA agrees that the regulatory definition of ``bona fide 
agent'' does not contemplate a casual relationship, as it requires the 
bona fide agent to be part of the motor carrier's normal operations and 
to perform duties as directed by the motor carrier pursuant to a 
preexisting agreement which provides for a continuing relationship. 49 
CFR 371.2(b).
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    \4\ See comments of PES, American Trucking Associations Moving & 
Storage Conference (ATA M&SC) at 3 FN6, and joint submission from 
MoveRescue, Mayflower Transit, LLC, and United Van Lines, LLC (MM&U) 
at 6.
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C. Other Aspects of the Freight Transportation Industry

    Another topic the IIJA requires FMCSA to consider when issuing this 
guidance is ``other aspects of the freight transportation industry.'' 
Numerous drivers and motor carriers raised concerns about economic 
pressures negatively affecting the industry.\5\ A group of commenters 
also sought action regarding allegations of fraud, supply chain abuse, 
theft of cargo, double brokering, and misappropriation of funds 
occurring in the industry.\6\ In response, FMCSA notes that ``double 
brokering'' is not a term defined by statute or regulation, and 
commenters use the term to refer to several different activities. 
However, it appears most commenters concerned with double brokering are 
referring to ways in which some entities act as brokers without proper 
authority.
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    \5\ See comments of PES, Hans Witt, Kadence Logistics 
Dispatching, and multiple anonymous commenters.
    \6\ See two comments from Henry Seaton, on behalf of multiple 
stakeholders.
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    FMCSA also notes that approximately 24 comments received in this 
docket asked the Agency to take actions beyond the scope of the 
guidance required by the IIJA, specifically regarding issues of 
transparency and fairness in transactions between motor carriers and 
brokers.\7\
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    \7\ On March 17, 2023, FMCSA granted petitions from the Owner-
Operator Independent Drivers Association (OOIDA) and the Small 
Business in Transportation Coalition (SBTC) to initiate a rulemaking 
on issues of transparency in brokered transactions. These comments 
appear to be related to this future rulemaking, and do not raise 
issues related to the guidance presented here. However, FMCSA will 
solicit public comment regarding transparency issues at the 
appropriate time.
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    While the guidance contained in this notice is limited to the 
issues Congress required FMCSA to examine with the enactment of IIJA, 
FMCSA nevertheless 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 its interpretation of its 
regulations and related matters. While the guidance may be relevant to 
stakeholder compliance with FMCSA's regulations, any changes to FMCSA's 
regulations, and consequently to a stakeholder's compliance 
responsibilities, would need to be made through a rulemaking 
proceeding.

IV. Final Guidance

    The interim guidance concerned six main areas: (1) the definition 
of broker; (2) the definition of bona fide agent; (3) the role of 
dispatch services in the transportation industry; (4) how to determine 
whether a dispatch service is acting as a broker or as a bona fide 
agent; (5) services dispatchers may provide without broker authority; 
and (6) services for which dispatchers must obtain broker authority in 
order to provide. The guidance also clarified the level of financial 
penalties for unauthorized brokerage activities under 49 U.S.C. 14916.
    FMCSA has considered the comments received and has made several 
updates to the guidance, discussed further below, and now issues final 
guidance on these topics.

