Double Brokering - Can it Be Eliminated?

Introduction

Is it possible to Completely Eliminate Illegal Double Brokering?

Who Knows?

However, what we do know is that the first step in eliminating Double Brokers is IDENTIFYING Double Brokers

For the past 30 days I have been doing research day and night to find out how we got to this point, what we are doing about it, and what needs to be done to prevent and eliminate Double Brokers for good.

Double brokering poses several risks to shippers, carriers, and brokers alike. For shippers, the primary risk is financial. If a shipment is double-brokered, the shipper may end up paying twice for the same service. In addition, the carrier actually transporting the shipment may not have the necessary knowledge or resources to properly handle the shipment, which could lead to delays, damage, or loss.

For carriers, the risks associated with double brokering are also financial. If a carrier accepts a shipment from a broker who has already assigned it to another broker, the carrier may not receive payment for their services. While the US Supreme Court has ruled that the "Carrier Must Be Paid" (Southern Pacific Transportation Company v. Commercial Metals Company, 456 U.S. 336 (1982),?n There are costs involved such as attorney's fees, collections fees, etc. In addition, the carrier may be held liable for any damages or losses that occur during the shipment.

How did we get to this point?

It all starts with the application process to obtain Motor Carrier Authority. If the applicant has a pulse, $300 on a Visa Gift Card, A VIN Number for a Truck and an Insurance company that incorporates greed into their business model in exchange for ethics; The Federal Motor Carrier Safety Administration (FMCSA) will issue a Motor Carrier Authority.

Among other things, there is no requirement for any Identification to prove the person applying is the name on the authority or the owner of the company. The Principal Business Address is not verified. There is no verification to see if the applicant has connections with present or past Motor Carrier Authorities. There is no verification that the applicant is a US Citizen or authorized to work in the US. There is no verification that the applicant even owns a truck, and there is no verification whether the applicant has pending Broker or Carrier Authority(ies).

Without these verifications, it becomes extremely difficult to nearly impossible to track down the owner of the Trucking/Brokerage company when they commit a fraudulent act, steal a load, or double broker freight.

These criminals use untraceable email addresses, list a virtual address, PO Box, UPS Store, or Service Agent address as their principal place of business and have burn phones with fake numbers - They also have several other MC numbers to put into place when caught.

It all starts with the approval by FMCSA of the application.

What are we doing about it?

Many companies such as MyCarrierPortal , Highway , Carrier Assure Inc. , Carrier411, TIA Watchdog are doing what they can to provide Brokers and Carriers with data from many sources to measure the likelihood of a carrier or broker that may be involved in fraudulent activity.

They use algorithms that Red Flag points out things like

• The carrier has 2 trucks but the factoring company paid $100,000 in invoices last week
• The owner of the company has 75 other MC numbers in 75 other cities
• There have been no inspections of the companies trucks in over 365 days
• There are 15 dispatchers and only 1 truck

These are great tools, however, much of this data comes from an already inaccurate database of information contained within the FMCSA. Further, there are other points to consider. From the examples above we can see that a carrier may receive a good rating when in reality, they should be precluded from moving freight. On the other hand, companies with an "F" grade, may in reality be a great carrier with no infractions.

For instance:

A carrier with 2 trucks with a company might factor receivables with different factoring company so the platform might not catch this. Some Carriers do not factor receivables at all. Although this might only be one of the Red Flags, it is something to be considered.

A carrier that is graded "F" because they have several duplicate MC numbers or have matches use of vehicles, could very well be an creditable carrier with 75 different MC numbers in 75 cities. We recently found a moving company that issues a separate MC number to each branch within their company. Since it is a household goods mover, we surmise that they do this to limit liability, or they purchased other moving companies through the years, or this is just their business model. Further investigation found that all MC numbers have the same email contact. It is the safety department for the corporation. All MC Numbers list the same owners information with FMCSA, and the ownership matches the name of the incorporators on the Articles of Incorporation with the appropriate Secretary of State office.

On the flip side, there are several carriers in these platforms that have high ratings or grades (low risk), yet they are have listed a Virtual Office, PO BOX, UPS Store, Service Agent, etc. as their Principal Place of business. This is a CLEAR violation of 49 CFR part 390.5T. How can someone that is in violation of a most basic provision of the Code be rated A+ ? There are currently HUNDREDS if not THOUSANDS of carriers and brokers that have applied for and been awarded MC Authority who have a Principle Place of Business that is not incompliance with the Code. Research has shown that when a Carrier/Broker has committed a fraudulent or double broker act, in most cases their address was not what listed at a physical and therefore they cannot be traced.

