Over the last couple of years double brokering has become a very hot topic in the world of transportation logistics. Double brokering is not at all a new thing; it’s been around for decades. Legitimate freight brokers have been standing against double brokering activities for decades as well. The biggest difference now is the insane volume of double brokers who are flooding the market with a single goal: profiting from fraud.
In order to understand what’s happening with our industry’s double broker issue, you have to first learn what is freight brokering versus double brokering.
In a traditional brokered load transaction, you’ll have 4 different entities involved: the shipper (manufactures/owns the product), the freight broker (third party middleman licensed to arrange freight movements), the carrier (owns the truck/equipment needed to move the product), the consignee (accepts delivery of the product). The shipper tenders the load to a freight broker. That freight broker then searches for truck availability, matches the load to the right types of available trucks, qualifies those matching carriers, negotiates with those carriers who were qualified, and contracts with the best carrier to move that load. The contracted carrier hauls the load and delivers the product to the consignee.
In a double brokered load transaction, there will be two or even three different entities performing broker activities. Here’s some examples of double brokered loads:
- The shipper tenders the load to the freight broker. The freight broker contracts with a carrier. That carrier then brokers the load out by contracting with a second carrier. The second carrier hauls and delivers the product.
- The shipper tenders the load to the freight broker. The freight broker contracts with a carrier. That carrier gives the load to a second freight broker. The second freight broker then brokers the load by contracting with a second carrier. The second carrier hauls and delivers the product.
- The shipper tenders the load to the freight broker. The freight broker contracts with a second broker. The second broker contracts with a carrier. The carrier hauls and delivers the product. NOTE: this specific transaction can be considered “co-brokering”. Co-brokering is acceptable within FMCSA/DOT regulations, as long as ALL parties (shipper, brokers, and carrier) are aware of the co-brokering agreement prior to the load moving. If all parties are not aware, then it’s not co-brokering, it’s double brokering.
So, what difference does it make if there are 2 or 3 different entities performing broker activities with the same load? Of course, there’s the standard ethical violations and legal ramifications that occur when a business entity misrepresents itself by fraudulently accepting a load as a carrier when they have no intention of hauling it. But, also, think beyond the ethics and potentially illegal actions of the double broker. Think about what can happen to the load. Think about how a double brokered load can impact you, as the original broker. Think about how a double brokered load can impact the shipper (your customer).
In double brokering situations, the original freight broker loses oversight and control over the selection and qualification process of the carrier. The original broker also loses oversight of the tracking process and is usually not given the ability to communicate directly with the driver. A whole lot can go wrong when the original broker is not able to ensure the carrier hauling that load has the authority and proper insurance to do so. There are significant liability implications for both the shipper and the broker when a load is hauled by a carrier without the proper insurance, or without the authority from FMCSA/DOT, or without the appropriate safety ratings.
Identifying and avoiding double brokers involves extensive carrier qualification. As a freight broker, if you aren’t using a thorough carrier qualification process, you will most likely learn the hard way why you should’ve avoided double brokers. Freight broker training will help you to avoid those painful situations a lot of inexperienced freight brokers find themselves in.
