The nation's largest advocate for truck brokers is looking to Congress to help clarify regulations with the goal of eliminating illegal dispatching – potential changes that have riled legitimate operators within this sector of the trucking industry.
The Transportation Intermediaries Association (TIA) has already filed a petition at the Federal Motor Carrier Safety Administration (FMCSA) requesting that the agency issue a rulemaking aimed at raising standards for dispatch services. That petition, which generated over 160 comments since it was filed in November, is still under review, according to FMCSA.
But while FMCSA considers whether to issue a proposed rule, TIA is also "floating the idea" of getting lawmakers to include the changes as part of the next highway bill, Chris Burroughs, TIA's vice president of government affairs, told FreightWaves.
"We didn't try to get language in [infrastructure bills] that were proposed last year, but we consider this more of a priority now, so that's why we're considering getting Congress to include it in there this time," Burroughs said.
Low Rates Spark Debate
The plunge in freight demand and the corresponding drop in rates within the trucking industry at the onset of the pandemic last year was particularly hard on small owner-operators – those most likely to make use of dispatching services.
The harsh economic climate led to trucker demonstrations in Washington in late spring 2020 with owner-operators alleging, among other things, that brokers were cheating them out of their rightful portion of the transportation rates paid by shippers. The demonstrations caught the attention of then-President Donald Trump, who claimed independent truckers were being price gouged.
Trump's assertion was immediately refuted by TIA, which maintained the low rates were a consequence of supply and demand. "We simply aren't shipping much of anything and there are too many trucks chasing too little freight," stated TIA's then-President and CEO Robert Voltmann at the time.
As it turned out, freight volumes, and rates, bounced back almost as swiftly as they fell (see SONAR chart). But the extreme volatility laid bare a simmering controversy affecting brokers, freight dispatchers and small-business truckers, resulting in calls for more rate transparency and changes in how the industry is regulated.
The outbound tender rejection index (OTRI) May 2020 – May 2021. OTRI is highly correlated with trucking spot rates.
To learn more about FreightWaves SONAR, click here.
Defining the problem
In May 2020, in the middle of rate-roller-coaster ride, the Owner-Operator Independent Drivers Association (OOIDA) filed a petition with FMCSA asking that the agency require brokers to automatically provide an electronic copy of each transaction record within 48 hours after service was completed. It also sought a rule prohibiting brokers from requiring carriers to waive their rights to access transaction records.
TIA responded months later with its own petition, which asked FMCSA to propose a rule to eliminate altogether old transparency laws that TIA asserts conflict with the current deregulated marketplace.
However, what has stirred up much of the concern among thousands of dispatch operators who book freight on behalf of their trucker clients – but who are not subject to the same federal oversight as brokers – is the second part to TIA's petition. TIA is looking for guidance from FMCSA on what constitutes a "dispatch service" as a way to keep illegal dispatchers from operating.
"The dispatch service is paid a commission by the motor carrier for their services, not the model that generally applies to brokers, where the shipper pays the broker for their service and the broker pays the motor carrier," TIA states in its petition. "We believe there are many illegal dispatch services that are operating illegally as unlicensed brokers. FMCSA should prohibit these companies from offering such a service without a license."
Dispatchers contacted by FreightWaves generally agree with the intention of TIA's petition, which is to eliminate bad actors from the market.
But they disagree with the method by which TIA proposes to accomplish that – by allowing dispatchers to be an agent for just one motor carrier. "Anything further," according to TIA's request, "requires a brokerage license and compliance with the financial responsibility requirements applicable to brokers."
Nora Spriggs, who runs 3D Transportation and Dispatch Services out of San Antonio, pointed out that legitimate dispatchers work as agents on behalf of one or more small business truckers, while brokers generally work for shippers. For her, getting a broker's license is a nonstarter.
"I have no desire to work with shippers and multimillion-dollar companies; it's more fulfilling to me to help blue-collar truckers who are struggling to put their kids through college and to help them navigate through this freight market," Spriggs told FreightWaves.
She added that becoming a broker would mean another $1,500 to $2,000 a month in overhead costs that she would have to pass down to her trucker clients.
"It seems as though the reason TIA is pushing towards that [one-carrier] definition is that they're well aware that dispatchers push for higher rates on behalf of their owner-operators, and brokers aren't fond of that," Spriggs said. "We're monitoring the market and making sure that our clients are getting top dollar. Unfortunately, that doesn't always work out for the brokers, but that's business."
Edward Sanderson, who submitted comments on TIA's petition, agreed that such a strict definition of what constitutes legal dispatching versus operating as a broker is unnecessary.
"It seems a lot of brokers are salty about this because they have an enormous amount of overhead," Sanderson wrote. "But that sounds like a personal problem – not something that the FMCSA needs to mandate or interfere with. Dispatchers don't need to be regulated/licensed/bonded as long as they have a guideline for appropriate business practices."
TIA and legal dispatchers both would welcome intervention from FMCSA, insisting that unscrupulous dispatchers are giving brokers and dispatchers a bad name.
"It's a little discouraging to see dispatch companies popping up like mushrooms right now. They're being told it's easy to get in and make a lot of money," Jacob Schmidlapp, president of Freight Girlz, a large trucking dispatch company, told FreightWaves.
"What irks me is that these companies jumping in don't set expectations that they can meet for the carriers. They tell small carriers they can make $12,000 a week, but they come up short and risk pushing the carriers under. There are too many gray areas. The FMCSA has to pony up and figure this out."
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