The complex operations that weave the transportation industry together create an even more complex glossary of industry terms and jargon. Supply chain professionals must memorize unique acronyms, like OTR, LTL, and IPI, or specific terms, like hours-of-service, statement of difference, and bill of lading. To a non-logistics outsider, the line of communication between involved parties of a shipment would appear as cryptic as the Latin language. However, even those in the industry will admit there’s an overwhelming exchange of varying terms, each with a distinct meaning behind them.
Some terms appear similar, if not synonymous, with one another. Take “co-brokering” and “double brokering”. At first glance, one may assume they are used interchangeably, however the reality is quite the opposite. One is a widely used, potentially advantageous, practice, while the other is a complete risk marred with fraudulence.
The following is a look at co-brokering versus double brokering as supply chain practices.
Co-brokering (the good one!)
Co-brokering is widely practiced by freight brokers (intermediaries between shippers and carriers) and motor carriers alike. The method involves the original party (selected by the shipper) re-brokering a load to another entity (transportation company or broker) to assist with the shipment. Co-brokering is typically used when there’s concerns regarding profitability or capacity with the requirements of a certain load.
On the outside looking in, this sort of arrangement may appear shady. However, the distinction of co-brokering is that it only occurs when there’s permission from all involved parties and everyone has visibility over the process, including the shipper-customer.
When everyone’s on the same page, co-brokering can often be an advantageous strategy. For the original broker, the practice expands the service coverage it has available for shipper-customer requirements. This gives brokerages the opportunity to secure business they otherwise wouldn’t have been able to service through their own capacity. In other words, instead of being forced to turn away customer requests, they’ll have the means to arrange an appropriate service proposal.
A co-brokering practice is crucial for more niche requests, like border crossings, oversize equipment, and hazardous materials. While an original broker may not be equipped to handle these types of requirements, many brokers exist on the market who solely dedicate their businesses to benefit from co-brokering certain niche loads.
This arrangement is a viable strategy for shippers as well. When they grant permission to their original broker to involve other parties who can assist with specific requirements, the shippers can simplify their decision making when it comes to finding the right partner for their freight. They won’t have to worry about shopping the market and trusting unfamiliar brokers for different loads. Instead, they can stick with a trusted brokerage who possesses an extensive service portfolio via co-brokering connections.
Double brokering (the bad one!)
If co-brokering is Spiderman, double brokering is Venom. The two practices are eerily similar—a shipper awards a load to an original freight broker, who in turn, offers said load to a motor carrier or another broker—but there’s one crucial distinction. Deception.
Double brokering is an arrangement which occurs without any visibility or permission from the initial parties—the shipper-customer and the original broker. Deprived of knowing what’s going on behind the scenes, there are zero benefits from double brokering—only extreme risks.
For example, say a motor carrier agrees to haul a load for an original broker chosen by a shipper. The broker believes that the carrier itself will transport the freight, but unbeknownst to the broker, the carrier instead re-brokers it to another carrier. Double brokerage.
Neither the shipper nor original broker are aware of nor consent to this practice. In the event of double brokerage, these parties are immobilized in a compromising situation.
For starters, the two do not know who is in possession of the freight and if that whoever is even qualified to handle it. Furthermore, there’s no knowledge that the initial carrier even passed the load onto another entity. They likely assume the chosen carrier is handling the load itself.
While the original broker can try tracking and tracing the freight, this can often be futile. The broker is usually left with incorrect or misleading information which will then be passed onto the shipper-customer.
The broker is also at risk of paying twice. Unaware that it was double brokered, it will pay the initial, chosen, carrier. However, if the carrier fails to pay the party it blindly re-brokered the load to, the broker may be held accountable to pay a second time for the same shipment.
Other risks include hostage loads, insurance issues, and theft.
Perhaps the most nefarious motive behind double brokering is theft. With zero visibility from concerned parties, double brokered loads are rarely tracked rendering the risk of a missing shipment very high. A form of theft also includes what’s mentioned above—the initial carrier not paying the carrier which received the re-brokered load, placing the responsibility onto the original broker.
Final Thoughts
On the one hand, co-brokering is an agreed-upon, potentially beneficial, practice. While on the other hand, double brokering is a deceiving and fraudulent transaction with usually a dastard motive.
Double broking not only smears the reputation of a widely used (legal) co-brokering practice but has also gives transportation brokerage a bad look as well.
As a freight broker, Commerce Express Inc. acknowledges it’s at an inherent risk of being targeted through fraudulent practices, like double brokering. However, the Commerce Express team works closely with their shipper-customers and transportation partners to ensure complete visibility for all parties.
“Our team rigorously vets prospective carriers before we make the important decision to entrust one with a client’s load. We have a qualification process which includes proving if a carrier is credible, reputable, and in business for at least six months. We also verify the identities of truck drivers, trucks and equipment, and other personnel involved in each transaction,” Commerce Express Managing Director Andrew Koval states.
Contact one of our team members if you have any questions regarding this topic or any others in domestic logistics.
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