Is FMCSA Coordinating With Brokers in Battle Over Freight Rate Transparency?
Washington D.C. – Recent comments by the head of the Federal Motor Carrier Safety Administration (FMCSA) on enforcing federal rules regarding freight rate transparency are raising new questions.
Small business truckers and trucking groups are still demanding the FMCSA actively enforce the now famous 49 CFR 371.3, which requires brokers to provide a copy of the transaction record to carriers, at the carriers request, upon delivery of the load.
Of course, most brokers require carriers to waive this right.
Groups such as the Owner Operator Independent Driver’s Association (OOIDA) and the Small Business in Transportation Coalition (SBTC) have petitioned the FMCSA to disallow such waiver provisions in brokers’ contracts with carriers.
However, based on recent statements made by Jim Mullen, FMCSA’s Acting Administrator, the Agency questions whether it has the “statutory authorities” to do so.
Coincidence or Coordination?
Mullen’s most recent comments on the freight rate transparency issue sound very similar to those being made by members of the freight broker lobby.
Let’s examine two examples.
During a webinar hosted by the Intermodal Association of North America (IANA) on Thursday, May 28, Mullen downplayed concerns that freight brokers were actively seeking to skirt 371.3 with waiver provisions.
Further, he questioned the original intent of the regulation.
“I believe that when the reg was promulgated that the whole process was different,” Mullen stated. “Motor carriers paid the brokers directly versus the shipper paying the brokers. There’s some perhaps difference of opinions as to what the net effect of that regulation was intended to be, but I’ll save that debate for a different time.”
Mullen made these statements unaware that Transportation Nation Network (TNN) had heard a very similar argument from the now former CEO of the largest association representing third party logistics (3PL) companies just a couple of weeks earlier.
In an unpublished portion of TNN’s exclusive two-part interview with Robert Voltmann, the then-head of the Transportation Intermediaries Association (TIA), he argued: “The 371 rules were promulgated during a time when rates were highly regulated and brokers earned a commission from the carrier, rather than the current system where the broker negotiates a price with the shipper and then negotiates a separate price with the carrier. The rules are there as a failsafe, but are no longer applicable to a modern, deregulated marketplace.”
Voltmann stunned many in the trucking community last week when he announced he was immediately stepping down as CEO and would be leaving TIA effective at the end of September.
TNN conducted its explosive interview with Voltmann on Monday, May 11, but did not publish Part I until Wednesday, May 20.
Part II published on Friday, May 22.
In Part II, Voltmann explained that shippers demand confidentiality agreements in contracts with brokers, so brokers in turn must require the 371.3 waiver provision in its contracts with carriers.
If 371.3 were to be strictly enforced it would be devastating to the 3PL industry and put many independent contractors out of business, he contended.
Voltmann put forward two specific analogies in making his case why shippers demand such provisions.
“Does Coke want Pepsi to know what their cost of transportation is? Hell no! Does Proctor and Gamble want Johnson and Johnson to know what their cost of transportation is? No.”
Again, Voltmann used these analogies on May 11 and these comments were not published until May 22.
WANT MORE? GET MORE!
Click HERE to read Voltmann’s two-part interview and find out why the industry is still buzzing about it.
On May 20, Mullen met at the White House with C.J. Karman, founder of Ezlogz, Mike Landis, founder of the United States Transportation Alliance (USTA), and Mark Meadows, President Donald Trump’s Chief of Staff.
To illustrate the problems that enforcing the much-debated provision would cause among shippers, Karman and Landis said Mullen used an example.
He made the case that Coke does not want Pepsi to know its transportation costs and vice versa.
Meadows reportedly had a strong reaction.
“I don’t believe that argument for a second because honestly, I don’t see Coke and Pepsi caring what the other pays for transportation,” Meadows replied, according to Landis.
“You could see the frustration in Mullen’s face,” Landis told TNN.
Were these coincidences or evidence of message coordination between the FMCSA and TIA?
We would like to know what you think.