Due to its frequency and the significant effects it can have on the parties involved, double brokering is a big issue in the transportation industry. To safeguard your company as a carrier, it’s critical to understand double brokering and how to prevent it.
What is Double Brokering?
Double brokering is a practice in which a load is accepted by broker A from a shipper or broker B and then passed on to a carrier as broker B’s own cargo. In this case, Freight Broker B accepts the cargo for more money than they plan to pay the carrier, pocketing the extra cash. Freight broker B typically does this to boost their income or steal the carrier’s compensation. Or, they may decide to keep the entire sum paid to them by the originating shipper or broker and never make any payments to the carrier.
There is also a similar process of co-brokering. Co-brokering is a form of brokerage that exists as well, although despite having similar complexity levels to double brokering, it differs slightly from it. In co-brokering, two brokers collaborate to assign a carrier while sharing the commissions.
Co-brokering and double brokering differ primarily in that co-brokering typically occur with the full cooperation of the company performing the shipping and with established channels of communication between all parties engaged in the logistics chain. In cases of double brokering, the shipper frequently has no idea that the cargo has been transferred to anyone other than the carrier.
What are the Risks for a Carrier?
In a double brokering scheme, you, as the carrier, take on the greatest amount of risk. Any or all of the following could occur if you take and carry a double-brokered load:
- Refusal of insurance claims in the event of cargo loss or damage.
- No payment.
- Severe delay of payment.
- If you are found to be participating, your FMCSA permission may be revoked, or your organization may be blacklisted.
Is Double Broking Illegal?
While double brokering generally isn’t illegal, it is strongly disapproved of. However, there is one instance of double brokering that is against the law: when a broker accepts payment for brokering a cargo, re-brokers it to a different company, and then don’t pay the carrier after the freight has been transported.
This type of brokering is considered service theft and can result in years in prison for fraud as well as charges for restitution to get back the motor carrier’s stolen services.
How to Avoid Double Brokering as a Carrier?
Double brokering cannot be totally avoided, but there are measures you can take to safeguard your business and yourself from the damaging effects of this common fraud.
- Make connections with trustworthy brokers. Establishing relationships with brokers will help you gain their trust and vice versa. Your comfort level in carrying on with a broker will increase the more successful cargoes you haul, timely payments, etc., you receive from them.
- Verify the broker’s information. To confirm that a broker is legitimate, always check FMCSA’s broker registry. Additionally, if anything appears wrong with the details, you should get in touch with the brokerage directly and request them to confirm the load information.
- Be on the lookout for suspiciously high or low rates. Rates that are much below market norms indicate more serious issues with the cargo and might be a sign of fraudulent willingness to pay.
- Review the load instructions and the rate confirmation in detail. Watch out for predatory instructions, like checking in under a different carrier’s name, sending the proof of delivery to an address other than the broker, or changing the load documents in any way, when you receive the pricing confirmation.
Losing money or your reputation by double broking is not worth it. It is a significant issue to be aware of and to take a stand against, whether you’re trying to become a freight broker or you’re looking to deal with one as a common carrier. This predatory behavior puts everyone involved in shipping at risk in the event that something goes wrong, in addition to being unethical and risky.
There is no way to guarantee that a shipper’s cargo can be carried over long distances securely and legally if the shipper, the broker, and the freight carrier are not in clear communication with one another. Additionally, if there are several brokers engaged, both carriers and shippers won’t be able to communicate efficiently with one another in the event of a problem.
It simply isn’t worth the trouble to become involved with double-brokered shipments, especially when you consider the possibility of one of the brokers committing fraud with the cargo payment.