Proposed Rule2024-27115
Transparency in Property Broker Transactions
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 20, 2024
Issuing agencies
Transportation DepartmentFederal Motor Carrier Safety Administration
Abstract
FMCSA proposes amendments to its property broker rules in response to petitions for rulemaking from the Owner-Operator Independent Drivers Association (OOIDA) and the Small Business in Transportation Coalition (SBTC). Under current regulations, the parties to a brokered freight transaction have a right to review the broker's record of the transaction, which stakeholders often refer to as "broker transparency." Contracts between brokers and motor carriers frequently contain waivers of this right. OOIDA requested that FMCSA promulgate a requirement that property brokers provide an electronic copy of each transaction record automatically within 48 hours after the contractual service has been completed, and explicitly prohibit brokers from including any provision in their contracts that requires a motor carrier to waive its rights to access the transaction records. SBTC requested that FMCSA prohibit brokers of property from coercing or requiring parties to brokers' transactions to waive their right to review the record of the transaction as a condition for doing business and prohibit the use of clause(s) exempting the broker from having to comply with this transparency requirement. Though the proposed rule is responsive to the petitions in reinforcing the broker transparency requirement, the proposed provisions differ from those requested by OOIDA and SBTC. 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. The proposal would also make changes to the format and content of the records.
Full Text
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<title>Federal Register, Volume 89 Issue 224 (Wednesday, November 20, 2024)</title>
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[Federal Register Volume 89, Number 224 (Wednesday, November 20, 2024)]
[Proposed Rules]
[Pages 91648-91670]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-27115]
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DEPARTMENT OF TRANSPORTATION
Federal Motor Carrier Safety Administration
49 CFR Part 371
[Docket No. FMCSA-2023-0257]
RIN 2126-AC63
Transparency in Property Broker Transactions
AGENCY: Federal Motor Carrier Safety Administration (FMCSA), Department
of Transportation (DOT).
ACTION: Notice of proposed rulemaking (NPRM).
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SUMMARY: FMCSA proposes amendments to its property broker rules in
response to petitions for rulemaking from the Owner-Operator
Independent Drivers Association (OOIDA) and the Small Business in
Transportation Coalition (SBTC). Under current regulations, the parties
to a brokered freight transaction have a right to review the broker's
record of the transaction, which stakeholders often refer to as
``broker transparency.'' Contracts between brokers and motor carriers
frequently contain waivers of this right. OOIDA requested that FMCSA
promulgate a requirement that property brokers provide an electronic
copy of each transaction record automatically within 48 hours after the
contractual service has been completed, and explicitly prohibit brokers
from including any provision in their contracts that requires a motor
carrier to waive its rights to access the transaction records. SBTC
requested that FMCSA prohibit brokers of property from coercing or
requiring parties to brokers' transactions to waive their right to
review the record of the transaction as a condition for doing business
and prohibit the use of clause(s) exempting the broker from having to
comply with this transparency requirement. Though the proposed rule is
responsive to the petitions in reinforcing the broker transparency
requirement, the proposed provisions differ from those requested by
OOIDA and SBTC. 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. The proposal
would also make changes to the format and content of the records.
DATES: Comments must be received on or before January 21, 2025.
ADDRESSES: You may submit comments identified by Docket Number FMCSA-
2023-0257 using any of the following methods:
<bullet> Federal eRulemaking Portal: Go to <a href="https://www.regulations.gov/docket/FMCSA-2023-0257/document">https://www.regulations.gov/docket/FMCSA-2023-0257/document</a>. Follow the online
instructions for submitting comments.
<bullet> Mail: Dockets Operations, U.S. Department of
Transportation, 1200 New Jersey Avenue SE, West Building, Ground Floor,
Washington, DC 20590-0001.
<bullet> Hand Delivery or Courier: Dockets Operations, U.S.
Department of Transportation, 1200 New Jersey Avenue SE, West Building,
Ground Floor, Washington, DC 20590-0001, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. To be sure someone is
there to help you, please call (202) 366-9317 or (202) 366-9826 before
visiting Dockets Operations.
<bullet> Fax: (202) 493-2251.
FOR FURTHER INFORMATION CONTACT: Mr. Michael Evans, Transportation
Specialist, Commercial Enforcement Division, Office of Safety, FMCSA,
1200 New Jersey Avenue SE, Washington, DC 20590-0001; (202) 568-0530;
<a href="/cdn-cgi/l/email-protection#5d30343e353c383173382b3c332e1d393229733a322b"><span class="__cf_email__" data-cfemail="adc0c4cec5ccc8c183c8dbccc3deedc9c2d983cac2db">[email protected]</span></a>. If you have questions on viewing or submitting
material to the docket, call Dockets Operations at (202) 366-9826.
SUPPLEMENTARY INFORMATION: FMCSA organizes this NPRM as follows:
I. Public Participation and Request for Comments
A. Submitting Comments
B. Viewing Comments and Documents
C. Privacy
D. Comments on the Information Collection
II. Executive Summary
A. Purpose and Summary of the Regulatory Action
B. Summary of Major Provisions
C. Costs and Benefits
III. Abbreviations
IV. Legal Basis
V. Background
A. History of Property Broker Regulations
B. History of the Current Rulemaking
C. Related Actions
VI. Discussion of Proposed Rulemaking and Comments
A. Proposed Rulemaking
B. Comments and Agency Responses
C. Issues on Which the Agency Seeks Further Comment
VII. Section-by-Section Analysis
A. Section 371.2 Definitions.
B. Section 371.3 Records To Be Kept by Brokers
VIII. Regulatory Analyses
A. E.O. 12866 (Regulatory Planning and Review), E.O. 13563
(Improving Regulation and Regulatory Review), E.O.
[[Page 91649]]
14094 (Modernizing Regulatory Review), and DOT Regulatory Policies
and Procedures
B. Advance Notice of Proposed Rulemaking
C. Regulatory Flexibility Act
D. Assistance for Small Entities
E. Unfunded Mandates Reform Act of 1995
F. Paperwork Reduction Act
G. E.O. 13132 (Federalism)
H. Privacy
I. E.O. 13175 (Indian Tribal Governments)
J. National Environmental Policy Act of 1969
K. Rulemaking Summary
I. Public Participation and Request for Comments
A. Submitting Comments
If you submit a comment, please include the docket number for this
NPRM (FMCSA-2023-0257), indicate the specific section of this document
to which your comment applies, and provide a reason for each suggestion
or recommendation. You may submit your comments and material online or
by fax, mail, or hand delivery, but please use only one of these means.
FMCSA recommends that you include your name and a mailing address, an
email address, or a phone number in the body of your document so FMCSA
can contact you if there are questions regarding your submission.
To submit your comment online, go to <a href="https://www.regulations.gov/docket/FMCSA-2023-0257/document">https://www.regulations.gov/docket/FMCSA-2023-0257/document</a>, click on this NPRM, click ``Comment,''
and type your comment into the text box on the following screen.
If you submit your comments by mail or hand delivery, submit them
in an unbound format, no larger than 8\1/2\ by 11 inches, suitable for
copying and electronic filing.
FMCSA will consider all comments and material received during the
comment period.
Confidential Business Information (CBI)
CBI is commercial or financial information that is both customarily
and actually treated as private by its owner. Under the Freedom of
Information Act (5 United States Code (U.S.C.) 552), CBI is exempt from
public disclosure. If your comments responsive to the NPRM contain
commercial or financial information that is customarily treated as
private, that you actually treat as private, and that is relevant or
responsive to the NPRM, it is important that you clearly designate the
submitted comments as CBI. Please mark each page of your submission
that constitutes CBI as ``PROPIN'' to indicate it contains proprietary
information. FMCSA will treat such marked submissions as confidential
under the Freedom of Information Act, and they will not be placed in
the public docket of the NPRM. Submissions containing CBI should be
sent to Brian Dahlin, Chief, Regulatory Evaluation Division, Office of
Policy, FMCSA, 1200 New Jersey Avenue SE, Washington, DC 20590-0001 or
via email at <a href="/cdn-cgi/l/email-protection#4a2838232b24642d642e2b222623240a2e253e642d253c"><span class="__cf_email__" data-cfemail="a4c6d6cdc5ca8ac38ac0c5ccc8cdcae4c0cbd08ac3cbd2">[email protected]</span></a>. At this time, you need not send a
duplicate hardcopy of your electronic CBI submissions to FMCSA
headquarters. Any comments FMCSA receives not specifically designated
as CBI will be placed in the public docket for this rulemaking.
B. Viewing Comments and Documents
To view any documents mentioned as being available in the docket,
go to <a href="https://www.regulations.gov/docket/FMCSA-2023-0257/document">https://www.regulations.gov/docket/FMCSA-2023-0257/document</a> and
choose the document to review. To view comments, click this NPRM, then
click ``Browse Comments.'' If you do not have access to the internet,
you may view the docket online by visiting Dockets Operations on the
ground floor of the DOT West Building, 1200 New Jersey Avenue SE,
Washington, DC 20590-0001, between 9 a.m. and 5 p.m., Monday through
Friday, except Federal holidays. To be sure someone is there to help
you, please call (202) 366-9317 or (202) 366-9826 before visiting
Dockets Operations.
C. Privacy
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the
public to better inform its regulatory process. DOT posts these
comments, including any personal information the commenter provides, to
<a href="http://www.regulations.gov">www.regulations.gov</a> as described in the system of records notice DOT/
ALL 14 (Federal Docket Management System (FDMS)), which can be reviewed
at <a href="https://www.transportation.gov/individuals/privacy/privacy-act-system-records-notices">https://www.transportation.gov/individuals/privacy/privacy-act-system-records-notices</a>. The comments are posted without edit and are
searchable by the name of the submitter.
D. Comments on the Information Collection
Written comments and recommendations for the information collection
discussed in this NPRM should be sent within 60 days of publication to
<a href="http://www.reginfo.gov/public/do/PRAMain">www.reginfo.gov/public/do/PRAMain</a>. Find this information collection by
clicking the link that reads ``Currently under Review--Open for Public
Comments.''
II. Executive Summary
A. Purpose and Summary of the Regulatory Action
Property brokers match motor carriers with shippers, which can
create new business opportunities for motor carriers and transportation
solutions for shippers. This business model can also lead to an
asymmetry of information between parties, which in turn can affect the
contracting process by limiting parties' ability to negotiate for their
desired terms.\1\ These risks can lead to market inefficiencies, such
as decreased freight capacity or decreased market competition, which
can arise when parties lack material information about the transaction.
FMCSA and its predecessor agencies have attempted to address these
problems by requiring property brokers to keep certain records of their
transactions and make the records available to motor carriers and
shippers involved in those transactions. Making the records available
to the transacting parties, sometimes referred to as ``broker
transparency,'' is meant to inform business decisions and enable self-
policing of abuses that may arise.
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\1\ Asymmetric information exists when one party in a
transaction has more information than the other, which can result in
a market failure. Asymmetric information provides an advantage to
one side of a market over the other when negotiating a transaction.
OMB Circular No. A-4, p. 17 (Nov. 9, 2023).
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The Agency has received rulemaking petitions and other input from
the public, however, that indicate many motor carriers cannot review
the brokers' transaction records as the broker recordkeeping regulation
intends. Brokers often include provisions in their contracts with motor
carriers that require motor carriers to waive their ability to review
broker records. In addition, even without waiver clauses, motor
carriers often face practical hurdles in accessing records that they
should be able to review under the current regulations. As a result of
the SBTC and OOIDA petitions, the Agency reviewed its property broker
recordkeeping requirements and is proposing certain amendments to those
requirements. The proposed amendments are intended to reinforce broker
transparency for motor carriers and to better tailor the required
contents of the records to the purpose of broker transparency.
The current and proposed regulations are based on the Agency's
authority to regulate the procurement of interstate transportation,
which includes authority over property brokers and their arrangement of
transportation. The Agency has the authority to collect
[[Page 91650]]
information from brokers and require them to keep certain records. The
Agency also has authority over the registration of property brokers,
and when registering them, to determine whether the broker is willing
and able to comply with all applicable regulations, including the
recordkeeping regulations. In exercising its authority over brokers,
the Agency is required to provide for the protection of motor carriers
and shippers. The proposed rule would use and implement this authority
by revising the broker recordkeeping requirements to further protect
motor carriers and promote efficiency within the motor carrier
transportation system.
B. Summary of Major Provisions
FMCSA proposes several amendments to 49 CFR 371.3, ``Records to be
kept by brokers.'' The first proposed provision would require property
brokers to keep their records in an electronic format. This provision
would serve the purpose of broker transparency by making it easier for
motor carriers and shippers to review broker records on request, and
remotely, as compared to the current practice of some brokers who
respond to transparency requests by making only physical records
available at their principal place of business. The Agency believes
that many brokers already maintain their records in an electronic
format.
The second proposed provision would modernize and tailor the
required contents of the records to better achieve broker transparency.
The current requirement uses a distinction between brokerage and non-
brokerage services, which is rooted in a previous regulatory approach.
FMCSA proposes eliminating this distinction and instead 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. This is substantially similar to the current
requirement but removes the outdated distinction. The record would also
be required to include any claims connected to the shipment, such as a
shipper's claims for damage or delay. This amendment would ensure the
parties have full visibility into the payments, fees, and charges
associated with the transaction so they can resolve issues and disputes
among themselves without resorting to costlier remedies.
The third proposed provision would clarify the obligation imposed
on brokers to respond to requests for transaction records and the
process parties must follow when requesting and supplying such records.
The current regulation frames the broker transparency requirement as a
right, given to the transacting parties, to review the records. The
proposed amendment would reframe broker transparency as a regulatory
duty imposed on brokers to provide records to the transacting parties.
The fourth proposed provision would require brokers to provide the
records required to be maintained under Sec. 371.3(a) within 48 hours
when a party to the transaction requests those records. This provision
is intended to ensure that the requesting party receives the records in
a timely manner, to support the resolution of issues around service or
payment.
C. Costs and Benefits
Broker transparency is intended to enable efficient outcomes in the
transportation industry by providing the material information necessary
for the transacting parties to make informed business decisions. Broker
transparency also supports the efficient resolution of disputes between
parties. Though the current regulations are meant to provide broker
transparency, the Agency has heard through numerous listening sessions
and comments from motor carriers that broker transparency is rare in
practice. The Agency believes the revisions to the regulation will make
it more likely that brokers will comply with their regulatory duty to
provide information. The Agency analyzes these potential benefits
qualitatively and seeks further information and data from the public to
better analyze the benefits.
Some motor carriers believe that increased broker transparency
would have a material effect on negotiated freight rates. The Agency
believes that other market factors, rather than the availability of
additional information through broker transparency, are likely dominant
in setting freight rates. However, the Agency has not ruled out the
possibility that motor carriers and shippers could negotiate for better
rates over time using the broker transparency information. The Agency
seeks further comment on this issue.
The Agency believes that the cost of the proposed rule would be
minimal. Based upon its interactions with brokers, the Agency believes
that most brokers already keep records electronically and that these
records already contain the information that would be required by the
proposed rule. The Agency believes that brokers already provide
information and documents, e.g., rate confirmation documents, to motor
carriers. The Agency believes that these current practices can be
adjusted, at relatively low cost, to provide broker transparency
information within 48 hours of request. The Agency analyzes these
potential costs qualitatively and seeks further information and data
from the public to better analyze the costs. The Agency does not
believe that this rule would be economically significant.
III. Abbreviations
API Application programming interface
BLS Bureau of Labor Statistics
COVID-19 Coronavirus disease 2019
DOJ Department of Justice
DOT Department of Transportation
DTSA Defend Trade Secrets Act of 2016
EDI Electronic data interchange
FHWA Federal Highway Administration
FMCSA Federal Motor Carrier Safety Administration
FR Federal Register
HHG Household goods
ICC Interstate Commerce Commission
IT Information technology
MATS Mid-America Trucking Show
NAICS North American Industry Classification System
NCCDB National Consumer Complaint Database
NPRM Notice of proposed rulemaking
OIRA Office of Information and Regulatory Affairs
OMB Office of Management and Budget
OOIDA Owner-Operator Independent Drivers Association
PIA Privacy Impact Assessment
PII Personally identifiable information
PPP Paycheck Protection Program
PTA Privacy Threshold Assessment
SAS Service Annual Survey
SBA Small Business Administration
SBTC Small Business in Transportation Coalition
Secretary Secretary of Transportation
TIA Transportation Intermediaries Association
UMRA Unfunded Mandates Reform Act of 1995
U.S.C. United States Code
IV. Legal Basis
The Secretary of Transportation (Secretary) has general
jurisdiction to establish regulations concerning the procurement by
property brokers of for-hire transportation in interstate or foreign
commerce (49 U.S.C. 13501). The Secretary is authorized to obtain
information from motor carriers, brokers, and other related parties
that the Secretary determines is necessary to ensure a transportation
system that meets the needs of the United States (49 U.S.C. 13101 and
13301(b)).
