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What is Double Brokering in Freight: Tips for Detecting Freight Fraud

Resources > What is Double Brokering in Freight: Tips for Detecting Freight Fraud
Learn how to detect double brokering and prevent your business from becoming a victim of freight fraud.
Published: July 20, 2023
Last Modified: August 28, 2023
Author: Josh Kimble

Double brokering is a fraudulent and unethical practice wherein a shipment is contracted out to a second motor carrier without the knowledge or consent of the shipper. But how does this deceptive practice occur and what impact does it have on the freight industry?

According to the Transportation Intermediaries Association (TIA), double brokering occurs when a carrier accepts a shipment from a broker, and then tenders that shipment out to another carrier, rather than transporting it themselves. This leads to significant fraud risk, increased costs, and a lack of transparency.

We’ll explain how to spot double brokering, so you can avoid it and find a freight carrier you can trust.

What is a Double Brokered Load and How Does it Hurt Shippers?

When a carrier accepts a shipment and then improperly contracts the load out to another carrier, the load becomes double brokered. In doing so, the carrier is misrepresenting themselves, which creates issues of liability and misuse of the supply chain. 

For shippers, double brokering can result in reduced visibility of your freight and increased costs, among many other issues.

One of the most obvious problems associated with brokering fraud is the lack of transparency for the shipper, who no longer knows who is transporting their freight. The hand off is done without the shipper’s knowledge. That means at any given time, they might not be aware of who is handling their cargo, making it challenging to monitor the quality of service and ensure compliance with their requirements.

Because of this, there is a lack of accountability, making it difficult to identify the party responsible and properly handle situations when things go wrong. This can lead to serious liability concerns when a shipment is delayed or cargo is lost or damaged. 

Because of the additional intermediaries involved, shipping involving transportation fraud can lead to inflated prices, reduced profit margins for shippers, and an increased price of goods for consumers.

This practice is currently on the rise, which means the likelihood that shippers will encounter issues resulting from fraudulent freight movement will only increase. We’ve included some data to show how cargo theft has been on the rise, partly due to an increase in double brokering.

Quarterly Theft Activity (2021-2022)

Quarterly Theft Activity 20212022Theft Increase YoY

Provided by CNBC

It’s been a problem in 2023 as well. According to Scott Cornell, the transportation lead at the insurance company Travelers, there was a 100 percent increase in double brokering between the 4th quarter of 2022 and 1st quarter of 2023. 

TriumphPay, a carrier payments platform, has also stated they’ve encountered numerous incidents of this fraudulent activity caused by this practice. In fact, they’ve claimed that between $500 to $700 million worth of freight can be considered victim to this practice.

Co-Brokering vs Double Brokering

While these two freight terms sound similar, they are two distinct practices in the freight transportation industry with very different arrangements and implications for the parties involved.

We’ve already been over the definition of double brokering and how it occurs when a freight broker accepts a shipment from a shipper, but then tenders it out to another carrier rather than arranging the transportation themselves. Essentially, the freight is brokered twice, with two separate brokers involved in the process, and it’s done without the shipper’s knowledge.

Co-brokering, on the other hand, is a legitimate and common practice in the freight industry. It happens when one freight broker (the primary broker) collaborates with another broker (the secondary broker) to fulfill a shipment request. In this scenario, the shipper is aware of and agrees to the involvement of the secondary broker.

Co-brokering is typically done when the primary broker doesn't have a direct relationship with a suitable carrier or when the shipment requires expertise in a specific region or type of transportation. 

The primary broker and the secondary broker work together to find a suitable carrier to handle the shipment effectively. The primary broker retains direct communication with the shipper, and the secondary broker assists in securing the appropriate carrier and facilitating the transportation process.

The key difference between double brokering and co-brokering lies in the level of transparency and consent from the shipper. In co-brokering, all parties are aware of the involvement of multiple brokers and agree to the arrangement, while double brokering is done without the shipper's knowledge or approval and is generally considered deceptive and unethical.

It is essential for brokers and shippers to have clear communication and trust in their freight arrangements to ensure smooth operations and maintain the integrity of the industry.

Two semis delivering double brokered freight down the highway

Is Double Brokering Freight Illegal?

