Business in any industry can be tricky if you don’t know how to navigate the waters or what exactly you should be looking out for when it comes to keeping your company in the clear. Within the trucking industry, one of those details is a tactic known as double brokering.
But what is double brokering? And is it dangerous? Should truckers really be worried about it? We’re going to explore the answers to these questions and more down below.
What Is Double Brokering?
Double brokering is when a shipper provides freight to a freight broker with the expectation that the freight brokerage will tender the freight to a carrier, which the carrier will then haul. Instead, the freight broker tenders the freight to another broker without the consent of the original shipper. This can happen multiple times depending on how complex the scheme is.
Can You Go to Jail For Double Brokering?
The legality of double brokering can be a tough one to decipher, as it largely depends on the contractual language used within the agreements between all parties. However, in most cases, the answer is usually yes, you can go to jail for double brokering. If the action is not explicitly authorized by the shipper, then it is a direct violation of FMCSA legislation, and therefore, it would be considered illegal.
Why Do People Do Double Brokering?
There are various reasons as to why some people resort to double brokering a load. For instance, it can make it possible for them to take the load through another party for less money than they originally booked it for. Doing so would allow them to make a profit because they would have a different carrier do the work without actually picking up the load themselves.
Another reason that could lead a trucking company to double broker a load is if an owner-operator has bitten off more than he or she can actually handle. If they don’t have the ability to actually run the load they secured from the load board themselves, they may double broker the load. Other situations can simply stem from scammers in the market who are trying to make money quickly and illegally.
Risks Associated With Double Brokering
To some, a double brokerage situation may not seem like that big of a deal. However, there are various impacts that step from double brokering that can indeed result in negative consequences.
We know that double brokering occurs as a result of a broker or carrier reassigning a load to yet another motor carrier. This is usually an unauthorized re-brokering of the freight. While there are situations where this can still result in a successful delivery and payment, that is far from always the case, especially if a claim or accident happens.
Usually, the carrier that ends up delivering the freight is at the most risk, because payment will not go to them directly, and it is up to the company to decide if they want to pass along the payment.
Some of the risks may include the following:
- Delayed payments or no compensation at all
- Denied insurance claim on the double-brokered load
- May not meet insurance requirements to haul the load
- Payment made to original carrier’s factoring company
- Tarnished business reputation
How To Spot Double Brokering
Double brokering is a practice that you’ll want to look out for, but how can you do that? Here are some common factors that might mean double brokering is taking place.
First, start with ratings. There are some great resources available, thanks to major load boards, that allow you to see reviews and ratings of companies. By scrolling through this information, you can often find out if they have been accused of this practice in the past.
You’ll also want to make sure you are on the lookout for any situations that could be fraudulent, like rate confirmation pages that look off or may have been altered. If you are told to check in as a different company than your own, that is another red flag.
This even applies to other documentation, such as the bill of lading. If it shows the name of a company you’re not familiar with, you need to verify and check it out to be safe. Tools and tips like these can save you a lot of headaches.
Contracting Vetting
Vetting should be common practice in the transportation industry. If there is a third-party contractor involved in your operations or there will be one in the future, then you’ll want to make sure that you properly vet them.
Within the vetting process, you should gain a clearer understanding of their history of business practices. Doing so will give you confidence that they will not pull anything shady while working with your business.
Carrier Vetting Process
Similarly to how you should vet third-party contractors, make sure that you are properly vetting the carriers that you decide to do business with as well. Look to see if anything in their business history, background, or even credit score raises a red flag about the possibility that they have been involved in double brokering practices in the past.
Rate Confirmations
The biggest thing that makes situations of double brokering questionable in regard to the legality of it lies within the contractual language used when confirming rates and making other agreements.
You should ensure that your agreements, including the rate con and the bill of lading, include language that forbids double brokering from taking place. This will give you the legal ground you’ll need to stand on to properly fight double brokering if it does occur.
What Is the Difference Between Co-Brokering and Double Brokering?
The difference between double-brokering schemes and co-brokering really comes down to legal permission or the understanding that this business practice will take place. Co-brokering legally permits the load to be assigned to another broker.
This will sometimes take place when a broker needs to rely on the expertise of another broker or their resources to aid in the transaction. In the situation of co-brokering, the practice is known about and approved of by all sides of the supply chain. This is not the case with double brokering, so the awareness factor is the main difference.
Why Building a Trustworthy Network is Crucial
You’ll always want to know who you are doing business with and what to expect from them. At the end of the day, the people you do business with will ultimately reflect on you and your business as well. With a reliable vetting process in place, you can be confident that the network you are building to grow your company is trustworthy and reputable.
Avoid the Pitfalls of Double Brokering
While double brokering may not technically be illegal in all cases, it usually is and is still typically not a practice you want to be involved in or associated with your business name. A huge concern for brokers getting a load that has been double-brokered is the contract is with the original broker and not with you so you may not get paid in the long run.
Also, with a reputation of double brokering, your business will not be viewed positively by potential customers. A double brokering reputation can get you mixed up in legal troubles and put you at the unnecessary risk of not getting paid as well.
By doing your research and vetting every one you do business with, you can build a strong network you’ll be able to trust. However, it is still important to be educated about what you should look for so that you can spot double brokering situations when they arise, if not before.
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