The Secretary has broad authority to adopt regulations to carry out
the requirements of the commercial statutes in Title 49 U.S.C.,
subtitle IV, part B (49 U.S.C. 13301(a)). Some of the needs articulated
in the national transportation policy (49 U.S.C. 13101) include
encouraging fair competition and reasonable rates for transportation by
motor carriers of property; promoting
[[Page 91651]]
efficiency in the motor carrier transportation system; enabling
efficient and well-managed motor carriers to earn adequate profits,
attract capital, and maintain fair wages and working conditions; and
improving and maintaining a sound, safe, and competitive privately
owned motor carrier system. The Secretary is also authorized to
prescribe the form of any required records prepared or compiled by
brokers, including those related to movement of traffic and receipts
and expenditures of money, and the time period for preservation of such
records (49 U.S.C. 14122). Furthermore, under 49 U.S.C. 13904(e),
regulations applicable to brokers ``shall provide for the protection of
motor carriers and shippers by motor vehicle.'' \2\
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\2\ The previous version of the statute (located at 49 U.S.C.
13904(c)) only required the Secretary to provide for the protection
of shippers by motor vehicle in broker regulations. The Moving Ahead
for Progress in the 21st Century Act (MAP-21), Public Law 112-141
(July 6, 2012), amended this provision to include the protection of
motor carriers as a requirement for regulations applicable to
brokers. Sec. 32916, Public Law 112-141, 126 Stat. 820 (July 6,
2012).
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In recent years, many motor carriers, industry-wide, have expressed
concern about their inability to access records pertaining to their
transactions with brokers. The inability to obtain these records from
brokers has led to financial harm, including but not limited to, an
inability to present a proper defense when shippers or brokers allege
problems with a shipment. Because FMCSA's mandate under 49 U.S.C. 13904
specifically includes providing for the protection of motor carriers
with respect to broker regulations, and because a records-transmittal
regulation would protect both motor carriers and shippers, FMCSA's
promulgation of such a regulation is authorized by 49 U.S.C. 13904(e).
This rulemaking is intended to address an asymmetry of information
between brokers, shippers, and motor carriers that affects the ability
of all parties to participate effectively in a fair, efficient
transportation system. FMCSA intends to modernize regulations
applicable to broker recordkeeping and disclosure while complying with
the requirement in 49 U.S.C. 13904(e) to ensure that the regulations
provide for the protection of motor carriers and shippers. FMCSA relies
on the statutory authorities cited above.
Authority to carry out the functions and exercise the authorities
cited above is delegated to the FMCSA Administrator under 49 CFR
1.87(a)(1)-(3) and (5)-(6).
V. Background
FMCSA regulates property brokers, defined as persons who, for
compensation, arrange or offer to arrange the transportation of
property by an authorized motor carrier (49 CFR 371.2(a)). The property
broker regulations include recordkeeping requirements, for each
transaction, at 49 CFR 371.3 ``Records to be kept by brokers.'' A
brokered transaction for transportation of property involves at least a
shipper seeking to have the property transported, a carrier willing to
transport the property, and a broker who arranges the transportation.
There may be separate contracts between the broker and the shipper and
between the broker and the carrier, but the broker, carrier, and
shipper are all party to the same brokered transaction for the purpose
of the broker recordkeeping regulation. The relationship between the
parties is further explained in the Property Broker Practices NPRM (45
FR 31140, 31141, May 12, 1980). Under the broker recordkeeping
regulation, FMCSA requires brokers to make certain transaction records
available to the transacting parties, that is, the shipper, the motor
carrier, and any other party to the brokered property transaction. The
availability of this information is sometimes referred to as ``broker
transparency.'' The term should not be misunderstood to mean public
disclosure of the information, i.e., ``public transparency.''
FMCSA proposes to amend the broker transparency requirement. FMCSA
initiated the rulemaking based on the grant of two rulemaking petitions
regarding broker transparency, and the Agency has also received input
on the topic through several related actions. The petitions and related
actions are summarized below. The broker transparency regulation has a
long history, with several predecessor rules and regulations. The
regulatory history is summarized below.
A. History of Property Broker Regulations
Congress tasked the Interstate Commerce Commission (ICC) with
regulating the motor carrier industry in the Motor Carrier Act of 1935,
which included regulating property brokers operating in the industry
(Pub. L. 74-255). The ICC issued its initial rule regulating brokers in
1949 (14 FR 2833, May 28, 1949). The rule was based on an ICC report
entitled Practices of Property Brokers (Ex Parte MC-39, 49 Motor
Carrier Cases (MCC) 277 (May 16, 1949)). The report contemplated
imposing a cap on broker commissions to address concerns over alleged
excesses. The ICC postponed implementation of a cap because it lacked
information to determine an appropriate upper limit. In the interim,
the ICC believed that concerns over commissions could be addressed by
having brokers maintain a public schedule of services with their
maximum charges for brokerage services. The cap was not pursued
further, and the interim solution persisted, as described in the
follow-on report ``Practices of Property Brokers'' (Ex Parte MC-39, 53
MCC 633 (Dec. 27, 1951)).
The property broker regulations remained unmodified for several
decades, except for a recodification that relocated them within Title
49, from part 167 to part 1045 (49 FR 20003, Dec. 20, 1967). On May 12,
1980, the ICC published an NPRM to revise the property broker
regulations (45 FR 31140). This proposed rule sought to eliminate
unnecessary regulations and to modify regulations that were
unnecessarily restrictive. The intent generally aligned with the
purpose of the Motor Carrier Act of 1980 (Pub. L. 96-296), which was
not in force at the time, but which was enacted a few months later, on
July 1, 1980. The ICC made this connection clear in the final rule
published on October 17, 1980 (45 FR 68941). That rule explained that
Congress had given the ICC the general mandate to open up the
bargaining process between shippers and motor carriers, and it sought
to remove unnecessary restrictions which might impede the free
operation of the marketplace. The ICC viewed its revisions to the
property broker regulations as consistent with those goals. The
rulemaking put into place regulations that are substantially similar to
FMCSA's current property broker regulations.
The final rule included a revised 49 CFR 1045.3, which had the same
requirements as the current 49 CFR 371.3 in all significant respects,
including the recordkeeping requirement placed on brokers and the right
of each party to the transaction to review the record. In discussing
the revisions to the required records in the NPRM, the ICC stated that
the primary purpose of the recordkeeping requirements was to ascertain
whether improper rebating activities were taking place, and it noted
that the proposed rule also included revisions to the rebating rules
(45 FR 31140). When the ICC issued the original property broker
regulations, it was concerned with a form of indirect rebating where
brokers would undercharge for services to
[[Page 91652]]
shippers as a means to secure and control the shippers' traffic and
make up for the undercharging by charging motor carriers instead (49
MCC 277, 317-18). In the 1980 NPRM, the ICC stated that this concern
over indirect rebating was no longer valid, and it revised the rebating
regulations accordingly (45 FR 31140, 31141).
After explaining the revisions to the required record contents, the
ICC then explained the addition of the right-to-review requirement as a
replacement for more complex requirements in Sec. Sec. 1045.5, 1045.6,
and 1045.10 (45 FR 31140). The ICC explained that Sec. 1045.5, which
required brokers to make their maximum prices for brokerage services
publicly available and to adhere to those prices, could be rendered
ineffective by brokers giving a wide price range instead (45 FR 31140,
31141). The same was true of Sec. 1045.6, which set forth similar
restrictions on prices for non-brokerage services. In removing these
regulations in favor of the new Sec. 1045.3(c), the ICC explained that
the new regulation would enable parties to determine what portion of
their bill was related to the broker's services (45 FR 31140, 31141).
Section 1045.10 prohibited brokers from charging both the shipper and
the carrier for a service without first advising both parties of the
details of the charges. The ICC stated that this requirement was
unnecessary and potentially burdensome since proper notification could
delay service, particularly when the broker was trying to arrange
freight transportation on an expedited basis, and it was replaced by
the right to review in Sec. 1045.3(c) (45 FR 31140, 31141). The broker
regulations remain substantially the same as when they were amended in
1980.
In 1996, pursuant to the ICC Termination Act (Pub. L. 104-88),
responsibility for certain transportation regulations was transferred
from the ICC to DOT and delegated by DOT to FHWA (61 FR 54706, Oct. 21,
1996). This transfer and redesignation included part 1045, which was
moved to part 371. Part 371 was subject to a minor technical amendment
in 1997 but has remained otherwise unchanged since that time (62 FR
15417, Apr. 1, 1997). FMCSA assumed responsibility for part 371 when
the Agency was created by the Motor Carrier Safety Improvement Act of
1999 (Pub. L. 106-159), and the Secretary subsequently delegated
authority to administer 49 U.S.C. chapters 131, 133, 135, and 139 to
the FMCSA Administrator (65 FR 220, Jan. 4, 2000).
B. History of the Current Rulemaking
On May 6, 2020, the Small Business in Transportation Coalition
(SBTC) petitioned the Department to initiate a rulemaking amending the
broker transparency regulation. SBTC described Sec. 371.3, the broker
transparency regulation, as providing motor carriers with a ``right to
know'' the rate offered by the broker as a proportion of the rate paid
by the shipper to the broker. SBTC raised concerns about the widespread
practice of brokers including clauses in their contracts that waive a
carrier's rights under Sec. 371.3(c). Transparency is necessary for a
market to operate in an ethical and fair manner, SBTC argued, and the
prevalence of waiver clauses undercuts that transparency. As a remedy,
the petition proposed prohibiting brokers from requiring waiver of
broker transparency as a condition of doing business. SBTC's petition
referenced the economic impacts of the COVID-19 national emergency,
impacts that were being acutely felt when the petition was filed in May
2020.
On May 19, 2020, the Owner-Operator Independent Drivers Association
(OOIDA) petitioned the Department to initiate a rulemaking amending the
broker transparency regulation. The petition sought two changes to
Sec. 371.3. First, the petition proposed adding a requirement that
brokers provide a copy of the transaction record required under Sec.
371.3(a), in an electronic format, within 48 hours of the service being
completed. Second, the petition proposed prohibiting brokers from
including clauses in their contracts that waive motor carriers' rights
to access the transaction records required under 371.3. The petition
argued that the prevalence of waiver clauses and instances of
retaliation by brokers against motor carriers seeking to exercise their
rights under Sec. 371.3(c) undercut the transparency envisioned by
Sec. 371.3. As with the SBTC petition, the OOIDA petition referenced
the economic conditions affecting truckers at the time. Both petitions
for rulemaking are included in the docket for this rulemaking.
FMCSA published a notice in the Federal Register on August 19,
2020, requesting public comment on OOIDA's and SBTC's rulemaking
petitions (85 FR 51145). On October 16, 2020, the Agency extended the
comment period by 30 days (85 FR 65898). The Agency received 1,391
comments on OOIDA's and SBTC's rulemaking petitions by the end of the
extended comment period. The public commented on the transparency of
charges and payments, broker margins, freedom of contract, pricing
confidentiality, and the history of the broker transparency regulation.
These issues are discussed below in Section VI.B., Comments and Agency
Responses. On March 16, 2023, FMCSA granted OOIDA's and SBTC's
rulemaking petitions. In the letters granting the SBTC and OOIDA
petitions, FMCSA made clear that, while the Agency found good cause to
open a rulemaking to amend 49 CFR 371.3, the proposed rule would not
necessarily include the changes SBTC or OOIDA sought. The letters
granting the petitions are available in the docket for this rulemaking.
C. Related Actions
In the time between the filing and grant of these petitions several
related actions have provided the Agency with further information about
broker transparency and wider context of the rulemaking. The related
actions also indicate that the concerns surrounding broker transparency
have persisted beyond the specific economic conditions of the freight
industry in 2020.
Shortly after the OOIDA and SBTC petitions were filed, the
Transportation Intermediaries Association (TIA) filed a rulemaking
petition on August 4, 2020, seeking the elimination of Sec. 371.3(c)
and requesting guidance on dispatch services. Only the portion directed
towards the elimination of Sec. 371.3(c) is relevant to this
rulemaking.\3\ The TIA petition argued that the regulation is outdated
given the changes in the brokered freight industry since the regulation
was introduced in 1980. The petition further argued that broker
transparency jeopardizes the confidentiality of proprietary pricing,
and that motor carriers have sufficient information about prevailing
rates to make informed business decisions without needing the records
required by Sec. 371.3.
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\3\ FMCSA issued guidance on the definitions of ``broker'' and
``bona fide agent,'' including guidance on the role dispatch
services play in the transportation industry and clarification on
when such entities must register as brokers, on November 16, 2023
(88 FR 39368).
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The Agency published a request for public comments regarding TIA's
petition on November 25, 2020 (85 FR 75280) and received 179 comments
in response. These comments were substantially similar to those filed
in response to the OOIDA and SBTC petitions. FMCSA denied TIA's
petition on March 17, 2023.\4\ In denying the
[[Page 91653]]
petition, the Agency stated that TIA's proposal would be contrary to
the stated transportation policy goals in 49 U.S.C. 13101, including
promotion of fairness and efficiency in the transportation industry.
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\4\ The petition for rulemaking and denial letters are available
in the docket for this rulemaking.
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While the SBTC, OOIDA, and TIA petitions were pending, FMCSA held a
public listening session on October 28, 2020, regarding the three
petitions and property brokers in general (85 FR 64613, Oct. 13, 2020).
FMCSA received 76 written comments in response to the Federal Register
notice announcing the listening session. During the listening session,
participants expressed concerns about freight rates, disclosure of
confidential pricing information, motor carriers directly soliciting
shippers, so-called ``double brokering,'' record-keeping costs,
comparisons to other industries, charge backs, and detention time fees.
The Agency has received additional input from the public on the
topic of broker transparency in several other contexts. In March 2023,
the Agency held a listening session at the Mid-America Trucking Show
(MATS) shortly after granting the SBTC and OOIDA petitions.\5\ Despite
the Agency's public statement that the listening session would focus on
other broker matters, including financial responsibility, public
commenters at MATS focused on broker transparency. Many of the
transparency related concerns were consistent with those raised in the
comments on the OOIDA and SBTC rulemaking petitions in 2020, suggesting
that the issues raised at the time of the public comment period for
those petitions had not subsided as of March 2023.
---------------------------------------------------------------------------
\5\ The transcript of the listening session is available in the
docket for this rulemaking.
---------------------------------------------------------------------------
The topic of broker transparency has also appeared in the comments
received on other proposed rules.\6\ While comments are most useful to
the Agency when directed towards the subject matter of the public
notice to which they respond, the Agency acknowledges these ancillary
comments as evidence of continuing concerns around broker transparency.
---------------------------------------------------------------------------
\6\ See, e.g., Comment FMCSA-2023-0268-0026 (comment on ``Fees
for the Unified Carrier Registration Plan and Agreement'') available
at <a href="https://www.regulations.gov/comment/FMCSA-2023-0268-0026">https://www.regulations.gov/comment/FMCSA-2023-0268-0026</a>; comment
FMCSA-2016-0102-0351 (comment on ``Broker and Freight Forwarder
Financial Responsibility'') available at <a href="https://www.regulations.gov/comment/FMCSA-2016-0102-0351">https://www.regulations.gov/comment/FMCSA-2016-0102-0351</a>.
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VI. Discussion of Proposed Rulemaking and Comments
FMCSA proposes this rulemaking in response to OOIDA's and SBTC's
petitions. The NPRM differs in certain ways from the provisions sought
by OOIDA and SBTC, as discussed below. The rulemaking is also informed
by the comments received in response to the petitions, as well as in
the related actions detailed elsewhere in this NPRM. The comments,
input from related actions, and the Agency's responses are discussed
after the provisions of the proposed rulemaking.
A. Proposed Rulemaking
To address the concerns over broker transparency raised in the
rulemaking petitions and subsequent public comments, FMCSA proposes the
following amendments to Sec. 371.3, ``Records to be kept by brokers,''
presented in the order in which they would appear in the section. The
Agency also proposes a conforming amendment to Sec. 371.2,
``Definitions.''
