Brokering’s Risky Deal

Q: Do you agree with this statement? Unauthorized double-brokering occurs without the knowledge and consent of the shipper while unauthorized re-brokering occurs without the knowledge and consent of the broker (done by the carrier).

Or are double-brokering and re-brokering the same thing, not to be confused with authorized and consented co-brokerage.

A: There’s an old movie called “What’s Up, Doc?” in which actors Barbra Streisand and Kenneth Mars have this exchange following a rather long and tendentious dissertation on a fairly abstruse technical matter by the Mars character:

Streisand, rather patronizingly: I think you’re oversimplifying.

Mars, very indignantly in the vaguely Teutonic accent he’s adopted for his character (Hollywood is big on stereotypical accents that never come very close to the real thing): Ovairsimplifying? I neffer ovairsimplify!

Vell ... er, Well, your explanation a bit oversimplifies the distinction between double- and re-brokering, but you have the general idea. They’re pretty close to the same thing, but not quite.
Double-brokering occurs when a shipper hires a broker to arrange for transportation and, rather than doing the job himself, that broker hires another broker to handle the shipment. If it’s “unauthorized,” it’s done without the shipper’s knowledge, although not all double-brokering, as you point out, fits that description.

At first glance, this may seem curious; isn’t all double-brokering “unauthorized?” I mean, why would a shipper hire one broker who merely hires a second one, rather than dealing directly with the second one and cutting out the unneeded middleman?

The reason, of course, is that the shipper may not know, or even know of, the second broker, who may have expertise needed or who may be helpful in getting the shipment moved. This is not uncommon on international shipments, and also may apply on specialized goods such as hazardous materials, refrigerated goods, unusually heavy or bulky freight, etc.

I also might point out that “unauthorized” is a pretty nonspecific term. Double-brokerage may be “unauthorized” in the sense that the shipper hasn’t explicitly approved it in advance and may even be unaware of it; but if the shipper hasn’t forbidden it (and many don’t), it isn’t necessarily improper as a matter of law.

Re-brokering involves the same general set of facts, with the shipper hiring a broker, the broker hiring one party (a carrier ordinarily) to haul the goods, and that party farming out the actual work to someone else. This time, though, the chain is constituted differently; whereas in double-brokering the original broker set up the three-party linkage, in re-brokering that was done by the party hired by the broker.

Again, this won’t always be “unauthorized.”

For example, the broker may hire a general freight carrier to handle specialized freight, knowing that carrier can’t do so itself but must re-broker to a carrier better equipped for the work; but the broker doesn’t have good connections with the specialist, while the carrier it hired does.

And, ºagain the amorphous nature of that word “unauthorized” may complicate the issue. Unless the original broker said to the hired carrier, in essence, “I expect you and only you to haul this load,” the re-brokering may not have been specifically authorized and may even be done without the broker’s knowledge but may still be legally proper.

Both double- and re-brokering have come to have bad names in the industry. The practices set up
long and convoluted chains of responsibility (I’ve even seen them extend one or two further links), making it difficult to pinpoint liability if and when things go awry.

In addition, they usually put people in the awkward position of doing business with strangers, which is never a good idea. When a shipper hires a broker, that shipper is trusting the broker to engage a carrier known to the broker (though not necessarily the shipper).

But when you get into multiple brokering, the shipper’s trust is misplaced; the broker, too, may not know the carrier who actually winds up taking custody of the shipment and moving it. The longer the chain gets, the more fragile it becomes.

Thus, it’s generally advisable for shippers and brokers to expressly forbid further brokerage down the line. Brokers generally are a lot more diligent than shippers about this in their dealings with the carriers they select, but sometimes even they fail.

The old saw is that too many cooks spoil the broth. That holds true as well in multipartite transportation arrangements.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010. 

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