The Difference Between a Freight Forwarder and a Broker: Why It Matters

by Tim Taylor, Executive Chairman N+FOB

 

Network FOB, Inc.  Is A Freight Forwarder, not a transportation broker; there is an important distinction between the two. A Forwarder Is A Common Carrier (not to be confused with a Motor Common Carrier) under the law and, as such, a Forwarder Must Adhere To Carmack Amendment Liability Set forth in USC code §14706 (2005) setting forth the proper handling of freight loss and damage claims. Under federal regulations a forwarder has the same cargo claims responsibility as a motor carrier.
 

Use this link to access a study of cargo liability by The US Bureau of Transportation Statistics (BTS)

http://ntl.bts.gov/lib/22000/22900/22922/cargolivab.pdfLink
 

To ensure our ability to perform on Cargo Freight claims Network FOB maintains primary cargo coverage in the amount of $250,000.00 a certificate offering evidence of such is available on our website. Brokers typically forward freight claims onto the carrier for handling.  Many brokers carry contingent cargo insurance not the more comprehensive primary cargo coverage as recommended for forwarders.

 

Brokers do not have a statutory freight claims liability under Carmack. Brokers typically have contingent cargo insurance coverage because unless the shipper has a contract with the broker specifically accepting such liability, they’re not liable in the event of a loss, (absent provable negligence) on the broker’s part.

A broker is not a carrier (common or otherwise) they are a broker.  Brokers arrange transportation with a carrier, either on behalf of the shipper or behalf of the carrier.  Under the law, brokers are not statutorily responsible for loss or damage and cannot issue bills of in their own name and should not be named in the carrier field of a bill of lading. Network FOB by virtue of its standing under the law is required to and does issue a bill of lading for the shipments they carry.

It’s important to appreciate the difference between contingent and primary cargo insurance coverage:  You can never simply assume a broker’s policy will cover the goods in the event of a mishap.

 

Contingent Cargo Insurance is for the protection of the broker, not you, the shipper.  If a carrier, through tariff or intransigence, determines an otherwise valid claim to be invalid, or simply ignores it which many do, would the contingent cargo insurance that the broker might carry step into the breach and fulfill the carrier’s obligation? The answer is maybe, not absolutely.

 

In most cases, Contingent Coverage kicks in only if the carrier’s insurance coverage is defunct.  If a motor carrier simply refuses to accept the claim, often the shipper’s only remedy is to hire counsel and attempt to prosecute the claim and trucker in court.  Prosecuting the broker would have no effect due to their lack of liability under statute. They can be named in a suit but most courts would rule against a recovery from the broker unless the broker’s negligence caused the claim.

 

The important part of the process here is responsibility and the approach to the application of that responsibility. A shipper using a trucker through a broker, is not the carrier’s (trucker’s) bread-and-butter customer.  Whether a trucker responsibly processes and pays a claim without being forced by a court of law sometimes is a matter of customer relations and, absent a true customer relationship, the outcome is not assured.

A Forwarder, on the other hand, is not only more comprehensively covered by cargo insurance, but also willingly stands up for the customer and works diligently to resolve the issue with the motor carrier on the customer’s behalf. If the motor carrier reneges their obligation, a forwarder is still responsible for valid freight claims to the shipper, under federal regulations as a requirement of the license they hold.

Nkargo is specialized in refrigerated transportation but they can also help you with your dry freight needs and any flat bed or specialized cargo you need to ship anywhere in the United States and Canada