Brokerage versus "Dispatch" Service

Question to AIPBA (originally published Aug 2013):

Do "dispatch services" need MC #'s? If they don't, at what point do they cross the line and do need a MC#?

AIPBA Response:

The terms "dispatch" and "broker" have been historically confused.

The answer to your inquiry lies in the definition subsection of 49 C.F.R. 371:

§ 371.2 Definitions. (a) Broker means a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport. (b) Bona fide agents are persons who are part of the normal organization of a motor carrier and perform duties under the carrier's directions pursuant to a preexisting agreement which provides for a continuing relationship, precluding the exercise of discretion on the part of the agent in allocating traffic between the carrier and others. (c) Brokerage or brokerage service is the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor, or consignee.(d) Non-brokerage service is all other service performed by a broker on behalf of a motor carrier, consignor, or consignee.

So, in order to fall under the term "dispatcher", one must be a "bona fide agent" of a particular motor carrier. The dispatcher has to be under the control of the carrier ("part of the normal organization of a motor carrier and perform duties under the carrier's directions pursuant to a preexisting agreement which provides for a continuing relationship, precluding the exercise of discretion on the part of the agent in allocating traffic between the carrier and others") and cannot be an independent third-party working for multiple carriers that has the independent discretion to, for instance, set the rates the carrier will receive from the "dispatch service" on behalf of a shipper. Note the part "which they are authorized to transport"; meaning, they are, in fact, the carrier itself operating pursuant to its operating authority.

Anyone who operates in interstate transportation and arranges regulated transportation for compensation without being a bona fide agent of a carrier or a duly licensed broker with an active MC Number (soon to be a USDOT number after the Sept. rulemaking goes into effect) is essentially operating an unlawful property brokerage.

Follow-up Q: Where does Uship.com fall into with this? They are just advertising?

Let's review the three components of the definition of "broker" above; they are:

1. You have to be a person (that includes partnerships, corporations, LLCs, ect.);
2. You have to arrange for transportation of regulated commodities;
3. You have to be paid.

At first glance, it would appear that uship meets all three; however, the central question becomes: what does "arrange" truly mean?

When it comes to uship, that brings up the next question: who do you have to contact to actually get the load when you are the carrier? You don't call uship. A carrier contacts the shipper who posted their load on uship. Although uship takes a percentage (from what I remember), they do not set the actual transportation rates and charges.

In general, load boards (no matter what their pricing structure) are essentially web-based conduits, similar to a phone company. Verizon, for instance, is a mechanism through which a broker and shipper can connect through telecommunications technology.

Think of the olden days and it is easier to comprehend:

Let's say it's 1950 and the shipper uses old fashioned telephone switchboard plug technology (remember the Andy Griffith Show?) and dials the switchboard operator who then puts the call through to a property broker. They make a deal while on the phone. They used the phone to communicate but the phone technology and the phone company itself are not a brokerage operation per se. They are merely the means through which the two parties connect. Fast forward to contemporary times and we see how the technology advanced so that the switchboard operator function became automated. Today, the call automatically goes through but the service is still merely connecting you nonetheless.

Load Boards are the same, only using Internet technology instead. The load board is essentially the automated switchboard operator operating in Internet mode. You can't call uship just like you can't call Verizon to get details on the load. Neither uship nor Verizon sets the rates or can negotiate with you the rates for a load; therefore, they are not a broker under the definition because they do not meet the test of what constitutes "arranging" the load.

The guiding principle under contract law is "offer and acceptance." That is, which party is actually offering the load (and which is accepting the offer)? It's not uship per se, it's the shipper posting the load on uship. In a true brokering situation, you are be able to call the party offering the load directly and negotiate the terms of a contract. uship does not perform that role. It is therefore not a broker under the definition.

I hope that helps!

--SBTC

https://www.smalltransportation.org