Freight Brokers Must Meet Compliance With FMCSA
Apart from the day-to-day tasks, a freight broker must regularly put in efforts to maintain relationships with carriers and shippers, market your business, network with other brokers, and — of course — work on developing your services. No wonder compliance can be such a challenge.
Yet, staying on top of freight broker compliance requirements, such as the Food Safety Rules recently adopted, or renewing your surety bond on time, is essential. Failing to do so can cost you time, money and perhaps your freight brokers authority cancelled if mistakes are made.
Here is the most important compliance issues while working as a freight agent or freight broker. Remember you may not own the brokerage and you work as a freight agent only, you must still keep freight broker compliance daily. Also check out our Freight Broker Topics Page
Freight Broker Compliance Requirements
The main compliance requirements which every freight broker must be acquainted with from the start are set out in the Code of Federal Regulations (CFR), Part 371 - Brokers of Property. The CFR spells out several general requirements for brokers to comply with, along with a number of special rules for household goods brokers.
The general requirements that brokers must comply with can be summed up as an obligation to keep records of transactions, avoid misrepresentation, not charge carriers in specific instances, and correctly account for their revenues and expenses.
Read on below for a brief explanation of each of these requirements. You can also find a detailed explanation of these in the freight broker compliance guide from Lance Surety Bonds.
1. Keeping Records
The CFR requires brokers to keep detailed records of all transactions they have for a period of three years. Such records need to include the name and address of the consignor, the motor carrier, the bill of lading, and the amount of money received by the broker in return for their services. These records must also be available to be reviewed by anyone who has been part of such a transaction.
2. Avoiding Misrepresentation
According to §371.7 of the CFR, freight brokers have a duty to avoid misrepresenting themselves as performing the services of a carrier in any way. Any advertisement conducted by a broker needs to clearly state that they perform brokerage services. Brokers are also required to perform and offer services only in the name they are registered with at the Federal Motor Carrier Safety Administration (FMCSA).
3. Not Charging Carriers
Brokers are not allowed to charge carriers for services in which the broker owns or has an interest in the shipment being transported by carriers. This also applies to instances in which brokers own or are owned by the shipper, and can exercise control over the shipment. Brokers are also not allowed to offer or give anything of value to shippers apart from inexpensive marketing materials.
4. Correct Accounting
Finally, according to §371.13, brokers must also properly account for their expenses and revenues in instances in which they engage in other forms of business. Revenues and expenses that are part of the brokerage services offered must be clearly distinguished and separated from the rest of the revenues and expenses or must be allocated on an equitable basis when they are shared.
5. Rules for Household Goods Brokers
The CFR also includes a whole section on special rules for household goods brokers. In summary, this section addresses questions related to:
The carriers such a broker can do business with
The information they need to display in advertisement
The information they must provide shippers with, and
The rules on maintaining written agreements with carriers
Since these rules are at times quite detailed, household goods brokers are advised to take the time to read Subpart B of Part 371 of the CFR, and fa