Double brokering is a fraudulent practice in the transportation industry where a broker accepts a load from a shipper and then re-brokers it to another broker or carrier without informing the shipper. This practice adds complexity and additional risks to the supply chain. While it is not considered illegal in Canada, it is strictly regulated in the United States.
Legality and Impact
Double brokering is generally deemed unethical. It can lead to significant legal and financial risks for the companies involved due to the lack of transparency and potential liability conflicts. According to the Canadian International Freight Forwarders Association (CIFFA), this practice is widely recognized as problematic and detrimental to the industry.
Statistics and Repercussions
In 2023, a survey revealed that 85% of respondents, primarily brokers and carriers in Canada, were impacted by double brokering. The financial losses were substantial, with nearly 56% of companies experiencing losses up to $50,000 and 18% facing losses between $50,000 and $150,000. These figures highlight the significant financial impact on Canadian companies.
Reasons for Double Brokering
Double brokering is primarily driven by the desire for quick financial gain. Fraudsters exploit weaknesses in the supply chain to profit by pocketing the difference between what they charge the shipper and what they pay the final carrier. This practice is facilitated by the lack of rigorous checks on brokers’ licenses and insurance.
Consequences for Companies
The consequences of double brokering include:
Financial Risk: Legitimate carriers may not get paid, leading to financial losses.
Reputation Damage: Delays and cargo damages can harm a company’s reputation.
Legal Disputes: The increased complexity of the subcontracting chain makes it difficult to determine responsibilities, which can lead to costly legal disputes.
