uShip Breaking the Broker Mold?

Q: As a long-time reader, I have always found your columns helpful. I am, however, still amazed — and I talk to several companies every year — at how few transportation managers and directors have little or no understanding of transportation law.

The April 14 Journal of Commerce story “uShip Spins a Bigger Web” addressed how a company called uShip links occasional shippers with carriers for movement of larger-than-parcel items. It sounds as though uShip isn’t arranging the freight, but only enabling the parties to link up, with pricing and terms to be agreed between the parties.

So this would not appear to be freight brokerage. But I wondered what your thoughts were and what might be the legal pitfalls of using uShip? For example, should the shipper be alert to examining the carrier’s rules tariff, especially for limitations on cargo loss or damage, getting the correct National Motor Freight Classification rating, etc.?

Thanks again for your insight and good reading.

A: Strictly speaking, I’m not so sure you’re entirely correct that operations such as uShip — of which there are quite a few, not just that one — don’t technically qualify as freight brokerages.

Notwithstanding that you’ve been around the industry long enough to be a long-time reader, I suspect you’re too young to recall the way motor carrier brokers were obliged to operate in the days of strict regulation under the former Interstate Commerce Commission. In fact, their operations weren’t dissimilar to those of contemporary online load-posting services such as uShip, and in those days they were deemed to be brokerages requiring federal licensure and bonding.

The old-timey broker, of whom there were precious few, wasn’t allowed to contract with motor carriers — in any case, contract carriers were likewise in short supply. If you used a broker back then, it was to deal with a common carrier. The broker might quote you rates of one or more such carriers, but strictly out of the carrier’s tariff (to which the carrier was legally bound), and mostly it just put you in touch with the carrier. If you shipped, you’d be billed directly by the carrier, and the broker received his or her own compensation from the carrier.

Sound familiar? That’s pretty close to the way uShip and its brethren operate today. They’ll offer you several choices and quote you prices from each, or, if that doesn’t satisfy you, you can post your load and deal with carriers who respond to your posting. Either way, you’re dealing directly with the carrier, and being billed by it.

A further similarity to the days of yore is that you’ll be bound by the tariff of the carrier of your choice. That means, as you suggest, you’d better familiarize yourself with the terms of that tariff, which will govern your possible recovery if a loss-and-damage claim must be filed. As to NMFC classification, uShip and the others ask for it, but you don’t really need it. The quotes you get are ordinarily freight all kinds, or FAK.

Under the law, a broker is someone who “arranges” for transportation “for compensation,” a definition broad enough to encompass what the uShip-type operations do. So far as I can make out, these operations — like the broker of yesteryear — earn their money from the carriers that subscribe to their services, so their compensation is invisible to the shipper. Still, clearly they are doing what they do for compensation, and what they do is just as clearly arranging for transportation, whether it’s via one of the carriers they will quote you initially or by another carrier you contact through the posting service.

Even so, I doubt anyone today would make an issue of their comparability to the older form of brokerage. Thus, such services aren’t registered with the Federal Motor Carrier Safety Administration as brokers, and aren’t subject to the bonding requirement. Especially given the FMCSA’s inattention to the entire registration/license process, I doubt the agency is going to make waves about this.

You asked about the “legal pitfalls” of doing business with companies such as uShip. I see none, except the usual problems of inexperienced shippers doing business with any carrier. The fact that a load-posting service put you in touch with that carrier is immaterial. Like the old-timey broker, the service bows out of the transaction before the shipment is made, so everything from that point forward is between the shipper and the carrier.

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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