A. Definition of Broker

    Final Guidance: FMCSA has determined that the definition of 
``broker'' at 49 CFR 371.2(a) is adequate. Handling money exchanged 
between shippers and motor carriers is one factor that strongly 
suggests the need for broker authority, but it is not an essential 
requirement for one to be considered a broker.
    Discussion: As explained in the interim guidance, FMCSA is unable 
to change the statutory definition of ``broker'' at 49 U.S.C. 13102(2). 
(87 FR 68637). Nor is it able to change the regulatory definition of 
``broker'' at 49 CFR 371.2(a) without going through the rulemaking 
process. However, FMCSA did clarify in the interim guidance that, 
although handling money exchanged between shippers and motor carriers 
strongly suggests the need for broker authority, it is only one factor 
of the analysis and is not, standing alone, determinative. (87 FR 
68638). Stakeholder reactions to FMCSA's interim guidance were mainly 
supportive.\8\
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    \8\ See, e.g., comments of SBTC at 1, ATA M&SC at 2-3 and ATA 
MS&C Supplemental Comment at 1, MM&U at 4-5, and Transportation 
Intermediaries Association (TIA) at 3.
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    Stakeholders asked FMCSA to clarify whether internet-based load 
matching services and load boards are considered brokers.\9\ While this 
topic garnered few comments, those that addressed it agreed that these 
services should not be considered brokers.\10\ However, some commenters 
expressed concerns about motor carriers, brokers, and dispatch services 
perpetrating fraud through the use of load boards.\11\
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    \9\ See comments of ATA M&SC at 3.
    \10\ See comments of ATA M&SC at 3 and ATA M&SC Supplemental 
Comment at 1; SBTC at 2.
    \11\ See comments of Hans Witt and Robert Bradley.
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    In response, FMCSA has determined that merely making information 
about potential shippers publicly available, regardless of whether a 
fee is charged, does not require an entity to obtain broker authority 
as long as the entity making the leads available is not otherwise 
involved in any transaction between the shipper and a motor carrier.

B. Definition of Bona Fide Agent

    Final Guidance: A bona fide agent may be either an employee of a 
motor carrier or a contractor but must perform its duties as specified 
in a preexisting agreement between the parties. While FMCSA has 
determined that the definition of ``bona fide agent'' in 49 CFR 
371.2(b) is adequate, FMCSA clarifies that the term ``allocating 
traffic,'' which appears in the definition, means any exercise of 
discretion on an agent's part when assigning a load to a motor carrier. 
If an entity representing more than one carrier exercises such 
discretion, it would not meet the definition of ``bona fide agent.''
    Discussion: The regulations define ``bona fide'' agents 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). 
FMCSA cannot change this definition absent a rulemaking.
    In the interim guidance, FMCSA determined that representing more 
than one motor carrier does not necessarily mean one is a broker rather 
than a bona fide agent. (87 FR 68638). Any

[[Page 39371]]

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. Several commenters requested more clarity on 
the meaning of ``allocation of traffic.'' \12\ FMCSA intended this term 
to mean any exercise of discretion, choice, or decision-making on the 
agent's part about which motor carrier to assign a load.
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    \12\ See comments of SBTC at 2-5, ATA M&SC at 4, and an 
anonymous commenter.
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    If a bona fide agent represents only one motor carrier, it will 
assign all loads it sources to that particular carrier and thus, no 
exercise of discretion is necessary, and there is no dispute that the 
agent is not a broker. However, an agent representing multiple carriers 
should be careful to structure its agreements to avoid the possibility 
of allocating traffic. The scope of these agreements and the agent's 
compliance with the terms of the agreements are key factors in the 
analysis of whether such an agent may qualify as a bona fide agent 
under the regulatory definition at 49 CFR 371.2(b). To illustrate, 
FMCSA presents two examples of situations where a bona fide agent may 
be able to represent multiple motor carriers without engaging in 
allocation of traffic.
    The first example is where a bona fide agent represents motor 
carriers that require the agent to source loads originating in 
different geographic areas and selected motor carriers will not pick up 
freight in the other carriers' locations. For instance, if the 
agreement between the bona fide agent and Carrier A requires the agent 
to source loads originating only in Maine, New Hampshire, Vermont, or 
Massachusetts, and its agreement with Carrier B requires it to source 
loads originating only in Florida, Georgia, or Alabama, the entity 
would not need to exercise discretion because all loads originating in 
a particular geographic location would necessarily be assigned to the 
relevant carrier.
    A second example is if the bona fide agent has agreements with 
multiple carriers to source specific types of loads and these services 
do not overlap. For instance, if the agent's agreement with Carrier A 
requires the agent to source only hazardous materials loads, and the 
agreement with Carrier B requires it to exclude hazardous material 
loads, the agent would not have to exercise discretion as to which 
carrier to assign a load to, because the carriers are not willing or 
able to haul the same loads if sourced by the bona fide agent. 
Similarly, if Carrier A operates refrigerated trucks while Carrier B 
operates flatbed trucks, a bona fide agent may be able to represent 
both carriers without engaging in allocation of traffic.
    However, if the agent's agreements require it to source the same 
type of loads for both carriers without geographic restrictions as 
described above, it could not represent both carriers without 
registering for broker authority, because any load assignments would 
necessarily require the entity to choose between carriers and would 
therefore constitute an allocation of traffic.
    Several commenters operating in the household goods industry also 
asked FMCSA to clarify whether this guidance applies to ``household 
goods agents,'' as that term is defined at 49 U.S.C. 13907 and 49 CFR 
375.205.\13\ FMCSA initially determined it would address issues 
previously raised by the household goods industry in a separate 
proceeding. (87 FR 68638 at FN20). However, the stakeholders believe 
this would be unnecessary and asked FMCSA to address their concerns in 
this final guidance.\14\ FMCSA agrees with the stakeholders and, 
consequently, is issuing guidance here.
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    \13\ See comments of ATA M&SC at 3, MM&U at 6.
    \14\ See comments of ATA M&SC at 3, MM&U at 6.
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    FMCSA recognizes that entities operating in the household goods 
transportation industry are subject to additional regulations. 
``Household goods broker'' is defined in 49 CFR 371.103 as ``a person, 
other than a motor carrier or an employee or bona fide 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 of 
household goods by motor carrier for compensation.'' Moreover, 49 CFR 
375.205 permits household goods motor carriers engaged in interstate 
transportation of household goods to have agents and provides that a 
``prime agent,'' a type of household good agent, ``does not include a 
household goods broker or freight forwarder.'' Thus, to the extent a 
person or company is operating as a prime agent in the household goods 
sector, this guidance would not be applicable to such person or 
company.

