As a professional in the trucking industry, you’ve probably heard the phrase “double brokering” thrown around every now and again. You may assume that your company is impervious to this practice, but it’s better to be safe than sorry.
Double brokering refers to the unauthorized transfer of a load to another trucking company. The transportation industry has seen a rise in this illegal practice due to market instability.
It can occur due to negligence, such as overbooking, or communication breakdowns. However, in more malicious cases, double brokering is done intentionally, causing financial losses for trucking companies.
Building off of this, here are two examples of double brokering:
It’s important to note that double brokering is not the same as co-brokering. Double brokering is illegal while co-brokering is a legal practice that entails two or more brokers and carriers working with the shipper to arrange transportation.
Note: with co-brokering, the broker fee is split among all parties to ensure a fair and equitable arrangement.
As an illegal activity, reputable companies have systems in place to prevent double brokering. However, with industry competition on the rise and slim margins at play, there are always companies looking for ways to reach the top. Unfortunately, this can lead them down the path of double brokering.
Let’s examine common scenarios among carriers and brokers that lead to this illegal activity.
As carriers look for ways to expand, it’s possible that they could book more freight than they can comfortably handle. When that happens, they have two choices: cancel the arrangement—which takes a toll on their reputation—or pass the load to another carrier.
If all parties are notified and agree, the result is a legal co-brokering arrangement. Conversely, if this doesn’t happen, the involved carriers are double brokering.
Brokers have an established network of carriers to pull from. Problems arise as a result of mismanagement, which can lead them to pass a load to another broker with better availability or capacity.
It appears to be a good idea on the surface because it’s a simple way to prevent the shipper from realizing that they can’t fulfill their needs. However, it’s an illegal act if the shipper is not notified and given the opportunity to provide authorization.
In either case, there’s a fine line between double brokering and co-brokering. To protect against trouble, communication among all parties is an absolute must.
With double brokering, the originator of the load no longer knows which company is transporting the cargo. So, for the trucking company carrying the load, there is no shortage of risks. Consider the following.
Transportation carriers are at risk of not receiving payment when transporting a double-brokered load. If issues arise, such as damaged goods or late delivery, the receiver may dispute payment. The carrier then faces challenges in identifying and contacting the original broker and negotiating payment without a contract or knowledge of the carrier. Legal intervention may be necessary to resolve payment issues.
And that’s only the beginning—imagine if a fraudulent broker is part of the process. Perhaps this “company” disappears with the shipper’s payment. This can put serious financial burden on a trucking company that’s already managing ultra-tight margins.
When carriers transport double-brokered loads, they may face insurance claim denials if the cargo is lost or damaged. While that’s a big problem, it’s just the tip of the iceberg.
An even more serious issue is an accident during transportation that causes injury or death. Should this happen, insurance companies may be able to refuse to provide coverage. This is a risk that you should never be willing to take.
Carriers and brokers risk damaging their reputation if they are found to be involved in double brokering. This involvement can result in the cancellation of their Federal Motor Carrier Safety Administration (FMCSA) authority or being blacklisted by reputable shippers, brokers, and carriers.
In other words, if you put your reputation on the line and something bad happens, it may be too much to recover from.
Now that you know just how serious double brokering can be, let’s turn our attention to the steps you can take to avoid it.
One of the best ways to avoid double brokering is to establish a network of trusted brokers. When you have established relationships with reputable brokers, you can avoid working with unknown parties who may be more likely to engage in unethical practices like double brokering.
Before accepting any loads from a broker, trucking companies should confirm that the broker is authorized to do business. This can be done by checking the Federal Motor Carrier Safety Administration (FMCSA) website or contacting the FMCSA directly.
Confirming a broker's authorization can help prevent double brokering and ensure that all parties involved are operating legally.
Clear communication between all parties involved is crucial to preventing double brokering. Trucking companies should implement clear communication protocols with their brokers and customers to ensure that everyone is on the same page. These protocols should include details such as load information, delivery expectations, and payment terms.
By establishing clear communication protocols, trucking companies can avoid misunderstandings that can lead to double brokering.
Double brokering is every bit as serious as it sounds. The best approach is to avoid this practice altogether. Don’t give it a second thought.
Contact us to learn more about our extensive database that allows you to check the history of brokers and flag any that have a troublesome past. You can also review this double-broker list for an overview of companies to avoid.
At REV Capital, we’re here to help you avoid double brokering all while maintaining positive cashflow with our transportation invoice factoring services.
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