Transport Topics / Broker Vs. Freight Forwarder

Broker Vs. Freight Forwarder

BROKER:

The most popular moniker for an intermediary in the transportation industry today is to identify itself as a “logistics company.” The term "logistics" is often used to describe a multitude of services, including distribution, warehousing, physical transportation of property and even freight payment. In regulated transportation, there still remain just two types of legal independent intermediaries: the property broker and the freight forwarder.

By statute, the term "broker" means a person other than a motor carrier, or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement or otherwise as selling, providing, or arranging for, transportation by a motor carrier for compensation. "Brokerage" or "brokerage service" is defined as the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor, or consignee.

Property brokers are required to keep a record of each transaction for a period of three years and these records must show the name and address of the consignor, the motor carrier, the bill of lading or freight bill number, the amount of the broker's compensation, a description of any non-brokerage services performed in connection with each shipment or other activity, the amount of any freight charges collected by the broker and the date the payment was made to the carrier. A property broker is required to maintain accounts so that the revenues and expenses relating to its brokerage portion of its business are segregated from its other activities.

A broker acts as a conduit for passing the consignor’s or consignee’s money on to the carrier it retains and the minimal surety bond or trust fund is in place in theory to insure they do so.

A broker is generally not liable to the shipper for cargo loss and damage. In terms of liability, a crucial issue for property brokers is whether they hold themselves out to the public generally as the actual transporter of the goods.If there is no evidence that a property broker held itself out as the actual transporter of goods it should not be found liable for cargo loss and damage, absent negligence on its part. Often, property brokers maintain contingent cargo insurance to protect their own business as well as the shipping public but acquiring same does not increase the broker’s basic legal obligations in terms of liability for the goods transported.

When a property broker has received payment and has failed to pass along the freight charges to the underlying carrier, the carrier has a number of options. First, the carrier has recourse to the property broker bond and/or the surety trust fund. Second, the carrier may have recourse to the shipper on prepaid or collect shipments provided Section 7 of the bill of lading contract has not been executed.

FREIGHT FORWARDER:

A freight forwarder, on the other hand, means a person holding itself out to the general public (other than as a pipeline, rail motor, or water carrier) to provide transportation of property for compensation in the ordinary course of its business.

(a) assembles and consolidates, or provides for assembling and consolidating shipments and performs or provides for break bulk and distribution of the shipments;
(b) assumes responsibility for the transportation from the place of receipt to the place of destination; and
(c) uses for any part of the transportation of carrier subject to jurisdiction under this subtitle.

A freight forwarder acts like a carrier vis-a-vis its shipper and similarly, it acts as a shipper vis-a-vis the carrier it retains. Under the ordinary course of its business, a freight forwarder must proffer assembly, consolidation, break bulk and distribution services for any and all traffic tendered or transportation services provided. The four service elements are basic to the definition of a freight forwarder. They are neither optional nor alternative. The service elements are required by the use of the conjunctive “and” in the statutory definition. Thus, in order to be a freight forwarder, a party must hold itself out to the public that it is prepared to provide the definitional services in all transactions. Moreover, if a party acting as an intermediary does not actually perform, but merely proffers such services, its activity is more akin to, and may be deemed to be, brokerage, for which a brokerage license is required. If the conduct evidences that the intermediary is merely arranging transportation rather than undertaking the transportation, such activity will likely not be considered freight forwarding.

A freight forwarder is both the receiving carrier and the delivering carrier and must assume responsibility for the transportation from the place of receipt to the place of destination. Since the freight forwarder wears two hats, as a carrier and a shipper, it is involved as a principal in both the payment and liability loop.

A freight forwarder has primary liability to the shipper for cargo loss and damage under the Carmack Amendment. This obligation flows from its carrier status, being both the receiving and destination carrier, and the assumption of responsibility for the transportation from point of receipt to place of destination.