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Risky Business

Brokering

Brokering

By Shelly Benisch, C.I.C., T.R.S.
Posted Sep 2nd 2015 11:01AM

A recent thread on E.O. reminded me that there could be misconceptions out there regarding brokering.  Specifically, is an Owner Operator hauling for a "Multi" brokering the load?  The short answer should be "No"...the long answer....

FMCSA requires that anyone Brokering freight to have a specific Broker authority.   A Broker contracts the freight from a shipper, then gives it to a Motor Carrier.

FMCSA Map-21 prohibits unauthorized rebrokering of freight with a hefty $10,000 fine per violation when caught.

To be clear, there are a handful of companies that have outside arrangements that allow rebrokering of freight to another Broker, but 95% of the time the Broker gives the freight directly to a Motor Carrier.   Any outside arrangements are per contract and in writing that you might want to see for yourself to confirm.

In most cases, FMCSA requires the Motor Carrier hauling that Expedite freight for hire across state lines to have their own Motor Carrier authority.   This is regardless of GVW.

(This "authority" used to be referred to as "MC" numbers, but FMCSA is phasing out these numbers in October and will be using "USDOT" numbers only.)

So...per FMCSA, an Independent Contractor Owner Operator without his own Motor Carrier authority hauls on the behalf of someone who DOES have their Motor Carrier authority.  You will hear it phrased as "the Owner Operator has 'leased on' to an authorized Motor Carrier."

An Independent Contractor Owner Operator who hauls for more than one Motor Carrier (i.e. Multi) is not "brokering" a load.  Owner Operators do not HAVE a Motor Carrier authority with FMCSA so they cannot legally take a load directly from a Broker.  The Motor Carrier he is 'leased on to" must take that load and then they give it to the Owner Operator to haul on their behalf.

An Independent Contactor Owner Operator can legally lease on with more than one Motor Carrier and provide their own insurance.  Usually, but not always, that insurance is our industry standard of $1 Million Primary Non-Contributory Commercial Auto Liability and $100,000 Cargo.  One of the reasons this is the industry standard is because most Motor Carriers provide Certificates of Liability, or proof of insurance, that is $1 Million/$100,000. That is also the minimum coverage of all Traditional Motor Carriers and Owner Ops.

When the Owner Operator carries less than these limits, the question is:

"How does the Broker, Shipper or 3PL submit a claim for a Cargo loss when the Owner Op only had $5,000 in Cargo?"

...or worse...

"How does anyone submit a fatality claim where the Owner Operator only had $100,000 or $300,000 in Liability?"

In either case, the Broker, Shipper, 3PL and even the Customer is drawn into lawsuits which, of course, they wish to avoid.

The thread reference to "an Owner Operator with their own authority" is simply a small Motor Carrier.

FMCSA does not allow the larger Motor Carrier who took the load to then "rebroker" the load to that smaller entity without Map-21 violations and breach of contract with the original Broker, Shipper, 3PL and again ultimately...the customer.

From an insurance standpoint in a claim, a small Motor Carrier cannot pick when they are operating as a "leased on Owner Operator" or when they are operating as an "authorized Motor Carrier" on these runs...it's like being half pregnant.  LOL 

Hope that helps to clarify the broker questions!

Shelly

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