Please see the link below regarding Principal Place of Business Regulations - Requirements and Restrictions are in part 390

https://www.govinfo.gov/content/pkg/FR-2009-07-29/pdf/E9-18142.pdf

A good carrier may have a poor rating due to the number of inspections. With the number of Carriers, Brokers, Drivers, and Commercial Motor Vehicles on the road, and the limited resources at FMCSA, it is not unusual to go a long period of time without being inspected

Help From the FMCSA?

This is not likely. With only approximately 1150 employees, sifting through THOUSANDS of new applications each week, conducting inspections, monitoring insurance cancelations, address changes, changes in ownership etc, it is too much to get done under current conditions.

That being said, technology could automate some of the processes. Applicant has a PO BOX? Application Rejected. Applicant does not list Contact Info? Application Rejected.

What Can WE as an industry do to prevent Fraud and Double Brokering?

We can only fix the problem if Carriers, Shippers, TMS Companies, Carrier Monitoring Companies, Load Boards and Brokers work together. There must be a unified front.

In the short term we must:

FMCSA

• Insist applications are thoroughly screened. If the information provided does not meet verifiable Principal Place of Business requirements etc, reject the application
• Require applicants to have a verifiable email address and phone number. We need to move away from GMail, Outlook, AOL etc. Offer a program where an applicant can obtain a real, verifiable domain and email address
• Require applicants provide Passport, Real ID or other verifiable for of Identification. IF their employees are required by law to Complete and File and I-9 Form and the necessary documents for verification, why cant the owners provide this info to the FMCSA?
• Require applicants to provide Articles of Incorporation/Organization from the Secretary of State office in their state. Often times the "fake" name on the MCS-150 does not match the name of the incorporators on file with the state. Since Most banks require Identification and verified/stamped Articles of Incorporation to open a bank account, and the FMCSA does not, the information with the SoS is probably more accurate ... follow the money
• Send a certified letter to any holder of an MC number that registered an address that does not comply with the code (PO BOX, UPS Store, etc). Give them 30 days to provide a proper Principal Place of Business address. If there is no response in 30 days, place the carrier/broker out of service. If the carrier responds and properly changes their address with the FMCSA set up an appointment with a FMCSA agent, Government Contractor or Local Law Enforcement to verify the location, or better yet set the company up for annual inspection.
• If a carrier is placed out of service or authority is revoked, the associated MC number needs to be permanently revoked. There should never be an opportunity to reactivate an MC number. The application process needs to start over. Similarly, an MC NUMBER SHOULD NEVER be able to be sold. All too many times a Double Broker will offer to purchase an old MC number from a reputable carrier, and offer a large cash payment. Because the carrier was known and had a good reputation the bad guy will prey on the old customers until they get caught and will then buy another old MC number for the cycle to continue.

Load Boards

When a carrier applies to participate in posting or searching for loads on any load board, the potential customer must be vetted much like brokers are expected in vetting a carrier. Some load boards have their own carrier watch type screening platforms, why are they not using them. If a broker can be held responsible for not properly vetting a carrier, my position that the load board from where the load came from is equally responsible if in their screening process they did not do their vetting. I read an entry recently on one such load board's website that only "Verified and Reliable" Transportation Partners would have access to the platform. Are they really checking or are they of the mindset that "well it is not on us, and the bad broker's money spends just as well as the good broker"?

Carrier Monitoring Companies

• Obtain Info from Secretary of State offices to match up incorporators with carrier/broker owners ( we have found that there are several co-founders of companies, and they coincidently have ownership in other Broker and Motor Carrier companies in the US (but are not listed on each with FMCSA) In other words we have found that several companies have multiple partners and several people have multiple carrier operations - they do not report affiliation with FMCSA
• Notify customers when carriers and brokers that violate 49 CFR by registering the Principal Place of Business as PO Box, Virtual Address, UPS Store etc
• Verify that if a person has more than one MC number that there is a reason for it (such as a moving company with several locations, or a carrier that has diverse operations or modes)
• Verify that if several companies are at the same address that they are not arbitrarily red flagged - they could be the same owner of various companies (a flatbed company, A Refer Company, an Expedite company and an Auto Carrier)
• Look more into broker qualifications so that carriers can make an informed decision when getting a load from a broker

TMS Systems

Work with 3rd Party companies such as MyCarrierPackets, Highway, Carrier411, CarrierWatch, CarrierAssure and others. Take care of your customer base by removing the verifiable bad carriers from your TMS system altogether. This way the bad guy cannot even be assigned to the load.

