Logistics is the backbone that keeps manufacturing operations running smoothly, which is why the practice of double-brokering is especially concerning. What is double-brokering and why should manufacturers beware?
#USAMfgHour Introductions
Hello, I am Tracy with Total Distribution, Inc. (Integrated Logistics Services and D+S Distribution, Inc. was recently acquired due to our owner retiring.) I handle business development and marketing. Our topic is Double Brokering Part 2. Please introduce yourselves.
- WOOT! Suzan, Rick, and Buddy are checking in from DCSC. We help distribution & manufacturing companies with Shipping, ERP, Inventory, Supply Chain Solutions & Consulting. Kirsten is out on assignment today. Thank you for hosting today, Tracy!
- HI Tracy, I’m Nigel popping in from Wales UK. We help find the elusive customers by understanding them and how they use the internet. I have a background in Manufacturing and delighted to share my knowledge. Thank you for hosting.
- Hi, Tracy! I’m Beth with Home Building Solutions in Novi, Michigan. We specialize in custom home remodeling. Nice to see you all!
Host Tracy St. Clair revisited our previous chat by asking “What is double brokering?”
- “If I remember correctly from last time, Double Brokering is when your shipment is transferred to another carrier without your knowledge.” said DCSC
- “Is that when you contract one hauler and they sub contract to another?” said Nigel T. Packer of Pelatis Online, Digital Customer Experience
- “This is where I’m gonna learn something lol!” said Beth from Home Building Solutions
- Host Tracy answered, “Double brokering occurs when a freight broker tenders a shipment to another broker without the knowledge or consent of the cargo owner or original broker.”
Host Tracy asked the next question, “Why does FMCSA (Federal Motor Carrier Safety Administration) struggle with data to address illegal brokers?”
- “It seems that if the contractor is unaware their shipment is not with the original hauler, they will not be able to report it to FMCSA? Said Nigel to which Tracy replied, “At some point they will find out because the cargo is usually stolen or sold without their knowledge.” And Nigel said, “Oh my!”
- “I agree with Nigel. It seems that it would be difficult to find the perpetrator” said DCSC.
- Host Tracy answered, “The lack of data and jurisdictional issues and the struggle to penalize unauthorized brokers. I should add that the perpetrators use sophisticated methods to avoid detection, such as paying the actual carrier at a reduced rate to maintain a facade of legitimacy.”
Host Tracy posed the third question, “Does the FMCSA have the authority to assess civil penalties for violations by unauthorized brokers?”
- “It sounds like the FMCSA doesn’t have all of the authority they need in all jurisdictions, said DCSC.” And host Tracy replied, “You’re correct. The FMCSA has no authority, which needs to change. The need for proper reporting is needed.”
- “I’ve seen some reports of freight loads stopped and treated as stolen goods, but that would be criminal charges, not civil …” said Amy.M.Anderson @snippetsbyAmy. Amy added, “Hi! Slipping in for a bit, this is such an interesting topic – and scary/expensive – consumer impact is immense! So thankful to Tracy for educating us!”
- “Many Gov Bodies (Quango – quasi-autonomous non-governmental organization) in the UK don’t have any teeth and can only give perpetrators a slap on the wrist. If the FMCSA is the same, I would think… No” said Nifel. “sounds like we need to strengthen our organizations on both sides of the pond” replied DCSC.
- Host Tracy answered the third question this way, “No, the FMCSA does not have any authority. The federal statue needs to be revised.” “Oh my. That’s even worse than I thought!” replied DCSC. Nigel responded, “How much is being lost in this way? It sounds like it is a considerable amount of money. Are these shipments covered by insurance? I would think that the Insurance companies would be lobbying the Federal Gov to provide a solution.” Host Tracy replied, “The loss is insanely high. A lot of the times the original broker will pay a ransom so they do not need to make a claim if it’s a low amount. This is why it is so important to vet the carriers.” Amy responded, “And paying the ransom helps perpetuate the problem, but what do you do? Fraud in all its forms adds to the cost of life!” Host Tracy replied, “Vetting the carriers is key. Plus, you have to verify the carriers name on the rate confirm and make sure it is the same name as the one picking up the load. So much goes into making sure the carrier is legit.”
Host Tracy posed the fourth question, “Who does the FMCSA refer cases to that violate commercial regulations?”
- The participants responded that they guessed maybe the FBI? the police? The Department of Transportation?
- Host Tracy’s official answer was, “The FMCSA refers cases to the DOJ (Department of Justice)”
Host Tracy followed that up with question five, “What is the problem having to refer to the DOJ?”
- “Because it’s the government and probably a super slow process?” guessed Home Building Solutions LLC to which DCSC replied, “took the words right out of my mouth, Beth!”
- “If the crime has taken place over a number of States, they would have to involve more than one DOJ?” asked Nigel. Host Tracy replied, “It would typically involve federal jurisdiction rather than multiple state Departments of Justice. The DOJ would handle the case. That’s when the FBI could be called into play.”
- Host Tracy’s official answer was, “Referring to the DOJ is a lengthy referral process that hinders the FMCSA’s ability to enforce the commercial regulations of those who are unauthorized brokers. DCSC commented, “Bureaucracy!” and Nigel asked “Aren’t they busy with other things?” Tracy replied, “I am sure they are, Nigel. This is a very lengthy process which causes nothing but problems. Allowing unauthorized brokers to continue to double broker.” “I bet the lengthy process makes it attractive for quick get in, get what we can, and disappear operations, which further complicates enforcement and encourages paying ransom…” said Amy. “Exactly, Amy. Making it harder to locate the guilty parties.” replied Tracy. “I would think that it would be an expensive process. Against the value of the goods, it may not be worth it. The time delays would also tie the consignor up and restrict their ability to do business?” replied Nigel. “Yes, and this is why it is so important to vet the brokers. Double check and triple check. You can never be too safe.” stated Tracy.
Conclusion: Double brokering is illegal, unethical and becoming more common. A revise in federal statute is needed, which would allow FMCSA to assess civil penalties in a timely manner.
- Beth: This was really interesting. Thank you, Tracy! I learned a lot.
- Nigel: Tracy, this is an important subject and causing difficulties to the smooth running of enterprises and individuals across the USA. This should be a priority for the federal Government. Thank you for hosting todays #USAMfgHour.
- DCSC: Thank you for hosting, Tracy! We always learn so much from you!
- DCSC: Thank you to all of our participants today! Thank you for coming! See you next week!
- Tracy: Thank you all for being here today. I appreciate each and every one of you. I am available on X and LinkedIn for any questions you may have. Kindly reach out if we are not already connected on LinkedIn.
- DCSC: Great job! Thank you for hosting Tracy and thank you to all of our participants. Speaking of hosting … we have hosting opportunities available for YOU! Please contact us to get on the schedule ASAP @DCSCInc @SocialSMktg @KeystoneClick