Sections 371.2 and 371.3 apply to all property brokers FMCSA
regulates, as would the proposed amendments. Property brokers are
divided between household goods (HHG) brokers, who arrange the
transportation of personal property between homes, and non-HHG (i.e.,
general freight) brokers. FMCSA believes that the broker transparency
regulation should continue to apply equally to HHG brokers and general
freight brokers, and the Agency has not identified any rationale for
imposing different transparency requirements on HHG brokers versus
general freight brokers. The comments received to date do not raise any
broker transparency concerns unique to HHG brokers, and the Agency
seeks comment on this issue.
1. Brokers Must Keep Records in an Electronic Format
FMCSA proposes requiring that the records covered by Sec. 371.3(a)
be kept in an electronic format to promote compliance with the broker
transparency requirement in Sec. 371.3(c). The Agency is aware of
brokers avoiding meaningful compliance with Sec. 371.3(c) by making
the required records available for inspection only at their principal
place of business, which often makes inspection by the motor carrier
difficult or impossible. By requiring that the records be kept in an
electronic format, the Agency intends to remedy this issue. Because the
Agency, based on its interactions with various brokers, believes that
most freight brokers already keep their records in an electronic
format, this requirement should not impose a significant burden on
these brokers. FMCSA believes that electronic recordkeeping may not be
as common among household goods brokers and seeks comment on what
burden, if any, would be imposed upon those brokers if electronic
recordkeeping were required.
2. Revisions to the Required Contents of Brokers' Records
Within the recordkeeping requirements of Sec. 371.3, paragraph (a)
specifies the details that the records must contain. The Agency
proposes the following revisions to ensure that the records are
tailored to the needs of the parties, therefore better addressing the
concerns of motor carriers while not imposing unnecessary recordkeeping
burdens on brokers.
Date of Payment
The Agency proposes adding the date of payment from both the
shipper to the broker and from the broker to the carrier. Some brokers
commented that they bear significant risk because they tender payment
to motor carriers prior to receiving payment from shippers, for
instance, in a situation where the carrier is paid within 3 days of
delivering a load, but the shipper has 30 days to pay the broker. On
the other hand, motor carriers have commented about not being paid by
brokers in a timely manner, often in the context of a charge back or
other contractual dispute over whether the carrier performed their
duties adequately under the contract. Including the date of payment
would provide transparency to all parties about the benefits and risks
of the carrier's payment structure. It would also provide motor
carriers with necessary information in the event they experience charge
backs or other instances of nonpayment, because the carrier would be
better able to understand any deductions the shipper may have made to
the payment it remitted to the broker and to verify that those
deductions correspond to the charge back against the carrier.
Elimination of Brokerage Service vs. Non-Brokerage Service Distinction
The Agency proposes eliminating the distinction between brokerage
services and non-brokerage services in Sec. 371.3(a) by removing
current paragraph (5) and revising paragraph (4). This distinction was
originally made by the ICC in its 1949 rule, which was based on the
``Practices of Property Brokers'' report. As explained in the report,
the ICC was contemplating a cap on brokers' commissions. The ICC
distinguished between brokerage and non-brokerage services to support
implementation of the cap and to prevent brokers from circumventing it
through charges for non-brokerage services. The
[[Page 91654]]
contemplated cap was deferred from the 1949 rule and ultimately never
adopted. Despite this, the distinction between brokerage and non-
brokerage services was included as part of the rule and has remained in
the regulations ever since.
The Agency believes that the distinction between brokerage and non-
brokerage services is unnecessary for the purposes of the broker
transparency regulation and proposes removing the distinction in favor
of a simpler itemization requirement described below. The term non-
brokerage service is defined at Sec. 371.2(d), and used only in Sec.
371.3(a)(5), so the Agency also proposes removing the definition of
non-brokerage service, which would no longer be used.
Itemization of Charges and Fees
The Agency 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. Brokers would also be
required to itemize any penalties assessed in connection with the
shipment, for example, a penalty for late delivery or cargo damage.
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.
3. Brokers Must Provide Records Upon Request
In their petitions, both OOIDA and SBTC sought an explicit ban on
waivers of the requirements in 371.3(c). However, as a general
principle, parties are permitted to waive any right unless Congress, by
statute, specifically makes a right non-waivable. The Agency 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. The petitions did,
however, identify inconsistencies between this regulation and the rest
of part 371, which the Agency intends to address through this
rulemaking. To this end, the Agency proposes amending the language of
Sec. 371.3(c) to more accurately describe the regulatory obligation
imposed on brokers and the process for requesting and supplying
transaction records.
When the ICC issued the broker transparency regulation in 1980, it
stated that it would enable the elimination of other, more complex
regulations. One of the major provisions eliminated, former 49 CFR
1045.10, related to the duties and obligations of a broker, which
included giving fair advice to shippers and not misrepresenting or
making false promises about the services motor carriers would provide;
not misrepresenting or giving false information to motor carriers about
the commodities in the shipment; advising both the shipper and carrier
of the amount and basis of any compensation being received from the
other; exercising due diligence in carrying out the terms of its
contracts with shippers and motor carriers and ensuring prompt payment;
and paying any freight charges in full to the carrier or carriers
without deduction for any amount due to the broker from such carrier or
carriers. The ICC was clear that its intention was not to eliminate
these duties and responsibilities entirely, but rather that providing
shippers and carriers with the ability to review the transaction
records would ensure that brokers were acting honestly and fairly.
By phrasing the requirement as a private ``right to review,'' the
original regulation did not prohibit a broker from requiring a waiver
of the private ``right to review'' as a condition of brokering a load
to a motor carrier and did not contain an enforcement mechanism for the
Agency to enforce the private ``right to review.'' However, FMCSA
believes the original wording did not adequately capture the ICC's
intent that brokers continue to comply with those duties and
obligations, particularly disclosure of such records to shippers and
motor carriers who find value in such information. To address these
concerns, FMCSA has reframed the disclosure requirement as a regulatory
obligation, as the Agency believes this more closely aligns with the
original intent of the regulation. Moreover, a regulated entity must
adhere to the regulations and cannot ``disguise its regulatory
obligations as contractual ones.'' Taylor Energy Co. LLC v. United
States, 975 F.3d 1303, 1306 (Fed. Cir. 2020). These changes would also
ensure that the language in Sec. 371.3(c) is consistent with the other
broker requirements in part 371.
The proposed amendments to Sec. 371.3(c) would clarify that
brokers maintain a continuing duty to act fairly and honestly, and that
visibility into the transaction records is the mechanism by which
shippers and carriers can ensure that brokers are complying with this
duty. The requirement to provide the records upon request would thus be
made explicit as a regulatory obligation. The proposed rule would not,
however, prohibit brokers from including confidentiality clauses in
their contracts with motor carriers. As long as brokers are complying
with the requirement to disclose records upon request, the parties may
negotiate and reach agreements regarding non-disclosure of the
information to non-parties.
4. Records Must Be Provided Within 48 Hours of Request
As discussed in the comments, the Agency is aware of brokers
avoiding meaningful compliance with the regulation by delaying the
availability of records for review, and by restricting access for
review to their principal place of business. The Agency proposes
amending Sec. 371.3(c) to require that records must be provided within
48 hours. 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. 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.
B. Comments and Agency Responses
In the notice requesting public comment on OOIDA's and SBTC's
rulemaking petitions (85 FR 51145, Aug. 19, 2020), the Agency posed a
series of questions regarding the rulemaking sought by the petitions.
FMCSA received a large number of comments in response to the notice,
and in subsequent related actions, many responsive to the questions
posed and others raising additional issues for the Agency's
consideration. The comments expressed a range of views from motor
carriers, brokers, and other interested parties, and the Agency's
proposed rulemaking is informed by this input.
1. The Agency's Authority Over Broker Transparency
The first question the Agency posed in the notice regarding the
rulemaking petitions referenced FMCSA's existing authorities related to
brokers (49 U.S.C. 13101-14916) and asked what statutory provisions, if
any, would be carried out by the regulatory changes requested
petitioners requested. Both successful petitioners, OOIDA and SBTC,
indicated that FMCSA has existing authority to carry out the proposed
changes in the petitions for rulemaking. OOIDA indicated Congress has
required the Secretary, and hence FMCSA, to regulate brokers to protect
motor carriers, including requiring brokers to
[[Page 91655]]
have a bond as found in 49 U.S.C. 13904(e) and (f), as detailed in
OOIDA's petition. SBTC indicated FMCSA already has existing authority
to act on these petitions for rulemaking under U.S.C. 13101 through
14916, and more specifically, 49 U.S.C. 14906, which addresses evasion
of regulation by motor carriers and brokers.
Few commenters responded directly to the Agency's questions about
authority. Of those who did, most indicated that FMCSA has a mission to
promote safe operation of commercial motor vehicles, and any form of
market regulation falls outside of this mission. Scopelitis, a national
transportation law firm, for example, indicated there is no need for
the existing regulations in a highly competitive industry, much less
the proposed addition of even more regulatory burden.
FMCSA also asked how a rule restricting the rights of private
parties (e.g., brokers) from including certain terms in their
agreements would align with the Agency's statutory authority. Few
commenters directly addressed this question. TIA and MODE
Transportation, for example, indicated that 49 U.S.C. 14101 provides
brokers the option to include a waiver provision. The applicability of
49 U.S.C. 14101 is discussed in Section VI.B.8. The National
Association of Small Trucking Companies did not cite a specific statute
but indicated that dictating the terms of contracts between private
parties was beyond FMCSA's authority. In contrast, OOIDA and SBTC
commented that FMCSA has the authority to restrict private parties from
including a waiver under FMCSA's existing authority. Overall, there was
substantial disagreement on this question.
FMCSA response: As discussed in Section IV. Legal Basis, the Agency
has the authority to establish certain regulations for property
brokers. The Agency believes that the proposed rule, which revises the
recordkeeping regulations for property brokers, falls squarely within
this authority. Comments that characterize broker transparency as
beyond the Agency's authority and unrelated to safety oversimplify both
the Agency's authority and the purpose of broker transparency. FMCSA
and its predecessor agencies have long been responsible for regulating
certain commercial aspects of motor carrier transportation, including
broker recordkeeping.
2. FMCSA Enforcement Role
Question two asked how a rulemaking expanding FMCSA's enforcement
of a requirement that brokers automatically disclose financial details
about each transaction to the motor carrier transporting the load, as
requested in the OOIDA and SBTC petitions, would align with the
statutes identified above (i.e., 49 U.S.C. 13301 and 14122).
In its comments on the petitions, CR England Logistics stated that
the rulemakings proposed by OOIDA and SBTC do not align with existing
FMCSA statutes. TIA indicated that disclosure of financial details is
in direct conflict with 49 U.S.C. 14101(b), in addition to
Congressional intent. A small number of commenters, such as TIA, stated
disclosure of commission, a violation of Sec. 371.3, has not been an
issue. TIA further stated there have been no complaints made to DOT's
National Consumer Complaint Database (NCCDB) for a violation of a
broker not disclosing its commission under Sec. 371.3(c). OOIDA stated
FMCSA would not experience additional burdens by adopting the changes
proposed in the petitions and already has existing authority to do so
under 49 U.S.C. 13904 and 14122.
FMCSA response: The Agency believes that the proposed rulemaking is
an appropriate exercise of its authority that builds on the current
recordkeeping requirements. Since the filing of these petitions, broker
transparency has become a topic of intense interest in the
transportation industry. According to Agency records, at least 32
complaints were received from 2018 through 2020. The Agency receives
complaints through NCCDB and other sources. As detailed above, FMCSA
believes the language of the original regulation does not accurately
describe the transacting parties' rights and burdens, and that a
broker's obligation to provide records is not premised on any inherent
right of the carrier or shipper to receive those records, but rather on
the Agency's statutory authority to protect motor carriers in
connection with its broker recordkeeping regulations.
FMCSA has several options for enforcing these regulations. In order
to register with FMCSA, brokers must agree to comply with all
applicable regulations (49 U.S.C. 13904(a)(2)), and FMCSA has the
authority to suspend or revoke a broker's operating authority for
willful failure to comply with a condition of registration (49 U.S.C.
13905(d)(2)(A)(iii)). FMCSA may also decline to renew a broker's
registration if the broker has demonstrated it is not willing or able
to comply with the regulations.
The Agency has a further option to seek a civil penalty for
regulatory violations. The penalty schedule in 49 CFR part 386 Appendix
B already sets out penalties for violations of FMCSA's commercial
regulations in paragraph (g), as well as penalties for evasion in
paragraph (i). The existing penalties cover violations of this proposed
rule, so FMCSA does not propose a new enforcement mechanism or alter
the current penalty schedule as part of this rulemaking. FMCSA is aware
that the Department of Justice (DOJ) must bring certain enforcement
actions for civil penalties on behalf of FMCSA.\7\ However, parties may
still file complaints with FMCSA for the Agency to investigate, take
enforcement action within its existing authorities, and refer to DOJ as
appropriate.
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\7\ See In the Matter of Darlene Riojas, Manuel J. Riojas, Four
Star Trucking, Inc., 7 Star Transport, LLC--Order Dismissing Three
Charges for Lack of Subject Matter Jurisdiction, and Reserving
Ruling on Other Summary Judgment Requests, Docket No. FMCSA-2012-
0174-0056 (May 8, 2019). This decision is available on the internet
at <a href="https://www.regulations.gov/document/FMCSA-2012-0174-0056">https://www.regulations.gov/document/FMCSA-2012-0174-0056</a>.
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The Agency's exercise of authority to regulate broker
recordkeeping, including its issuance of broker transparency
regulations, is not in conflict with 49 U.S.C. 14101(b). That statute
permits shippers and carriers to waive certain rights and remedies by
contract, but for reasons discussed in section VI.B.8. of this NPRM,
the Agency believes brokers are not shippers within the meaning set out
by 49 U.S.C. 14101(b). Because the statute does not relate to brokers,
it does not conflict with the Agency's broker transparency regulations.
Congress has also expressed its clear intent in 49 U.S.C. 13904(e) for
the Agency to issue regulations applicable to brokers that provide
protection for shippers and motor carriers, consistent with the
Agency's responsibility to carry out the objectives of the national
transportation policy and its general authority to regulate brokers of
property.
3. Broker Size as Related to Transparency
The third question in the notice was whether the transparency
issues raised by OOIDA and SBTC are limited to small brokers or large
brokers (e.g., brokers with revenues above a certain threshold, brokers
with a certain number of transactions, etc.) or whether they are more
widespread such that the rulemaking should cover all brokers,
regardless of size. The fourth question assumed that transparency
issues were primarily associated with large brokers and asked what
revenue threshold FMCSA should consider for the applicability of any
new requirements. It also asked how the Agency could
[[Page 91656]]
obtain accurate information about brokers' revenues.
Of the commenters that responded directly to the third question,
the majority indicated that the proposed rule should apply equally to
large and small brokers. These commenters included brokers and trade
associations, such as England Logistics and OOIDA, and a large number
of individuals involved in the trucking industry.
A smaller number of commenters responding to question four
indicated that freight brokers, particularly large brokers, due to
their size and resources, are taking advantage of the current
situation. However, most commenters did not differentiate based on the
size of the broker but rather stated that brokers as a whole were not
transparent and were not treating motor carriers fairly.
FMCSA response: The Agency believes that the proposed broker
transparency requirements should apply to all brokers, regardless of
size, as is the case with the current regulation. The Agency believes
that a lack of broker transparency causes problems whether the broker
who arranged the transportation is large or small.
4. Cost of Providing Transaction Records
The fifth question posed related to the most efficient and
effective means for brokers to provide information, automatically and
electronically, to motor carriers. The Agency asked whether each broker
should have, for example, a stand-alone system with motor carriers
receiving an email from the broker after the contractual service has
been completed, or whether the brokers should be allowed to satisfy the
request with partnerships or networks through which registered brokers
would upload transaction information which would then be automatically
transmitted via the network to the registered carrier associated with
the transaction. The sixth question, related to the fifth, was a
request for cost estimates for implementing an information technology
(IT) solution to accomplish OOIDA's request, either through stand-alone
systems run by individual brokers, or systems operated by groups of
brokers notifying the individual motor carriers utilizing any of the
brokers within the group.
The majority of the commenters agreed that electronic transmission
is the most efficient means for brokers to provide information.
