Q: I read a few months back about your opinion regarding carriers rebrokering shippers’ freight to other carriers. I’m not sure if I remember correctly, but your opinion was that absent a contract between the carrier and shipper forbidding the practice, nothing was illegal with it.
My question is, would the carrier need broker authority?
An attorney deposing a carrier regarding a fatal accident is trying to establish that the carrier disregards the rules and laws, and one arrow in the quiver is the fact that the carrier does place its shipper’s freight with outside carriers when overflow occurs. The attorney says the carrier is illegally placing the freight with other carriers absent brokerage authority. The carrier has about 240 trucks and 250 trailers.
A: Oh, boy. I’m pretty sure I know where the attorney got that idea, and it’s an authoritative source, but it’s still wrong on this issue as a matter of clear law.
You’ll find the relevant language at the Federal Motor Carrier Safety Administration’s site under “FAQ” (frequently asked questions): “9. [Q:] Can a contract carrier broker loads? [A:] No. A contract carrier cannot broker loads without first applying for and receiving a license to operate as a broker of freight.”
Remember how some of your schoolteachers used to tell you there’s no such thing as a stupid question, only stupid answers? Well, this is, I’m afraid, one of the latter.
Here’s where the FMCSA goes wrong: It defines a broker as “a person who, for compensation, arranges, or offers to arrange the transportation of property utilizing authorized for-hire carriers to provide the actual truck transportation” (FAQ No. 17). That’s a pretty good paraphrase of the applicable statutory definition found at 49 U.S.C. Section 13102(1) except it omits one key phrase; under the law, a broker is just such a person “other than a motor carrier or an employee or agent of a motor carrier.”
Well, you might say, but the FMCSA didn’t mention a “motor” carrier; its reference was to a “contract” carrier. Trouble is, under the statute, the distinction between types of carriers (“contract” and “common”) vanished as of Jan. 1, 1998; legally, both are now merely “motor” carriers. Under 49 U.S.C. Section 13102(14), a motor carrier is merely “a person providing motor vehicle transportation for compensation;” it’s immaterial whether the compensation is received under a separate contract or merely a bill of lading.
So why didn’t the FMCSA pick up on this distinction? Well, it was supposed to. When the current law took effect in 1996, Congress gave it (or actually the Federal Highway Administration, where the FMCSA’s licensing operation then resided) two years to fix its carrier registration procedures to accommodate the statutory change.
But neither the FHWA nor the FMCSA gave a rat’s patootie about the registration procedures saddled on them by the shutdown of the former Interstate Commerce Commission. It’s now 16 years after the fact, but the FMCSA still doesn’t; it’s still, contrary to the clear law, drawing the distinction between “common” and “contract” carriers in its own little bureaucratic cubbyhole.
Not that it matters administratively. The FMCSA isn’t seeking out violators of its obsolete standards, and wouldn’t prosecute one if it walked up and bit them in the rear end. But its stubborn refusal to recognize that we live today in a whole different legal world than did the old ICC (from which it inherited its standards) can and does mislead those ignorant of current law, a category in which the attorney you mentioned evidently falls.
What the law says is that anybody “other than a motor carrier (etc.)” that performs brokerage activities must be licensed by the FMCSA to do so. But someone properly registered as a carrier, especially one with a sizable fleet of equipment (showing that the carrier registration is no mere sham), doesn’t also need a broker license to farm out excess loads to other carriers.
I do wish the FMCSA would accurately update its Web site on this issue, and, in fact, I recall pointing the inaccuracy out in another column several years ago. They ignored me. But that doesn’t make them right as a matter of law; it just makes them obstinate or lazy.
So I can’t speak for how the carrier that the attorney you mention is targeting follows the rules and laws in other respects, but if its brokering freight is a mainstay of the argument, the lawyer has got a problem. This is a quiver badly in need of more functional arrows than this one.
Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.