Transportation Brokers play a crucial role in the logistics and freight industry, acting as intermediaries between shippers and motor carriers. In Texas, the operation of transportation brokers is governed by specific regulations outlined in the Texas Transportation Code. This article provides an overview of Chapter 646 of the Texas Transportation Code, focusing on motor transportation brokers and their legal obligations within the state.
Who is a Motor Transportation Broker in Texas?
According to the Texas Transportation Code, specifically Sec. 646.001, a motor transportation broker is defined as someone who engages in the following activities:
- Selling, offering for sale, providing, or negotiating for the transportation of cargo.
- This transportation must be carried out by a motor carrier operated by another person.
- Aiding or abetting another person in performing these actions also qualifies one as a motor transportation broker.
Essentially, a transportation broker in Texas is an entity that facilitates the movement of freight by connecting shippers with carriers, without directly operating the trucks themselves. This definition is broad and encompasses various activities within the freight brokerage industry.
Exceptions to Transportation Broker Regulations
It’s important to note that not all transportation brokers are subject to Chapter 646. Sec. 646.002 outlines specific exceptions. The regulations do not apply to a motor transportation broker who:
- Is already registered as a motor carrier under Chapter 643 of the Texas Transportation Code. This means if a company operates as both a carrier and arranges transportation as a broker, and is registered as a carrier, they are exempt from these specific broker regulations.
- Holds a permit issued under Subtitle IV, Title 49 of the United States Code. This refers to brokers who are already permitted at the federal level, ensuring compliance with national standards.
These exceptions are in place to avoid redundant regulations for entities already operating under other state or federal transportation frameworks.
The Bond Requirement for Transportation Brokers
A key provision of Chapter 646 is the bond requirement stipulated in Sec. 646.003. This section mandates that:
- A person cannot operate as a motor transportation broker in Texas unless they provide a bond to the Texas Department of Motor Vehicles (department).
- This bond serves as a financial security measure to protect parties involved in transportation agreements.
Details of the Bond
The required bond has specific characteristics to ensure its validity and purpose:
- Amount: The bond must be at least $10,000.
- Execution: It must be executed by a bonding company authorized to conduct business in Texas, ensuring the financial stability of the bond provider.
- Payable to: The bond is payable to the State of Texas or to any person to whom the motor transportation broker provides services. This dual payee structure ensures protection for both the state and the clients of the broker.
- Condition: The bond is conditioned on the performance of the transportation contract between the broker and the person receiving their services. This means the bond can be claimed against if the broker fails to fulfill their contractual obligations related to transportation services.
Bond Review Fee and Payment Methods
The Texas Department of Motor Vehicles is authorized to manage the bond process and associated fees:
- Bond Review Fee: The department may charge a bond review fee to cover the costs of reviewing the submitted bond. This fee cannot exceed the actual cost of the review.
- Payment Rules: The department can establish rules regarding fee payments, including:
- Electronic Funds Transfer and Credit Cards: Authorizing the use of electronic funds transfer or credit cards issued by recognized financial institutions or credit organizations.
- Service Charges: Requiring payment of discount or service charges for credit card transactions, covering processing costs.
These provisions provide the department with the necessary mechanisms to manage and oversee the bond requirement effectively.
Criminal Offense for Failure to Provide a Bond
The Texas Transportation Code emphasizes the importance of bond compliance by establishing penalties for non-compliance. Sec. 646.004 clearly states:
- It is a criminal offense if a person fails to provide the bond as required by Section 646.003.
- This offense is classified as a Class C misdemeanor in Texas.
This legal consequence underscores the seriousness of operating as a transportation broker without the mandatory bond, ensuring that brokers adhere to the regulatory framework.
Conclusion
Chapter 646 of the Texas Transportation Code provides a clear legal framework for transportation brokers operating within Texas. By defining who qualifies as a motor transportation broker, outlining exceptions, mandating bond requirements, and establishing penalties for non-compliance, Texas law aims to regulate and legitimize this vital part of the commercial vehicle industry. For individuals and businesses operating or planning to operate as transportation brokers in Texas, understanding and adhering to these regulations is crucial for legal and compliant operation. Compliance ensures not only legal standing but also builds trust and reliability within the transportation marketplace.
