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Double Brokering: 5 Tips To Avoid Getting Scammed
There are a lot of great and not so great elements to the trucking industry—safety is still the biggest risk in this business, but double brokering is also a significant problem. Double brokering is a particularly controversial aspect of transportation logistics that is hotly debated, as it's a tricky subject that requires careful handling. So what is double brokering and when does it happen? If you’re in the business of trucking or shipping, double brokering is a problem that impacts your bottom line. Here are some things to keep in mind if you want to do something about it: Double brokering is the process when a carrier is accepting a shipment and passing it off to another carrier who is not necessarily affiliated with the original shipper. Meaning, it’s the re-brokering of the load to another trucking company, without authorization or informing the customer. This means that whoever booked the load does not actually know who is hauling the load. Sometimes you may hear this referred to as freight interlining, and it is usually not encouraged due to risks associated with who actually hauls the weight and who gets paid making the delivery.
The scam has become quite popular and unfortunately the shipper and truck drivers pay the price. How it can work is through the establishment of shell companies, which exist only for the purpose of the scam. A shell trucking company may book a load with a shipper or brokerage, claiming that they will move the load through their truck and driver. There are a ton of fake motor carrier numbers created by these fraudsters. They will then re-broker the load as their own to another trucking company. The company will then make pickup and delivery, unaware that they hauled for the shell company, and send the BOL and invoice to the shell company. The shell company then invoices the broker for payment. The shell company gets paid but does not pay the actual hauling carrier. Then the shell company disappears.
It takes about of 60 days to figure out the shell company is gone and money's still not come in, and then the shipper (whose name is on the BOL) is contacted for payment, as the company who did the haul has not gotten paid and has no contact with the now gone shell company. Legally then the customer has to pay again as the trucking company who hauled has to be paid. This is where legalities come in and things get tricky.
Why is double brokering a problem?
There are a lot of risks with double brokering, because there is lack of accountability or clarity as to who is hauling the load. One of the biggest problems with double brokering is brokers and shippers having to pay double for the loads. Fraudulent brokerages or shell companies can be created to contract out loads, and not ever pay the actual hauling carrier. The carrier who moves the load could also not be vetted, not have proper safety rating for the load, or not meet standards of brokers. This would put the broker and shipper at risk for losses, liabilities or claims as a result of the potential unqualified carriers. It leaves shippers and the carriers exposed and makes it hard to address any delays or issues. Bottom line, it's bad for business.
The FMCSA considers double brokering to be a violation, also making it illegal.
Are co-brokering and double brokering the same?
These two terms may sometimes be interchanged, but they are not the same. The main difference between double brokering and co-brokering is communication and legality. Co-brokering is a legal practice which allows multiple brokers to work together on the same freight. It’s different than double brokering, because double brokering is illegal and usually involves multiple brokers working on a single load without their knowledge. In co-brokering you can get loads covered quickly if there is a breakdown of logistics, and it should only happen if shipper has given consent.
In double brokering, the original shipper has no idea that the load has changed hands, or who has their freight. While in co-brokering the shipper tends to be aware of this relationship and where their load is. While in co-brokering each broker would also split a single commission which makes them partners for that load, for double brokering each gets their own commission, though illegally.
How to prevent double brokering?
- Carriers are advised not to take on more loads than they can manage at a time. Try to build relationships with brokers and clients, so that you know generally who is reputable or trustworthy. You can also press the broker or agent about the load, to make sure they know what they are dealing with.
- Background checks. Check brokers credit score, research them. Check the broker you’re considering through FMCSA registration, to ensure they are legit. Check your caller ID as well, and compare it to the broker’s phone on the FMCSA website, or DAT directory. If it doesn’t match, hang up and call the number you found on the FMCSA website and ask for your contact by name. You can always access the contact information of brokers using the Zipments broker directory, so that you can speak to legitimate brokerages for your business.
- Check the rate confirmation. Your Bill of Lading data should match the rate confirmation. If you see that you need to check in as another carrier other than yourself, this is a double brokered load.
- Contract. Make a transportation agreement or contract outlining requirements and prohibition of double brokering. Contracts should be mandatory for carriers working with a 3rd party brokerage.
- Shippers, ask your brokers for the name of the carrier you booked, and have the dock worker confirm that the correct carrier is picking up the load. You can also use language on the BOL state that the carrier is the broker and any loads moved not by the named broker will result in nonpayment to carrier.
The world of transportation is constantly changing, and the industry is becoming increasingly complex. With hundreds of companies vying for attention, there's no doubt that double brokering is becoming more prevalent in this industry. It is a tricky business with lots of twists, turns and backbends. But the path to success can be found with attention to detail, good old fashioned hustle and the right mindset. Know your limits, and don’t be afraid to stick with one broker you trust, when you first start out. Keep in mind what double brokering is, so that you know the pitfalls to avoid. Above all, maintain strong business relationships with those you work with and trust your instincts.