C. Role of Dispatch Services

    Final Guidance: There is no statutory or regulatory definition of a 
dispatch service, nor is there a commonly accepted definition of such a 
service. Some features of dispatch services include working exclusively 
for motor carriers, not for shippers; sourcing loads for motor 
carriers; and performing additional services for motor carriers that 
are unrelated to sourcing shipments. FMCSA does not have statutory 
authority to regulate dispatch services unless such entities also meet 
the criteria for registration as brokers, freight forwarders, and/or 
motor carriers.
    Discussion: 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. 
However, Congress did not define the term ``dispatch service'' in the 
IIJA provision mandating this guidance, and the comments FMCSA received 
prior to issuing the interim guidance made clear that there is no 
universally accepted definition of the term. Thus, FMCSA attempted to 
determine what constitutes a ``dispatch service'' by examining the role 
such entities play in the transportation industry and set out several 
common features of dispatch services in the interim guidance. (87 FR 
68639).
    TIA suggested that FMCSA should require all dispatch services to 
register with FMCSA, either as brokers or as a new class of licensed 
entity.\15\ Freight Girlz also asked FMCSA to develop and issue a 
certificate of compliance to ``legitimate dispatch companies'' and 
suggested numerous criteria for obtaining such a certificate.\16\ 
However, FMCSA cannot define a new class of operating authority in this 
guidance. The existing registration statutes do not authorize FMCSA to 
regulate any entity in the transportation industry other than motor 
carriers, brokers, and freight forwarders. If a dispatch service or 
other entity does not meet the criteria for inclusion in one of these 
categories, FMCSA is unable to require registration or otherwise 
regulate that entity.
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    \15\ See comment of TIA at 3.
    \16\ See comment of Freight Girlz.
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    Some commenters on the interim guidance indicated that dispatch 
services are more attuned than brokers are to a carrier's needs and a 
specific driver's preferences, location, and other data.\17\ However, 
relatively few comments specifically addressed this portion of the 
interim guidance, as most commenters were concerned with the issue of 
how to determine whether a dispatch service is acting as a broker or as 
a bona fide agent.
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    \17\ See comments of Project Freight, LLC, Michael White, OOIDA 
and several anonymous commenters.

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[[Page 39372]]

    After reviewing the comments, FMCSA has determined that the interim 
guidance is appropriate and has not made any significant changes in the 
final guidance.

