BROKER OR COMMON CARRIER? HOW TO TELL THE DIFFERENCE
Reproduced with the Permission of Miles L. Kavaller
The title of this article reminds me of the story about the mosquito-how is the difference between a male and female mosquito determined? Those who know the answer to this question are also likely to know how to determine the difference between a broker and a common carrier. for those who do not know the answer to either question, read on.
The ICC Termination Act of 1995 ("ICCTA") defines a broker in the same manner as the term has been described since its adoption in the Motor Carrier Act of 1935 and the ICC's regulations in 49 C.F.R. Part 1045. In 49 U.S.C. & 13102(2) a broker is defined as "a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation." ICCTA also defines a carrier as "a motor carrier, a water carrier, and a freight forwarder." According to ICCTA, a motor carrier is "a person providing motor vehicle transportation for compensation."
Historically, neither motor common nor motor contract carriers holding certificates for permits respectively from the ICC could also hold a broker's license. With the administrative deregulation in the late 1970's and early 1980's, however, this prohibition was eliminated. It is now commonplace for companies to hold all three forms of operating authority. Thus, the distinction between a motor carrier and a broker has become all that more confused and difficult. the significance of the distinction, however, lies in liability for freight loss and damage claims, payments of freight charges and even liability for motor vehicle accidents causing personal injury and property damage.
In determining whether an entity is acting as a motor carrier or a broker, its ICC (now FILA) license is relevant, but not conclusive. Thus, a licensed broker could perform operations as a motor carrier and be held responsible for freight loss or damage or even automobile accidents involving motor vehicle equipment transporting the freight. Similarly, motor carriers holding either certificates or permits from the ICC who use owner-operators who also hold their own ICC authority may not be responsible to the shipper, for example, freight loss and damage or, to the general public, in the case of a motor vehicle accident. Rather than relying on the form of the entity's license, focus should be on the parties identified in the bill of lading and the party or parties who actually control the transportation service provided. the broker which obtains owner-operators to perform a transportation service may thus be liable to the shipper as a common carrier. If the broker is identified on the bill of lading as the "carrier", and further if the broker actually controls the motor vehicle equipment during the course of its transit, then the broker should be held liable as a carrier and should be responsible for the shipper's loss and damage or, for that matter, automobile accidents which result from the negligence of the truck driver. See for example Franklin Stainless Corp. Vs. Marlo Transport Corp., 748 F.2d 865 (4th Cir. 1984)
Where the entity holds both broker and motor carrier authority, the distinction becomes that much more difficult. but the focus is on the same elements, the parties identified in the bill of lading and the party who actually controls the motor vehicle transportation. If the entity is identified as the carrier on the bill of lading, it is unlikely that any claim that it was operating as a broker will be successful and it should be held liable for shipper's freight loss and damage. Further, the shipper ought not to be liable for the payment of the charges incurred for the motor vehicle providing the transportation, frequently an owner-operator or other motor carrier. The broker/motor carrier has assumed that responsibility as part of its transportation service.
In the final analysis, the distinction between a broker and a common carrier lies in the definition of those terms in the ICCTA. Reduced to the most basic concept, a broker "arranges" for transportation by motor carrier; a motor carrier "provides" the motor vehicle transportation. The difference between a male and female mosquito can be seen simply by carefully inspecting their anatomy by pulling one leg apart from the other.