What is Double Brokering?
Safety is the biggest risk but double paying is still a HUGE problem. Awareness is key.
Double Brokering, as it is referred to in the transportation industry, is when a carrier accepts a load for a specific motor carrier number, but runs the load under a different one instead. While this is a common practice in the transportation industry, and can oftentimes be referred to as freight interlining or co brokering to make it sound less risky, it is universally frowned upon by brokers and shippers due to risks associated with who is actually hauling the freight and who is getting paid for making the delivery. Oftentimes, the concept of double brokering is specifically prohibited in Transportation Service Agreements due to the significant financial and safety risks associated with the concept.
In a perfect world, the concept of double brokering would work but oftentimes it is done without the proper safety precautions and with the intention to steal money from truckers, shippers and brokers.
Deeper Explanation of Double Brokering
When a load is doubled brokered, the originator of the load doesn’t actually know who is hauling the load. The carrier hired to move the load could be one who is not vetted to the standards of the brokers. The carrier might not have the proper authority or satisfactory safety rating to actually move the load. This in turn puts the broker and the shipper at significant risk to any liability, loss, or claim that occurs through the actions of the unqualified carrier. Past judgements and court rulings based upon the legal concept of vicarious liability has resulted in nuclear judgements being enforced on transportation companies because of carrier vetting and safety protocols not being followed resulting in violations. These vetting and safety concerns are of paramount importance because the originator and broker do not actually know who is hauling the load.
Risks Associated with Double Brokering
The most prevalent form of risk associated with double brokering is the risk of shippers and brokers having to double pay for loads. One might ask how and why shippers and brokers ever have to pay twice for a load, but it is a routing problem that plagues the trucking industry. The innocent version of a double-broker situation would be a trucking company that overbooked brokers a load to an owner op or some other company they know or have a relationship with and once the driver made the delivery they would pay them. However, as the majority of people already know, the world is not so innocent of a place.
In reality, what happens is that fraudulent shell trucking and brokerage companies are used to contract out loads with the intention of never paying the actual hauling carrier. This is why double brokering is such a rampant problem in the trucking industry.
Double Brokering Process
Here is how it goes down. A shell trucking company, in a later blog post we will go over how to identify and vet them, will book a load with a shipper or a brokerage with the claim that they will move the load with their company truck and driver. Simultaneously, the shell brokerage company will rebroker the shipment out as their own to another trucking company. The actual trucking company will then make the pickup and delivery and, thinking they hauled the load for the shell brokerage, will then send the bill of lading (BOL) and invoice them for payment. The shell trucking company then takes the signed BOL and invoices the broker for payment direct. The broker then issues payment to the shell trucking company, the shell brokerage in turn never pays the actual hauling carrier. Then both shell companies disappear. After about 60 days of the actual trucking company who did the load not being paid and having no contact with the now defunct shell brokerage, the shipper (whose name appears on the BOL) is contacted for payment. The shipper who contracted out the original broker reaches out to see what has happened and then the double broker scheme is discovered. Legally, the actual trucking company has the right to be paid and the customer or broker must repay the already paid freight invoice (more details about this to come in a later blog post).
Given the size and scope of the transportation industry, and the ever increasing sophistication of individuals looking to commit fraud, the harsh realization is that the issue of double brokering is becoming more prevalent in this industry. The only defense against the problem is having a company that knows who to hire to effectively prevent and handle this issue. At Chariot Logistics, we have seen every form of double brokerage imaginable, and we routinely catch carriers in the act of trying to commit the fraud.
Chariot Logistics has a stringent carrier vetting process, a strategy for spotting the key indicators of potential schemes, and the experience and real world understanding of how these problems unfold, how to settle them and the consequences and risks associated with them. Our team knows that, as a broker, we are the front-line defense against double brokerage and we are equipped and prepared to make sure our customers and their freight is protected at all costs.