Double Brokering Marches On: Strategies and Tactics for Risk Mitigation

Double brokering, a deceptive practice in the freight industry, occurs when a broker who has already been contracted to move a shipment outsources the job to another broker without the shipper’s knowledge or consent. This creates a long chain of intermediaries, which can lead to increased costs, reduced transparency, and lower carrier earnings. As a freight broker, it is crucial to take steps to mitigate the risks associated with double brokering to maintain a reputable business and foster long-term relationships with shippers and carriers. This article discusses strategies for freight brokers to tackle the double brokering issue.

• Reduced transparency: Shippers lose visibility into the actual carriers handling their shipments, making it difficult to monitor quality and compliance.
• Increased and unwarranted costs: Each intermediary in the chain takes a cut of the profits, driving up the overall cost of transportation for the shipper.
• Lower carrier earnings: As multiple brokers take their share of the fees; the end or actual carrier ultimately receives a reduction in pay or no payment for their services at all.
• Delays and complications: A longer chain of intermediaries increases the likelihood of miscommunication, errors, and delays in the transportation process and also creates complications in the event of a claim.

Strategies for Freight Brokers to Mitigate Double Brokering Risks

1. Establish a rigorous carrier vetting process: Implement a thorough carrier selection process to ensure that you are only working with reputable and reliable carriers. Verify carrier credentials, including operating authority, insurance coverage, and safety ratings. Regularly update your carrier database to keep track of any changes in their compliance status. Some digital tools can often come with added benefits as well. ComFreight HaulPay, for example, filters carriers coming onto its payment network so that brokers can rest assured they are paying a party that is not fraudulent and is in good standing.
2. Maintain clear communication with shippers and carriers: Open and transparent communication with shippers and carriers is essential. Keep all parties informed about the progress of the shipment and address any concerns or issues promptly. Providing regular updates and being responsive to inquiries can help establish trust and reduce the likelihood of unauthorized subcontracting.
3. Implement technology solutions for enhanced visibility: Utilize technology tools, such as transportation management systems (TMS) and carrier onboarding and monitoring systems to improve shipment visibility, track carrier performance, and ensure regulatory compliance. These tools can help you monitor shipments in real time and flag any potential issues, making it more difficult for double brokering to occur. ComFreight HaulPay also can help stop carriers with a double brokering or fraud history before they ever get assigned to a load for final payment with their trusted network process.
4. Develop long-term relationships with trusted carriers: Building strong relationships with reliable carriers can discourage double brokering practices. A loyal carrier base is more likely to prioritize ethical business practices and communicate any concerns or issues directly with you, reducing the chances of unauthorized subcontracting. Resources that provide a trusted carrier network, like HaulPay, can also offload much of this work.
5. Educate your staff about double brokering risks: Ensure that your employees understand the negative consequences of double brokering and are trained to identify and address any signs of this practice and are well-versed in utilizing industry tools to cross-check carrier compliance and registered vs purported carrier contact and business information. Encourage open communication within your team and provide ongoing training to keep your staff informed about industry best practices and regulatory updates. The TIA can also help with excellent training for your team to cover these cases.
6. Set clear expectations and contracts with carriers: Clearly communicate your expectations regarding subcontracting with carriers. Include clauses in contracts that prohibit double brokering or require prior approval before subcontracting to establish clear guidelines and discourage unethical practices. Ensure any Shipper authorizes in writing or signs a formal agreement for any co-brokering arrangements.
7. Join industry associations and networks: Participate in industry organizations like the TIA, to stay informed about best practices, regulatory updates, and potential fraud risks. Leverage association tools like Watch Dog and continue to learn from other professionals in our industry. TIA Connect, TIA’s member forum also provides an excellent platform to learn more about these challenges and how other members are overcoming them. Networking with other professionals in the industry can provide valuable insights and resources for preventing double brokering.

Factoring Companies and Payment Risk Alignment

The right factoring company will have countermeasures in place to help ensure both carrier and broker clients are not doing double-brokering and are adhering to ethical industry practices. The financial incentives between good factors and ethical brokers are typically aligned because the factor is trying to avoid exposure to bad debt. When double-brokering occurs it is often the case that one of the parties, usually the end carrier is not paid, or the shipper refuses to pay invoices because the party they contracted to did not actually perform the services. This can lead to a high degree of payment risk for both the end carrier, the broker and the factoring company and this risk is only exacerbated by any potential claim that could arise.

As a freight broker, addressing the issue of double brokering is essential for maintaining a reputable business, avoiding potential financial exposure, and fostering long-term relationships with shippers and carriers. By implementing strategies such as rigorous carrier vetting, clear communication, effective training, and the use of technology and payment tools like ComFreight’s HaulPay, you can mitigate the and eliminate many of the risks associated with double brokering and ensure that your brokerage thrives.

By: Steve Kochan, Founder & CEO ComFreight HaulPay