Format of Transportation Transactions

With the all of the potential parties involved in transportation, there are several variations that can arise. Below are the four most common.

Direct or Non-Brokered Load

Cosignor/Shipper ---> Motor Carrier ---> Cosignee/Receiver

In this format, the motor carrier has a direct relationship with the shipper. This is the simplest form of transportation and usually provides the carrier with the best value. The reason carriers do not go directly to the shipper include:

Carrier does not have enough trucks to meet the demands of the shipper
The shipper has outsourced the transportation department to a broker
The carrier lacks the “ability” to sell to shippers directly

Brokered Load

Cosignor/Shipper ---> Broker ---> Motor Carrier ---> Cosignee/Receiver

In this format, the motor carrier has an initial relationship with the broker, not the shipper. This is a common form of transportation. However, it is important to remember the bill of lading is a contract between the carrier and the shipper.

Double Brokering Vs Co-Brokering

Cosignor/Shipper ---> Broker ---> Broker ---> Motor Carrier ---> Cosignee/Receiver

Many people confuse these two phrases. The most important thing to remember is one is legal and the other is illegal.

Co-brokering is the legal process where one broker knowingly uses another broker to fulfill its duties to the shipper. The most notable thing about co-brokering is that all the parties are informed as to the relationship. An example might be where one broker hires another broker to move hazardous material because the first broker last the expertise in this field.

Besides being illegal, there are no situations where double brokering works, only risks. When a motor carrier agrees to transport freight for a broker (under the guise it will haul the freight), and the carrier subsequently re-brokers it to another carrier, the freight has now been double brokered.

Cosignor/Shipper --> Broker --> Motor Carrier --> Motor Carrier --> Cosignee/Receiver

The same is true when a carrier (that also has broker authority) accepts a brokered load (as the carrier) and then tenders that load to another carrier through its brokerage (without the first broker's knowledge or consent).

In either event, the original broker and shipper are now in a compromised situation:

It does not know who is actually handling the freight.
It does not know whether the actual carrier has the required permits.
It does not know if the carrier's insurance is adequate to protect the parties.
It does not know what due diligence was performed to qualify the carrier.
Tracing the freight also becomes dubious at best, usually leaving the original broker with incorrect information to transmit to its customer.

The original broker also runs the risk of being caught in a potential double jeopardy situation. For example, if it pays the contracted carrier (that double brokered the load), and that carrier does not pay the actual carrier, the original broker (or its shipper) may be held accountable to pay a second time for the same freight movement.

The intent of MAP-21 was to clarify that motor carriers need separate brokerage authority and the subsequent bonding requirement to broker freight legally.