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Category : Freight Broker Agent

Shippers Beware!

The Federal Motor Carrier Safety Administration (FMCSA) has issued a final rule that will eliminate Cargo Insurance requirements for freight forwarders and most motor carriers.  Only household goods carriers will be required by law to maintain Cargo Insurance.  All other motor carriers and freight forwarders will no longer be required to maintain Cargo Insurance as of March 11, 2011.

What is the logic of this?  The FMCSA originally proposed eliminating Cargo Insurance in a proposed rule dated May 2005 along with the then new unified registration system.  The FMCSA has noted that motor carriers typically carry Cargo Insurance in excess of the regulatory requirements ($50,000 Minimum).  Most Shippers require the carrier to have cargo insurance as a condition for doing business.  Shippers also have the option of buying their own cargo insurance policy.  As a result, the FMCSA felt that since Shippers and motor carriers negotiate their own contracts, the FMCSA did not need to regulate Cargo Insurance.

Big and Medium Shippers understand this and have mechanisms for verifying that the motor carriers that they use do have Cargo Insurance.  But smaller, infrequent Shippers typically assume that the government regulates motor carriers and that a motor carrier automatically carries all the liability insurance necessary to protect the public—including Cargo Insurance.  As of March 11, 2011, this will definitely not be the case.  Any Shipper who ignores verifying the kinds of insurance that it feels is necessary to protect them and their freight from liability issues with a motor carrier will do so at its peril.

One Solution to this problem for Shippers is to use a freight broker such as Freight Tec to move their freight.  Freight Tec qualifies every single carrier and verifies that each carrier has Active operating authority, Cargo Insurance, Automotive Liability Insurance, and appears to be reasonably safe according to the information available from the federal government.  This is a great service for Shippers who do not have the budget or do not want to do a carrier qualification process by themselves.  In addition, Freight Tec carries its own Professional Errors and Omissions Liability Insurance Policy (same as Doctors, CPA’s, and attorney’s carry) to protect its Shippers from loss in the event Freight Tec makes a mistake and fails to properly qualify the carrier.  Less than 100 freight brokers out of 15,000 nationwide carry this insurance. This provides added Peace of Mind to Freight Tec’s Shippers.

NASTC Best Broker Directory 2010-2011

The National Association of Small Trucking Companies (NASTC) – http://www.nastc.com – recently named Freight Tec in their “Best Broker Directory” for 2010-2011.

NASTC screens every one of these brokers by carrier payment policy, history, and recommendations they receive from other NASTC members.

“We feel this group of brokers represents the top of the brokerage community and they move more than 150,000 loads per month.”

– From the NASTC Best Broker Directory 2010 – 2011

Freight Tec is proud to be listed amount this group of Best Brokers, and especially proud to be only one of three brokers in Utah that are listed.  That is quite a compliment.

 

NASTC - Best Broker Directory 2010 2011

Diamond Broker with $100k Bond

Freight Tec carries a significantly higher bond than is currently required by the F.M.C.S.A., and has for quite some time now.  Interesting to note that legislature is currently trying to raise the bond limit to $100k instead of just $10k, under the “Motor Carrier Protection Act of 2010” (S 3483).

In the May/June 2010 issue of IT (Internet Truckstop) Magazine, Freight Tec is recognized as a “Diamond Broker” with a $100k Bond.  We are one of only 21 brokers listed that carry this $100k bond.

What does this mean?

Carriers can be assured that Freight Tec’s credit-worthiness is at the top.  Shippers can be assured that Freight Tec is a prominent broker in the industry, and a broker they can trust.  We are ranked as one of the Top 100 Brokers in the Nation.

If you are a Shipper needing a load moved, or a Carrier looking for loads, Contact Us Today.

