TORONTO, Ont. - Load brokers are frequent whipping boys in the trucking industry, with perception running rampant that some aren't always dealing fairly and often don't pay on time if at all.But carri...
TORONTO, Ont. – Load brokers are frequent whipping boys in the trucking industry, with perception running rampant that some aren’t always dealing fairly and often don’t pay on time if at all.
But carriers can be their own worst enemies when it comes to doing due diligence on parties with whom they are contracting.
And these days, load brokers, who are also known as freight forwarders, logistics services, and property brokers (in the U.S.), have become indispensable players in the Just-in-Time environment.
“We seem to feel that when we have a third party in between, that there’s something wrong or that they’re ripping us off. Even large companies are downsizing their traffic department, and logistics providers/load brokers are going to be the ones handling their traffic, and I think we have to develop a way to work with them and also protect ourselves,” says John McKevitt, president of McKevitt Trucking Ltd.
According to Dean Saul, a transportation lawyer with Gowling Lafleur Henderson in Toronto, carriers now find themselves running at an increasingly competitive pace, stressing the need for someone else to procure traffic.
“Just-in-Time, whether it’s needed or not, is really putting pressure on carriers. The heat is on the driver. I’ve seen some of the logistics contracts and the demands are such that when a carrier has a truck out there, there’s a lot of money at stake. And there’s a schedule that he has to meet somewhere else. And you’re in the hands of a load broker because everything is so tight,” says Saul.
But the bottom line is, carriers are still concerned about the number of times they feel they get burned. And often there is no one to blame but themselves. They’re getting burned because they aren’t doing their homework.
“There are good brokers and there are bad brokers, and a good broker should be asking you for your certificate of insurance, your workman’s compensation, and your operating authority,” says George Ledson, of Cavalier Transportation. If they don’t, he says warning bells should be ringing loud and clear.
“I think the carriers have to do their homework and if the broker objects to it then maybe you shouldn’t be working with this guy,” he adds. “That’s how I’ve run the business and I think that’s how any broker should run the business. We consider it a partnership. Don’t blame the broker if you’re hauling for money you can’t make. And don’t keep accumulating if he hasn’t paid you. What we do often is threaten to go to the shipper – we’ve been successful at getting paid that way.”
So while the frustration may be obvious: money. The solution, apparently, is easy: due diligence.
“If someone offers you a wonderful price, and doesn’t pay you, it still comes to nothing when you’re finished,” says Saul. “When you’re dealing with a load broker, you may not know who the actual principal is. In circumstances where as a carrier, you don’t have direct contact to the shipper, and vice versa, and there’s no reference to the shipper on the bill of lading, then you’ve got to presume that it’s the broker who’s going to pay you, and if they don’t pay you, that’s the end of the line.”
There aren’t a lot of cases around which indicate that a carrier can go back to the shipper and collect money he says.
“It happens from time to time, but don’t count on it. You really have to do your due diligence on the basis of the contract with the load broker,” says Saul. In Ontario, he points out, load brokers are supposed to apply to have a certificate to transport someone else’s goods for compensation where the carrier provides the service.
“In fact, Ontario is the only jurisdiction that gives the carrier the benefit of obliging the load broker who is certified to maintain a trust account and on paper it’s perfect,” he explains. “The load broker gives you the traffic, he gets the money from the shipper, he puts it in his trust account and can’t touch the money until he’s paid you.”
But the question remains, if the broker has this trust account, why isn’t there some enforcement of it?
“Think about it for a moment. I think there are about 300 active, certified load brokers in Ontario,” and probably hundreds more that aren’t he estimates. Would you want the Ministry of Transportation (MTO) staff, at your expense, to do audits? “Practically speaking, enforcement stops on your desk,” says Saul.
So what are your solutions? First of all, don’t look to the government.
“I think that you can expect that the Ontario government will be giving you less protection in the load broker situation in the future. In practical commercial terms, I don’t think you’re ever going to see a situation where the load broker is going to be singled out as someone who is going to have to protect your money. You have to accept the fact that if you don’t do your due diligence, you ought to let the traffic go,” says Saul.
If you can trace back to making the shipper a part of the bill of lading, you’re on the right road.
“But, if it’s a good load broker, you’re never going to be able to put that on a piece of paper. There’s no reasonable enforcement you can expect other than what you can do yourself,” he says.
The carrier, however, does have the option of using a lien against the load being carried for the freight charges relating to that specific load.
“Maybe it’s something we should be doing more often if we think we’re not going to get paid. You don’t have to release that load until you’ve been paid for that freight. But it could be very awkward and might not be popular,” says John Douma, the Ontario Trucking Association’s (OTA) general counsel. He says the provincial government intends to do away with large parts of the Transportation Act and in particular, load broker sections.
“MTO has no intention of regulating something that hasn’t been effective. It sees its role in life these days as purely safety and nothing else,” says Douma. The OTA meanwhile has moved to bring reform to the Bill of Lading Act on collecting from a consignee or shipper.