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Is Your Freight Broker Legit?

First off -who, or what is a Broker or Agent, or Consignor?

A Freight Broker or Freight Broker Agent as they are sometimes called is the entity that arranges transportation services between shippers, receivers and your company. In almost all cases they are the ones whom you invoice to pay the freight bill. If your company acts as its own freight broker, that is good news because you are ahead of the competition. However, even trucking companies that find their own freight sometimes need a Freight Broker to secure a load.

For the purpose of this discussion, we will refer to as Freight Brokers all those known by various names but who we have identified as the entities that act as third parties to the actual Shippers, Consignors or Consignees.

Freight Brokers are regulated by the US Department of Transportation (www.fmcsa.usdot.gov) . They are required to obtain and maintain a Property Brokers License, a Surety Bond (BMC-84) or Trust (BMC-85) that can be tapped to pay freight-bill claims, and be properly registered with the Uniform Carrier Registration (UCR) program that was introduced around 2007/2008.

Some Freight Brokers also carry contingent liability insurance that covers them in case of a claim that is not covered by a shipper's or trucking company's cargo liability insurance. -Yes! That's right -shippers also carry cargo liability that covers such things as cargo going bad, damage caused by their cargo to property, etc. Shippers rarely reveal that they carry any insurance on the cargo they tender for transport. -A 10 seconds thought process should reveal that when you have a size-able interest in your cargo, you'd want some peace of mind and not just entrust 100% that Joe Broker or Speedy Transport will have the necessary or adequate insurance to cover loss/damage.

So now that you know who a Freight Broker is, how do you check at the time you are about to take a load from them whether they are still legit from last week?

There are several ways that you can do this, and some processes that you should implement in your truck business model to ensure that your broker is not just legitimate, but is also financially sound enough to pay you for the load.

  • Maintain a database of ALL Freight Brokers that your company works with. This database should be easily accessible and should be viewed as a business tool to help in your decision-making. Some easy ways to maintain such a database would be to create a spreadsheet or filing system that you consult every time you deal with the broker. Using a simple spreadsheet or manual process can get out of hand very quickly, not to mention that it doesn't scale very well for use with other staff members in your business. I recommend a solid program like TSC (click here to learn more) which tracks and maintains Freight Broker data and has quick links to current information from the FMSCA database for each broker.

    Your Freight Broker database should contain as much data about the broker as possible, and include all contact information, payment history, transaction history, etc. Consult this database each time you work with the broker to verify information about the broker, and update any changed data.

  • Check the Freight Broker's credentials online. This is an absolute must every time to make sure the broker's license has not been revoked, or their BMC-84 Surety Bond / BMC-85 Trust fund has been removed. Current Freight Broker licensing information can be obtained on the FMCSA official website: http://li-public.fmcsa.dot.gov/LIVIEW/pkg_carrquery.prc_carrlist free of charge. A regular check can quickly reveal whether the broker is in trouble, if for instance you notice that the bond has been cancelled, or the licence has been revoked and reinstated too many times.
  • Always make sure you have the Freight Brokers current phone numbers, fax numbers and written payment policy for each load.
  • Each load tendered to you must have a dated, signed Rate Confirmation spelling out the shipper(s), consignee(s), product, transportation equipment required, and more importantly: the payment rate for the load. The rate confirmation should also specify other things such as who is responsible for unloading, and who is responsible for which costs. It's the tiny details that become big problems later on if they are not properly addressed.
  • Check with the shipper to verify they know the broker, and that they have an ongoing relationship regarding the load tendered to you. This simple action can save you from picking up a load that has been double-brokered.
  • Check all references provided by the Freight Broker, and more if you can by checking some online services like Internet Truckstop or GetLoaded. You should also subscribe to reputable business credit reporting services that allow you to check the payment records or the Broker, and that also notify you if certain key indicators show financial problems with the broker.
  • Even after performing your due diligence to check out the broker, sometimes you encounter some smooth talking broker that fools you into believing he is legit. To help protect yourself even further, make sure you get a properly completed, legible, signed Bill of Lading from the shipper. Always make sure the consignee signs the Bill of Lading, or a receipt for the goods delivered. Always make and keep copies of all pages of any paperwork relating to the load.
  • If there are changes in instructions after the load is picked up, get the changes in writing - obtain a new rate confirmation, and a new Bill of Lading or amendment to the BOL faxed to you. You should have the updated documents before delivering the load. The Freight Broker or Shipper have very little incentive to provide accurate documentation once the delivery has been made, so be sure to make it a condition of delivery that you receive proper documentation.

To summarize, also learn to trust your gut feeling about a Broker when the deal sounds to good to be true. Build or join a peer network of people in the trucking business with whom you can network for insight and reference. If you do not know the broker well, do not act on rush orders or the promise of paperwork later -that is a sure sign of fraud; walk away from the deal.