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Freight Brokerage or Freight Forwarding? Know Your Exposure!

Relationship Manager

These days, specialized services are what gain and retain clients.  In fact, specialized services are probably what add the biggest margin dollars to your bottom line.  However, there are some cases where those additional services could open up a whole new set of exposures for your company. 

Is it Freight Brokerage? 

One particular area this could be happening in your company is your brokerage.  A general definition of a freight broker is: 

A freight broker is an individual or company that acts as a liaison between another individual or company that needs shipping services and an authorized motor carrier. The broker doesn't function as a shipper or a carrier themselves. Instead, they work to determine the needs of a shipper and connects that shipper with a carrier willing to transport the items at an acceptable price while never taking physical possession of the freight. 

However what if your client asks if one of your units can pick up that same freight (that you typically broker), take it to your warehouse/cross-dock, and then broker it?  On the surface it doesn’t appear that the exposure changed all that much.  However, one could easily argue that the possession and movement of that freight to your facility changed the transaction from pure brokerage to one of freight forwarding. 

Or is it Freight Forwarding? 

The legal definition of freight forwarding (according to 49 USC 13102 (8)) is:


 "Freight forwarder" means a person holding itself out to the general public to provide transportation of property for compensation and 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 operations of the shipments;

(B) assumes responsibility for the transportation from the place of receipt to the place of destination; and

By the simple act of picking up the freight and taking possession of the goods you may have unknowingly become a freight forwarder instead of a broker.  Freight forwarders need to have proper authority and insurance which can be very different from a pure transportation broker.

If you have any questions on how your company operations would be classified, check with your transportation attorney to make sure the transactions you always thought of as brokerage are not producing unknown or unintended exposures as a freight forwarder.


Topics: Transportation