Transportation Scams Threaten the Very Existence of the US Economy.

In the last twelve months, we have seen an unprecedented increase of international scammers that have entered the US Transportation Industry and is robbing it blind.

There has always been a specter of fraud in the transportation industry. From the days of corrupt union bosses to the "co-brokering" of freight allowing multiple freight brokers to take a cut of the revenue from cargo, fraud has always been part of the industry. The government has done some things to combat these bad actors. The Teamsters were cleaned up. MAP-21 brought clear definition to modern roles in the industry. But the industry is facing a new set of crises: The Great Cargo Depression of 2023 and the exponential rise of international scammers invading the market. It is the latter that concerns us in this article.

International Scammers have been preying on Americans for as long as I can remember. We are not talking about an enterprising immigrant making a living for their family on the open road. We are talking about well organized, financed, and moderately trained individuals operating in coordinated rings primarily out of Eastern Europe, India and Pakistan. Since Email was commonplace, Prince Richey Rich of Poor Country has been begging us to loan him $500 to unlock his $10M account, with a promised return on investment that was 100 fold. As the internet age grew, we saw scams in eCommerce, crypto currency, and retirement plans. The transportation industry is no different. The international scammers have been watching the industry for years, dabbling in the inner workings to probe and learn how the industry works. Covid saw the first major spike in the presence of these bad actors. As new carriers entered into the cargo rich world of Covid, scammers saw an opportunity in the practice of double brokering. This is where our story really begins.

Since 2020, scammers have been increasingly present in the industry. They usually create a carrier company with a valid authority, and then create a separate broker company with a valid broker authority. These are legitimate authorities issued by the Federal Motor Carrier Safety Administration (FMCSA). Once the authorities are active, the games begin.

These Double Broker (DB) scams came in two flavors. The "Skim off the top" scam saw a DB carrier booking a load with a legitimate freight broker. The scammer then uses a DB broker authority to broker the load to a legitimate carrier. The scammer will pay the legitimate carrier they tender the load to, but that pay is usually 20-30% less than the scammer is getting paid for the load.

For the scam to work, the scammer maintains a smoke screen to prevent the legitimate carrier and the legitimate broker from finding out the other exists. The scammer may go by the name "Jack" when he is talking to the real carrier. When speaking to the real broker, the scammer may go by "Sam". Make no mistake that this is still the same person using different emails and phone numbers to continue the charade. In order to keep the scam straight, and facilitate a perfect flow of communication it must be the same person in the middle. When the load is delivered, the legitimate carrier presents proof of delivery (POD) to the DB broker, who then gives the same POD to the legitimate broker. The scammer gets paid by the legitimate broker, and the scammer then pays the lower amount to the legitimate carrier. Once the scammer identifies a broker that is willing to keep booking with them, the scammer will book more and more loads knowing they can get away with the scam. It is estimated that the average scammer will double broker 10-12 loads per day. Assuming an average theft of $500 on each load, the average scammer was making $5000 per day, all stolen off the backs of American truck drivers.

The second type of scam is the "Too good to be true" scam. Once the scammer reaches the end of their life cycle (usually 6-12 months), they are looking to make a strong and profitable exit. Instead of offering legitimate carriers 20-30% less than the real rate on a load, the scammer will offer 50-100% MORE on the load. In this case, the scammer has no intention of paying the legitimate carrier at all. By the time the legitimate carrier realizes that they are a victim of this scam, the scammer will have run away with the full value of the load, never to be heard from again, at least until they open under a new company name and authority and start all over again.

These scammers began to be easy to spot. From foreign accents, to odd email addresses, to ridiculous carrier instructions, these scammers began exposing themselves more brazenly. Since 2022, the number of scammers operating in the transportation industry has gone up exponentially. The reason they have been accessing the transportation industry is the ease of access to market entry.

FMCSA is the gate keeper who is tasked with screening authority applications. It appears that FMCSA is either understaffed to actually screen these applications to verify physical addresses in the US as well as company assets, or they have chosen to put the screening process on auto-pilot where if an entity meets all of the initial qualifications on paper, then the authority is granted. Regardless of how it happened and the fact that it is still happening unchecked today, these scammers are in the industry and involvement from within is the only thing that can drive them out.

It is for this reason that VTS created the Double Broker Bounty Hunters (DBBH). Through this program, scammers are identified on a load by load basis. If the scam is identified while the load is in motion, then the real carrier can stake a claim to the real broker, causing the scammer to get kicked off the load without being paid. This approach is only as effective as the legitimate broker is willing to accept the fact that the scam occured. This is the best case scenario. In this case, the scammer is cut out, and the real carrier is paid the same rate that the real broker promised on their original rate confirmation.

The DBBH is effective in individual cases, but in reporting these scammers to the Department of Transportation, nothing seems to happen. Reports go into a database, and some scammers can be listed hundreds of times before DoT and FMCSA move to revoke the authority. DBBH has reported the same scammer as much as 15 times in a month with seemingly no action against the scammer by the government.

The economic damage to the transportation industry has been devastating. Since September of 2022, the DBBH has recovered over $70k in attempted stolen finds for 7 carriers. With 700,000 carriers currently operating in the US, it can be extrapolated that carriers have suffered combined loses of as much as $7B over the last 12 months alone, and most of these carriers don't know it is happening to them. These scams are a huge part of why rates paid to carriers are so low. These scammers have been artificially driving down rates by as much as 20-30%. The impact could very well be greater. These numbers do not take into account the economic damage of stolen cargo, or of the losses freight brokers take when they are forced into double pay liability by paying the scammer first, then finding out they have been scammed when the real carrier presents their invoice. The law says that the final mile carrier must be paid, so brokers are forced to pay for the same load twice in many "too good to be true" cases.

These international scammers are bleeding the transportation industry dry. This industry alone is the backbone of our society. If the industry breaks, then the grocery store shelves will be empty in 3 days time. If you thought buying toilet paper was impossible in the first few months of Covid, wait until you see the same thing for basic food stuffs.

The government needs to step in and do something about this now. They need to properly screen authority applications. In some cases, they should stop accepting authority applications all together for a period of time until they can get the situation under control. They need to revoke authorities of proven scammers. They need to impose a floor on transportation rates to prevent the industry's collapse. The average cost of a owner operator to run their truck is $2.24 per mile, excluding any possible profit. The average rate paid to owner operators nationwide is around $1.75 per mile. Owner operators cannot make a living among rising operating casts and falling cargo rates. Owner operators and independent small carriers (less than 10 trucks) make up 97.7% of the carriers operating today. If the owner operators park their trucks, even a child can do the math and see that the industry will collapse under consumer demand. Something must be done before the Great Cargo Depression of 2023 turns into the Great Depression of 2024 for the entire US Economy.