However, one commenter, MODE Transportation, indicated that
implementing an electronic or IT solution is not required to solve the
transparency issue and was never envisioned when Sec. 371.3 was
developed. Echo Global Logistics stated that much of the information
sought through broker transparency is already publicly available,
including rate information from aggregators like <a href="http://DAT.com">DAT.com</a> and required
financial reports from publicly-held brokers. Echo Global Logistics
argued that, given the public availability of this information, the
cost of developing and maintaining an electronic reporting system to
comply with the petitioners' proposed regulations is not justifiable.
There was disagreement among commenters as to whether a proposed
electronic system should be stand alone or a current electronic
format(s) which the broker may already be using. Some commenters
mentioned use of existing electronic formats, such as email,
spreadsheets, faxes, which are in common use to meet a proposed
electronic requirement. However, most brokers that commented indicated
that dedicated stand-alone systems such as an electronic data
interchange (EDI) or application programming interface (API) are just
as likely to be already in use by many freight brokers, and these
systems provide the necessary data privacy and security. England
Logistics mentioned that the data transmitted could potentially be
trade secrets and therefore would require more intensive IT systems to
protect.
In terms of cost, most commenters indicated that, if the use of a
standalone system such as EDI or API were required, it would have a
cost impact on those brokers which do not have such systems in place
already. Both Axle and Lange Logistics indicated this cost impact may
affect small businesses more profoundly than others.
Five commenters directly responded to question six and provided a
cost estimate for brokers to establish an electronic system to transmit
records. Trinity Logistics and Tucker Worldwide estimated a cost of
$2,500 to $10,000 per carrier setup. TIA further provided an estimated
cost example of a broker that utilizes 5,000 motor carriers in their
database, using their own existing IT system (presumably EDI- or API-
based), would incur a cost of $12.5 million to $50 million for
implementation. ArcBest indicated personnel and equipment required to
implement the electronic information transfer would be $500,000 per
broker.
FMCSA response: FMCSA is not proposing to prescribe a specific type
of electronic system brokers must use, provided the system complies
with 49 CFR 390.32, ``Electronic documents and signatures.'' The Agency
finds that the requirements listed there are appropriate in the context
of the broker recordkeeping requirements and sees a benefit in having a
consistent standard for electronic documents. FMCSA's experience in
reviewing brokers' records shows that most records covered by Sec.
371.3(a), including bills of lading, are already kept in electronic
format, though paper bills of lading may still be occasionally used.
Thus, the burden on parties to keep and transmit transaction records
electronically is expected to be minimal.
The proposed rule does not include an automatic disclosure
provision. FMCSA believes that the cost estimates provided in response
to question 6, which were related to developing an IT solution for
automatic disclosure within 48 hours of the completion of contractual
obligations, are overestimated. Since the rule does not include an
automatic disclosure provision and records would only be provided upon
request within 48 hours, the Agency expects that the costs would be
significantly lower because brokers' existing systems, either as
currently implemented or with minor modification, could be used to
fulfill these requirements. However, the Agency lacks specific data to
quantify these costs and is seeking public comments on the cost
estimates for this proposal.
In response to the comment that much of the information brokers
would have to provide is already publicly available, FMCSA notes that
information found on publicly held brokers' financial reports is not
transaction specific. While reviewing this information could give
shippers and motor carriers a general sense of the state of the freight
brokerage industry, it does not provide them with information about the
loads they have consigned or hauled. Rate aggregation websites provide
pricing information that carriers may find useful in deciding whether
to accept an offer to haul a prospective load, but it is also not a
substitute for broker transparency information. In particular, it would
not provide shipper, carrier, or bill of lading information for a
particular shipment, nor would it provide carriers with any information
about chargebacks or other fees assessed against them in connection
with a particular delivery. FMCSA therefore does not believe relying on
publicly-available information is an adequate substitute for the
information disclosure proposed in this rule.
5. Economic Benefits to Motor Carriers and Costs to Brokers
Both rulemaking petitions linked broker transparency to concerns
over carrier revenue and broker margins, and the notice requesting
public comment
[[Page 91657]]
sought input on these concerns. Margins, as discussed in this proposed
rulemaking, refer to the division of a shipper's payment between the
broker and the motor carrier, expressed as a percentage. SBTC stated
that, in the context of the economic impact of the COVID-19 national
emergency, freight rates had dropped drastically, yet brokers, in at
least a few instances, were making large margins on freight. SBTC
stated that it did not seek regulations limiting the amounts or
percentages brokers earn, but it viewed broker transparency as
essential to making sure market forces operate ethically and fairly.
The OOIDA petition raised similar concerns. The notice asked for
quantitative estimates of the economic benefits that would likely be
achieved by motor carriers if FMCSA adopted the rules requested by
OOIDA and SBTC, including how much additional revenue motor carriers
might receive on a per-transaction basis. The notice also sought
quantitative estimates of the economic costs to brokers or others,
including how much profit reduction on a per-transaction basis brokers
would experience and what percentage of the costs would be passed
through to shippers or motor carriers.
Only a few commenters responded to these questions. OOIDA estimated
that the additional revenue a carrier would earn in an individual
transaction would be between tens to thousands of dollars, depending on
the specifics of the transaction. This estimate was preceded by a
discussion of increased convenience and a decrease in unfair billing
practices, and it is unclear how OOIDA's estimated additional revenue
was apportioned among the increase in convenience, the decrease in
unfair billing practices, greater negotiating power for motor carriers,
or other factors. Few of the comments from small motor carriers
contained responsive estimates, and several motor carriers noted that
the current lack of broker transparency meant that they do not have
access to the transaction information necessary to provide an informed
estimate. Brokers commented that motor carriers would not receive any
economic benefit from the proposed transparency rulemaking. Brokers
provided estimates of the cost to comply with OOIDA's proposal based on
information technology and staffing costs but did not provide an
estimate of the economic impact due to changes to freight rates, profit
reduction on a per-transaction basis for brokers, or percentage of
costs that would be passed through to shippers or motor carriers.
Although the Agency received few quantitative estimates of the
economic benefits of broker transparency to motor carriers and the
economic costs to brokers, many comments addressed carrier revenue and
broker margins. Motor carriers commented on the prevailing low freight
rates at the time and provided examples of offers of one dollar or less
per mile. Motor carriers described the impact of these low rates. For
example, some comments stated that the offered rates make it difficult
to cover motor carriers' operating expenses, including maintaining
equipment in safe working condition. Some comments also described low
rates as a contributor to undue stress on drivers and unsafe operating
practices. Many comments from motor carriers characterized the rates as
inequitable given the difficulty of the work they do and value of the
service they provide. Many of these comments identified brokers as
responsible, at least in part, for low rates and many characterized the
brokers' business practices as deceitful. Carriers also say they cannot
operate a profitable business unless they haul brokered loads, and some
have reported taking brokered loads at a loss, citing the need for
revenue to service business debts. In addition, many motor carriers
expressed concern that they lack negotiating power to exclude
transparency waiver provisions from contracts and, if they exercise
their right to view the transaction records, brokers will select other
motor carriers to work with and refuse to do business with them in the
future.
Many comments from motor carriers support the broker transparency
proposals in the petitions as a remedy for the issues they raised. Some
comments state that increased broker transparency would allow motor
carriers to negotiate higher rates. Many comments simply supported
broker transparency as a means for increasing carrier revenue, without
describing how revenue would increase as a result of transparency.
Other comments suggested modifying the rules requested by OOIDA and
SBTC to address their concerns about low rates more directly, including
several suggestions to provide the broker transparency information when
the parties are negotiating a rate, before the service is provided.
Some of these comments stated that the transparency information would
not be useful to the carrier after the transportation service had been
provided.
Some motor carriers did not support broker transparency and stated
that the information is irrelevant to motor carriers because the only
pricing information they need is the offered rate. Other commenters
proposed a rule limiting broker margins to a certain percentage of the
price paid by the shipper.
Many of the comments from brokers challenged the assertions made in
the petitions and other comments regarding freight rates and broker
margins. Broker commenters also argued that low freight rates are not a
result of high broker margins but rather a result of broad market
forces, particularly the short-term acute economic impact of the COVID-
19 national emergency. They disputed claims about price gouging by
identifying a variety of factors that influence the price a broker sets
for a load. Brokers also explained that their contracts with shippers
are typically for a set period, often one year, while their contracts
with motor carriers are typically shorter, often on a load-by-load
basis. As a result, the broker's margin for a load covered by the
shipper contract will fluctuate based on the spot market, so that the
broker may have a higher margin on some loads and a lower, sometimes
negative, margin on other loads. Brokers also explained that their
margins should not be equated with profitability and described the
various expenses incurred to provide brokerage services to shippers.
These expenses would not be reflected in the broker transparency
information.
Many of the comments from brokers stated that the rulemaking the
petitions sought would not have the claimed effect of increasing
carrier revenue. These comments stated that broker transparency would
not increase freight rates. They also stated that load boards and other
commonly available services already provide motor carriers with enough
information regarding freight availability, traffic lanes, market rate
information, seasonality adjustments, and so on to make informed
business decisions, rendering the records available under Sec. 371.3
unnecessary. Some comments added that motor carriers can decline to
take a load if the offered rate is too low to be profitable. In
response, some comments explained that motor carriers with leased
trucks may accept unprofitable loads to secure revenue, even as that
revenue is not profitable.
Since the comment period closed, FMCSA has received further input
regarding broker transparency. This input includes further expressions
of concern regarding low prevailing freight rates, and of the belief
that the low freight rates are caused, at least in part, by high broker
margins. There is continued interest from motor carriers in broker
transparency as a solution to low prevailing rates.
[[Page 91658]]
FMCSA response: The purpose of the proposed rule is not to provide
an economic benefit to motor carriers, nor to impact broker margins.
However, the Agency considers the economic impacts of the proposed rule
as part of its mandated regulatory analysis. The comments received to
date do not conclusively establish what the economic impact of the
proposed rule would be. As with the current rule, the proposed rule
would give shippers and carriers the option to access information about
a brokered freight transaction after the parties have negotiated the
terms of the contract and the transaction is complete but would not
require disclosure prior to that time, nor would it require automatic
disclosure. The information provided would allow the carrier to compare
the amount that the shipper paid the broker to the amount that the
broker paid the carrier but would not set or limit rates or brokers'
margins. By clarifying the regulatory obligation for brokers to provide
the transaction records, the proposed rule would make the information
enumerated at Sec. 371.3(a) available to all parties participating in
a brokered freight transaction.
Although the Agency cannot determine, with the currently available
information, what economic impact the proposed rule would have, two
main theories can be derived from the comments. Under one theory,
broker transparency would not provide an economic benefit to motor
carriers even if such transparency was widespread. Motor carriers would
not have access to the transparency information when determining
whether to accept a brokered load at the broker's offered price or when
negotiating the price of a load with a broker. The information,
provided after the fact, would not change the price of the load. The
information may not have an impact on the price of future loads for a
variety of reasons. The carrier may not find the information from past
transactions useful when negotiating prices for future loads offered by
the same broker or loads offered by other brokers. If, based on the
transparency information, the carrier chose not to accept future loads
from that broker, the carrier might not be able to find higher-paying
loads from other brokers. Relatedly, the broker in that scenario may be
able to find other motor carriers willing to accept the load, even if
one carrier refuses to work with them.
Under the second theory, broker transparency would provide an
economic benefit to motor carriers if such transparency was more widely
available. The broker transparency information might impact the price
of future loads that the carrier accepts. Motor carriers may be able to
negotiate a higher price if they can apply their knowledge from
previous loads to negotiations for future loads from the same broker or
future loads with similar characteristics. Brokers may have to accept
the higher price if they cannot find other motor carriers. Although the
transparency information would not be publicly available, a broker
might develop a reputation among motor carriers for offering low rates
relative to the price paid by the shipper. If that reputation deterred
motor carriers from taking loads, the broker may have to offer higher
rates to place their loads. At least one broker highlighted concerns
that transparency information could result in motor carriers directly
soliciting shippers, bypassing brokers for future loads. The ICC
considered this issue when it adopted the current regulations in 1980,
emphasizing that motor carriers and shippers are free to deal directly
with each other and ``[o]nly where the shipper finds that it can get
better service from the broker will it stay with the broker'' (45 FR
68941, Oct. 17, 1980).
There exists a possibility that transparency information could
reduce the exclusive knowledge that brokers bring to a transaction if
shippers and motor carriers collect transparency information over time.
If the Agency were to assume that the broker's exclusive knowledge is
considered value-added and therefore currently captured in broker
margins, then increased transparency with this proposal could result in
downward pricing pressure on broker margins from motor carriers,
shippers, or both.
As discussed in section VI.B.4, above, FMCSA does not view the
information available on load boards or through other publicly
available sources to be an adequate substitute for the transaction-
specific information set out in this proposed rule. Shippers and motor
carriers have an interest in knowing details about their particular
shipments, especially when problems with a shipment arise or the
compensation received differs from the contractual amount. Broker
transparency provides the retrospective transaction-specific detail on
completed loads necessary to resolve these issues. By contrast, the
prevailing rate information available on load boards for prospective
loads is useful for making informed decisions about which offers to
accept but is not useful in addressing issues with completed loads.
From the comments received, the Agency cannot determine whether
either of these theories would prove correct under the proposed rule.
The actual impact may be somewhere in between these theories, or both
theories may be incorrect. If broker transparency remained rare under
the proposed rule, there may not be any economic impact. The Agency
seeks further comment to better estimate the economic impact of the
proposed rule.
6. Transparency of Charge Backs, Accessorial Fees, and Surcharges
The broker transparency comments brought up several issues not
raised in the petitions or in the notice. One issue was the
transparency of charge backs. Several comments described questionable
claims in situations where a carrier delivered a load, got a clean bill
of lading from the receiver, and then later had a claim, or ``charge
back,'' on the load from the broker despite the clean bill of lading.
Motor carriers contend that these claims often lack sufficient
explanation or description of the reason for the charge back, and the
motor carriers find it difficult to contest them, particularly when
their payment for transporting the load is withheld unless they accede
to the claim. In situations where the contracts include cross-
collateralization provisions, payment for other loads transported by
the same carrier for the same broker may also be withheld unless the
claim is accepted.
Other comments described issues with detention charges and fuel
surcharges, where the rates and conditions of the fees that brokers
charge shippers are different than the rates and conditions of payments
remitted to the carrier, despite the fees being premised on the
carrier's operating costs. As an example, fees for detention time are
premised on the operating costs of keeping a truck idle while waiting
to load or unload, costs that include the driver's time. One commenter
described a situation where the broker charged the shipper for
detention time after the first hour, at a rate of $50 per hour, but
paid the carrier for detention only after 4 hours, and at a rate of $35
per hour. Comments from motor carriers expressed similar concerns
regarding fuel surcharges.
FMCSA response: The practices identified in the comments are
concerning because, depending on their prevalence, they may
significantly disrupt the efficiencies and opportunities offered by
brokered freight transactions. Broker transparency seems to be a useful
tool in addressing these concerns, by providing parties to a brokered
transaction visibility into the associated payments, fees, and charges,
[[Page 91659]]
enabling the parties to resolve issues and disputes among themselves
without resorting to costlier remedies. If a claim is made against a
shipment, the carrier should be able to understand the basis of the
claim, not just to dispute questionable claims, and in instances of
well-founded claims, to take precautions with future shipments and
thereby avoid such claims. On the remittance of surcharges, there may
be a reasonable justification for a broker to remit less than the full
amount of a surcharge received from a shipper to a carrier, but the
carrier should be able to see that difference, particularly when the
surcharge is premised on the carrier's operating costs.
In addressing broker transparency, FMCSA cannot replace prudent
business judgment and cannot guarantee the trustworthiness of every
shipper, broker, and carrier. However, the brokered freight
transportation industry requires a certain degree of trust to operate
efficiently. Trust is eroded when motor carriers are prevented from
seeing the charges and payments associated with the service they are
providing. In addition to creating mistrust, unsubstantiated and
specious charges levied on motor carriers divert resources to paying or
litigating the charges, that could otherwise be spent providing safe
and efficient transportation.
7. Confidentiality of Pricing
Brokers commenting on transparency raised concerns about the
confidentiality of their pricing. Brokers stated that shippers require
pricing confidentiality in their contracts with brokers, which is one
reason why brokers require confidentiality in their agreements with
motor carriers. In this regard, several motor carriers noted that the
broker-carrier contracts typically have confidentiality clauses, which
would serve to protect shipper pricing in the context of greater broker
transparency.
