Many carriers that ‘give away’ loads are acting as a broker without proper authority.
As capacity tightens, many motor carriers find they have more freight than they have drivers and trucks. This dilemma often leads to – as many call it –“subcontracting.” This arrangement appears perfect: the cargo makes it to its destination on time and the customer is happy, all while the original motor carrier still maintains a share of the fee charged to the shipper.
Motor carriers that are offering their loads to these so-called “subcontractors” are actually acting as a “broker” of freight – providing they are not leasing the truck from the other motor carrier. According to the Federal Motor Carrier Safety Regulations (FMCSRs), a broker arranges, for compensation, the truck transportation of cargo belonging to others, utilizing authorized for-hire carriers to provide the actual truck transportation. A broker does not assume responsibility for the cargo and usually does not take possession of the cargo.
This definition catches some motor carriers off guard. They are unknowingly brokering loads without proper authority. Brokers of general freight must register with FMCSA by filing a Form OP-1, “Application for Motor Property Carrier and Broker Authority.” Authority is granted if the FMCSA finds the person fit, willing, and able to be a broker for transportation and to comply with all applicable laws and regulations.
Similar to becoming a motor carrier, the FMCSA will expect a broker to have proof of the appropriate financial responsibility (i.e. surety bond or trust fund). The broker license remains in effect only as long as a surety bond or trust fund remains in effect. Plus, the broker has to identify a “process agent.” He or she is a representative upon whom court papers may be served in any proceeding brought against a broker. When applying for broker authority, applicants must submit Form BOC-3, “Designation of Legal Process Agents.” Brokers must list process agents in each state in which they have an office and in which they write contracts. Many commercial firms will arrange process agents in any state for a fee.
Once an entity becomes an authorized property broker, it has a number of ongoing regulatory responsibilities under Part 371 in areas including recordkeeping, accounting, and compensation. Brokers may not represent themselves as motor carriers. If a broker engages in any other activity, such as motor carriage, the accounts relating to the brokerage business must be separate from the accounts for other business activities.