When it comes to logistics, having a reliable and properly insured transport provider is the key to meeting your shipping needs. However, there are several ways that companies fulfill their logistic services, one of which is by double brokering.
Double brokering is when a carrier accepts a shipment or a load from a freight broker, then assigns the load to another carrier. It's like hiring a subcontractor, but the difference is that double-brokering is done without the consent or knowledge of the company that owns the cargo.
It’s a controversial topic in the transportation industry because of how often it happens. Although it’s not illegal in certain cases, it is considered an unethical practice.
How can you avoid double brokering? Keep reading to find out!
What Is Co-Brokering and How Is It Different From Double Brokering?
In double brokering, a freight broker books a load with a brokerage company under the understanding they will move the load using their own shipping or transport service. Instead, the brokerage company then passes the shipment to another transport service while calling it their load.
The problem is that the secondary shipping company might not have the authority to ship loads across borders or have the appropriate safety rating to move the load. This, in turn, puts an immense liability risk on both the initial shipping company and also the freight broker who has no idea what is happening.
Co-brokering, on the other hand, is the legal practice of multiple freight brokers working in partnership with the original shipper to facilitate the transport of goods with a carrier. Every stakeholder involved in the shipment is aware of the partnership and the commissions made from the transport.
While co-brokering is legal, some carriers still avoid it out of fear the shipment won’t pay as well, or that it might be difficult to maintain clear boundaries with other stakeholders.
How Can You Avoid Double Brokering?
Double brokering is a rampant issue in the trucking industry and can lead to late deliveries, damaged goods, and payment disputes. It can also lead to unreported accidents or lost or stolen goods, among other risks.
Consider the following steps to protect your trucking company from double brokering:
Investigate and Check Credit Scores
Conduct thorough research—including a complete background check—on the broker you’re transacting with to ensure they’re legitimate. Additionally, checking a company’s credit score can give you a good idea of a broker’s reputation.
Make sure to verify the contact details of the freight broker or carrier with whom you’re transacting. Many identity thieves are eager to trick people out of their hard-earned money, and the scamming schemes are becoming more sophisticated by the day.
Build Good Relationships With Brokers
After every successful transaction, make sure to build on that relationship and save that person’s contact details. This way, you’ll have someone dependable to call if there are more opportunities to work together again.
Before this, make sure to do your research and only work with brokers who have a good reputation and track record. Check their references, reviews, and credentials to ensure they are trustworthy and reliable.
Review the Rates
If a load rate seems too appealing, it could be a sign you’re dealing with an illegitimate broker with no intention of paying. They could also be offering a high rate to lure in carriers.
Another clue that double brokering will occur is if the rate confirmation requires you to check in as someone other than the actual carrier who booked the shipment. In some instances, a broker may insist proof of delivery be sent to a random email address immediately after a delivery has been made.
Communicate Clearly and Quickly
While this is an important aspect of every transaction, creating open communication lines with everyone involved is essential to avoiding double brokering. Maintaining clear communication also helps you keep track of your loads throughout the entire haul, helping you identify any potential issues early on and take corrective action if necessary.
When your broker or carrier doesn’t respond immediately to your queries, starts providing vague answers or incomplete information, or is generally too difficult to contact, consider it a sign to find new brokers or carriers.
For a successful shipment, all parties privy to the transaction must set clear expectations and be responsive throughout all phases of the transportation process.
The Risks of Double Brokering
One of the most common risks of double brokering is that shippers and freight brokers pay double for loads. In most cases, double brokering is a fraudulent scheme designed to prey on trucking companies to make cash.
Illegitimate carriers and freight brokers will accept loads for a set fee with no intention of transporting the load. Instead, they’ll pass on the responsibility to another carrier at a lower rate and keep the difference. If you’re dealing with a scammer, expect them to disappear right after accepting the payment for the shipment.
If you own a fleet business, you run a high risk of falling victim to double brokering. This is why it’s important to have a risk-management strategy in place. For instance, if an accident occurs and the haul you’re transporting gets lost or stolen, transportation insurance can cover the damages or legal fees incurred from the incident.
Why Choose KASE Insurance?
Double brokering is a dangerous scam that puts your goods and reputation at risk. As a shipper or freight broker, knowing how to spot a potential double-brokering scheme in action will help you avoid potential disasters.
KASE Insurance prides itself on offering our clients the best insurance solutions to their problems. We are a leading commercial insurance brokerage based in Toronto, composed of an award-winning team of experts.
We are ready to cover all your insurance needs. Contact us today to learn more about our services and how we can help you!