The 3PL Industry Is Under Attack!

Rate Intrusion – CFR 371.3 

BACKGROUND: 

In the 1980s, the Interstate Commerce Commission (ICC) promulgated a regulation, CFR 371.3 (c), that requires all parties to a brokered transaction to have the right to view certain information relevant to the load, including financial information. The regulation was put in place following the transportation deregulation period where free market principles started determining rates rather than rates decided by government mandate, and brokers operated off commissions paid by the motor carrier. The ICC was concerned about an issue called “freight rebating” where a shipper and broker could have common ownership and essentially double dip, hence the reason for the transparency in a commission-based marketplace.

Today, there are two separate transactions between the shipper and broker, and the broker and the carrier – where the broker gets paid by the shipper directly and no longer receives a commission from the motor carrier.

TIA has been an advocate of the elimination of 371.3c altogether, but the Owner Operators Independent Driver Association (OOIDA) has asked the FMCSA to expand upon this regulation by proposing the following changes:

– Bar brokers from including contract language that waives a carrier’s right to having access to rates. 

– Require an electronic copy of all transactions be electronically transmitted to the carrier within 48 hours after delivery of the load.  

WHAT THIS MEANS FOR YOU:

This regulation is dangerous to the industry as it threatens to expand on exposing proprietary information in the name of “transparency” in contract negotiations between a broker and a shipper. It could also mean a broker violating trade secret laws by revealing proprietary information of the shipper. Furthermore, this expansion of the current regulation could lead to re-regulation of freight rates and the possibility of motor carriers back soliciting our shipper customers.  

ISSUE: 

The FMCSA is overstepping its authority in trying to influence private contract negotiations between two independent parties. FMCSA should focus on keeping our highways safer – its sole mission and purpose of existence – and not meddling in private disputes between two parties. 

WHAT’S NEXT: 

TIA and its members continue to lobby against this invasive rulemaking. The FMCSA continues to delay going forward with the rule making. Should the agency eventually make this regulation, TIA is prepared to go to Congress and/or the court system to combat this.   

TAKE ACTION:

 On Nov. 19, the FMCSA released its Notice on Proposed Rulemaking on Rate Transparency. The industry has 60 days to file comments against this proposed rule. TIA asks every member to file comments.

DEADLINE:

Comments are due by Jan. 21, 2025.