What Is Double Brokering?

What Is Double Brokering

Last Updated June 24, 2024

The trucking industry is heavily regulated. Therefore, a bulk of what makes a freight brokerage company successful is knowing rules and regulations back to front and avoiding fraudulent, illegal, or simply irresponsible practices.

Yet, sometimes, brokers don’t play by the rules. This can be for many reasons. Perhaps they’ve stretched themselves thin with a hectic schedule or lack the funds to operate by the book. A common illegal practice carried out by freight brokerage companies is the act of double brokering.

Double brokering is a scam that every carrier and shipper should be cognizant of, and that goes beyond just learning the meaning of double brokering. Learning how to detect double brokering and how to report it will help you avoid getting duped by brokers and ensure you’re responding appropriately if it does occur. Continue reading to protect your business.

What Is Double Brokering?

Double brokering is an illegal practice in the freight industry. It occurs when a broker that’s signed a contract with a shipper passes on the shipment to a different broker unbeknownst to the shipper. As a result, the “secondary broker” is the one actually completing the work while the original broker takes a backseat, despite fronting as the one doing the work.

The secondary broker might present themselves to the carrier as the one managing the shipment of the goods, when in reality the contract was signed to a different broker company.

Why Does Double Brokering Occur?

Freight brokers might resort to double brokering for a few different reasons. Most commonly, they might find themselves with an overbooked schedule, meaning they are too busy or don’t have enough hands on deck to manage the transportation of the goods they agreed to help transport. Therefore, they utilize a different broker to do the work for them.

Is Double Brokering Illegal?

Yes, double brokering is very much illegal. It is against FMCSA legislation and can lead to severe penalties beyond just brokers not getting paid for their work.

Why Is Double Brokering Illegal?

Double brokering is illegal because the other parties involved in the transaction are completely unaware of a second broker’s involvement, which goes against contractual agreements.

More importantly, double brokering puts carriers at severe financial risk of not being paid for their work as well as liability-related risk given that double-brokered loads become uninsured. Given the shipment was transported illegally, insurance companies won’t be required to assist carriers in case help is needed. Therefore, if a load is lost or damaged, an accident occurs, or an accident causes physical injury, it puts carriers in serious jeopardy of losing their trucking business entirely.

Penalties for Double Brokering

Double brokering scams come with serious penalties. These include:

  • Not getting paid for the shipment.
  • Fines of up to $10,000 per instance of double brokering.
  • Loss of brokerage authority and operating licenses.
  • Expensive legal fees for all parties involved.
  • Criminal charges and even imprisonment, depending on the nature of the case and the jurisdiction’s respective laws.

Furthermore, since double brokering makes the respective load uninsured, any potential damages aren’t covered.

How to Detect Double Brokering

There are a few telltale signs of a double-brokered load, including:

  • When brokers request carriers to check in with shippers under a name other than their own.
  • When a different carrier or broker’s name is on the bill of lading (BOL).
  • When the load has an unusually high rate.
  • When BOL details don’t match rate confirmation details. The broker’s information on the rate confirmation should match what is listed on the FMCSA or FMCSA’s SAFER resource.

What Carriers Can Do If They Unknowingly Transported a Double-Brokered Load

From the carrier’s perspective, transparency is key once it’s discovered you were involved in shipping a double-brokered load.

This first involves notifying the shipper and receiver of the load immediately. It’s common that whoever pays the freight bill is equally unaware of the double brokering. If this is the case, the payor will forward payment to the carrier directly rather than the broker(s) at fault. It will then become apparent to the shipper that they’ve been working with a fraudulent company, and moving forward they will not receive any further shipments from the broker they’ve been working with.

How to Report Double Brokering

It’s important for carriers or other affected parties to know how to report double brokering, so they don’t become liable or considered at fault for the situation.

The FMCSA has a specific resource with steps on how to report fraudulent activity. When it comes to double brokering, they advise carriers to gather all evidence possible, including identifying who is paying the freight on the load and contacting their brokerage company. Then, they can file a complaint with the FMCSA online or by calling 1-888-DOT-SAFT (1-888-368-7238) Additionally, carriers can seek out legal advice and consider filing a lawsuit if they deem the freight fraud is significant enough to warrant doing so.

Double Brokering vs. Co-Brokering

Double brokering is not to be confused with co-brokering.

Double brokering is an illegal offense involving a broker passing a shipment to a separate broker without notifying the other parties involved in the transaction. Co-brokering, however, occurs when a broker gets approval from the shipper to work with another broker to complete the haul more efficiently.

Co-brokering might occur in instances where the primary broker doesn’t have all of the capabilities required to manage the shipment as planned. Permission can then be granted by the shipper to utilize the assistance of a secondary broker, with the hope that the combined resources of both companies improve the process overall.

In-Summary: What Is Double Brokering?

Double brokering is a shady practice that everyone in the trucking industry should learn how to detect and report. As a carrier, it’s no fun being taken advantage of—your company deserves full transparency from the brokers you’re working with, so don’t be afraid to report double brokering to the FMCSA and read up on double brokering laws to see what measures you can take in retaliation if it does occur.

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Double Brokering FAQs

What is a double-brokered load?

A double-brokered load is a shipment that, unbeknownst to the carrier, is passed on from one freight brokerage company to another brokerage company to handle.

Can you go to jail for double brokering?

Yes, penalties for double brokering include possible imprisonment depending on the jurisdiction it occurs in and its relative laws. Other significant penalties for double brokering include five-figure fines and loss of brokerage license.

How do you avoid double brokering?

Realistically, there’s no way to 100% protect your company from a double-brokering scheme. But there are measures you can take to significantly reduce the chance of it happening. These include checking your freight brokers’ credit scores before agreeing to work with them, meticulously reviewing contractual details and rate confirmation, and keeping an eye out for abnormally high rates.

Who is responsible for damages on a double-brokered load?

The carrier is responsible for any damages on a double-brokered load or any physical injury in case of an accident. This is what makes double brokering so risky and unfair to carriers who are completely unaware that their shipment has been re-brokered.