Double brokered loads aren’t explicitly illegal unless a customer clearly states they don’t want their freight to be re-brokered or if a carrier isn’t paid. That being said, the practice is still regarded as unethical and can absolutely be illegal if fraud is proven to have occurred. 

It can be a breach of the contract between the shipper and the initial broker. Shippers should work hard to avoid these situations to prevent unnecessary issues for them and their customers.

What is the Penalty for Double Brokering?

According to Chris Burrows, VP of Government Affairs for the TIA, penalties for double brokering can include a fine of $10,000 per incident. 

Though not always properly enforced, this fine is based off of the Moving Ahead for Progress in the 21st Century (MAP-21) laws, which govern aspects of national transportation policy in the United States.

That fine would typically be levied by the Federal Motor Carriers Safety Administration (FMCSA), however the agency has recently stated that double brokering is not officially defined by statute or regulation, and as a result, has decided not to provide interpretation of the practice in order to avoid “unintended consequences”.

Other penalties include a suspension or revocation of a broker’s license, effectively preventing them from operating as a freight broker, as well as legal and reputational consequences. 

If the shipper or the carrier involved suffered financial losses or damages due to the double brokered load, they may pursue legal action against the offending broker to recover damages.

Whether or not the offending carrier suffers direct consequences, it will almost certainly suffer reputational damage. Brokering fraud is considered extremely unethical within the industry, making it challenging to conduct business with reputable shippers and carriers in the future.

Can You Go to Jail for Double Brokering?

In some cases, double brokering freight can lead to criminal charges, and individuals involved may face the possibility of going to jail. While penalties can vary depending on the jurisdiction and the severity of the offense, it can be considered a serious crime, especially if it involves fraud, deception, or a pattern of illegal activity.

For example, if double brokering is found to be a deliberate act to defraud shippers or carriers, it may be prosecuted as fraud under federal law. Conviction on federal fraud charges can result in substantial fines and imprisonment.

Freight on pallets set to be loaded into the back of a truck

How Can You Detect Double Brokering Schemes?

Knowing how to prevent brokering fraud is extremely important for shipper and carriers alike.

You can detect when this practice will occur by doing the following:

  • Properly screen potential carriers
  • Check for absurdly high freight rates
  • Verify broker information
  • Check the bill of lading (BOL)

Following these practices can lead to tell-tale signs that a double brokering scheme is occurring.

  1. Proper Carrier Screenings

Properly screening potential carriers is crucial to ensure that you work with reputable and trustworthy partners in the freight transportation industry. Here are some steps you can take to effectively screen carriers:

  • Check FMCSA Database: In the United States, you can use the FMCSA to check a carrier's authority status, safety record, and any previous violations or complaints. Look for any red flags or warning signs that might indicate a carrier has been involved in brokering fraud or other unethical practices.
  • Review References: Ask the carrier for references from previous clients or partners. Contact these references to inquire about their experiences working with the carrier, including their reliability, transparency, and any issues they may have encountered.
  • Perform Background Checks: Consider performing background checks on the carrier or their principal operators. This can help you identify any past legal issues or criminal records that might raise concerns about their integrity.
  • Monitor Industry Forums and Complaint Websites: Keep an eye on industry forums and websites where carriers and brokers may be discussed or reviewed. Look for any complaints or negative feedback regarding the carrier you are considering.
  • Establish Direct Communication: Communicate directly with the carrier's representative to gain insights into their communication skills, responsiveness, and professionalism.

Proactively screening potential carriers and maintaining a diligent approach to business partnerships can help you avoid potential issues related to freight fraud and foster long-term, trustworthy relationships within the freight industry.

  1. Check for a Strangely High Load Rate

One way to detect double brokered freight is by checking the shipping rate. While these expenses can fluctuate based on the carrier and other market factors, the cost to transport the cargo should still be at a reasonable price. There are a few reasons why rates will be excessively high when brokering fraud occurs.

This includes the following:

  • Additional fees
  • Markup for profit

The second broker will usually add their own fee on top of the original freight charges. This inflates the overall cost and results in a shipping rate that may seem strangely high compared to average market expenses.