Brokers also asserted that their pricing can constitute trade
secrets, and broker transparency requirements would conflict with the
Defend Trade Secrets Act (DTSA) (18 U.S.C. 1831 et seq.). Motor
carriers commented that DTSA doesn't apply to this situation because
motor carriers have a right to the transaction information under the
current regulations and, consistent with DTSA, the information can
still be protected from public disclosure without waiving the carrier's
right to access. Motor carriers argued that a broker disclosing to a
carrier the transactional information to which the carrier is
authorized to access is not equivalent to theft of a trade secret.
FMCSA response: The Agency recognizes that shippers, motor
carriers, and brokers in a brokered freight transaction likely have a
compelling business interest in protecting information about that
transaction. The broker transparency regulation does not require public
disclosure, and the Agency believes that broker transparency is
compatible with the prudent protection of business information. Section
371.3 does not require the broker to disclose to the carrier all
details of the business relationship between the broker and shipper,
but rather only the transaction-specific details enumerated in Sec.
371.3(a). The Agency believes that the confidentiality provisions in
broker-carrier contracts can provide protection consistent with broker
transparency. The concerns around confidentiality must be balanced
against the issues that broker transparency is meant to remedy, as
described above.
Regarding trade secrets, the Agency does not believe that Sec.
371.3 in its current form, or with the amendments proposed, conflicts
with trade secret protections. The DTSA prohibits economic espionage
and theft of trade secrets, defined as when a person steals, receives,
buys, possesses, duplicates, transmits, or engages in other similar
activities regarding proprietary economic information, or conspires
with others to do so. Here, the information is required to be kept and
handled in accordance with a Federal regulation. Therefore, a broker or
carrier is legally in possession of such information and does not
violate the DTSA when it handles such information pursuant to the
regulation. Parties are also permitted to include confidentiality
clauses in their contracts that limit further disclosure of such
information.
Moreover, while a pricing formula could be a trade secret as a type
of business information with independent economic value, the record of
an individual transaction covered by Sec. 371.3(a), without more, is
not likely to be covered as a trade secret. Brokers are not required to
disclose additional information or documentation beyond the scope of
what is covered in Sec. 371.3(a). Further, Sec. 371.3(c) does not
require the type of public disclosure that would be economically
damaging to a party. Instead, it only requires that brokers give the
parties to a transaction access to a limited amount of information
pertaining to that transaction.
8. Applicability of Other Statutes
Several comments argued that any rule preventing the waiver of
Sec. 371.3(c) would be contrary to 49 U.S.C. 14101. Those commenters
argue that 49 U.S.C. 14101 should be interpreted to cover brokers and
therefore permits brokers to include waiver provisions in contracts
with motor carriers that waive the broker's obligations to the motor
carrier under Sec. 371.3. In support of this claim, several commenters
cited the Dixie Midwest \8\ ICC decision for the proposition that a
broker is a shipper in relation to a carrier.
---------------------------------------------------------------------------
\8\ Dixie Midwest Express, Inc., Extension--General Commodities,
No. MC-125038 (Sub-No. 24), 132 M.C.C. 794 (Feb. 3, 1982).
---------------------------------------------------------------------------
FMCSA response: The language of 49 U.S.C. 14101 refers to shippers
and motor carriers, not brokers. The Agency does not interpret that
statute to apply to brokers, and the proposed rule therefore would not
conflict with the statute. Motor carriers or shippers would not use 49
U.S.C. 14101 to contract out of their rights under Sec. 371.3(c),
because 49 U.S.C. 14101 is premised on a contract between a carrier and
a shipper, not a brokered freight transaction, while Sec. 371.3 is
focused solely on a brokered freight transaction. It is unreasonable to
say that a broker could rely on 49 U.S.C. 14101, which on its face does
not apply to brokered freight transactions, in order to waive a right
that applies only to brokered freight transactions.
Regarding the Dixie Midwest decision, in that case the ICC was
determining whether a broker could be considered a shipper in the
context of supporting an application for contract carrier authority.
That situation has limited bearing on the interpretation of 49 U.S.C.
14101. Most federal courts that have addressed the issue of whether 49
U.S.C. 14101(b) applies to brokers in more recent years have held it
does not.\9\
---------------------------------------------------------------------------
\9\ See, e.g., Exel, Inc. v. S. Refrigerated Transp., Inc., 807
F.3d 140, 148-49 (6th Cir. 2015); Supreme Auto Transp., Inc. v. JBL
Logistics, LLC, 2017 WL 4334064, at *4 (D. Colo. Mar. 8, 2017);
United Rd. Logistics LLC v. Alpha Transportation Grp. LLC, 2017 WL
1755825, at *2 (E.D. Mich. May 5, 2017). See also TransCorr Nat'l
Logistics, 2008 WL 5272895 at *4 and REI Transp., Inc. v. C.H.
Robinson Worldwide, Inc., 519 F.3d 693, 694 (7th Cir. 2008) (both
recognizing that brokers are not shippers, but allowing for the
possibility that a broker could step into a shipper's shoes to
assert claims against motor carriers).
---------------------------------------------------------------------------
The Agency is aware that some courts have determined, after a fact-
specific analysis, that a broker acted as a shipper under the
particular conditions present in those transactions.\10\ However, the
Agency does not consider all brokers to be shippers in relation to
motor carriers or for that to be the standard by which
[[Page 91660]]
broadly applicable regulations are formulated. In circumstances where
the broker does, in fact, act as the shipper, 49 U.S.C. 14101(b) limits
the circumstances under which the Agency may prohibit waivers in
contracts. However, the Agency believes that in most brokered
transactions, the broker is not the shipper, and 49 U.S.C. 14101(b)
does not apply.
---------------------------------------------------------------------------
\10\ See, e.g., Jackson Rapid Delivery Serv., Inc. v. Thomson
Consumer Elecs., Inc., 210 F. Supp. 2d 949, 954 (N.D. Ill. 2001).
---------------------------------------------------------------------------
The proposed amendments to Sec. 371.3(c) would also render this
objection largely moot by clarifying that access to records is not a
right belonging to motor carriers or shippers that can be contracted
away, but instead is a regulatory compliance requirement that brokers
must meet in order to operate in the interstate transportation
industry.
9. Context and Impact of the COVID-19 National Emergency
The SBTC rulemaking petition, which was filed in May 2020, referred
to the COVID-19 national emergency and its negative impact on freight
rates. The OOIDA petition, also filed in May 2020, noted that freight
rates had reached historic lows but did not reference the COVID-19
national emergency specifically. SBTC's petition raised concerns that
brokers were taking advantage of the situation to obtain high margins,
and several comments on the petitions expressed similar concerns. These
concerns were not based on systematic data, but on personal
experiences, beliefs, and anecdotes about broker margins during that
time; however, motor carriers also noted the difficulty in providing
supporting data because they rarely obtain information about broker
margins. Several motor carriers made the related point that they
provided essential transportation services during the COVID-19 national
emergency and should be compensated accordingly.
The comments received from brokers disagree with the motor
carriers' claims. These comments state that the COVID-19 national
emergency did not provide brokers with high margins; instead, brokers
claim they experienced the same weak freight market and had difficulty
finding loads to broker. Several brokers characterized the rulemaking
proposed in the petitions as a reaction to short-term economic forces
and opposed the petitions because they believed that such a reaction
was inappropriate. These brokers noted that freight rates were already
rebounding at the time they filed their comments, which was later in
2020. Some commenters referenced freight market indices to support this
point.
Returning to the carrier point of view, the OOIDA petition did not
directly tie its proposed rulemaking to COVID-19 and stated that
``OOIDA has long pushed for greater transparency in transactions with
brokers.'' In 2021, at a time when the freight market was stronger than
when the petitions were filed, SBTC submitted a letter to DOT
expressing continued interest in a broker transparency rulemaking. As
described previously, FMCSA held a listening session at MATS in March
2023 on the topic of property brokers. During this session the Agency
heard from several motor carriers expressing their support for a broker
transparency rulemaking.
FMCSA response: The COVID-19 national emergency had a drastic
negative impact on the freight market in 2020, but the market began to
recover later that year. Subsequently the market has continued to
fluctuate, reaching notable highs in 2021 and 2022 but dropping off
significantly in the last few years. Though the Agency is aware of
economic conditions in the industry, the proposed rulemaking is not
intended to address those conditions. The circumstances of the COVID-19
national emergency may have increased the interest in broker
transparency regulation, but the Agency believes the proposed
rulemaking serves a purpose beyond the context of that emergency, a
conclusion supported by the continued engagement of motor carriers on
the issue of broker transparency.
10. Automatic Disclosure and Retaliation
The OOIDA petition sought a provision making disclosure of the
records automatic. OOIDA stated the automatic disclosure was necessary
to prevent selective retaliation, i.e., blacklisting, against motor
carriers who exercise their option to review the transaction records.
The SBTC petition did not seek an automatic disclosure provision. Many
commenters expressed the same concern with retaliation as OOIDA.
FMCSA Response: The proposed rule does not include an automatic
disclosure provision. Instead, as in the current regulation, parties to
the transaction would have the ability to review the records upon
request. The Agency believes that an automatic disclosure provision is
unnecessary at this time and could be excessively burdensome to
brokers. Though the concerns regarding retaliation appear plausible,
the Agency cannot determine how frequently retaliation would take place
or its potential effect on the motor carrier transportation industry.
The Agency seeks further comment on this issue.
C. Issues on Which the Agency Seeks Further Comment
While the Agency invites comment on all aspects of the NPRM, we are
particularly interested in comments that address the following issues.
In addressing topics, FMCSA requests that commenters number their
remarks to correspond with the list below:
1. What impact, if any, would the proposed rule have on freight
rates? Please provide support for your position.
2. How common is electronic recordkeeping among household goods
brokers? What burden, if any, would be imposed if electronic
recordkeeping was required?
3. How much time would a broker spend creating an electronic record
from paper documents for the record mandated by Sec. 371.3? What would
be the costs for a broker to create an electronic record per
transaction?
4. Do you believe that the 48-hour timeframe proposed for Sec.
371.3(c) would create a substantial burden for brokers? Why or why not?
If you disagree with the proposed 48-hour timeframe, what timeframe
would best balance the objectives of transparency while minimizing the
burden on brokers?
5. If this proposal effectively reduced instances of illegal
brokering, through carrier policing with transparency information,
would the brokers engaged in illegal practices exit the market,
resulting in the transfer of illicit profits to legally operating motor
carriers and/or brokers?
6. Should freight brokers and household goods brokers be subject to
the same recordkeeping requirements under Sec. 371.3? If your answer
is ``no,'' why should they be subject to different requirements?
7. Should parties requesting records under Sec. 371.3(c) be
required to submit their request in writing? Should parties requesting
records under Sec. 371.3(c) be required to submit their request
electronically? Would requiring a specific format for submitted
requests impose a cost on the parties or otherwise deter requests for
transparency? Please provide support for your position.
8. Would the proposal that records be provided electronically under
Sec. 371.3(c) make broker transparency more likely, as compared to not
specifying a method of provided the records? Should the Agency be more
specific in requiring a particular format for records provided under
Sec. 371.3(c), and if so, what method and/or format is preferrable?
Please provide support for your position.
[[Page 91661]]
VII. Section-by-Section Analysis
Part 371, entitled, ``Brokers of Property,'' provides requirements
for entities or individuals brokering the transportation of property by
authorized motor carriers. FMCSA proposes to amend Sec. Sec. 371.2,
``Definitions,'' and 371.3, ``Records to be kept by brokers.''
A. Section 371.2 Definitions
Section 371.2 defines terms used in part 371 and includes a
definition for ``non-brokerage service,'' which is used only in Sec.
371.3. FMCSA's proposed amendments to Sec. 371.3 would remove the term
``non-brokerage service'' from the section, and FMCSA therefore
proposes a corresponding amendment to Sec. 371.2 to remove the
definition, which would no longer be used.
B. Section 371.3 Records To Be Kept by Brokers
In Sec. 371.3 the Agency proposes modernizing the language of the
regulation by replacing the word ``shall'' with the word ``must.''
These words have the same meaning in the FMCSRs, as explained in Sec.
390.7(b). Further, the addition of the electronic format in accordance
with Sec. 390.32(d) has been proposed to align with FMCSA's electronic
records requirements elsewhere in the FMCSRs and to make records
readily available to all parties. Paragraph (a)(4) would be revised to
include the amount of compensation received by the broker for each
service performed in connection with each shipment, including, but not
limited to, freight charges, surcharges, and accessorial fees; the date
of payment; and the name of the payer, including any business aliases,
if known. Paragraph (a)(5) would be revised to require broker records
to include any penalties assessed in connection with each shipment and
to delete reference to ``non-brokerage service.'' Paragraph (a)(6)
would be removed, as FMCSA proposes incorporating its language into
paragraph (a)(4). FMCSA proposes revising paragraph (b) to replace
``three'' with ``3,'' to align with the U.S. Government Publishing
Office guidelines on numeral styling, and to add ``must'' to confirm
that records are required to be kept for 3 years. Finally, FMCSA would
revise paragraph (c) to include the requirement that brokers must
provide records electronically within 48 hours of request to any party
to the brokered transaction.
VIII. Regulatory Analyses
A. Executive Order (E.O.) 12866 (Regulatory Planning and Review), E.O.
13563 (Improving Regulation and Regulatory Review), E.O. 14094
(Modernizing Regulatory Review), and DOT Regulatory Policies and
Procedures
The Office of Information and Regulatory Affairs (OIRA) determined
that this proposed rule is not a significant regulatory action under
section 3(f) of E.O. 12866 (58 FR 51735, Oct. 4, 1993), Regulatory
Planning and Review, as supplemented by E.O. 13563 (76 FR 3821, Jan.
21, 2011), Improving Regulation and Regulatory Review, and amended by
E.O. 14094 (88 FR 21879, Apr. 11, 2023), Modernizing Regulatory Review,
and does not require an assessment of potential costs and benefits
under section 6(a)(3) of that Order. This rule is also not significant
within the meaning of DOT Order 2100.6A, ``Rulemaking and Guidance
Procedures'' (June 7, 2021). Accordingly, OMB has not reviewed it under
these Orders.
1. Need for the Regulation
This proposal would amend the requirements of Sec. 371.3 to
further improve transparency in brokered freight transactions between
brokers, motor carriers, and shippers. The Agency seeks to increase
transparency and reduce information asymmetry so that the freight
brokerage market operates in a more ethical, fair, and efficient
manner. Information asymmetry is a term describing a situation where
one or more parties to a transaction have additional material
information on a transaction not available to another party.
Information asymmetry may give brokers a strategic advantage in
contract negotiations, potentially enabling them to secure more
favorable contractual terms. Information asymmetry is generally
undesirable, and the Agency believes it creates inefficient outcomes in
brokered freight transactions. Based on comments to the OOIDA and SBTC
petition for rulemakings, the Agency understands that information
asymmetry hinders motor carriers in their negotiations with brokers.
Furthermore, motor carriers may not be able effectively to defend
themselves against potential abuses, such as unfounded claims. The
OOIDA petition argued that the prevalence of waiver clauses and
instances of retaliation by brokers against motor carriers seeking to
exercise their rights under Sec. 371.3(c) undercut the transparency
envisioned by Sec. 371.3. The SBTC petition similarly highlighted the
issue of waiver clauses and reported instances of ``profiteering, price
gouging and low-balling tactics.''
2. Summary of the Requirements
As described above, the purpose of this NPRM is to reduce
information asymmetry among parties to brokered freight transactions,
i.e., brokers, shippers, and motor carriers. The NPRM proposes to do so
by improving transparency. To accomplish these goals, the Agency
proposes the following substantive amendments to Sec. 371.3:
1. Amend Sec. 371.3(a) to require that brokers keep the required
records in an electronic format;
2. Amend Sec. 371.3(a) to revise the required contents of brokers'
records;
3. Amend Sec. 371.3(c) to clarify that brokers must provide
records upon request; and
4. Amend Sec. 371.3(c) to require that records must be provided
electronically within 48 hours of request.
The following analysis provides a discussion and overview of the
impacts likely to result from the proposed changes. The analysis
discusses the effects of these proposed changes qualitatively due to
the limitations of available data, which preclude the Agency from
making quantitative estimates.
3. Costs
The Agency provides the following cost analysis for each change in
the proposed rulemaking.
