Working within the shipping industry comes with a lot of terms that are not common in everyday conversation. Some terms that may be common in the trucking industry, would cause major confusion to someone who is new to the industry, and it could wreak havoc on your business. One term that comes to mind is double brokering, which is when a freight broker offers a load to a specific carrier, and that carrier assigns that load to another carrier. This is a different process than co-brokering, the distinction coming by double brokering the company that assigns the first company a load, they have no idea that they are assigning it to another carrier. There are many different risks that come along with double brokering, and laws against it as well.
This process starts with a freight broker booking a load with a specific brokerage company. The freight broker believes the brokerage company will complete the load with its trucks and their drivers. However, the brokerage company will then turn and send the brokered load out to another trucking company as though it is their load. After the trucking company that completed the load has completed the transport of the brokered goods, will then send the invoice to the brokered company that had hired them. The original freight broker will pay the brokerage company that had originally booked with, as they believe the company had completed hauling their goods.
The truly horrible part of this process is when the secondary brokerage firm receives payment; it does not pay the actual trucking company that hauled the goods. However, the freight broker must pay the actual trucking company or they will double pay. This is where double brokering becomes unethical and unlawful.
Double brokering is an extremely complicated process, so it is very difficult to determine if there was any wrongdoing. There are specific laws against double brokering, with a possibility of penalty for double brokering or just considered unscrupulous, depending on the situation. The situation becomes illegal when a broker receives payment for brokered loads and fails to pay the carrier after the goods are shipped. This situation is considered a theft of services or as fraud and can result in a jail sentence or fines for restitution.
Aside from the issues with the law, double brokering also has issues for the company who needs their goods hauled. One issue is that the insurance policy that was taken out for the original broker, will not cover the other company that is hauling the goods. Because of this, if there is an accident or damage to the goods during transport, they may not be covered because of this fraudulent act of double brokering. Furthermore, if there is an accident to the truck, the company that arranged for the shipment may be held liable for any claims.
There are a few different steps that you can take in order to assure you avoid double brokering to avoid any unnecessary fines or even jail time.
- Investigate the Broker
First of all, it is important to investigate the broker, which includes a background check against the Federal Motor Carrier Safety Administration registration. Another area that you could look into is their credit scores and safety ratings.
- Working with Trusted Brokers
This goes along with investigating the broker, but to reduce any double-brokered load, it is important to develop trusting relationships with brokers you believe to be ethical.
- Mind the Freight Rate
In order to avoid a broker who is prone to double brokering, review the rate confirmation after the brokered loads have been booked. If the rate confirmation requires one to check in as someone other than the actual carrier, it is more than likely a double brokered load. Furthermore, an unreasonably high rate and if the broker insists on the proof of delivery is forwarded to a random email address after the delivery.
Double brokering is an extremely complicated process involving many brokered loads. It closely relates to co-brokering, but not all of the companies are aware of all parties involved. This is why double brokering walks a fine line between being illegal and simply unethical. In order to avoid any problems with double brokering, you should make sure you investigate the broker, work with trusted brokers only, and make sure you mind the rate of the freight.
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