The transportation and logistics industry is fragmented and massive. The customer’s expectation of rapid delivery at an acceptable cost is the pinch point and hotspot of supply chain planning and execution. 

A property broker acts as the “middle person” between a shipper and a motor carrier. Brokers arrange for the transportation of property or household goods between buyers and sellers of transport services for a fee. This role has been in existence since motor carrier deregulation in 1980, and has historical roots dating back to the 1940s, with the Interstate Commerce Commission preceding the Federal Motor Carrier Safety Administration’s authority over property brokers. Today, the rule is known as 49 CFR 371.

The rule specifies the roles, responsibilities and obligations of parties in commercial transportation transactions that are arranged by licensed property brokers. It specifies two types of brokers of property: general (commercial), and household goods brokers (known as Subpart B). FMCSA’s proposed rulemaking addresses Part 371 (brokers of property), specifically Section 371.3, which concerns records to be kept by brokers. 

Public comments are welcome, with the comment period open until January 21, 2025. Here is a condensed version of the 78-page Notice for Proposed Rulemaking in the Federal Register, including key phrases highlighting the important points. 

How It Works Now

Current law specifies that the shipper and carrier involved in a property brokered transaction have the right to view the records of the brokered transaction. Brokers, as a condition of doing business with shippers and carriers, often include a waiver of that right. A few years back, FMCSA received several petitions seeking to modify the broker transparency rule. The Owner-Operator Independent Drivers Association (OOIDA) and Small Business in Transportation Coalition (SBTC) requested that the waiver be addressed specifically, and that all transaction costs and sell prices be made transparent to the parties after the transaction. 

Shippers and carriers who have requested this degree of transparency have often found themselves blacklisted or placed on “do not use” lists. Clearly, the law hasn’t operated as intended for more than 40 years, with little or no enforcement during that time. As a result, many in the property broker industry think they can control the terms of the transaction without any need for transparency. 

Under the rulemaking, brokers are required to retain transaction records in an electronic format, where they can be enhanced with amounts and dates of payments between brokers, carriers and shippers. Brokers must provide this settlement information within 48 hours of a request by a party to the transaction.

Topics for Comment

Following are some topics for comment on the proposed rulemaking:

• Who is considered a party to the broker transparency duty? 
• Who can ask for the electronic record that the broker collected?
• While the rulemaking proposes that the broker must retain the record in electronic format, it doesn’t specify how it’s to be delivered to the requester, or how the requester is to authenticate that it’s a party to the transaction.
• The rulemaking suggests the broker must provide the electronic copy of the transparency record, but doesn’t specify how it’s to be provided.
• The rulemaking specifies that the broker must provide the transparency record, including financial transactions from the shipper to broker and broker to carrier, within 48 hours of a request. However, it isn’t customary for shipper-to-broker transactions to be paid that quickly, or for the broker to pay the carrier early, unless it’s deducting money for fast payment or processing it through a factor. 
• How should a party ask for this transparency data, and what cost (if any) should be imposed for each record?
• In the case of a shipment being delivered by a carrier with a charge-back for lost or damaged product, or detention or late delivery charges, the carrier needs documentation to resolve discrepancies. The obligation to provide this data within 48 hours isn’t feasible in situations where a delivery is in dispute, and expenses aren’t yet fully accounted for.
• The rule proposes that brokers who fail to comply with regulations will be subject to the powers of the FMCSA, including revocation of brokerage authority and monetary penalties for willful avoidance of the law. 
• Can a broker still include a waiver of this duty in its broker-carrier and broker-shipper agreements?

What FMCSA Wants to Know

FMCSA particularly requests that the following questions be addressed by commenters:

• What impact, if any, would the proposed rule have on freight rates? Provide support for your position.
• How common is electronic recordkeeping among household goods brokers? What burden, if any, would be imposed if electronic recordkeeping were required?
• How much time would a broker spend creating an electronic record from paper documents for the record mandated by Section 371.3? What would be the costs for a broker to create an electronic record per transaction?
• Do you believe that the 48-hour timeframe proposed for Section 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?
• If this proposal effectively reduced instances of illegal brokering, through carrier policing with transparency information, would brokers engaged in illegal practices exit the market, resulting in the transfer of illicit profits to legally operating motor carriers and/or brokers?
• Should freight brokers and household goods brokers be subject to the same recordkeeping requirements under Section 371.3? If your answer is “no,” why should they be subject to different requirements?
• Should parties requesting records under Section 371.3(c) be required to submit their request in writing? Should they 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? Provide support for your position.
• Would the proposal that records be provided electronically under Section 371.3(c) make broker transparency more likely, as compared to not specifying a method of providing the records? Should FMCSA be more specific in requiring a particular format for records provided under Section 371.3(c), and if so, what method or format is preferrable? Provide support for your position.

Michael Darden is chief executive officer of DFM Data Corp., Inc.