Putting the Brakes on Re-brokering

Q: I’d forgotten about my letter regarding carriers brokering out freight until I saw it printed in the Dec. 12, 2011, issue. I guess I should have elaborated a little more but thought I’d clarify now.

As I said, we’re a broker. What prompted my original letter isn’t necessarily the issue of where we’d hire a carrier and they’d issue a bill of lading. But we’ve run into several situations where that carrier brokers out the freight and the subcontracted carrier issues its own B/L.

Most carriers we deal with are up front if they’ve put another truck under the load. But on rare occasions when we’ve had issues or claims, the carrier we’ve thought was under the load denies responsibility because the carrier they had hired that actually signed the B/L is some owner-operator with his own insurance.

It seems like this is more of a load board issue where some of these shady operators are trolling postings looking for freight. I’m very cynical and skeptical about load boards, but sometimes they’re a necessary evil.

I demand due diligence and screening from everyone in the office, and we’ve caught some real dandies. But we also have missed a couple. The worst one was several years ago when we had a wrongful death lawsuit, through someone we had been using regularly and who was representing themselves as the principal while often brokering out the freight to owner-operators or small carriers. That one made me get old in a hurry. Fortunately, it worked out in the long run, but we learned a few things about using an “additional insured” clause under certain circumstances.

Some of these characters are really good at their scamming, and even have fake drivers taking the dispatch. It’s a tough situation, and I still wish only brokers could actually broker freight.

If the carriers we were hiring would meet their responsibilities, I’d have no problem with them subcontracting. Unfortunately, when an incident or insurance claim comes along, my experience has been that the hired carrier sometimes seems to become scarce. If you remember Sgt. Schultz in “Hogan’s Heroes” he always, “Know(s) nothing! See(s) nothing!” We’ve seen that attitude prevail a time or two.

A: There’s no way you can protect yourself in these circumstances. Your shippers, however, can protect themselves and you with your help.

Simply tell them in advance the name of the carrier that’s picking up. And also tell them that if any other carrier arrives not to turn over the shipment, but to call you. Provided you have a trusted carrier or two who can dispatch empties on an emergency basis (so there’s no delay in service), the unknown subcontractor can be turned away and the goods are never given over to that carrier or anyone else you don’t know.

Sure, I know brokers hate to reveal the names of carriers to their shippers, lest the shipper decide to cut out the middleman and make arrangements directly with the carriers. I also know there’ll be an administrative cost. But I can think of no other way to thwart the subcontracting problem that, at least by the mail I get, is becoming rampant.

You also can prepare bills of lading yourself for all shipments and fax or e-mail them to your shippers, naming the carrier you chose and directing the shippers not to accept any other B/L. In some cases that, too, will help, although it doesn’t prevent your chosen carriers from making themselves scarce in claim situations (that’s a matter of vetting your carriers carefully before you give them loads).

I think you take my point, which is that there’s only one place where you can hope to prevent subcontracting reliably, and that’s at the pickup dock. As a broker, you’re of course not present on the dock, so you need to work with your shippers — who are — in order to extend your reach.

A further step is to put teeth in the prohibitions against re-brokering that you insert in your contracts with carriers. (You do have contracts with such clauses, right?) Specifically, if the carrier subcontracts without prior authorization, it forfeits its right to payment for that load; and the re-brokering also constitutes breach of contract that voids it for the future (the carrier is off your list thereafter).

These are pretty draconian steps, I know. But you seem to regard this as a major problem, and major problems require heavy-duty solutions.

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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