FOR A NUMBER OF YEARS, THE TERM “FREIGHT BROKER” HAS
conjured up visions of Joe Bob parked in a booth at the Flying Z truck
stop with his cellphone, pad and pencil, and a generous helping of
chicken-fried steak. In a few instances, that might still be the case, but
for the most part, Joe Bob and his shady cohorts have joined the ranks
of the dinosaurs. Today, freight brokerage has grown into a much
more sophisticated multimillion dollar industry. The leader in the field
is the venerable C.H. Robinson, which along with a handful of select
players, presides over a marketplace of thousands of small mom-and-pop-like firms.
While Joe Bob may be history, the industry’s image
problems persist—particularly with the smaller brokers. Although some shippers have found the small
businesses to be financially responsible and excellent partners, others have complained of fraud at the
hands of less-than-honorable players. In an effort to
curtail abuses in the industry, Congress included in
the Moving Ahead for Progress in the 21st Century
Act (MAP- 21) a provision increasing the surety
bond for brokers to $75,000 from $10,000. This
change, which took effect Oct. 1, 2013, was supported by the American Trucking Associations (ATA),
Transportation Intermediaries Association (TIA), and others.
The measure also has its detractors. Perhaps the most vocal opponent is the Association of Independent Property Brokers and Agents
(AIPBA), which represents the smaller, independent brokers. AIPBA
sought an injunction of the new bond requirements before they
became effective. The injunction was not granted, and that decision
has been appealed.
AIPBA sees the new MAP- 21 provision not as an anti-fraud measure,
but as an attempt to drive smaller brokers out of business. According
to the group, almost 40 percent of the industry’s freight brokers have
been forced to shut down because of the legislation, and a rather emotional statement on its website suggests that smaller brokers will be
eliminated, carriers will suffer, consumer prices will rise, and jobs will
be lost due to the “megabrokerages’ new oligopoly.” It also suggests
that the legislation resulted from the multimillion dollar companies’
“hooking up with small truckers and their trade groups to cut a deal,”
along with some other veiled insinuations.
One of the proponents of the new requirements, TIA, has stated that
the issue is not the large vs. the small, but a question of good manage-
BY CLIFFORD F. LYNCH fastlane
One last attempt
ment, regardless of size.
Still, AIPBA isn’t letting go of the matter.
In a brief filed on Feb. 14, 2014, in Association
of Independent Property Brokers and Agents
v. Anthony Foxx, Secretary of Transportation
and U.S. Department of Transportation Federal
Motor Carrier Safety Administration, AIPBA
asked the U.S. Court of Appeals to find that
the FMCSA had failed to follow the provisions of the Administrative
Procedure Act in publishing the new rule and to set
it aside. There has been no
decision.
The latest move by AIPBA
seems to be a desperate
attempt that has little chance
of success. It does not appear
that the industry has been
harmed by the loss of brokers and arguably has been
significantly bolstered by the
fact that the brokers with which shippers deal
are likely to be more financially responsible.
I believe the TIA summed it up well. The
argument is not about the size of the broker.
It is simply a question of whether when they
contract with firms in this important segment
of the industry, shippers can be reasonably
assured that they are dealing with responsible,
financially sound companies.
Shippers just have to follow one simple rule:
Exercise the same care in selecting a freight broker as you would in securing any other logistics
service.
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider
of logistics management advisory services, and author of Logistics
Outsourcing – A Management Guide and co-author of The Role of
Transportation in the Supply Chain. He can be reached at cliff@
cflynch.com.