Brokers Must Keep Records in an Electronic Format
The Agency is aware of brokers avoiding meaningful compliance with
Sec. 371.3(c) by making the required records available for inspection
only at their principal place of business. The Agency believes this
behavior may allow brokers to avoid their duty to provide the Sec.
371.3 transaction records to the transacting parties. Brokers are
already required to maintain a record of each transaction under Sec.
371.3. The Agency also believes that most, if not all, brokers are
currently maintaining records of their transactions in an electronic
format, as electronic recordkeeping is a standard practice in many
business transactions. Electronic recordkeeping also offers several
advantages over paper records:
1. Information can be easily searched and retrieved, eliminating
the need to search through physical documents;
2. Electronic records are less susceptible to loss or damage, as
data can be backed up to prevent permanent data loss; and
[[Page 91662]]
3. Electronic records offer a significant cost advantage over paper
records. According to a study by MCC Innovations, creating and
maintaining paper records can be up to 141 times more expensive
compared to electronic records.\11\
---------------------------------------------------------------------------
\11\ MCCi. ``The Dollars and Cents of Paper vs. Digital.'' 2024.
https://mccinnovations.com/insights/blog/the-cost-of-paper-vs-
digital/
#:~:text=Comparing%20%240.0159%20to%20store%20a,storage%20costs%2057.
6%20times%20more (accessed Apr. 25, 2024).
---------------------------------------------------------------------------
Given the advantages of electronic recordkeeping, it is likely that
brokers have already transitioned to electronic recordkeeping.
Therefore, the Agency concludes that this requirement would not
constitute a burden for most brokers. FMCSA recognizes that a small
number of brokers may still maintain records solely in paper format.
However, the Agency does not know how many brokers do not have records
of their transactions in an electronic format, nor the number of
transactions those brokers conduct relative to the overall number of
broker transactions and is therefore unable to quantify a total cost
for this proposal.
The Agency has instead attempted to quantify the cost of creating
an electronic copy of a record on a per transaction basis. FMCSA
believes that brokers who are not creating electronic versions of their
transaction records currently have access to the technology needed to
do so (e.g., document scanners, digital cameras, document management
software, etc.). FMCSA anticipates that these tasks can be completed by
an office clerk in 5 minutes per transaction as these records are
currently stored by transaction and should be easily accessible to the
broker. The Agency is reinforced in this belief based on comments
submitted in response to the OOIDA and SBTC petition for this
rulemaking but requests further comment from the public on this
assumption.
The burden hours associated with this task are monetized using an
hourly wage for an office clerk adjusted for fringe benefits and broker
overhead. The Bureau of Labor Statistics (BLS) median wage for an
office clerk is $19.46 (SOC 43-9061). The hourly wage is increased by
fringe benefits and broker overhead, which results in a $32.93 wage
($32.93 = $19.46 + ($19.46 x 48.2%) + ($19.46 x 21%)). The fringe
benefits rate used was 48.2 percent \12\ and relies on data published
by BLS. Overhead costs are business expenses that are not directly tied
to the production of goods or services. These may include rent for
office space, payroll administration costs, and employee training
costs. FMCSA relies on publicly available Service Annual Survey (SAS)
data from the Census Bureau in the truck transportation industry
(subsector 484) and transit and ground passenger transportation
industry (subsector 485) to estimate a composite overhead rate.\13\
After reviewing SAS data from 2013 through 2021, FMCSA found 2015 to be
the most appropriate baseline from which to estimate industry overhead
rates because it is the most complete year of pre-COVID data. FMCSA
first summed the seven overhead expense categories most focused on firm
fixed price expenses for both subsectors 485 and 484 including (1)
expensed purchases of software, (2) data processing and other purchased
computer services, (3) purchased repairs and maintenance to buildings,
structures, and offices, (4) lease and rental payments for land,
buildings, structures, store spaces, and offices, (5) purchased
advertising and promotional services, (6) purchased professional and
technical services, (7) cost of insurance, and then divided the sum of
the overhead expense categories by gross annual payroll to calculate an
average industry overhead rate of 21 percent (21 percent = $16 billion
/ $75 billion) for use in this analysis.
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\12\ DOL, BLS, Employer Costs for Employee Compensation. Mar.
17, 2023. Available at: <a href="https://www.bls.gov/news.release/archives/ecec_03132024.htm">https://www.bls.gov/news.release/archives/ecec_03132024.htm</a> (accessed Apr. 22. 2024). Rate is calculated by
dividing ``wages and salaries'' by ``total benefits'' for the
transportation and warehousing industry.
\13\ U.S. Department of Commerce, U.S. Census Bureau. Service
Annual Survey Historical Data (NAICS-basis): 2015. SAS Table 5. Jan.
28, 2016. Available at: <a href="https://www.census.gov/programs-surveys/sas/data/tables.html">https://www.census.gov/programs-surveys/sas/data/tables.html</a> (accessed Apr. 22, 2024).
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FMCSA estimates a $2.75 cost per record to create an electronic
copy of a transaction record. As stated above, FMCSA finds it is likely
that brokers have already transitioned to electronic recordkeeping,
which would mitigate the impact of the potential burden. The Agency has
no data that would allow it to quantify the overall size of the
additional burden.
Table 1--Wage, Time, and Labor Costs
[In 2023]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Median base
BLS Fringe wage +
Occupation occupation NAICS occupational designation Median base benefits Overhead fringe
code wage rate (%) rate (%) benefits +
overhead
--------------------------------------------------------------------------------------------------------------------------------------------------------
Office Clerks, General \1\.................. 43-9061 Cross-industry......................... $19.46 48.2 21 $33
--------------------------------------------------------------------------------------------------------------------------------------------------------
FMCSA estimates that an office clerk could spend up to 5 minutes per document to create an electronic copy of that transaction record, at an hourly wage
rate of $33. Therefore, the cost to create an electronic copy of each document would be up to $2.75 (5 / 60 x $33) per record.
Note: Industry wage with benefits and overhead is hourly and has been rounded to the nearest dollar.
\1\ DOL, BLS. Occupational Employment and Wage Statistics (OEWS). National. May 2023. 43-9061 Office Clerks, General. Available at: <a href="https://www.bls.gov/oes/current/oes439061.htm">https://www.bls.gov/oes/current/oes439061.htm</a> (accessed Apr. 18, 2024).
Revisions to the Required Contents of Brokers' Records
The Agency proposes updating the content of records under Sec.
371.3(a) to include the date of payment for brokered services. The
Agency believes this proposal would impose a minimal burden as most
brokers likely already retain payment dates for brokered services as
part of their standard transaction and accounting processes. Under this
proposal, brokers would be required to update the contents of records
kept under Sec. 371.3 to include dates of payment. While the Agency
cannot quantify the cost impact to include payment dates in records
kept under Sec. 371.3, due to the limitations of available data, FMCSA
expects it would be de minimis due to the minor adjustments that would
be required to comply with this proposal, as discussed previously.
FMCSA proposes this requirement in response to comments both to the
OOIDA and SBTC petitions and to an FMCSA Broker Listening Session at
MATS in March 2023, where
[[Page 91663]]
multiple commenters discussed charge backs and claims after loads were
delivered. The Agency believes the inclusion of a date of payment would
provide additional information to motor carriers that they may use to
counter any inaccurate claims. For example, date of payment information
may aid a carrier to establish a timeline of events, such as payments
to the broker by the shipper, and possibly aid in rectifying
discrepancies and spurious charge backs with brokered freight
contracts. The Agency lacks data to quantify the amount of fraudulent
or inaccurate charge backs imposed on motor carriers but concludes that
there would be some cost savings for motor carriers if they are able
more readily to contest these charges with the increased transparency
information.
The Agency also proposes to eliminate the distinction between
brokerage services and non-brokerage services in Sec. 371.3(a) by
removing paragraph (5) and revising paragraph (4). The rationale for
the distinction was initially set out in the brokers of property rule
promulgated by the ICC in 1949, as detailed earlier in this NPRM in
section V.A. History of Property Broker Regulations. In the past, the
ICC attempted to regulate broker fees by setting a cap, but this relied
on differentiating between brokerage and non-brokerage services.
However, the broker fee cap was never adopted. With the current focus
on transparency in broker transactions, the distinction between these
service types is no longer necessary. The Agency, therefore, proposes
to require that the records contain all charges and payments connected
to the shipment. This proposed change is consistent with the obligation
imposed on federal agencies by the Plain Writing Act of 2010. This law
requires that federal agencies use, ``clear Government communication
that the public can understand and use.'' \14\ As this proposed
amendment does not change the contents of records under Sec. 371.3,
the Agency finds that there would be no economic impact associated with
the modernization of this language.
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\14\ Plain Writing Act of 2020. <a href="http://GovInfo.gov">GovInfo.gov</a>. Oct. 2020.
Available at: <a href="https://www.govinfo.gov/content/pkg/PLAW-111publ274/html/PLAW-111publ274.htm">https://www.govinfo.gov/content/pkg/PLAW-111publ274/html/PLAW-111publ274.htm</a> (accessed May 24, 2024).
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Brokers Must Provide Records Upon Request
FMCSA is proposing to amend the language of Sec. 371.3(c) to state
that brokers have an obligation to disclose records within 48 hours of
request. The prevalence of waivers may be reduced through the framing
of this regulatory obligation. Broker transparency is intended as a
mechanism to allow parties to a brokered freight transaction to self-
police the performance of the transaction. A free market in the
brokered freight industry would represent a scenario where the demand,
supply, and prices of brokered transportation of property are
determined by the parties to these brokered transactions, i.e.,
shippers, brokers, and motor carriers. However, free markets require
transparency to operate efficiently. When parties to a brokered
transaction have unequal access to relevant information, known as
information asymmetry, that could lead to an inefficient allocation of
resources and therefore a sub-optimal outcome for society. Since
waivers of Sec. 371.3 inhibit the sharing of information in brokered
freight transactions, these waivers may create some degree of market
failure or inefficiency.
A party to a brokered transaction may seek records under Sec.
371.3(c) for various reasons, including, but not limited to the
following:
<bullet> Motor carriers may seek transaction records in furtherance
of a remedy against potential charge back abuses or other erroneous
charges on completed loads. For example, if the broker made a
concession to the owner of a brokered load and attempted to recapture
these funds from the carrier, this could be verified by the carrier
through transaction records requested under Sec. 371.3. It is evident
from the comments received that some motor carriers believe spurious
charge backs can be identified if motor carriers have access to
transparency information.
<bullet> Shippers may use transaction records to verify that the
services that they were billed for by the broker were provided. This
can help to prevent fraud or errors in billing.
<bullet> Motor carriers and shippers may seek transparency on
broker margins. Although a party to a brokered contract would have
access to transaction records under Sec. 371.3 only after the
contractual service has been completed, carrier and shippers could use
this information determine whether the margins are commensurate with
the service provided, and potentially to negotiate for better rates or
turn to other brokers for future loads. If many motor carriers and
shippers were to make a similar decision, some brokers might find it
difficult to contract out loads and therefore would face pressure to
offer better rates and therefore improved margins for motor carriers.
<bullet> Motor carriers and shippers may use transaction
information to identify instances where loads have been brokered
without authority and to report such instances to FMCSA.
<bullet> Motor carriers believe less time would be spent resolving
disputes if transaction information is readily available. Several
reports submitted to FMCSA indicate that motor carriers have spent
considerable time seeking such information or resolving issues stemming
from its absence.
FMCSA does not regulate freight rates or broker margins. The
proposed rule would reframe the existing regulation that requires the
broker to provide a record of the transaction to the motor carrier on
request after the transaction is complete, but it would not regulate
rates or margins. The Agency believes that this transparency could have
some impact on rates and margins, and the current prevalence of waivers
suggests that brokers likely derive some benefit from not providing
transaction records to motor carriers. However, the Agency also
believes that the proposed rule may have only a minimal impact on rates
and margins, and other factors may still predominate in the setting of
rates and margins. The possibility of a minimal impact is supported by
the wide availability of rate information and the fact that carriers
would only receive the transparency information after a transaction is
completed, i.e., after the rate is negotiated. Due to the limitations
of available data, FMCSA cannot judge the likely impact and the Agency
seeks further information to determine the degree of impact.
To gain a clearer understanding of the impact of clarifying
brokers' obligations to provide records under Sec. 371.3, the Agency
examined market conditions in the freight brokerage industry over the
past few years. According to data from the U.S. Census Bureau, revenues
for freight brokers increased, in aggregate, from 2019 to 2021.\15\
While the Census Bureau data shows a decrease in motor carrier revenues
from 2019 to 2020, it also shows a rebound in motor carrier's revenue
in 2021. Truck driver wages also showed continuous growth during 2019
to 2021. A study conducted by the American Trucking Associations also
shows average wage increased for truck drivers by 18% between 2019 and
2021.\16\ The COVID-19 emergency also
[[Page 91664]]
resulted in reduced costs for motor carriers. According to a report
published by The Trucker, motor carriers benefitted from reduced costs
in fuel and increased fuel economy due to lower traffic levels. Motor
carriers' marginal operating costs per mile correspondingly decreased
by approximately 5 cents.\17\ These cost savings would have helped to
offset the reduction in revenues for the industry during the COVID-19
national emergency.
---------------------------------------------------------------------------
\15\ U.S. Census Bureau. Impact of COVID-19 on Passenger and
Freight Transportation (<a href="http://census.gov">census.gov</a>). Sept. 2023. Available at:
<a href="https://www.census.gov/library/stories/2023/09/air-transportation-pandemic-impact.html">https://www.census.gov/library/stories/2023/09/air-transportation-pandemic-impact.html</a> (accessed Apr. 18, 2024).
\16\ Fisher, Josh. ``Truckload driver wages up 18% over past two
years.'' Fleet Owner. Aug. 2022. Available at: <a href="https://www.fleetowner.com/operations/article/21248550/truckload-driver-wages-up-18-over-past-two-years">https://www.fleetowner.com/operations/article/21248550/truckload-driver-wages-up-18-over-past-two-years</a> (accessed May 7, 2024).
\17\ ``Study details COVID-19's impact on trucking industry.''
The Trucker. Dec. 2021. <a href="https://www.thetrucker.com/trucking-news/the-nation/study-details-covid-19s-impact-on-trucking-industry">https://www.thetrucker.com/trucking-news/the-nation/study-details-covid-19s-impact-on-trucking-industry</a>
(accessed Apr. 18, 2024).
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The number of brokers with operating authority grew by 20.90
percent from 2020 to 2021. Similarly, the number of motor carriers with
operating authority grew by 18.81 percent from 2020 to 2021. Public
industry data shows that rates for brokered freight loads rebounded
from their COVID-19 downturn in late 2020 and peaked in 2022.\18\
Figure 1 provides a visual display of the relative change in brokered
freight rates over time. The Agency finds that the rapid entry of new
motor carriers into the market during 2022 was driven by a surge in
freight demand beginning in 2021, with new brokers and motor carriers
intending to capitalize on unprecedented market conditions. These
conditions included government subsidies such as the COVID-19 economic
impact payments, the Paycheck Protection Program (PPP), lower marginal
costs and relatively high rates for trucking loads as seen in Figure 1.
---------------------------------------------------------------------------
\18\ Spot Market Insights. Truckstop. Available at: <a href="https://truckstop.com/product/spot-market-insights/">https://truckstop.com/product/spot-market-insights/</a> (accessed Apr. 18,
2024).
---------------------------------------------------------------------------
By 2023, however, as a market correction emerged, brokers and motor
carriers began leaving the market. As the initial pandemic response
waned, demand began to normalize which led to an oversupply of capacity
and subsequent broker and carrier exits. Freight rates also came down
from their 2022 peak. Such rapid expansion, as seen in 2021, was
unlikely to be sustainable, and a natural correction towards a new
equilibrium was anticipated. However, the Agency finds that the average
rate for a brokered load and the total number of motor carriers and
brokers holding active authority remain at levels higher than their
pre-pandemic numbers, indicative of a freight industry more robust than
when OOIDA and SBTC submitted their petitions. This, combined with a
study published in January 2024, indicating average broker margins of
approximately 13.47 percent to 15.4 percent, depending on the
configuration of the truck, suggests a period of favorable margins for
both brokers and motor carriers.\19\
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\19\ Lockie, Alex. ``How much money are brokers really making
from owner-operator's hauls?'' Overdrive Online. Feb. 16, 2024.
Available at: <a href="https://www.overdriveonline.com/business/article/15661579/how-much-money-are-freight-brokers-really-making-from-truckers">https://www.overdriveonline.com/business/article/15661579/how-much-money-are-freight-brokers-really-making-from-truckers</a> (accessed Apr. 18, 2024).
