The Federal Motor Carrier Safety Administration earlier this month finally moved on its long awaited broker transparency rulemaking, and in doing so immediately ignited a fierce debate between brokers and carriers.
Existing broker regulations in 49 Code of Federal Regulations 371.3 already give carriers the “right to review the record of the transaction,” but FMCSA’s rulemaking notice pointed out longstanding reality that carriers almost never get to exercise that right. Instead, brokers inject contract clauses asking carriers to waive the right, or otherwise find ways to make that record inconvenient or impossible to review.
The proposed new rule on broker transparency includes four amendments to the brokered freight transparency regulations, which seemingly intend to beef up the current non-enforced or non-enforcable “right to review.” The amendments are as follows:
- Requiring brokers to keep records in an electronic format
- Revising the required contents of brokers’ records
- Requiring brokers to provide records upon request
- Requiring that records be provided within 48 hours of request
Considered alone, those amendments fall short of what trucking advocates had hoped for — an explicit ban on brokers inserting waivers into contracts with carriers. Such a ban could unblock, so to speak, carriers’ “right to review” where those contract waivers exist.
FMCSA wouldn’t weigh in on the contract language question. Congress, they said, hadn’t given them that power. Instead, there’s another aspect of the transparency rule proposal aimed at getting around those waivers: FMCSA seeks to change the “right to review” in 371.3 from something that carriers can waive to a “regulatory duty” of brokers to share for review when requested.
The proposed rule would “reframe broker transparency as a regulatory duty imposed on brokers to provide records to the transacting parties,” rather than a right, FMCSA wrote in the rulemaking proposal.
But … what exactly does that mean? Can brokers simply update contract clauses to waive the “duty” like they did with the “right”? In practice, could brokers just blacklist carriers who request transparency or otherwise coerce their way out of fulfilling their “duty?”
The Transportation Intermediaries Association vowed to fight the rulemaking and comment to that effect, but in the immediate aftermath of the proposal’s announcement, on a call with reporters, representatives put some stock in the belief that they can still continue to write the contracts as they see fit. Essentially, brokers feel they can once again waive and/or exclude their way out of transparency.
[Related: Brokers plan to fight FMCSA’s transparency push]
Secondly, for many truckers it hasn’t been entirely clear just when carriers under the proposal could request to review the records. “The proposed rule would revise the regulatory text to make clear that brokers have a regulatory obligation to provide transaction records to the transacting parties on request,” FMCSA wrote in the proposed rulemaking. FMCSA proposed “requiring that the records contain, for each shipment in the transaction, all charges and payments connected to the shipment, including a description, amount, and date.”
That bit about “all charges and payments,” coupled with a proposal to amend the record-keeping requirements to include the date of payment “from both the shipper to the broker and from the broker to the carrier” raises a serious timing question: With so many brokers operating on 30-, 60- or even 90-day payment terms, do carriers need to wait until both they and the broker have been paid to request transaction records?
Carriers and owner-operators who replied to Overdrive‘s early-year questions about the topic of broker transparency supported the notion of greater transparency, as FMCSA seems to propose now, by a wide majority (75% felt boosted transparency would help them). The chief motivation for access to records was to aide in load negotiations. Records of freight charges and payments negotiated, say, 48 hours ago might well hold a lot more value than finding out what the broker was paid on a load from 30, 60 or 90 days ago.
[Related: How much money are brokers really making from owner-operators’ hauls?]
Overdrive reached out to FMCSA seeking clarity on the two questions — pertaining to waivers and records-request timing.
First off, FMCSA appeared to rebuff brokers.
“FMCSA’s intent in undertaking this rulemaking is to address the lack of access to information among shippers and motor carriers that can impact the fairness and efficiency of the transportation system,” a spokesperson wrote.
No matter what happens with broker transparency, no matter how it gets enforced, or not, carriers from now on forever more can say it was FMCSA’s intention that brokers should share the shipper’s rates and other important information tied to any load to correct a market imbalance. If brokers try to “waive” their way out of it or find some other method of avoiding sharing the data, they will be doing so against the wishes of federal regulators.
When it comes to contract waivers specifically, FMCSA reiterated language in the rulemaking noting it received petitions from trucking organizations to bar brokers from inserting such contract language, but couldn’t go along with it.
“As a general principle, parties are permitted to waive any right unless Congress, by statute, specifically makes a right non-waivable,” the FMCSA rep said. “FMCSA has not identified any statutory provision in which Congress expressly barred waivers in this context, and therefore the agency has not included the requested language in the revised regulation.”
[Related: Broker ‘Confessions’ novel aims at seedy underbelly of digital freight culture]
The rest of FMCSA’s answer on that front might be intentionally vague as they await more information and input from public comments, maybe even perspective from the incoming administration. “The agency proposes amending the language of §371.3(c) to more accurately describe the regulatory obligation imposed on brokers and the process for requesting and supplying transaction records,” FMCSA continued.
In short, FMCSA seems to want to obligate brokers to give transparency, but they haven’t identified yet the textual silver bullet to make it so.
On the question of when the records can come out, FMCSA was a little more clear.
“FMCSA proposes amending § 371.3(c) to require that records must be provided within 48 hours,” the agency rep said. “This amendment is intended to provide the requestor with the records in a timely fashion, which enables the use of the records to resolve any issues around service or payment.”
The agency further elaborated on the purpose of the proposed rule, which it basically sees as making the broker hand over the information.
“By requiring the broker to ‘provide’ records electronically, this amendment is intended to prevent a broker from only making its records available for review at its principal place of business or another, potentially inconvenient, location. Instead, the amendment plainly places the responsibility of delivering the information to the requestor on the broker,” the rep wrote.
FMCSA appears to see the role of broker transparency not as any move to improve or increase rates by providing carriers a glut of pricing data, a view brokers and some around trucking often disagree with vehemently, saying instead it will create a “race to the bottom” on rates from shippers. Rather, FMCSA looks at it is a way to keep honest brokers honest.
[Related: Why brokers don’t want to give owner-ops transparency in freight transactions]
“FMCSA proposes clarifying that the records must itemize all charges and fees associated with the brokerage service, to include an amount and description of each charge and fee,” the agency said. “Brokers would also be required to itemize any penalties assessed in connection with the shipment” — late delivery deductions, cargo claims offsets, and the like. “This revision is intended to ensure the parties have visibility into the payments, fees, and charges associated with the transaction, and can resolve issues and disputes without resorting to costlier remedies.”
That’s all very good, but when exactly can a carrier expect to get the transparency data? “Records must be provided within 48 hours of request,” FMCSA wrote in response to a direct follow-up.
At this stage of the rulemaking process, the agency is actively looking to receive feedback from stakeholders — that’s you, the owner-operator or driver or carrier of any type. That also includes feedback on any clarifications within the provisions of the rule that may be needed, as well as recommended edits and other considerations. FMCSA said it shared Overdrive‘s questions and feedback with the rulemaking team, but now it is your turn to join the growing chorus.
Already, some 750 have commented on the rulemaking, many for and many against the broker records transparency the proposal would seek to provide. The comment period remains open until January 21. In your comments, feel free to ask for clarity around the timing and contract clauses, or voice any other concern or opinion you might have — professionally, of course.
In the meantime, if you haven’t seen it already, take our quick two-question survey to let us know your opinion on long-term potential impacts of the broker transparency shift the rule represents.