Q&A: A Broker Regulation That’s Run Its Course

Q: As you wrote in a previous article, brokers often are reluctant to reveal their carriers’ names to their customers. But we spot-check brokers on loads if we feel they are taking advantage of truck shortages in the marketplace, and we inform our brokers that we reserve the right to inspect their files for any given load when necessary.

Some balk, of course, but I point to the Code of Federal Regulations. I’m surprised this is still in the regulations, but since it is, I’ll take advantage of it.

Section 371.3(a) of Title 49 of the CFR requires brokers to maintain records showing:

“(1) The name and address of the consignor.

“(2) The name, address, and registration number of the originating motor carrier.

“(3) The bill of lading or freight bill number.

“(4) The amount of compensation received by the broker for the brokerage service performed and the name of the payer.

“(5) A description of any non-brokerage service performed in connection with each shipment or other activity, the amount of compensation received for the service, and the name of the payer. “

(6) The amount of any freight charges collected by the broker and the date of payment to the carrier.”

And subsection (c) further specifies that “(e)ach party to a brokered transaction has the right to review the record of the transaction required to be kept by these rules.”

So any broker who does business with us must agree to disclose when requested.

 

A: Well, good for you, I guess. I can’t dispute anything you’ve written, and I commend it to the attention of my readers — for whatever good it may do them.

What I meant when I said brokers sometimes won’t identify their carriers was that they won’t do so ahead of time. Once a shipment is picked up, though, the secret’s out. I mean, these carriers aren’t stealth operators, sneaking in under cover of darkness to snatch the shipments away surreptitiously; they’re coming in with flags flying, logos emblazoned on their rigs, with ID to show to the dock workers who help them load up, and (hopefully) writing their names onto the bills of lading.

So by the time there are any records for you to inspect, you already have all the information they reveal. You know who the carrier was from seeing it at pickup (or delivery if you’re brokering inbound service), and because you paid the broker’s bill, you know all that stuff, too. What else is there for you to learn from the records?

You say you check the records to see if they’re taking advantage of you when empty trucks are in short supply. Well, the only way I can see they might be doing that is by increasing their markup over what they’re paying the underlying carriers, and that’s something the records won’t tell you.

The regulation you’ve quoted harks back to an era when brokers operated differently than they do today. Back then, you paid the carrier directly, and it then remitted a “commission” to the broker who’d set the deal up. That’s why the regulations focus on who paid the broker and how much.

They haven’t, however, been updated for years. The Federal Motor Carrier Safety Administration, which now administers them, has zero interest in keeping them up to date, and the former Interstate Commerce Commission (from which the FMCSA inherited them and which presided over the beginning of the shift in broker operations) saw the political handwriting on the wall years before its sunset and lost all interest in any regulatory work in its last days.

So all the broker’s records need show under the regulations is the gross you paid it, which you already know — not how much it passed on to the underlying carrier. And you can bet the rent that this is something it won’t reveal voluntarily.

There’s one thing in these records of potential value: the requirement they show the date the carrier was paid. This might give you a head’s up if the broker is chronically late paying carriers (or isn’t paying at all). But do you really think a broker who’s struggling to stay afloat isn’t prepared to fudge the information it shows you? So even that’s of questionable value; and the rest, as I say, is useless. 

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.

 

 

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