In a 90-minute online listening session Wednesday to have Federal Motor Carrier Safety Administration (FMCSA) leaders hear views about possible changes in current broker transparency regulations, one question regarding a possible rule change with potentially serious repercussions came up repeatedly: what about the shippers?
At issue are the major requests of the two petitioners to FMCSA, owned-operator trade group OOIDA and the Small Business in Transportation Coalition led by James Lamb. There is no proposed rule. But if FMCSA adopted what OOIDA and SBTC want, brokers would be required to automatically send to carriers documentation of the details of a transaction electronically, and to do it quickly.
FMCSA is seeking comments on a list of questions it released in August in response to the OOIDA and SBTC petitions. The listening session was part of the agency’s gathering of information.
Carriers can get information on transactions now under federal law but may need to physically show up at a broker’s office to do so — an effective impossibility.
In a session where several impacts of such a rule were discussed at length, the focus on shipper confidentiality requirements came up several times.
Larry Minor, FMCSA’s associate administrator for policy, asked a question of the listeners and commenters on the session: Given confidentiality agreements in the contracts between brokers and shippers, “are you as brokers in a situation where the contracts you have with shippers state you couldn’t provide information even if you wanted to?”
Jeff Tucker, the CEO of 3PL Tucker Worldwide, said during the comment period that shippers do not want information on what they are getting charged for shipping to “get down to the carrier level, because shippers don’t want their competitors to know what they’re paying for freight.”
A commenter named Justin Olsen said shippers “consistently” require nondisclosure agreements with brokers, and “brokers are bound to honor these requirements and are contractually bound to honor the requirement of nondisclosure.” Olsen said he also believed that the regulations under Section 371.3 of Title 49, which spells out the requirements for broker disclosure now, might be in conflict with other federal laws regarding disclosure.
As one commenter said, the information about what the broker is charging the shipper and other pieces of financial information are “none of the carrier’s business.” If the carriers don’t like it, “they can source their own shippers if they choose.”
But existing law effectively makes it their business, though with a lot of hurdles to get it done. What is at issue is the method of transmission of the information to carriers. The ability of the broker to get that information now, regardless of how difficult it might be, has essentially established that carriers have a right to see it.
The question of the confidentiality agreements could be moot if FMCSA does implement changes and bars such confidentiality agreements between shipper and broker. Instead, a confidentiality clause among all three parties could become part of the new rule, said Lamb, president of the SBTC. “Are you saying carriers can’t keep a secret?” Lamb added.
In the model contract for broker-carrier relationships, confidentiality is required, and he objected to accusations that carriers would “routinely breach this.”
Todd Spencer, the president of OOIDA, responding to Minor’s query, said shippers’ concerns about confidentiality could be “fully satisfied” with nondisclosure and noncompete clauses in broker-carrier contracts.
One of the questions FMCSA has published is what brokers would need to spend to comply: “How much profit reduction on a per-transaction basis would brokers experience, and what percentage of the costs would be passed through to shippers or motor carriers?”
Jason Craig, the director of government affairs at C.H. Robinson, said the cost would be significant and a challenge to calculate accurately. OOIDA and SBTC have not anticipated a “corresponding increase in costs solely in delays to payments the requested remedy will require, due to information required in 371.3a5 for rate accounting of non-brokerage services like fees and detention time.”
Craig said the current law harkens back to a time when carriers often paid a commission to a broker, so that the underlying amount of the load would need to be known for a fair accounting.
But Craig and other commenters noted that is no longer how the market works, and there’s plenty of rate transparency. Tucker said there is “incredible” transparency in the market, and rate information is available down to the granular level of a particular lane.
But he noted rates are also subject to Bell curve-type distributions. And it is at the tail end of those rates that spurred the actions by OOIDA and SBTC, when the historically low rates of April, in the middle of the pandemic, kicked off the protests that led to the groups’ respective petitions.
Chris Burroughs, the vice president of governmental operations at 3PL trade association Transportation Intermediates Association, questioned the need for a radical overhaul brought on by a temporary situation. “If this was a systematic problem, why were there no complaints before COVID-19?” he said.