A fraudulent broker might mark up the rate significantly to ensure they still make a profit after paying the original broker and the carrier. This leads to the shipper bearing the brunt of these extra costs.

  1. Verify Broker Information

Many companies that participate in this unethical practice try to pass themselves off as legitimate. By verifying all of their information, you can have more confidence that they are who they say they are.

Shippers can determine if their broker is trustworthy by checking the following:

  • United Stated Department of Transportation (USDOT) and Motor Carrier (MC) numbers
  • Examine proof of insurance 
  • Investigate business records
  • Review broker’s carrier agreement

Each broker and carrier in the U.S. is assigned a unique USDOT and MC number. Shippers can verify these numbers on the FMCSA website. Discrepancies can indicate double brokering or other fraudulent operations. 

Reputable brokers will readily provide their proof of insurance. If the provider is hesitant or unable to offer this, it might be another sign of freight fraud. Businesses should look into the company’s business records as well. 

This includes checking:

  • How long they’ve been in business
  • Their credit score
  • Complaints lodged against them

While this information can be hard to obtain, it helps to reveal any unethical practices. Finally, a proper carrier agreement will specify that the broker will not re-broker the load. If this clause is missing or altered, it could indicate a double brokering scheme.

  1. Review the Bill of Lading (BOL)

Reviewing your BOL for signs of fraud is another good practice. Businesses should check this document for the name of the organization or individual that arranged transportation for their shipment. If the name of the broker is different from the one the shipper hired, then it’s possible there is fraud involved.

Organizations and individuals who engage in this shady practice will use a different name to hide their own involvement. 

Problems that shippers will encounter include:

  • Verification obstacles
  • Disputes and confusion

If the broker's name is different on the BOL, it can complicate the verification process. Tracking freight throughout the shipping process becomes considerably more challenging. Any issues that may arise during this transportation process will also be harder to resolve.

Read our article on documents required for domestic shipping to determine how to fill out your BOL and other types of paperwork. 

A red and white semi truck traveling down a country road

How to Report Double Brokering?

If you come across a situation where you suspect fraudulent activity is occurring, it's essential to report it to the appropriate authorities or regulatory agencies. Reporting double brokers can help protect honest businesses and maintain the integrity of the industry. Here's how you can do it:

  1. Gather Information: Before reporting freight double brokering, gather as much information as possible about the incident. Take note of the brokers and carriers involved, the shipment details, and any evidence that supports your suspicion.
  2. Contact the Shipper: If you are the shipper or represent the shipper in the transaction, inform the proper individuals about your concerns regarding potential brokering fraud. The shipper has the right to know if their shipment is being brokered multiple times without their consent.
  3. Contact the Primary Broker: If you are aware of the primary broker (the one initially contracted by the shipper), communicate your concerns to them. They may not be aware of any double brokering and may take action to resolve the issue.
  4. Report to the FMCSA: In the United States, you can report instances of freight fraud to the FMCSA by filing a complaint through their National Consumer Complaint Database. Provide all relevant information and evidence to support your complaint.
  5. Report to Industry Associations: You can also report the incident to industry associations related to freight transportation, such as the TIA or the National Customs Brokers & Forwarders Association of America (NCBFAA). They may have mechanisms in place to address complaints and ensure ethical business practices.
  6. Involve Law Enforcement: If the double brokering involves fraudulent or criminal activities, you may need to involve local law enforcement or the appropriate authorities in your region. Provide them with the necessary information and evidence to support their investigation.
  7. Seek Legal Advice: If you have suffered financial losses or damages due to brokering fraud, consult with legal professionals to understand your rights and explore possible legal remedies.

Remember to maintain clear records of all communication and documentation related to the incident. Reporting a double brokered load can contribute to a more transparent and trustworthy freight transportation industry, benefiting all parties involved.

What To Look for In A Reliable Truckload Freight Broker

The rise of double brokered loads have caused many shippers to avoid 3PLs altogether. Businesses can have trouble determining if the provider they hire is legitimate. Therefore, shippers are attempting to use asset-based carriers exclusively. 

While these kinds of transportation providers are useful, businesses shouldn’t rule freight brokers out altogether. Even if shippers choose asset-based carriers, there’s still a chance their load might be brokered out at some point during the transportation process. 