Shippers

Work with only Reputable Brokers and Carriers. It is time to look at value over price

• Check Broker or Carrier MC number to be certain are what they say they are. Look to see if they are actually a carrier if you booked the load with a carrier
• Make Sure the email address and phone number that you a corresponding with matches the information in your companies database
• Require the broker or carrier to provide a copy of the Driver's License, Cab Card/Registration and Proof of Insurance (not just the Certificate of Insurance from the carrier) - The driver is REQUIRED to carry these documents in the truck. The copy of the Cab Card/Registration will have the Name of the company that owns the truck, VIN number for the Vehicle and Plate number. Ensure that the information on Registration and Proof of Insurance regarding the owner name matches all of the documents.
• Require a "selfie" of the driver next to the door of his/her truck with the MC number and company name in plain view
• When the driver arrives, ask to see the driver's license, Registration and Proof of Insurance match it to the documents you received from the carrier or dispatcher - Look at the License plate and VIN number on the truck. After all, none of us get into an Uber without checking to see if the driver name matches and the plate info matches, why put our freight on a truck that does not meet the same requirements?

Brokers

Check, Double Check and Check Again

• Check Carrier MC number to be certain they are a carrier and not a broker
• Make Sure the email address and phone number that you a corresponding with matched the information in your TMS, your Carrier Monitoring Partner and the FMCSA
• Require the carrier to provide a copy of the Driver's License, Cab Card/Registration and Proof of Insurance (not just the Certificate of Insurance from the carrier) - The driver is REQUIRED to carry these documents in the truck. The copy of the Cab Card/Registration will have the Name of the company that owns the truck, VIN number for the Vehicle and Plate number. Ensure that the information on Registration and Proof of Insurance regarding the owner name matches all of the documents.
• If items do not match, the driver may have a lease agreement in place. ASK for the lease agreement (drivers are required to carry the document in the truck) Please review regulations surrounding lease agreements in this link https://www.ecfr.gov/current/title-49/subtitle-B/chapter-III/subchapter-B/part-376
• Require a "selfie" of the driver next to the door of his/her truck with the MC number and company name in plain view
• Send a copy of the driver's license, Registration and Proof of Insurance to the shipper along with the photo of the driver/door. This way the shipper know who to expect and what the truck will look like - IDENTITY IS KEY
• Train shippers to look at the VIN on the truck, the Plate on the Truck and the Name/MC Number on the door. After all, none of us get into an Uber without checking to see if the driver name matches and the plate info matches, why put our freight on a truck that does not meet the same requirements?
• Take care of your good carriers! Pay them Quickly, develop a relationship so they come back. It is much better to have carriers on your team you can count on rather than depending on load board to find new carriers

Carriers

• KNOW YOUR CUSTOMER!
• Whether it is a shipper or broker, provide them with the driver's License, photo of the Registration and Proof Of Insurance. Give them the driver cellphone number.
• VERIFY that the load you are taking is NOT coming from another carrier. Verify the MC number. If the MC number belongs to a carrier, advise them that you cannot accept loads from a carrier MC. Ask for a verifiable Broker MC. Investigate the Broker. Don't take the load if you can't verify broker info

Long Term Strategy

1. Make the ability to get a FMCSA Motor Carrier Authority match the significant responsibility that goes with the job. Obtaining FMCSA authority should be more than just filing out a couple forms and putting $300 on a credit card

To become a barber in the United States a person is required to:

1. Complete a course or apprenticeship (in most states a minimum of 200 hours)
2. Successfully complete a Licensing Examination
3. Meet Requirements for Licensure - Pass a Background Investigation and Physical Examination

To obtain Motor Carrier Authority and become a licensed Motor Carrier one must:

1. Have a pulse
2. Complete and Submit an application (takes about 15 minutes)
3. Pay $300
4. Obtain insurance on as little as One Motor Vehicle
5. Wait 30 days

It really is that simple. One person can (and several do) have several MC Docket numbers. When they get caught in a fraud scheme they just use another

My position is that when a driver delivers a pallet of hockey pucks to an airline for a flight on a passenger aircraft, he is required to present a TWIC card. But if someone wants to start a trucking company here, he does not really need anything.

