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Nov.30, 2015

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Q&A 60 THE JOURNAL OF COMMERCE www.joc.com NOVEMBER 30.2015 TECH FIRM OR BROKER? Q: I HAVE 10 years' experience work- ing for property brokers (or, as some like to call themselves, 3PLs) as well as international freight forwarders. I recently ran across this new company called "XYZ." They offer a service for shippers to connect with carriers in certain local markets. Shippers post their shipments on XYZ's website for vetted carriers to quote on and accept. The shipper pays XYZ for the load, and in turn XYZ pays the carrier. Of course, it seems XYZ takes its fee. Is XYZ allowed to offer this service without a property broker's license from the Federal Motor Carrier Safety Admin- istration? It seems to me it's acting as a broker, not just a "technology com- pany," as it markets itself. It's arranging for the transportation of property by car- riers for compensation. Without being licensed as a broker, it isn't required to have a bond, putting the carriers at risk for nonpayment. XYZ has its terms and conditions on its website and states that neither party (shipper nor carrier) is an agent or partner of XYZ, but are "independent contractors." I've received sales calls from other companies offering a similar "technol- ogy" service, but it really just seems to me they are offering a service that would require them to be licensed and bonded as a property broker. Thanks for any insight on this. A: YOU RAISE A VERY INTERESTING question, to which I'm afraid I can't offer you a definitive answer. Oh, I can give you my opinion, which is that your suggestion is entirely accurate — to wit, companies that provide the type of services you describe are indeed brokering freight as described in the law and FMCSA regulations. Under 49 U.S.C. Section 13102(2), a broker is defined as "a per- son, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation." I don't see a meaningful distinc- tion between that definition and the services your "technology compa- nies" offer. By acting as interfaces between shippers wanting to move freight and carriers wanting to haul that freight, they're "arranging for" motor carrier transportation; by accepting payment from the shipper, extracting therefrom some portion that they retain and then passing the balance on to the carrier, they're clearly doing that "for compensa- tion." In fact, in my youth — in the era before brokers were allowed to contract with motor carriers, as is the norm today — this is pretty much how all brokers were obliged to operate, setting up shipper-carrier relationships individually shipment by shipment. The reason I can't answer your question definitively, though, is that I'm neither a court nor the FMCSA, which are the only bodies legally authorized to provide the answer. And so far as I'm aware, neither has offered a formal declaration that com- panies such as those you're describing are in fact legally brokerages and must comply with the laws govern- ing brokers. Now, it's not as though these companies are acting surreptitiously or clandestinely. Their Internet sites are openly out there in front of God and everybody. So they're not exactly operating "under the radar," inasmuch as the FMCSA has as good a view as anyone else of what they're doing. That being the case, you'd think that if the agency had a prob- lem with their operations it would have said something by now (this has been going on for quite a few years by multiple providers). The reality is, however, that the FMCSA doesn't really take its enforcement responsibilities in this area very seriously. It regards its primary mission as being related to highway safety, and is bureaucrati- cally annoyed at having to deal with carrier and broker registration. So it isn't all that prone to take action in this kind of area. And without the agency taking a lead, courts have no motivation or justification for issu- ing pronouncements of their own on the status of these "technology companies." Which is to say, your question is unlikely to receive an authoritative answer in the foreseeable future. To be sure, there are risks involved with carriers and/or shippers doing business with such "unofficial" bro- kers, as you point out. But since the situation appears unlikely to change, the most I can advise is that all con- cerned exercise caution in their use of such online services. JOC Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; email, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010. By Colin Barrett The reality is, the FMCSA doesn't really take its enforcement responsibilities in this area very seriously.

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