Additionally, these kinds of trucking companies might not have the coverage a 3PL can achieve. Shippers can find a reliable and legitimate company by looking for the right characteristics. 

This includes:

  • Direct communication and quick responses
  • Transparency in business operations
  • A robust and reliable carrier network
  • Adherence to applicable regulations 

Shippers should understand these characteristics thoroughly to find a 3PL they can trust with their freight. 

  1. Direct Communication and Quick Responses 

Oftentimes, double brokering comes with a lack of transparency between the broker and the shipper. Therefore, businesses that need to ship freight should look for 3PLs that communicate  with their customers. 

Examples of this include:

  • Open and direct communication
  • Accurate documentation
  • Real-time tracking

Regular updates on shipment status and delays show that a 3PL values transparency. Quick responses to questions or concerns also indicate a commitment to honesty and clarity. Providing accurate Bills of Lading (BOLs) and other documents helps customers understand the details of their shipments. 

Finally, 3PLs should be able to provide real-time tracking for all shipments. Many 3PLs offer this service using advanced technologies such as GPS and Transportation Management Systems (TMS).

  1. Transparency in Business Operations

On top of clear and open communication, a legitimate freight broker should also be transparent in their business operations. This indicates to customers they’re reliable and won’t engage in double brokering. 

Ways that a 3PL can display transparency includes:

  • Clear pricing
  • Open reporting
  • Regulatory compliance

A transparent 3PL will provide clear, detailed breakdowns of all costs. This allows customers to understand exactly what they're paying for and why they’re being charged a certain price. 

Expenses that 3PLs should provide include:

  • Freight rates
  • Surcharges
  • Additional fees

Transparent 3PLs offer open reporting on performance metrics. Clear business functions like these provide insights into how effectively the 3PL manages operations and where improvements may be needed.

Legitimate companies will openly share their USDOT and MC numbers, insurance information, and other regulatory compliance details. This helps customers verify that they're working with a licensed 3PL.

  1. A Robust and Reliable Carrier Network

It’s not enough that a 3PL is reliable. Their network of carriers must be legitimate as well. Many brokers look for some key features in the transportation providers they partner with in their operations. 

This includes:

  • Safety record
  • Reputation
  • Operating authority
  • Timely deliveries

Reliable and legitimate 3PLs work with trucking companies that have a good safety record, which includes accident rates and violations. This information can often be obtained through the FMCSA Safety Measurement System (SMS).

A 3PL will also check a carriers' reputation within the industry. This could involve reading reviews and testimonials of the services they’ve provided. The operating authority of a transportation provider is also very important. The FMCSA has a database where this information can be accessed. The carrier should have active operating authority and adequate insurance to cover potential damages or losses. 

Finally, a reliable carrier will also have a good record of timely deliveries. This indicates they can meet deadlines consistently. Shippers should determine that the 3PL they want to hire partners with carriers that have these characteristics. This gives them the assurance their cargo will be handled with care.

  1. Adherence to Applicable Regulations

3PLs have to follow different regulations to legally operate. Businesses should make sure their provider of choice follows these requirements to determine if they’re legitimate. 

Regulations that 3PLs must follow include:

  • Federal Motor Carrier Safety Regulations (FMCSR)
  • Hazardous Materials Regulations (HMR)

As we’ve also mentioned, 3PLs will need a USDOT and MC number. Providers that follow these guidelines are legitimate and shippers should do their best to work with them.  

Read our article on freight shipping hazardous materials if you plan on shipping HAZMAT products. 

A semi truck stopping for gas mid delivery

Avoid Double Brokering with USA Truckload Shipping

USA Truckload Shipping stands ready to provide transparent and reliable freight services, ensuring you never have to worry about issues like double brokering. We have a network of reliable carriers that can transport your cargo safely and quickly. 

We offer a variety of different services that you can take advantage of, such as:

Whether you need to move a single truckload or manage an entire freight network, we are equipped to deliver results you can rely on. If you’re ready to use our services, fill out your request for proposal. Our team is also available at (866) 353-7178 if you have any questions or concerns.

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