Transporting brokered freight

Scope

A freight broker is used between shippers and carriers to help get freight moved by qualified drivers.

Regulatory citations

• None

Key definitions

• None

Summary of requirements

Finding brokered freight. Available brokered loads can be found by calling a freight broker or by consulting a “freight board.” Industry trade magazines and trade organizations are excellent sources to locate a broker. Freight boards, also known as load boards or freight matching services, are available on the internet and on truck stop monitors. For example, DAT is a freight load board found across the country in trucks stops.

Qualifying a broker. It is always a good idea to “qualify” a broker, so a background check is a recommended practice. A place to begin is to verify that they have broker authority from the Federal Motor Carrier Safety Administration (FMCSA) and make sure they have the required surety bond (not less than $75,000) on file. A credit check, including credit history, payment history, judgements pointing to legal problems, and length of time in business will help ensure that the broker is reputable. The broker should be able to provide a policy for qualifying and selecting carriers.

There are services available that allow comparison of brokers based on a number of factors, including their time frame for payment. Another option is to do business with larger brokerage houses that have a favorable record.

Written contract with the broker. The contract executed with the broker that defines the terms of the relationship is an important step. It can also be a time-consuming process, which has led to the development of several model broker-carrier agreements. The National Industrial Transportation League (NITL), the Transportation Intermediaries Association (TIA), and the American Trucking Associations (ATA) have each developed a motel broker carrier contract intended to decrease negotiation time and to ensure essential provisions are clearly stated. These contracts differ in important and substantial areas, so the parties should be familiar with the agreement being used before signing the contract.

After locating a load, contact the freight broker. The freight broker will verify that the driver has the authority and insurance necessary to transport the load. If the driver is leased to a carrier, the driver should call the carrier; the carrier and broker will determine the details of the transportation. The broker will provide any special requirements for the freight, such as tarping or temperature needs, and negotiate the terms and payment for moving the load.

Contacting the shipper. After the driver receives the “load sheet” from the broker, the driver should contact the shipper and make arrangements to pick up the freight. The driver should verify the load and correct bill of lading, or if necessary, fill out the bill of lading. The broker should not be a party on the bill of lading.

Payment for transporting brokered freight. Upon delivery of the freight, the driver submits the bill of lading to the broker for payment. The broker then bills the shipper and pays the driver.

There is no Department of Transportation (DOT) mandated time frame within which the driver must be paid; a broker can delay payment to the driver until they receive payment from the shipper. There are also no DOT provisions for ensuring the driver is paid at all, so it is a good practice to make sure you are working with a reputable broker before entering into a business relationship.

Smaller, or newer, motor carriers and independent contractors operating under their own authority sometimes choose to ensure immediate revenue and cash flow by “factoring” their accounts. A factoring company buys the carrier or contractor’s bills. In this way, the carrier or contractor does not have to worry about collecting the money.

The downside of factoring is that the carrier or contractor will lose 1% to 3% of the load revenue.

Responsibilities when transporting brokered freight. The broker has no physical connection to the actual freight; the broker’s responsibility is to pass the load information on to the driver/carrier. A broker does not assume responsibility for the cargo and usually does not take possession of the cargo. A broker may not actually provide the transportation unless also a motor carrier.

The driver is responsible for verifying the information provided by the broker with the shipper and picking up and transporting the freight. If the driver finds the freight is not what was described, or is the wrong freight, the driver should not take the load. The driver is also responsible for the cargo while being transported and any cargo claims resulting from the transportation.