Q&A: Double Brokering, by the Book

Q: My company is a small freight broker. If we tender a shipment to a carrier, can it tender to another carrier if it has a broker’s license, provided it tells us who it’s tendering to? I know this is double brokering, but is it legal if it discloses who it gave the shipment to and it’s a legitimate broker and carrier?

If this is legal, what name goes on the bill of lading for billing purposes?

 

A: You travel in more ethical, and more strictly legal, circles than most of my correspondents do.

The typical sort of question I receive along these lines goes something like this: We’re a broker, and we tendered a shipment to a motor carrier. Unbeknownst to us, they subcontracted the shipment to another carrier. The second carrier in turn passed it on to yet another carrier. Now a problem has arisen (fill in blank here), and how do we sort this whole mess out?

Instead, you (and your contracted carriers) are doing it strictly according to the book, and you’re still worried about whether it’s legal? Not only yes, but yessity-yes-yes. And if you want to keep doing it by the book, the name on the B/L should be that of the carrier that actually hauls it.

Double brokering has a bad name (and a worse reputation), largely because so much of it takes place under the table. Broker A hands the load to Carrier B, often (though not always) in the expectation that Carrier B is going to haul it. Instead Carrier B passes it off to Carrier C, Carrier C may, in turn, sub it out to Carrier D, and so on. Sooner or later, somebody actually picks it up and moves it; where in the chain this occurs is anyone’s guess. And often identities are hidden under dreadfully deficient documentation.

The sort of arrangement you’re describing, by contrast, is the textbook way these transactions are supposed to work. First, according to the Federal Motor Carrier Safety Administration, a motor carrier also must be registered with it as a broker in order to legally farm out loads to other carriers.

(Yes, I know this runs contrary to the law’s description of a broker as someone “other than a carrier” who arranges for motor carrier transportation; 49 U.S.C. Section 10102(2). But the FMCSA has decreed it otherwise, and I won’t argue over something this minor.)

Second, according to basic ethical standards — not to mention the small matter of security — the shipper (the customer who contracted with the original broker to move the load) ought to be told just which carrier is moving it. I mean, suppose the shipper has had past experience with Carrier C, D or whatever letter of the alphabet drew the short straw and doesn’t want to do future business with it on a bet? And if a claim arises, with whom should it be filed?

This is where the sloppy documentation usually found can become a serious problem — for which, I’m sorry to say, shippers aren’t uncommonly responsible. The loading dock gets its orders from upstairs, and what “upstairs” often knows is only the identity of the broker to whom they gave the load. So that’s the name that appears on the shipping order that trickles down, and it’s emblazoned on the shipper-prepared documents, including the B/L.

Now, whatever carrier does the pickup is supposed to correct this by carefully crossing out the broker’s name and inserting its own instead. Ask me how often that happens. Hey, some of the drivers may not even speak (or read, or write) English all that well. Correcting shipping documents is, as legendary comedian Freddie Prinze used to say, “not (their) yob.”

In addition, of course, the carrier may have its own motivations for remaining anonymous, at least so far as the shipper is concerned.

As to the legality of the re-brokerage according to FMCSA standards, don’t even raise the point. Carriers routinely farm loads out without a hint of brokerage authority from the agency. In fact, sometimes they’re not real picky about whether the final link in the farming-out chain has FMCSA carrier authority.

Anyhow, that’s what often happens — too often, sadly to say, for anybody’s good. Compare that with the pristine, everything-above-the-table-and-in-plain-view way you’re doing things and I’d say you’re entitled to a gold star, and so are your carriers.   

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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