Federal Regulations and Requirements for Brokers: Nov, 2024
Iron Sheepdog brokers can benefit greatly from understanding the regulations and requirements for brokers in the hauling industry. Here are some frequently asked questions and answers:
Broker: A broker arranges for the transportation of goods and materials by connecting contractors with service providers.
Hauling Service Provider: Operators that haul loads to and from construction sites
Interstate: Hauling across state lines
Intrastate: Hauling within state lines
Motor Carrier: Subhauler or Owner Operator
Are brokers required to have a U.S. Department of Transportation (DOT) number?
Brokers that act as hauling service providers are required to have a U.S. DOT number if they are arranging interstate transportation. This is because the DOT number is essential for tracking and monitoring the safety and compliance of commercial motor vehicles crossing state lines. Brokers that do not also act as hauling service providers, however, are not required to have a U.S. DOT number.
Do our brokers require a Federal Motor Carrier number?
Brokers do not require a Federal Motor Carrier (FMC) number if they are strictly connecting contractors with service providers for intrastate transportation. However, if the broker is arranging interstate transportation, they must apply for broker authority with the Federal Motor Carrier Safety Administration (FMCSA) via the Unified Registration System. This process involves providing proof of insurance coverage, filing a Designation of Process Agent Form, and paying a nonrefundable application processing fee.
Does a broker need a bond?
As part of the registration process for FMCSA, a broker acting strictly as an arranger of services and not a service provider for interstate transportation must (1) show proof of insurance coverage in either with a surety bond (Form BMC-84) or Trust Fund Agreement (BMC-85) in the amount of $75,000, (2) file a Designation of Process Agent Form (Form BOC-3), and (3) pay an nonrefundable application processing fee of $300.
Is it legal for our brokers to reassign dispatches to each other? Would that be considered double brokering?
The Iron Sheepdog platform creates a situation where brokers are co-brokering, which is not illegal. Double brokering occurs when a broker assigns a load to a motor carrier without notifying anyone in the chain, and then the motor carrier reassigns the load to a different motor carrier. Co-brokering, on the other hand, occurs when two brokers work together with a shipper's approval to assign the load to another motor carrier. Co-brokering is legal because there is transparent consent from the shipper.
To ensure that reassignments are not illegal, it is best practice for brokers to include a provision in the contract between the contractor and the broker that expressly permits reassignment of loads. Additionally, it is advisable to notify the contractor of the reassignment and provide them with the new service providers' name and contact information.
Is a carrier agreement between the broker and subhauler necessary?
While not strictly necessary, it is considered best practice for brokers and their subhaulers to enter into a written agreement. This agreement should state that the agreement between the broker and contractor applies in its entirety to the subhauler under the reassignment. This written agreement helps ensure clarity and mutual understanding of the terms and conditions governing the transportation of goods.