(Washington Insider Magazine) – One may wonder about the question: Is double Brokering Illegal? This topic has been a subject of discussion among experts in the transportation industry. Professionals were interviewed in a recent investigative series to shed light on this matter.
Double brokering, which involves a broker arranging for a load to be hauled by a carrier and then brokering that load to another carrier, has been a practice since the early days of freight transportation. Many industry insiders believe it is generally considered legal if certain conditions are met. These conditions include obtaining consent from the shipper for the double brokering arrangement and ensuring that the carrier hired to transport the freight knows and agrees to the transaction details. Additionally, the carrier must be appropriately compensated for
its services.
Despite its perceived legality under certain circumstances, freight brokers unanimously acknowledge the risks of double brokering. However, they also highlight an important caveat: double brokering becomes illegal when a shipper explicitly states that their loads should not be re-brokered.
When a shipper includes a clause in their agreement prohibiting the re-brokering of their loads, any attempt to engage in double brokering without their knowledge or consent is considered unlawful. This restriction aims to protect shippers from potential issues such as additional intermediaries, loss of control over the transportation process and decreased visibility into handling their goods.
Is Double Brokering Illegal?
Is double brokering illegal? Double brokering is when a motor carrier accepts a shipment but intends to pass it on to another carrier, often pretending to be a third-party logistics brokerage (3PL). This behavior puts all parties involved at risk. Shippers lose control over their products and face unexpected liabilities, the carrier responsible for hauling the freight does not receive payment, and the broker must deal with these issues.
A fraudster obtains a motor carrier (MC) number and books a shipment with a reputable 3PL. They impersonate another trusted 3PL, transfer the load to a different carrier, and either steal the shipment or collect payment and vanish.
Here’s a Breakdown of How it Works
- The fraudster obtains an MC number
- They book a load with a reputable 3PL using the obtained MC number
- Using the 3PL’s documents, they pose as another reputable 3PL
- The load is transferred to a different carrier for transportation
- The fraudster either steals the shipment or ensures its delivery
- Payment is collected from the brokerage
- The fraudster disappears
Double brokering is generally considered illegal, but it’s important to understand the distinction between double brokering and co-brokering. Co-brokering is a legitimate practice where a carrier passes a shipment onto another carrier with the shipper’s knowledge and consent, and all parties agree to the liabilities. Double brokering, on the other hand, is done covertly and solely to exploit financial gain. The Federal Motor Carrier Association (FMCSA) deems double brokering illegal.
To protect yourself from falling victim to a fraudulent scheme, ask the following questions to verify the legitimacy of the brokerage firm:
- Have you contacted the broker using the contact information listed on SAFER or Carrier411 to confirm it matches?
- Has the rate confirmation been provided, and does it appear to be altered?
- Is the rate suspiciously high or too good to be true?
- Have you spoken with a real person, or has communication only occurred through emails and texts?
- Do the email address and website domain match, or are they different? (Note: A broker using a free email service instead of a company domain name is a red flag.)
Taking the time to conduct due diligence can save you from significant problems and prevent theft and claims worth thousands of dollars.
Final Words: Is Double Brokering Illegal?
The legality of double brokering can vary by jurisdiction; it is generally considered unethical and potentially illegal. Double brokering can lead to issues such as undisclosed parties, poor communication, and increased cargo loss or damage risk. Furthermore, it undermines trust and transparency within the logistics industry. To ensure a smooth and reliable supply chain, it is crucial for brokers to uphold their commitments and act in the best interests of both shippers and carriers, avoiding the practice of double brokering.