Motor Carrier acting as a broker

A few things i find wrong with this.

1 - it is legal for me to ask another carrier to take a load from a consignee or shipper when I have a contract with said party.

2 - I do not have to give ALL the revenue to that carrier, I am under an obligation to pay them the agreed amount.

3 - I do not have to have a brokers authority because I am not soliciting for work to find a solution for the consignee or shipper, I am a carrier and I have great latitude in how I provide the solution.

4 - I have a legal requirement to do my due diligence in ensuring that there is proper insurance coverage, etc ... with the carrier I engage to provide that service.

5 - my liabilities the same with a cargo claim, I am still responsible but in the chain of responsible parties, the carrier who actually transported the load is the first responsible party.

6 - there is a difference between being responsible for the load and being the contracting party for the load. YOU may have possession of the load and responsible for the transport, the originating carrier is still the interface of the load and has control over it legally when it comes to payment and arrangement.

7 - I often do this for my contracted customers, when I can't provide capacity for their stuff, I go external for it.

As for the OP's question, work out a contract with them, define who does what and why. This is needed anyway to cover you.

 

Your not exactly correct: see the following changes especially from number 5 on, after MAP 21 came into affect. Taken from the government website:

MAP-21 QUESTIONS AND ANSWERS UPDATES FOR BROKERS, FREIGHT FORWARDERS AND MOTOR CARRIERS
Question 1: What is the policy on prohibition of coercion? (Sec. 32911)
Answer 1: An operator of a commercial motor vehicle is not coerced by a motor carrier, shipper, receiver, or transportation intermediary to operate a commercial motor vehicle in violation of the regulations.

Question 2: What is the date change for the Motor Carrier Safety Advisory Committee? (Sec. 32912)
Answer 2: The Safe, Accountable, Flexible, Efficient, Transportation Equity Act: A Legacy for Users is amended to the date of September, 30, 2013 instead of June 30, 2012.

Question 3: What is the timeframe in which FMCSA has to complete the review of financial requirements for motor carriers, motorcoaches, freight forwarders and brokers? (Sec. 32104)
Answer 3: 180 days

Question 4: Is there a new provision that requires motor carriers, freight forwarders and
brokers to update their registration information. (Sec. 32107)
Answer 4: Yes. The registration information is to be updated annually and within 30 days of
certain essential information changes.

Question 5: Is a motor carrier allowed to arrange transportation for shipments when it does not have broker authority? (Sec. 32915)
Answer 5: No. The motor carrier is prohibited from brokering shipments when it does not have broker authority. A motor carrier must apply for broker authority to broker shipments.

Question 6: Are the new registration requirements for freight forwarders and brokers the same? (Sec. 32916)
Answer 6: Basically yes. Registration requirements for both include that the person must have sufficient experience to qualify to act as a freight forwarder or broker; and is fit to act as a freight forwarder or broker. Each shall employ, as an officer, an individual who: 1) has at least 3 years of relevant experience; and 2) provides satisfactory evidence of the individual’s knowledge of related rules, regulations, and industry practices. Also, the freight forwarder and the broker must register separately as a motor carrier to provide transportation services as a motor carrier.

Question 7: What are the effective periods of registration? (Sec. 32917)
Answer 7: Each registrant shall have an effective date as specified by the Secretary and shall remain in effect as the Secretary determines appropriate by regulation. A freight forwarder or broker shall require registration renewal not later than 4 years after the date of enactment of the Commercial Motor Vehicle Safety Enhancement Act of 2012. The effective period is not to be later than 5 years after the date of renewal.

Question 8: What is the financial security for brokers and freight forwarders? (Sec. 32918)
Answer 8: The security amount is $75,000 to be used to pay any claim arising from the failure to pay freight charges under a contract, agreement, or arrangement for transportation. This amount will be evaluated every 5 years.

Question 9: Is a group Surety Bond, Trust Fund or other Surety acceptable to satisfy the financial security requirements for brokers and freight forwarders? (Sec. 32918)
Answer 9: Yes. A group Surety Bond, Trust Fund or other Financial Security may be acceptable only if they consist of assets readily available to pay claims without resorting to personal guarantees or collection of pledge accounts receivable.

Question 10: What is the response of surety providers to claims submitted? (Sec. 32918)
Answer 10: When a surety provider receives a claim it shall respond to the claim on or before the 30th day following the date on which the notice was received. If the claim is denied, a written reason for the denial must be provided to the claimant by the surety provider.

Question 11: What is the notification process when financial security is cancelled?
Answer 11: When a financial security is cancelled the holder of the financial security shall provide electronic notification to the Secretary not later than 30 days before the effective date of the cancellation.

Question 12: What happens if a broker’s or freight forwarder’s financial security falls below $75,000?
Answer 12: The broker or freight forwarder will have their registration suspended.