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In conclusion, analysis of available data suggests that brokerage
margins generally align with the self-reported industry averages of
approximately 15 percent. The Agency posits that isolated instances of
higher margins are not indicative of broader trends within the
industry. Instead, the Agency maintains that pricing trends in the
brokerage industry are tied to market factors.
BILLING CODE 4910-EX-P
[GRAPHIC] [TIFF OMITTED] TP20NO24.106
BILLING CODE 4910-EX-C
[[Page 91665]]
Table 2--Year-Over-Year Changes of Active Brokers and Motor Carriers \1\
----------------------------------------------------------------------------------------------------------------
Total brokers Total brokers Total motor carriers Carrier percentage
Year registered percentage change registered change
----------------------------------------------------------------------------------------------------------------
2015......................... 16,745 ................... 551,150
2016......................... 17,764 6.09 524,058 -4.92
2017......................... 18,637 4.91 543,061 3.63
2018......................... 20,154 8.14 586,720 8.04
2019......................... 21,770 8.02 602,542 2.70
2020......................... 24,138 10.88 637,721 5.84
2021......................... 29,184 20.90 757,652 18.81
2022......................... 31,885 9.26 813,844 7.42
2023......................... 28,773 -9.76 787,189 -3.28
----------------------------------------------------------------------------------------------------------------
\1\ Pocket Guide to Large Truck and Bus Statistics, FMCSA. Available at: <a href="https://www.fmcsa.dot.gov/safety/data-and-statistics/commercial-motor-vehicle-facts">https://www.fmcsa.dot.gov/safety/data-and-statistics/commercial-motor-vehicle-facts</a> (accessed Jun. 10, 2024). Data for each year is captured at year
end.
FMCSA understands that several factors influence freight brokerage
pricing including, but not limited to:
1. Costs of fulfilling contractual obligations e.g., fuel, labor,
depreciation of equipment, licensing, insurance, taxes;
2. Market rate information;
3. Demand by motor carriers for brokered loads;
4. The supply of brokered load contracts on the market;
5. Seasonal demand, i.e., the changes in demand for brokered loads
depending on the time of year;
6. Type of commodity; and
7. Existing economic conditions, e.g., COVID-19 national emergency,
recession.
The Agency believes that these factors, rather than the
availability of additional information concerning broker margins, are
likely dominant for pricing brokered loads. Through comments submitted
by industry stakeholders, FMCSA understands that broker records would
be of limited utility in negotiating contracts due to the effect of the
pricing factors listed above, as such records are provided only upon
request and after the completion of the contractual obligations.
Therefore, the records may only be useful for negotiating pricing for
future loads. However, a broker may refuse such negotiations by
claiming that all the pricing factors for the load are not the same.
Any shift in pricing in the brokered freight industry would take
the form of transfers. A transfer in this context would be a shift in
revenue from one party to another, specifically from brokers to motor
carriers. FMCSA cannot predict the magnitude or frequency of any
transfers between parties to brokered transactions but believes
transfers could occur because of this proposed rule.
The Agency is unable to quantitatively estimate the magnitude or
frequency of any transfers due to lack of data on:
1. How many transactions under Sec. 371.3 are waived;
2. The number of transactions in the brokered freight industry;
3. The margins of brokers and motor carriers throughout the
industry; and
4. The degree to which those margins are impacted by waivers to the
current regulation.
The Agency believes transfers may occur based on the following
factors:
1. A significant number of motor carriers have said they intend to
use transparency information to negotiate for better rates. However, as
discussed previously, FMCSA believes the content of records under Sec.
371.3 would be of limited utility in negotiating rates;
2. Brokers who currently use Sec. 371.3 waivers may relinquish
some degree of competitive advantage if the proposed rule is effective
at reducing the frequency at which these brokers use waivers to the
regulation. If brokers currently price the value of this competitive
advantage into their brokerage contracts, their ability to maintain
current margins could be weakened; and
3. If this proposal were to effectively reduce the prevalence of
waivers then carriers may be better able to detect unauthorized
brokering by examining transparency data to identify the parties
involved in the brokered transaction. Carriers could then report
suspected unauthorized brokering to FMCSA for enforcement action. If
these measures successfully reduce unauthorized brokering, then those
profits could potentially be redirected to motor carriers and brokers
with the appropriate authority.
FMCSA also acknowledges that transfers need not be large, as a
percentage of total industry revenue, to meet the economically
significant threshold of $200 million, under E.O. 14094. The Agency
estimates the actual revenues specific to the broker entities subject
to this regulation range from $11.6 billion \20\ to $65 billion \21\
per year. Additional revenue estimates for the entire industry also
include $16.58 billion.\22\ The Agency has no industry revenue
information specific to brokers that would be impacted by this
rulemaking. Due to limitations in available data, it is not possible to
isolate revenue estimates specifically for brokers subject to this
proposed rulemaking. Since these brokers represent a subset of the
overall U.S. brokerage industry, their revenue is unlikely to be at the
upper end of this range.
---------------------------------------------------------------------------
\20\ Freight Brokerage Market Size & Share, Growth Trends.
Global Market Insights (GMI). Feb. 2024. Available at: <a href="https://www.gminsights.com/industry-analysis/freight-brokerage-market">https://www.gminsights.com/industry-analysis/freight-brokerage-market</a>
(accessed May 10, 2024).
\21\ 2017 Economic Census. Table EC1700SIZEREVFIRM--Selected
Sectors: Sales, Value of Shipments, or Revenue Size of Firms for the
U.S.: 2017. U.S. Census Bureau. Available at: <a href="https://data.census.gov/table/ECNSIZE2017.EC1700SIZEREVFIRM?t=Receipt%20Size&n=488510">https://data.census.gov/table/ECNSIZE2017.EC1700SIZEREVFIRM?t=Receipt%20Size&n=488510</a> (accessed
Apr. 18, 2024).
\22\ Global News Wire. ``United States Freight Brokerage Market
Revenues to Reach USD 24.75 billion by 2028.'' Mordor Intelligence.
July 2023. Available at: <a href="https://www.globenewswire.com/en/news-release/2023/07/06/2700461/0/en/United-States-Freight-Brokerage-Market-Revenues-to-Reach-USD-24-75-billion-by-2028-Market-Size-Share-Forecasts-Trends-Analysis-Report-by-Mordor-Intelligence.html">https://www.globenewswire.com/en/news-release/2023/07/06/2700461/0/en/United-States-Freight-Brokerage-Market-Revenues-to-Reach-USD-24-75-billion-by-2028-Market-Size-Share-Forecasts-Trends-Analysis-Report-by-Mordor-Intelligence.html</a>
(accessed Apr. 18, 2024).
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The maximum percentage of transfers that could occur in response to
this rulemaking without reaching the economically significant threshold
of $200 million of impacts in any 1 year ranges from 1.7 percent \23\
to 0.3 percent.\24\ As discussed, the Agency believes the economic
threshold for significance is likely closer to 1.7 percent than to 0.3
percent, as the broker entities subject to this regulation represent a
subset of the total number of transportation brokers operating in the
United States. The Agency requests comment on the frequency and
[[Page 91666]]
magnitude of transfers that may occur as a result of this rulemaking
and invites all interested parties to submit relevant data and
information.
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\23\ $200 million / $11.6 billion = 1.7%.
\24\ $200 million / $65 billion = 0.3%.
---------------------------------------------------------------------------
It is important to note that any shift away from the current
practice of including waivers of Sec. 371.3(c) may present economic
disadvantages to brokers. The Agency acknowledges England Logistics'
comment that inappropriate solicitation of freight to owners of
brokered loads presents a business risk to them. The Agency recognizes
that a broker's role extends beyond matching shippers with motor
carriers. Brokers act as an extension of the shipper's team, managing
and overseeing cargo transportation with the carrier and handling
varying documentation. The Agency does not believe that this proposal
would materially alter the value proposition offered by brokers to
shippers or make brokers less competitive as compared to working
directly with motor carriers. Although the proposed rule clarifies that
brokers have a regulatory obligation to disclose records upon request,
it does not prevent them from including confidentiality clauses in
their contracts with motor carriers or shippers.
The proposed amendments to paragraph (c) would not impose any duty
on motor carriers. They clarify that the broker has a duty to provide
records to the motor carrier upon request, as intended by the current
regulation, but the motor carrier is not obligated to request the
records. The Agency does not believe that the proposed amendments will
impose a cost on motor carriers.
Records Must Be Provided Within 48 Hours of Request
The current regulation lacks a defined timeframe within which
brokers must fulfill information requests. The Agency has received
reports of motor carriers experiencing lengthy delays in obtaining
required information from brokers. The Agency has heard from at least
one carrier claiming that a broker asserted that Sec. 371.3, ``does
not state how long they have, to comply with that request and we can
wait 10 years before we give you those records.'' \25\ A defined 48-
hour compliance period for brokers to respond to transparency requests
under Sec. 371.3 would directly address industry stakeholder concerns
about excessive delays.
---------------------------------------------------------------------------
\25\ Complaint reported to FMCSA's National Consumer Complaint
Database in January 2022.
---------------------------------------------------------------------------
The Agency acknowledges that the requirement for broker records to
be provided within 48 hours may present some costs for brokers. Brokers
may need to restructure their processes, invest in IT systems, or
develop new IT systems altogether to meet this requirement. Through
comments to the OOIDA and SBTC petitions, the Agency understands that
not every broker may have pertinent transaction records in the same
database, filing system, or transport management system.
Under this proposal, brokers would not be required to produce or
create new information. However, some brokers may need to increase
total available staffing hours or invest in technology upgrades to meet
the 48-hour timeframe. The Agency lacks data to estimate these costs.
The Agency believes that most, if not all, brokers are complying
with the current regulation to maintain a record of each transaction in
accordance with Sec. 371.3. The Agency is unable to quantify the costs
to brokers of providing transparency information within 48 hours due to
limited available data on:
1. The total number of transactions processed by brokers that would
be subject to the proposed regulation in any given time;
2. The anticipated volume of requests for transaction-specific
information under Sec. 371.3; and
3. The technological readiness of brokers to fulfill these requests
within the proposed 48-hour timeframe.
However, the Agency believes that some of these costs could be
minimally offset by cost savings from having to respond to repeated
inquiries from motor carriers for the content of records under Sec.
371.3. The Agency acknowledges that currently motor carriers may, in
some instances, submit repeated requests for records under Sec. 371.3,
extending over long periods, potentially lasting months. A defined 48-
hour compliance period for brokers to respond to transparency requests
under Sec. 371.3 would directly address delays in receiving
transparency information and therefore mitigate the need for repeated
inquiries.
4. Benefits
The primary purpose of this proposed rule is to modernize FMCSA's
existing recordkeeping requirements and transparency provisions for
brokers and clarify the obligation imposed on brokers to respond to
requests for transaction records and the process parties must follow
when requesting and supplying such records. The electronic
recordkeeping requirement would offer several advantages over paper
records. Information can be easily searched and retrieved, eliminating
the need to search through physical documents. Electronic records are
also less susceptible to loss or damage, as data can be backed up to
prevent permanent data loss. A lack of transparency in freight
brokerage contracts has been linked to excessive and inappropriate
charge backs by brokers. Motor carriers argue that access to broker
information mandated by Sec. 371.3 is essential for them to
effectively challenge or even verify the legitimacy of charge backs.
Without this information, they claim their ability to defend themselves
against potentially inaccurate charges is significantly hampered.
The Agency believes the inclusion of the date of payments with the
contents of records would provide additional information a carrier may
use to counter any inaccurate claims, or spurious charge backs. The
intent of the current regulations in Sec. 371.3 is, in part, to enable
self-policing of freight-brokered contracts in the absence of more
restrictive regulation. The proposed rule would help improve self-
policing of freight-brokered contracts on issues such as charge back
abuses and unauthorized brokering.
Some motor carriers allege that broker information would enable
them to negotiate for better rates. The Agency has not been able to
determine the frequency or magnitude of any possible transfers
resulting from this rulemaking but acknowledges that motor carriers and
shippers may be able to negotiate better rates over time using such
information due to a decrease in the information asymmetry present in
the brokerage industry. Any resulting shift in revenues between the
entities that would be subject to this rulemaking would take the form
of transfers. Transfers are not considered to be economic benefits or
costs at the societal level.
The Agency believes that broker information would offer limited
utility in securing more favorable rates. This belief is based on a few
key considerations. First, the pricing of brokered contracts is
primarily driven by prevailing market forces. Factors such as the
overall economic climate, supply and demand dynamics within the
brokerage industry, and other relevant market conditions, as discussed
in Section VIII.A.3. Costs, exert a great influence on brokered
contract pricing. Second, the information itself would become available
only after the contractual obligations have been fulfilled. Because
brokered contracts are highly specific, with variation in terms,
length, and conditions, information on past contracts would be only
minimally applicable for direct comparison in
[[Page 91667]]
future contract negotiations. However, the reduction in information
asymmetry due to increased transparency should enable a more efficient
market by reducing charge back abuses.
5. Alternatives Considered
The Agency explored alternative approaches, such as a phased
implementation, automatic disclosure of the content of records under
Sec. 371.3, prohibiting waivers, and a longer timeframe for providing
transparency information than the proposed 48 hours. FMCSA decided
against these alternative approaches. The Agency finds that a phased
implementation would not reduce potential burdens imposed by this
proposed rule for the following reasons:
1. Brokers are already obligated to maintain records under Sec.
371.3. Therefore, they possess the information necessary to comply with
the proposed 48-hour turnaround for information requests;
2. The Agency believes that most brokers are maintaining a record
of their transactions in an electronic format; and
3. Brokers likely capture the date of payment for brokered services
as part of their standard transaction and accounting processes.
The OOIDA petition sought a provision making disclosure of the
records automatic. OOIDA stated the automatic disclosure was necessary
to prevent selective retaliation, i.e., blacklisting, against motor
carriers that exercise their right to review the transaction records.
The proposed rule does not include an automatic disclosure provision;
instead, parties to the transaction would continue to have the ability
to review the records upon request. The Agency believes that an
automatic disclosure provision would be excessively burdensome to
brokers. Though the concerns regarding retaliation appear plausible,
the Agency cannot determine how frequently that retaliation would take
place. This is, in part, because motor carriers have frequently waived
their right to review, which makes it difficult for the Agency to
determine if retaliation would be a common problem if the proposed
regulation is implemented.
Automatic disclosure would provide the content of records under
Sec. 371.3 to all motor carriers, but many motor carriers may choose
not to utilize this information. A request-based system ensures that
motor carriers who value access to the content of records under Sec.
371.3 receive it, while minimizing the burden for brokers who, under an
automatic disclosure requirement, would need to distribute the content
of records to all parties, whether or not they wanted to receive it.
The Agency is unable to develop quantitative cost estimate comparisons
for this alternative due to lack of data on the number of transactions
per broker, how many of these transactions include waiver clauses, and
how many parties request access to the content of records under Sec.
371.3.
As previously discussed, FMCSA considered whether to include an
explicit ban on waivers, as suggested by SBTC and OOIDA, in the
regulation and decided against it.
The proposed timeframe of 48 hours to provide requested records
would benefit motor carriers by ensuring timely access to information
and would produce cost savings for brokers by reducing the frequency at
which brokers would need to respond to or consider repeated inquiries
under Sec. 371.3. A longer timeframe than 48 hours would diminish
these cost savings. The Agency views 48 hours as a balanced approach,
promoting both industry efficiency and manageable burdens for brokers.
The Agency seeks comment on the 48-hour proposed timeframe to provide
requested records.
B. Advance Notice of Proposed Rulemaking
Under 49 U.S.C. 31136(g), FMCSA is required to publish an advance
notice of proposed rulemaking (ANPRM) or proceed with a negotiated
rulemaking if a proposed safety rule ``under this part'' is likely to
lead to the promulgation of a major rule. ``This part'' is Part B of
Subtitle VI of Title 49, United States Code, i.e., 49 U.S.C. chapters
311-317. The statutory authority for this rule, however, is derived
from the Agency's commercial authorities in Part B of Subtitle IV of
Title 49, United States Code, i.e., 49 U.S.C. chapters 131-149.