Here is my pipedream for a solution:

Require any current or future applicant company principle(s) (owning 5 percent or more) to:

1. Complete 40 hours of training from a Freight Broker/Motor Carrier Training Entity. Some examples are: TIA (Transportation Intermediaries Association) CTB OOIDA ?#DOTCSA? Talentek by Hubtek ?#ProfitQuest?and others) PRIOR to applying for DOT or MC Authority. The applicant must pass a written examination indicating complete understanding of Federal Motor Safety Regulations and MAP-21
2. Obtain a Transportation Workers Identification Credentials (TWIC) Card. Per current regulations, a holder of a Motor Carrier authority at no point is required to provide any identification. Applicants can be (and Many Are) based in other countries and have no intention of living in the United States. Someone could literally use the name Charlie Brown and a company name Comic Book Trucking and Get Authority - Through the TWIC Process, the Owners of the entity must apply in person, are subject to a background check and must have no disqualifying offenses or factors (including offenses in foreign countries) - The TWIC number will be made available as public record for monitoring companies, brokers, shipper and carriers to validate companies
3. Require Applicants to provide same documents as their employee presents for I-9 Requirements
4. Require applicants to provide Principal Place of Business address that is in compliance with 49 CFR 390.5T - NO PO BOX, UPS Store etc. Verify with Local Authorities
5. Require Applicants provide certified copy of Articles of Incorporation from the State where they are organized and a Bank Letter verifying account status
6. Because the TWIC card must be renewed ever 5 years, the carrier authority must also be renewed every 5 years. IF the TWIC Card cannot be renewed, neither can the authority
7. IF a carrier is reported, investigated and found guilty of Double Brokering, or if the carrier is placed out of service, the Carrier Authority and TWIC card are Revoked. The Principle is prohibited from applying for a new TWIC or MC/DOT Authority for a period of 5 years. The Principle also forfeits any TSA PreCheck, FAST or Global Entry privileges for 5 years.
8. If a motor carrier or broker is sold, the FMCSA must be advised immediately so that a NEW MC NUMBER IS APPLIED FOR and the new principles must provide TWIC Card Information at date of close of the sale. If the new owner does not have a TWIC Card, they will want to submit application at least 60 days prior to sale date to ensure there is no lapse in authority
9. If a motor carrier authority is revoked (voluntary or involuntarily) it is PERMANENTLY revoked. One cannot simply reactivate. This will eliminate the sale of old MC numbers that may give an impression that the company has been around for some time. A new application and TWIC Card Must be submitted.
10. Prior to insuring a Commercial Motor Carrier Insurance companies must confirm TWIC Card information and place Principle TWIC number on Certificate of Insurance. Insurance company must ensure that the mailing address, email address, phone number and TWIC number provided matches FMCSA/DOT records
11. Principle can have only ONE authority associated with a TWIC Card number (Exceptions can be made if the principle has a separate Motor Carrier, Broker or Freight Forwarding Authority) A Waiver may be applied for on a case by case basis
12. If a company ceases operations, the associated MC Number/DOT Number is permanently Revoked
13. Penalty for conviction of Double Broker shall be a felony.

To make this happen all happen The DOT and FMCSA must require

1. Any the principles of any holder of a Motor Carrier authority and/or DOT number to provide a valid TWIC Card within 45 days - if they do not have a valid TWIC Card they must prove application and deadline will be extended to 90 days. If the deadline passes, the motor carrier authority will be revoked.
2. Principles must provide proof of training at accredited broker training/motor carrier training that includes applicable 49 CFR Training and MAP-21 Training within 90 days. The verification must be submitted electronically to FMCSA by the training entity

New Applicants must complete all training, obtain TWIC card, provide proper Certificate of Insurance from Insurance Provider with Verification of TWIC, address, etc. prior to applications

Conclusion

Double brokering is a serious issue that poses significant financial risks to all parties involved. To prevent double brokering, shippers, carriers, and brokers should work together to establish clear communication channels, verify the legitimacy of their partners, and educate themselves about the risks associated with this practice.

But the first step in eliminating double brokers is by identifying them. With assistance of FMCSA and TSA, we can do that.

With the time saved by not passing out MC Numbers and Authorities like Santa Claus passing out Candy Canes to unidentified applicants, FMCSA staff can concentrate on properly vetting new carriers and proper renewal of current carriers.(It is really just making sure they have a TWIC Card, TSA already vetted them)

By requiring a TWIC card as a prerequisite for obtaining an MC or DOT number, for the first time in FMCSA history, there will be no doubt about who owns a Docket Number or a DOT number.?After all it is called a Transportation Workers Identification Card - Lets Properly Identify our Transportation Workers !

We MUST all Collaborate! This will ensure the integrity of the freight industry and protect the interests of all stakeholders, our carriers, brokers, shippers and ultimately the general public.