OOIDA scoffs at high cost estimates for broker transparency

The filing by the Owner-Operator Independent Drivers Association (OOIDA) in response to a Federal Motor Carrier Safety Administration (FMCSA) fact-finding mission it largely started stays away from discussions of the strength or weakness of the market and instead focuses on the question of the hurdles to disclosure.

FMCSA is studying whether to turn a federal rule that carriers may request data on a transaction from a broker into a rule that the broker must supply that data automatically to a carrier (and other parties in a transaction) within 48 hours. There is no proposed rule yet, just a call for comments and a public virtual listening session at the end of this month. 

What’s notable about some other comments by brokers to FMCSA about the question of a change in broker transparency rules is that they talk frequently about the market. “It’s a free market,” either verbatim or indirectly, can be found sprinkled through the comments submitted by 3PLs. 

For example, in a submission by Choptank, that 3PL declares that “the free market is alive and working well, currently in favor of carriers who are making close to $3 a mile on the spot market.”

And while the push to have brokers be required to automatically share information was spurred by the low rates of the spring, the level of rates is not an issue that FMCSA discusses or seems to care about in its questions to the industry. 

Instead, the FMCSA questions in the survey focus on whether it has the authority to order such automatic disclosure and what would be the burdens on the industry if it does so. 

OOIDA, in its response, mostly avoids complaining about low rates. However, it concedes that the rates of the spring spurred its request for changes in the brokerage transparency rule, a request that has resulted in the fact-finding mission by FMCSA. “In the wake of historically low freight rates earlier this year, OOIDA petitioned [FMCSA] to improve broker transparency,” OOIDA writes in its comments. 

The reversal in rates is not enough to change its views, however. Although rates have increased, “the need for better broker transparency remains urgent,” according to the submission by Todd Spencer, OOIDA president. “Federal regulators must act expeditiously to enhance and enforce current broker regulations.”

FMCSA’s information-seeking effort consists of a series of eight questions. One of the more contentious is the question of the costs of requiring brokers to supply carriers with information on the transaction, including the broker’s own costs of acquisition and by extension its margin, within 48 hours.

Although large carriers are notably absent from the list of companies that have submitted comments, LTL carrier ArcBest sticks out as probably the biggest to file comments. It opposes a rule requiring disclosure, saying the rule would add at least $500,000 in costs to every broker each year to comply.

OOIDA’s comments to FMCSA take aim at that forecast, noting that there is no evidence to support estimates that it would cost $2,500 to $10,000 per carrier to comply with the rules. 

“These brokers describe their cost estimates as necessary for EDI or API integration,” OOIDA writes in its comments. “This description implies that their current compliance with (the current disclosure rule) is not yet integrated into their EDI or API systems. If those brokers have already invested in and use systems that employ EDI or API, why have they not adopted them yet to comply with the current rules?”

OOIDA describes current compliance as printing hard copies to be transmitted via fax or the U.S. Postal Service. “If they are using such methods of business communication, then their conversion to comply with OOIDA’s proposed electronic transmission, using their efficient and time-saving electronic systems, would save them money in the long term,” the association writes in its comments. “It is more likely though that they have not been complying with the current rule by choice and any perceived technological investment is largely inflated.”

The issue of whether brokers are now complying with the law is tricky. The consensus in the industry is that requests for the documents are somewhere between rare and nonexistent. Measuring compliance therefore becomes difficult.

OOIDA takes on that issue. “There are too many brokers preventing truckers from accessing information by only providing transaction records at their office location during normal business hours,” OOIDA writes, a reference to the fact that the current rule can be met by allowing in-person review of transaction documents. “Brokers know requirements like these make it nearly impossible for truckers to view the information they have a right to see. Because much of the brokering process is already being conducted digitally, electronic records of transactions should also be provided electronically within 48 hours of a load being delivered.”

Even if the current rules can be met by antiquated methods like faxes or hard copy mail, OOIDA argues that brokers should already be in position to meet a demand for a 48-hour turnaround on supplying transaction documents automatically. “It is doubtful that modern brokers do not already create electronic documents, conduct electronic transactions and transmit data to and from shippers and carriers for every load they arrange,” OOIDA said.

When trying to determine the costs of meeting a new rule, OOIDA says FMCSA should assume that brokers are already in compliance with the law and that the only cost to be considered should be what it would take to automatically send out documentation within 48 hours. “FMCSA should only account for the cost of changing the time frame to 48 hours within which the broker must comply,” OOIDA writes. “In some instances, minor IT infrastructure and compatibility upgrades might be needed to assist in automatically disclosing the records. However, major investments in IT infrastructure would not be needed for compliance.”

FMCSA’s questions start out with one of the most basic ones: Can we do this? Does FMCSA have the authority to set such rules?

Not surprisingly, OOIDA says it does. It quoted FMCSA as saying in a report to the Senate back in 2006 that broker regulations are needed to protect the public from “unscrupulous brokers.” 

“Any comments claiming that broker rules are an out-of-date vestige of the ICC have no support in the law,” OOIDA writes.

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