Therefore, the Agency is not required to publish an ANPRM or proceed
with a negotiated rulemaking.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.), as amended
by the Small Business Regulatory Enforcement Fairness Act of 1996,\26\
requires Federal agencies to consider the effects of the regulatory
action on small business and other small entities and to minimize any
significant economic impact. The term small entities comprises small
businesses and not-for-profit organizations that are independently
owned and operated and are not dominant in their fields, and
governmental jurisdictions with populations of less than 50,000 (5
U.S.C. 601(6)). Accordingly, DOT policy requires an analysis of the
impact of all regulations on small entities, and mandates that agencies
strive to lessen any adverse effects on these businesses.
---------------------------------------------------------------------------
\26\ Public Law 104-121, 110 Stat. 857, (Mar. 29, 1996).
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Affected Small Entities
This rule has the potential to impact shippers, brokers, and motor
carriers. The Small Business Administration's (SBA) size standard for a
small entity (13 CFR 121.201) differs by industry code. The entities
affected by this rule fall into many different industry codes. In order
to determine the number of affected small entities, FMCSA examined the
2012 and 2017 Economic Census data for two different North American
Industry Classification System (NAICS) subsectors: Truck Transportation
(subsector 484) and Transit and Ground Transportation (subsector 485).
As shown in Table 3 below, the SBA size standards for subsectors
484 and 485 range from $19.0 million to $43.0 million in revenue per
year. To determine the percentage of firms that have revenue at or
below SBA's thresholds within each of the NAICS national industries,
FMCSA examined data from the 2017 Economic Census.\27\ The Census
Bureau will suppress (omit) data in Economic Census tables if the data,
were it to be known, would allow one contributor's value to be too
closely estimated. This can occur when there are very few contributors,
or when there are one or two large contributors that dominate the
aggregate statistic.\28\ In instances where 2017 data were suppressed,
the Agency imputed 2017 levels using data from the 2012 Economic
Census.\29\ Boundaries for the revenue categories used in the Economic
Census do not exactly coincide with the SBA thresholds. Instead, the
SBA threshold generally falls between two different revenue categories.
However, FMCSA was able
[[Page 91668]]
to estimate the percentage of small entities within each NAICS code.
---------------------------------------------------------------------------
\27\ U.S. Census Bureau. 2017 Economic Census. Table
EC1700SIZEEMPFIRM--Selected Sectors: Employment Size of Firms for
the U.S.: 2017. Available at: <a href="https://www.census.gov/data/tables/2017/econ/economic-census/naics-sector-48-49.html">https://www.census.gov/data/tables/2017/econ/economic-census/naics-sector-48-49.html</a> (accessed Feb. 3,
2023).
\28\ U.S. Census Bureau. Disclosure: Cell Suppression. Available
at: <a href="https://www.census.gov/programs-surveys/economic-census/technical-documentation/methodology/disclosure.html">https://www.census.gov/programs-surveys/economic-census/technical-documentation/methodology/disclosure.html</a> (accessed Jun.
14, 2024).
\29\ U.S. Census Bureau. 2012 Economic Census. Table
EC1248SSSZ4--Transportation and Warehousing: Subject Series--Estab &
Firm Size: Summary Statistics by Revenue Size of Firms for the U.S.:
2012. Available at: <a href="https://www.census.gov/data/tables/2012/econ/census/transportation-warehousing.html">https://www.census.gov/data/tables/2012/econ/census/transportation-warehousing.html</a> (accessed Feb. 3, 2023).
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The percentages of entities with annual revenue less than the SBA's
threshold, and therefore considered small, ranged from 93.1 percent to
99.5 percent. Specifically, approximately 93.1 percent of the firms in
the category representing brokers, Freight Transportation Arrangement
(national industry 488510), had annual revenue less than the SBA's
revenue threshold of $20.0 million and would be considered small
entities.\30\ FMCSA estimates 99.5 percent of firms in the General
Freight Trucking, Local (national industry 484110) had annual revenue
less than the corresponding SBA's revenue threshold of $34.0 million
and would be considered small entities.
---------------------------------------------------------------------------
\30\ All national industries under this subsector have an SBA
size threshold of $34 million with the exception of General Freight
Trucking, Long Distance, Less Than Truckload (484122), which has a
revenue threshold of $43 million.
---------------------------------------------------------------------------
The Agency believes that the burden to small brokers would be de
minimis. The proposed rule would not impose any burdens on small motor
carriers. Small brokers would be required to maintain transparency
records electronically, include the date of payment for each service
performed in connection with each shipment, and would be permitted to
include confidentiality clauses in their contracts. The Agency believes
that most, if not all, small brokers are currently maintaining records
of their transactions in an electronic format. For brokers who are not
maintaining their records electronically, the Agency estimates that
these records can be made available electronically at a per transaction
cost of $2.75, based on the assumption that it would take an office
clerk approximately 5 minutes to create an electronic record of each
transaction. The Agency also believes that small brokers likely already
retain payment dates for brokered services as part of their standard
transaction and accounting processes. The Agency finds that including
date of payments with records requested under Sec. 371.3 would
constitute a minimal burden. Small brokers could incur some loss in
revenues through transfers if the proposed regulation is effective in
increasing transparency between brokers, shippers, and carriers.
However, the Agency is unable to quantify the frequency and magnitude
of possible transfers but believes it would be small based on the
following factors:
1. Pricing for brokered contracts is nuanced, and the economic
conditions affecting any given brokered contract are unlikely to be
identical to those affecting any future brokered contracts. This limits
and may possibly negate the effectiveness of using broker information
to negotiate for better rates on future contracts;
2. The willingness of motor carriers to accept brokered freight
contracts are based on several factors, such that increased
transparency may have minimal to no impact on carrier preferences.
These factors include costs of fulfilling the contractual obligations,
market rate information, existing economic conditions, the type of
commodity, and the time of year; and
3. Brokers may find that they can retain current margins due to the
relatively strong demand for brokered freight contracts.
Table 3 below shows the complete estimates of the number of small
entities within the industries that may be affected by this rule.
Table 3--Estimates of Number of Small Entities
----------------------------------------------------------------------------------------------------------------
SBA size
NAICS code Description standard Total number Number of Percent of all
(millions) of firms small entities firms
----------------------------------------------------------------------------------------------------------------
484110...................... General Freight $34.0 22,066 21,950 99.5
Trucking, Local.
484121...................... General Freight 34.0 23,557 23,045 97.8
Trucking, Long
Distance,
Truckload.
484122...................... General Freight 43.0 3,138 3,050 97.2
Trucking, Long
Distance, Less
Than Truckload.
484210...................... Used Household and 34.0 6,097 6,041 99.1
Office Goods
Moving.
484220...................... Specialized 34.0 22,797 22,631 99.3
Freight (except
Used Goods)
Trucking, Local.
484230...................... Specialized 34.0 7,310 7,042 96.3
Freight (except
Used Goods)
Trucking, Long
Distance.
488510...................... Freight 20.0 13,252 12,332 93.1
Transportation
Arrangement.
----------------------------------------------------------------------------------------------------------------
Consequently, I certify that the proposed action would not have a
significant economic impact on a substantial number of small entities.
D. Assistance for Small Entities
In accordance with section 213(a) of the Small Business Regulatory
Enforcement Fairness Act of 1996 (Pub. L. 104-121, 110 Stat. 857),
FMCSA wants to assist small entities in understanding this proposed
rule so they can better evaluate its effects on themselves and
participate in the rulemaking initiative. If the proposed rule would
affect your small business, organization, or governmental jurisdiction
and you have questions concerning its provisions or options for
compliance, please consult the person listed under FOR FURTHER
INFORMATION CONTACT.
Small businesses may send comments on the actions of Federal
employees who enforce or otherwise determine compliance with Federal
regulations to the Small Business Administration's Small Business and
Agriculture Regulatory Enforcement Ombudsman (Office of the National
Ombudsman, see <a href="https://www.sba.gov/about-sba/oversight-advocacy/office-national-ombudsman">https://www.sba.gov/about-sba/oversight-advocacy/office-national-ombudsman</a>) and the Regional Small Business Regulatory Fairness
Boards. The Ombudsman evaluates these actions annually and rates each
agency's responsiveness to small business. If you wish to comment on
actions by employees of FMCSA, call 1-888-REG-FAIR (1-888-734-3247).
DOT has a policy regarding the rights of small entities to regulatory
enforcement fairness and an explicit policy against retaliation for
exercising these rights.
E. Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
(UMRA) requires Federal agencies to assess the effects of their
discretionary regulatory actions. The Act addresses actions that may
result in the expenditure by a State, local, or Tribal government, in
the
[[Page 91669]]
aggregate, or by the private sector of $200 million (which is the value
equivalent of $100 million in 1995, adjusted for inflation to 2023
levels) or more in any one year. Though this NPRM would not result in
such an expenditure, and the analytical requirements of UMRA do not
apply as a result, the Agency discusses the effects of this rule
elsewhere in this preamble.
F. Paperwork Reduction Act
This proposed rule contains information collection requirements
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). As
defined in 5 CFR 1320.3(c), collection of information comprises
reporting, recordkeeping, monitoring, posting, labeling, and other
similar actions. The title and description of the information
collection, a description of those who must collect the information,
and an estimate of the total annual burden follow. The estimate covers
the time for reviewing instructions, searching existing sources of
data, gathering and maintaining the data needed, and completing and
reviewing the collection.
Title: Property Broker Recordkeeping Requirements.
OMB Control Number: [2126-NEW].
Summary of the Information Collection: There are two information
collections. The first covers brokered transaction recordkeeping,
including the requirement for brokers to keep records of their
transactions for three years and make those records available for
inspection by FMCSA on demand. The second covers disclosure of records
to parties involved in a brokered transaction. A broker is obligated to
provide transaction records, upon request, to a shipper or motor
carrier involved in the transaction.
Need for Information: The first collection of information is needed
for determining whether a broker is complying with FMCSA's
recordkeeping regulations. The second information collection is needed
for resolving disputes between shippers, brokers, and motor carriers
arising from brokered transactions.
Proposed Use of Information: In the first information collection,
FMCSA would inspect and copy records of brokered transaction, to
confirm whether the broker is complying with FMCSA's regulations. This
would generally occur as part of an investigation following a complaint
about a broker's practices. In the second information collection,
shippers and motor carriers would use the records to verify transaction
data, answer questions regarding charges and payments made, and provide
supporting evidence in the event of disputes.
Description of the Respondents: The respondents are brokers of
property, that is, persons who, for compensation, arrange, or offer to
arrange, the transportation of property by an authorized motor carrier.
The respondents include HHG and non-HHG brokers.
Number of Respondents: The estimated number of respondents is
32,362.
Frequency of Response: For the first information collection, the
frequency of response as it pertains to a broker's obligation to make
records available for inspection by FMCSA on demand will depend on how
often the Agency inspects brokers' transaction records. The Agency
believes that this will be a relatively rare occurrence compared to the
total number of brokered transactions. For the second information
collection, FMCSA finds no material difference in the anticipated
frequency of requests for information from HHG brokers and non-HHG
brokers. The Agency estimates that 5 percent of brokered property
transactions will result in a request for transaction records. This
would correspond to an average of 4 requests per year for each HHG
property broker and 630 requests per year for each non-HHG property
broker.
Burden of Response: The first information collection would impose
no annual burden hours on brokers because it is an ordinary and
customary business practice. The second information collection would
impose an estimated burden of 2 minutes per request.
Estimate of Total Annual Burden: There is no annual burden for the
first information collection. For the second information collection,
the total annual burden is estimated at 670,000 hours, which
corresponds to an estimated $22,110,000 of labor costs. There are no
non-labor costs associated with the second information collection.
As required by the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)), FMCSA will submit a copy of this NPRM to OMB for review. You
are asked to comment on any aspect of this information collection,
including: (1) Whether the proposed collection is necessary for FMCSA
to perform its functions; (2) the accuracy of the estimated burden; (3)
ways for FMCSA to enhance the quality, usefulness, and clarity of the
collected information; and (4) ways that the burden could be minimized
without reducing the quality of the collected information.
G. E.O. 13132 (Federalism)
A rule has implications for federalism under section 1(a) of E.O.
13132 if it has ``substantial direct effects on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government.'' FMCSA has determined that this rule would not have
substantial direct costs on or for States, nor would it limit the
policymaking discretion of States. Nothing in this document preempts
any State law or regulation. Therefore, this rule does not have
sufficient federalism implications to warrant the preparation of a
Federalism Impact Statement.
H. Privacy
The Consolidated Appropriations Act, 2005,\31\ requires the Agency
to assess the privacy impact of a regulation that will affect the
privacy of individuals. This NPRM would not require the collection of
personally identifiable information (PII).
---------------------------------------------------------------------------
\31\ Public Law 108-447, 118 Stat. 2809, 3268, note following 5
U.S.C. 552a (Dec. 4, 2014).
---------------------------------------------------------------------------
The Privacy Act (5 U.S.C. 552a) applies only to Federal agencies
and any non-Federal agency that receives records contained in a system
of records from a Federal agency for use in a matching program.
The E-Government Act of 2002,\32\ requires Federal agencies to
conduct a Privacy Impact Assessment (PIA) for new or substantially
changed technology that collects, maintains, or disseminates
information in an identifiable form. No new or substantially changed
technology would collect, maintain, or disseminate information as a
result of this rule. Accordingly, FMCSA has not conducted a PIA.
---------------------------------------------------------------------------
\32\ Public Law 107-347, sec. 208, 116 Stat. 2899, 2921 (Dec.
17, 2002).
---------------------------------------------------------------------------
The Agency will complete a Privacy Threshold Assessment (PTA) to
evaluate the risks and effects the proposed rulemaking might have on
collecting, storing, and sharing personally identifiable information.
The PTA will be submitted to FMCSA's Privacy Officer for review and
preliminary adjudication and to DOT's Privacy Officer for review and
final adjudication.
I. E.O. 13175 (Indian Tribal Governments)
This rule does not have Tribal implications under E.O. 13175,
Consultation and Coordination with Indian Tribal Governments, because
it does not have a substantial direct effect
[[Page 91670]]
on one or more Indian Tribes, on the relationship between the Federal
Government and Indian Tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian Tribes.
J. National Environmental Policy Act of 1969
FMCSA analyzed this proposed rule pursuant to the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and
determined this action is categorically excluded from further analysis
and documentation in an environmental assessment or environmental
impact statement under FMCSA Order 5610.1 (69 FR 9680), Appendix 2,
paragraphs 6(k)(1) and (2). The categorical exclusions (CEs) in
paragraphs 6(k)(1) and (2) cover requirements pertaining to the duties
and obligations of a broker, and the records a broker must keep. The
proposed requirements in this rule are covered by these CEs.
K. Rulemaking Summary
As required by 5 U.S.C. 553(b)(4), a summary of this rule can be
found in the Abstract section of the Department's Unified Agenda entry
for this rulemaking at <a href="https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202310&RIN=2126-AC63">https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202310&RIN=2126-AC63</a>.
List of Subjects in 49 CFR Part 371
Brokers, Motor carriers, Reporting and recordkeeping requirements.
Accordingly, FMCSA proposes to amend 49 CFR part 371 as follows:
PART 371--BROKERS OF PROPERTY
0
1. The authority citation for part 371 is revised to read as follows:
Authority: 49 U.S.C. 13301, 13501, 13904, and 14122; subtitle
B, title IV of Pub. L. 109-59; and 49 CFR 1.87.
Sec. 371.2 [Amended]
0
2. Amend Sec. 371.2 by removing the definition of ``Non-brokerage
service''.
0
3. Revise and republish Sec. 371.3 to read as follows:
Sec. 371.3 Records to be kept by brokers.
(a) A broker must keep a record of each transaction. Such records
must be maintained in an electronic format as described in Sec.
390.32(d). For purposes of this section, brokers may keep master lists
of consignors and the address and registration number of the carrier,
rather than repeating this information for each transaction. The record
must show:
(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 each
service performed in connection with each shipment, including freight
charges, surcharges, and accessorial fees; the date of payment; and the
name of the payer, including any business aliases, if known; and
(5) Any penalties assessed in connection with each shipment.
(b) Brokers must keep the records required by this section for a
period of 3 years.
(c) Brokers must provide, upon request by any party to a brokered
transaction, a copy of the record of the transaction required to be
kept by this section. Records must be provided electronically within 48
hours of the broker's receipt of the request.
Issued under authority delegated in 49 CFR 1.87.
Vincent G. White,
Deputy Administrator.
[FR Doc. 2024-27115 Filed 11-19-24; 8:45 am]
BILLING CODE 4910-EX-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.