D. Dispatch Service: Broker or Bona Fide Agent

    Final Guidance: Dispatch services may be classified as either 
brokers or bona fide agents, depending on the nature and scope of their 
activities. This requires a fact-specific analysis of whether the 
dispatch service's activities meet the criteria set out in the 
statutory and regulatory definitions of ``broker'' or ``bona fide 
agent.'' 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 is relevant because the greater control a 
carrier has over a dispatcher's actions, the less likely the dispatcher 
is to exercise independent discretion in sourcing and allocating loads 
and hence need broker authority.
    Discussion: 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. Approximately 20 commenters addressed this topic, and 
many of these comments indicated continuing uncertainty about how to 
properly categorize dispatch services. In response, FMCSA provides 
additional clarification in the final guidance and has reorganized the 
factors in the following sections indicating either the ability to 
perform services without broker authority or the need to obtain broker 
authority.
    FMCSA does not believe it is the intent of Congress to eliminate 
the use of dispatch services in the freight transportation industry. It 
is also clear, based on feedback from stakeholders, that both small and 
large motor carriers believe dispatch services play an important role 
in their operations. In particular, small motor carriers who cannot 
afford a fulltime employee may rely on dispatch services to perform 
various functions, including ensuring the motor carrier has a steady 
stream of shipments, while allowing the motor carrier to focus on its 
core business of transporting freight.
    FMCSA clarifies that, to determine whether a dispatch service is a 
bona fide agent, one must analyze whether the services the dispatcher 
is providing fall within the definition of bona fide agent in 49 CFR 
371.2(b). If a dispatch service arranges transportation on behalf of 
multiple motor carriers and engages in the allocation of traffic, 
pursuant to 49 CFR 371.2, it is not a bona fide agent and must obtain 
broker operating authority registration. Ultimately, this analysis 
requires careful consideration of the nature and scope of the 
relationship between the dispatch service and the motor carrier, the 
number and type of carriers the dispatch service represents, and the 
specific services the dispatcher performs.
    FMCSA understands that dispatch services may not be able to operate 
a successful business if they only work for a single, small carrier. 
Thus, the Agency has attempted in this guidance to describe the maximum 
flexibility permissible under applicable law. However, FMCSA also 
recognizes that some dispatch services currently operating without 
broker authority may determine, based on the guidance, that their 
activities require them to either reduce the number of carriers they 
represent or apply for broker authority.
    To help dispatch services determine whether their activities 
require them to apply for broker authority or not, FMCSA provides 
additional guidance in the following sections regarding specific 
activities that dispatch services may engage in without obtaining 
broker authority, and those that require broker authority.

E. Factors Indicating Broker Authority Is Not Required

    Final Guidance: A dispatch service that meets the following 
criteria would generally be considered a bona fide agent and would not 
require broker authority. This list is not exclusive, and a dispatch 
service does not necessarily have to meet every listed factor, 
depending on its specific activities.
    (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. The 
written legal contract should specify the insurance and liability 
responsibilities of the dispatch service and motor carrier.
    (2) The dispatch service complies with all state licensing 
requirements, if applicable.
    (3) The dispatch service goes through a broker to arrange for the 
transportation of shipments for the motor carrier and does not seek or 
solicit shippers for freight.
    (4) The dispatch service does not provide billing or accept 
compensation from the broker, 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 an agreement with 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.
    (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. Factors Indicating Broker Authority Is Required

    The following factors indicate the dispatch service should obtain 
broker authority. This list is not exclusive, and a dispatch service 
does not necessarily have to meet every listed factor, depending on its 
specific activities.
    (1) The dispatch service interacts with or negotiates any 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 and there is no written legal contract with the motor 
carrier that meets Section IV.E.1 of the Guidance above.
    (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 engages in allocation of traffic by 
accepting a shipment that could be transported by more than one carrier 
with which it has agreements and assigns it to one of those carriers.
    (6) The dispatch service is a named party on the shipping contract.
    (7) The dispatch service is soliciting to the open market of 
carriers for the purposes of transporting a freight shipment.

G. Financial Penalties

    Finally, the IIJA required FMCSA to clarify the level of penalties 
for

[[Page 39373]]

unauthorized brokerage applicable to dispatch services. In the interim 
guidance, FMCSA determined that this 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. If no finding of unauthorized brokerage is made, 
it will not be subject to such penalties.
    After reviewing the public comments, FMCSA has determined that the 
interim guidance is appropriate and adopts the same analysis in the 
final guidance.

Robin Hutcheson,
Administrator.
[FR Doc. 2023-13080 Filed 6-15-23; 8:45 am]
BILLING CODE 4910-EX-P
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