What is Double Brokering: How to Avoid Trucking Scams
Scammers are everywhere. They use tactics such as fake websites, emails, phone calls, or investment schemes to deceive unsuspecting victims. These schemes can cause significant financial and emotional harm to the victims, and in some cases, the scams can be challenging to detect or stop. In the transportation industry, scamming can be performed by double brokering. This practice has become a more common way of fraud in the logistics industry nowadays. They will steal your loads and be the reason for unpleasant consequences to your trucking company. Thereafter, one might be careful and attentive to not get into their trap.
This guide will guide you on how to detect and prevent double brokering practices, sharing important tips along the way. You will learn about the issues double brokering can cause for trucking companies and be prepared to avoid this scam.
Royalty, as a specialized insuring company in the trucking industry, condemns this kind of practice and recommends all trucking businesses be attentive and avoid misleading actions like double brokering.
What is Double Brokering
Double brokering is a practice when the shipper hands off the freight to the broker and that broker gives the freight to another unauthorized third-party broker to proceed with the shipment. As a result, the shippers are losing their control over the cargo and facing liabilities they weren’t aware of.
Double brokering is illegal based on MAP-21 legislation and is a prohibited activity. This is a new transportation law that provides a penalty to a person who engages in this type of activity. No matter what circumstances you face, you should never engage in double brokerage.
Double Brokering vs Co-Brokering
Sometimes double brokering might be confused with co-brokering, however, there is a slight difference between them, and co-brokering is a legal practice. It is a process in which the broker partners with another licensed and experienced broker to complete the shipment. The collaboration can be done successfully when both parties are on the same page and everything is within the scope of the law. During co-brokering, the shipper formerly is aware of the third-party broker that will finalize the shipment.
How Double-Brokering Can Impact Trucking Company
Double brokering can have serious consequences for trucking companies. Here are some challenges that your company might face because of this fraud:
Double brokering can result in the loss of profits for the trucking company, as that broker takes a cut of the revenue and leaves less for the trucking company.
Double brokering can result in misunderstandings and poor communication between the many parties, which can result in delivery issues and dissatisfied clients. This can damage the trucking company’s reputation and reduce customer loyalty.
There is a possibility of promoting the legal implications in this situation. Since the double brokers may not operate with proper licenses and insurance, they will put the trucking company at risk of liability during different types of accidents.
Double brokering can have a significant impact on your truck insurance, too. It may be challenging to identify who is accountable for damages if a double broker is involved and an accident or damage happens during transit. As a result, insurance claims could get complicated, making it challenging for the trucking company to recover losses reimbursement.
Therefore, it is important for trucking companies to be aware of the potential impact of double brokering and to take steps to minimize the risks.
How to Avoid Double Brokering
Fortunately, there are steps to fight against double brokering and avoid this kind of scam. To protect yourself from falling victim to double brokering, it is important to take proactive steps to ensure that your broker operates transparently and with your best interests in mind. By following these steps, you can reduce the risk of encountering a double brokering situation and secure the best representation during your transaction.
- Partner with Reputable Brokers - Before collaborating with the broker, make sure they fit your requirements and expectations. If you are hiring a new broker, check out the broker’s background that has at least 2 years of experience in the industry.
- Check References - Verify the broker’s reputation in the industry and request references from other transportation companies.
- Avoid High or Low Prices - Make sure the rates are not outside of market demands. Keep up-to-date with industry trends.
- Check the Documentation - Check the Documentation - Carefully review the contract before signing it. Make sure it specifies the broker’s duties and responsibilities, including a commitment to not engage in double brokering. Check the correctness of the documentation and confirm the tax I.D. numbers.
- Develop a Network of Brokers - It will be rather easy to proceed with collaboration with the brokers, who you already trust. As a result, you will ensure your cargo is protected from fraud and that the shipping process is seamless.
- Value the Transparency - Transparency is the key to success, thanks to which you will make the shipment effective. Also, transparent business practices such as fair pricing, ethical treatment of drivers, and environmentally sustainable practices can also help to build trust and reputation in the trucking industry reducing the risk of fraud.
It is essential for trucking companies to be aware of these potential impacts and to work with reliable brokers to minimize risks. By learning about the harmful impact of double brokering and by maintaining clear contracts, and open communication, trucking companies can protect themselves and ensure the smooth delivery of shipments to their customers.
How to Detect Double Brokering Fraud?
Check the company’s background. Check the details of the broker and make sure that he is registered in FMCSA.
What to Do if You are Double Brokered?
How to Check Broker’s License?
Since all brokers should be regulated by FMCSA, you need to go to the website and check whether the broker you are working with has the license or not.