Double Brokering - What to Watch for and How to Avoid it

CITT Spoke to the Wellington Goup of Company's Bill Robinson, Director of Carrier Relations, about the problem of double-brokering

You find yourself under pressure to broker a last-minute load and keep a valued customer’s supply chain moving. Your trusted carriers don’t have the capacity to take it on. So, you search the load board, match with a carrier and rest easy knowing the load’s going to get from A to B on-time and on-budget.

Or will it?

According to recent investigations by U.S. Homeland Security investigators, the costs related to nefarious double-brokering and cargo theft are estimated to reach between 15 and 35 billion per year in the U.S. and 5 billion in Canada.

For brokers unlucky enough to find out too late that their shipment has either vanished, or that payments they thought they made to a carrier never made it (meaning they’re going to end up paying double to get their shipment where it needs to go), the ramifications of this nefarious practice are obvious.

So, just what is double-brokering, and how can it be handled? We spoke with Wellington Group of Companies, Director of Carrier Relations Bill Robinson to find out.

Bill Robinson
Director, Carrier Relations
Wellington Motor Freight

What exactly is double brokering?

While there are legitimate scenarios in which Co-Brokering can occur, this should not be confused with Double Brokering. Double brokering is when an asset carrier or another broker takes a shipment knowing they will broker the shipment to another carrier.

A questionable broker, posing as a carrier accepts a load from a legitimate broker. The legitimate broker believes they’re hiring a carrier for a load and pays them in what they think is good faith.

In reality what happens, is that the questionable broker turns around and re-brokers the load to an actual carrier, without telling the legitimate broker. Now, the legit broker has no idea who has their load or what conditions have been offered to the carrier. Most importantly, they also haven’t paid the carrier directly, so if any problems arise, the questionable broker keeps the money for themselves, and the legit broker is on the hook.

“In this scenario, a bad actor might go on the internet carrier boards and pretend they’re a carrier. They send information paperwork like a carrier, then take the freight like a carrier, but turn around and double broker. If something goes wrong, they disappear, and they’ve got your money.”

When does it happen?

Double brokering can happen when a broker doesn’t perform their due diligence. As in the opening scenario, it often happens when they’re under pressure to deliver, or have run out of time on the administrative side of things.

Helping the problem along is the proliferation of load boards and internet sites matching carriers with brokers. Usually, when a broker sees a carrier on such sites, they assume the sites themselves have vetted them, but this isn’t always the case.

According to Robinson, a large issue is criminal enterprise registering multiple MC numbers, often all at once.

“One of the groups [we’ve seen] took out 25 MC numbers in one day”, Bill explained. “First week they used five of them. The following week, those five were already shut down and they’re moving onto the next five. You have no way of identifying who’s doing what.”

But the problem goes beyond even that.

“These same enterprises have also started buying up legitimate authorities from smaller carriers, or carriers who are retiring, taking over MC numbers, insurance and more. Brokers who recognize the names and numbers of the carriers aren’t told of the change, believe they’re still doing business with the previous licensee, and can find themselves caught in the double brokering trap.”

How to prevent double brokering

Vetting your carriers

As a broker, with the rise of load boards and internet-based carrier matching, the only real way to protect yourself is to implement a thorough vetting process whenever you’re dealing with a new carrier, or even a new person at a carrier you’ve used in the past. Watchouts might include:

• Carriers with mismatched addresses and physical locations
• Insurance with exclusions
• Suspiciously low numbers of inspections versus number of trucks
• New personnel

Taking your time

In today’s business climate, and especially in transportation and logistics, slowing things down typically runs counter to the entire ethos of the business. However, given the spectre of potential losses in terms of money, reputation, and customers caused by double-brokering, it can go a long way.

With this in mind, take your time to vet carriers, and explain to your shipper clients that a delay on the front end while you ensure their shipment is covered and protected, will save a much larger headache on the back end.

Freight Validate

Running in parallel with load boards and internet freight matching sites is the rise of freight validation sites like Freight Validate. This platform is designed to verify the ID of all Motor Carriers and Freight Brokers, using FMCSA data, along with data pulled from companies like MyCarrierPackets, TransCredit and Carrier Details.

Getting into the habit of running any potential carrier through Freight Validate might add an extra step to getting your next load to its final destination, but at least you’ll know it has a better chance of getting there at all.

At the end of the day, criminal organizations, like the transportation industry itself, never stand still. In order to protect your business from double brokering, staying one step ahead of the game, is the name of the game.