One of the biggest confusions in the transportation industry is knowing the difference between dispatch companies and brokers. The FMCSA issued guidance attempting to define this difference, and Cassandra sat down with Adam Wingfield, a transportation industry expert, to talk about it!
What is a dispatch company?
First and foremost, dispatch companies usually have a bad reputation because they are only associated with the word “dispatch,” but they are much more than that. A dispatch company goes beyond just communicating with truck drivers to provide directions.
Dispatch companies are also referred to as “carrier agents,” representing the carrier to ensure correct freight transportation. They serve as an intermediary between carriers and brokers. Some of their responsibilities are:
- Book loads
- Track loads
- Handle compliance
Even though dispatch companies are a crucial help for carriers, it’s essential to watch out for certain red flags to avoid working with companies that are not working with you for the right reasons. For instance, sometimes dispatch companies to get paid directly and not through the carrier or provide fly-by-night dispatcher services.
FMCSA guidelines for brokers and dispatch companies
Considering the confusion about dispatch companies and brokers, the FMCSA issued guidelines to differentiate these two types of companies and services. This is a guide. It’s not a ruling; therefore, it’s not a law.
A dispatch company, as mentioned above and under the law, is a bonified agent. But in some cases, companies try to blend their services to become what we know as brokers.
The issue is that being a broker has different requirements than being a dispatch company. For example, brokers need to have their broker authority and a bond.
FMCSA Areas to Consider
These are some factors the FMCSA showcases to analyze whether a dispatch service needs broker authority.
- Interacts or negotiates freight directly with a shipper or representative of the shipper
This usually does not happen, but the confusion started during the pandemic because of increased dispatch services and competition. Therefore, some of these companies began to look for ways to stand out and add more value for their clients—one of the additional services these services were offering dedicated freight to shippers.
- Accepts a shipment without a truck or carrier and then attempts to find a truck or carrier to move the shipment
This is another scenario that is not common, but certain dispatchers go on load boards to find loads for an MC and then look for the carrier to transport it.
- Soliciting the open market of carriers for the purpose of transporting freight
This factor relates to the one above as it refers to posting a load with all the information and the rate and then trying to find carriers to transport it.
- Accepts or takes compensation from a load from the broker or factoring company or is involved on any part of the monetary transaction between any of those entities
Some dispatch companies partner with factoring companies and carriers. This relationship can sometimes make the payment process more challenging as more parties are involved.
For example, a dispatcher that has a relationship with a factoring company books a load with a carrier, but when they’re going to pay the carrier, the factoring company suggests taking off the percentage the dispatcher has negotiated from the payment and the factoring fee, and proposed they pay the dispatcher the negotiated fee directly.
These are just some of the topics the FMCSA guidance touched on. But it brought up the debate on these two types of services. It pushed dispatch companies to stay within what they can legally do with certifications that show their legitimacy. If dispatchers want to provide more services and continue helping carriers, they need to merge into becoming brokers, get their authority, and acquire the knowledge to provide those services and avoid legal issues.