But the other side of the argument is what one carrier said was the disadvantage that fleets would always face. “When we do not know what the shipper pays the broker, then we do not know how to negotiate the rate and we end up grossly shorted,” the carrier said. And it isn’t just the carrier side of the ledger, she said. “Shippers are grossly overcharged.”
The other complaint, which has spurred part of the petitioners’ requests, is that asking to see the data that is now guaranteed in the law brings negative consequences for carriers. “The brokers are bullies if you ask too many questions,” the unidentified carrier said. “You will be blackballed and put on a ‘do not use’ list.”
The docket for taking comments on the FMCSA questions is open through Nov. 18.
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Tom
Broker Transparency…. It about MORE than just the haul rate!
Broker Transparency is about MORE than just the haul rate. It’s about the detention time that most carriers don’t get compensated for. It’s about the claims that a carrier is forced to pay without any real proof of claim. It’s about the penalty and fines that a broker claims the carrier incurred for being late or, in some cases, early for an appointment at shippers or receivers.
How many times has a carrier reported to a broker that they were detained for an extended period of time and the broker says something to the effect of… “I see what I can get you” or “This customer doesn’t pay for detention.” How do you really know?
The claims issues are a huge factor that can quite literally make or break a small carrier. Yet many broker carrier agreements disallow the claims process detailed in Part 370 of the FMCSR and contractually require that a carrier must take the word of the broker on any alleged overage, short & damaged (OS&D) claims. Without the ability to investigate the claim or mitigate the damages a carrier is at the mercy of the brokerage. Add in the cross-collateralization clause and the carrier can find themselves unable to collect the monies generated from past loads they carried for that broker that hasn’t been paid yet.
This is all part of the broker transparency issue, and the rate is just the tip of the iceberg.
Mary Robinson
Of course they don’t want us to see the rates, because that way we’d know what they’re really making. as for them paying detention time that’s another joke that is included in the rate and a lot of drivers don’t ever see detention the company keeps it the broker keeps it the shipper refuses to pay it it’s all a scam so they can keep the money and the owner operators that are running on these freight lines are getting screwed left and right The big mega carriers aren’t they’ve got enough trucks to cover the cost. I drove for over 20 years ran owner up and saw what the fridge did and barely survived four or five different companies three of whom were mega carriers and as a company driver we got paid so cheap that it’s a joke. All the money they made off all those loads from the drivers they’re paying cheaply they used to buy new trucks for the company or new company cars for the head of the companies and the divisions. as a next driver I’d love to go into the office section of it but they won’t bring me in because I’ve driven as an owner operator company driver and I would see the rates they’re paying and I would be outraged.
Rogelio
Brokers state that owners can’t keep the cost info “secret”. If the current law requires full disclosure then it is fair to say owners have been keeping info “secret”. The real reason brokers don’t wish to disclose any numbers is because they have been charging shippers to much and paying owners to little. Any time parties enter into an agreement and one side wishes not to disclose all the information it is because the nondisclosure party has something to hide.
This industry would be much better served if shippers and manufacturers would post their load lists and allow for owners to offer their rates thus by removing the middle man the shipper would save on shipping cost and the owners would make a good market rate.
Steve Blevins - Vice President / Co-Owner Priority Logistics Inc.
Anyone in this business for a period of time MUST know we are dealing in a commodity! The swing goes both ways and anyone who says it doesn’t is not living in reality. The actual problem is there are bad Brokers out there! This is not new! The same goes for carriers, there are bad carriers out there too! There is no reason for either to not be successful AND take a solid moral stance and stick to it no matter what! Once you waiver on that there is no return and the ones who do this will only receive short term gains until it catches up with them. The difficulties come in following companies like that which give the good ones a bad name. There is enough good business out there for all of and we all have to stick to a good business practice.
If you like the price take the load. Don’t waste your time worrying about what someone else made off of it. Those companies will earn their fate! Well wishes to all of us!
NICE GUYS DO FINISH LAST, GOOD COMPANIES POWER THROUGH ALL!