Question 13: What steps does the Surety Provider take when a broker or freight
forwarder experience financial failure or insolvency?
Answer 13: The Surety Provider shall: 1) submit a notice to the Administrator to cancel the financial security; 2) publicly advertise for claims for 60 days beginning on the publication date of notice to cancel the Financial Security by the Secretary; and 3) pay claims not later than 30 days after the expiration of the initial 60 days.

Question 14: What is the penalty of a Surety Provider that violates the financial security regulations?
Answer 14: The Surety Provider shall be liable to the United States for a civil penalty not to exceed $10,000. Also, the Surety Provider shall be ineligible to provide Financial Security for 3 years.

Question 15: What is unlawful brokerage activity? (Sec. 32919)
Answer 15: Activity when an individual arranges transportation services and they are not registered as a broker with FMCSA. All brokers must be registered and have approved financial security on file to arrange for transportation services. There is also a penalty for brokering without operating authority.

Question 16: What are some of the additional requirements for household goods motor carriers? (Sec. 32921)
Answer 16: An applicant seeking to register as a household goods motor carrier must successfully pass an examination to demonstrate knowledge and intent to comply with all applicable Federal laws relating to consumer protection.

Question 17: When is the consumer protection standards review done for a household goods motor carrier? (Sec. 32921)
Answer 17: The first 18 months after the household goods motor carrier begins operations.

Question 18: Does the Secretary consider the effects on small businesses regarding the
consumer protection standards review?
Answer 18: Yes. The Secretary offers alternate locations where such reviews may be
conducted for the convenience of small businesses.

Question 19: What relief is available to a consumer when their shipment is held hostage? (Sec. 32922)
Answer 19: The Secretary shall assign all or a portion of the penalty to an aggrieved shipper.

Question 20: What are the changes in settlement authority? (Sec. 32923)
Answer 20: The Secretary is authorized to structure settlements of civil penalties by accepting lesser amounts of money, suspension of penalties, payment of penalties over time or investment in training or other activities or equipment to improve regulatory compliance.

 

We went rounds with on issue with the FMCSA, they asked one question who actually is responsible for the load for the customer?

The legal people at the FMCSA pointed to this -

49 Part 371.2 Definitions.
(a) Broker means a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.

They keep telling me that I do not have to be a broker to take care of MY customer's transport needs because I am the responsible party for a load, as an accepted carrier by the consignee/shipper, I have the right to seek out another carrier to transport that load to fulfill that obligation. I also know that I can be compensated if I do seek an external service to fulfill those obligations which removes the consignee/shipper from the billing cycle of the load.

However, if it was the case that you need to be a broker to do this, then any and all distressed loads that need to be "rescued" by a 3pl would be illegal to move without a broker involved or a brokerage authority.

 

Key words “for compensation”. You can’t receive or keep any money from the load.

I’m not trying to argue. It’s a gray area. It’s the government and it’s whoever investigates any claims that uses their interpretations of the law. It’s like asking one DOT cop about an ag exemption and getting one answer and then asking another and getting a completely different answer. We can go back and forth siting the FMCSA, and both be right and both be wrong. It’s how you choose to run your business. I wouldn’t take the risk, that’s me. You are willing to, that’s fine. I’d rather not have to argue it in a court of law. It’s cheaper and easier to be 100% covered. Broker bonds are cheap.

 

I am not trying to be argumentative either but this is common practice in the business.

I don't see where the compensation issue comes into it in any regulation. I am told I can be compensated for any and all loads I am involved with, nothing is for free.

I will explain why I know about this, I was going to buy a distressed carrier, small 10 truck business. They were in court over another issue but this issue was raised as something to ding the owner with. We (legal advisors and myself) talked to the FMCSA legal people about what it was all about and found out that I don't need to be a broker because I already am obligated under contract for a load, as I explain. Now if you have other info that show they are wrong, please do or a court case would be better. I didn't buy the carrier by the way because there was information withheld and breached the contract we had with the owner.

 

You're talking interlining. In our audit in 2014 we were questioned about this. From a complaint(found to be from another broker). Through one customer that we handle all their freight, we had a few carriers the we interlined with.

Only thing that saved us from fines for that is:
1. We do have common/contract/broker under the same number.
2. We had "brokered" to those carriers on another account so we had a contract on file.

To be legit, it has to be contracted freight that you haul yourself, you have to be involved in the load. If it's loaded on your trailer and the customer re-loads it on another carrier it's legit.
If it's on your trailer and another carrier pulls it, it's legit.
If you cross dock it, it's legit.

Does a motor carrier that participates in freight interlining have to register as a broker?
No. Anyone brokering a load must be registered as a broker, which by definition may only arrange -- not perform -- transportation unless the person is also separately registered as a motor carrier. A motor carrier that is performing part of the transportation as an interline operation, however, typically performs that service under its own motor carrier operating authority registration or the operating authority of the originating motor carrier. As a result, the motor carrier arranging the interline service in order to perform the transportation service requested by the shipper would not be brokering the load and would not require broker registration.
Key word is "performing part of"

Still a common practice and unless someone files a complaint nothing to worry about.