Protecting Carriers from Bad Brokers

Excellent article we wanted to share from Truck’n HotNews, by Utah Trucking Association, June 21 – June 27, 2010

LAWS TO PROTECT CARRIERS FROM BAD BROKERS

Senators Olympia Snowe (R-Maine) and Amy Klobuchar (D-Minn.) have
introduced the “Motor Carrier Protection Act of 2010” (S 3483), in response to
concerns about unscrupulous brokering practices that continually take advantage
of small business truckers. “If passed, this law would put a stop to a system that
allows rogue brokers and scam artists to operate unchecked,” said OOIDA Executive
Vice President Todd Spencer. “Too often, we’ve seen bad brokers get
away with collecting payment from shippers but leaving truckers holding the
bag.” The “Motor Carrier Protection Act of 2010” would:

  • Increase the broker bond from $10k to $100k and expand that bond requirement to freight forwarders
  • Increase requirements and disclosures for any person or company seeking to obtain broker or freight forwarder authority
  • Establish significant penalties for violations of broker regulations, including unlimited liability for freight charges for conducting brokerage activities without a license or bond
  • Create a requirement for brokers and freight forwarders to renew their operating authority annually and require the Federal Motor Carrier Safety Administration (FMCSA) to revoke operating authority that is not renewed annually; revenue generated from the renewal fees will be dedicated to FMCSA’s oversight and enforcement of broker regulations
  • Establish strict guidelines on companies that provide brokers with surety bonds and on how they administer bonds
  • Clarify that trucking companies must have a broker’s or freight forwarder’s license and an appropriate bond in addition to their motor carrier operating authority to arrange freight for another carrier for compensation.

Shippers Giving One Load to Multiple Freight Brokers

What happens when a Shipper gives one load to multiple freight brokers in order to find a truck? Market Distortion, and it’s Expensive for Shippers.

An interesting Market Distortion occurs when Shippers call multiple Brokers to move their load(s).  When a Broker receives a call from the Shipper to move a load on a particular lane, he will post the load on the various load boards unless he already has a truck available.  If a Shipper thinks that they are going to have better coverage for their load at the lowest price, they are mistaken.  Brokers pretty much use the same load boards.   Here is what happens when the Trucker sees 15 load postings for the same   lane.  Truckers subscribe to the same load boards as the Brokers and they will notice that there are 15 loads for one lane and that he is the only truck in town to move 15 loadsImmediately, the Trucker thinks in terms of “supply and demand” economics.  If there are 15 loads to move he can easily raise his price as he is the only game in town.  The Trucker will call several Brokers.  The Trucker raises his price to move that load to a higher level—sometimes a much higher level.  The Broker receiving the call from the Trucker can’t move the load for the price the Trucker is demanding so he calls the Shipper to advise that he has found a truck but that they will need more money to move the load.  The Broker isn’t going to move the load for free so either the Shipper pays more money or the Broker backs off the load.   Then, the process repeats itself until the Shipper pays more to move the load.  That is a Market Distortion!  Yet it repeats itself many thousands of times each day.

As trucks become tight, this Market Distortion due to multiple postings of the same loads by multiple Brokers will cause the prices required to move the loads to rise at a faster than normal rateThe best solution for the Shipper is to only use one or two brokers and reduce the redundant postings to counter this Market Distortion.  Using multiple brokers will only create higher prices for the Shipper as the false signals for supply and demand are broadcast through the load boards.

Oil Speculation

In January of this year, the Commodity Futures Trading Commission proposed a new rule that would set limits on who can trade futures in the oil market.  The CFTC has rightly determined that the sudden increase of oil contract futures in Mid-2008 was caused by speculators who did not have a “legitimate commercial interest” in buying oil contract futures other than to enrich themselves by playing a market.  As a result, oil contract futures shot rapidly upward to $150/barrel.

Under the CFTC rules a Speculator is defined as an individual or group who is trading in a commodity that has no legitimate commercial interest in that commodity who is purchasing that oil contract future as an investment with no real intention of taking possession of the oil.  As an example, those who do have a legitimate commercial interest would be trucking companies, airlines, ship owners, taxicab companies, etc.  A trucking company may choose to buy oil contract futures at a given price to hedge against a future rise in prices.

What happened in the Summer of 2008 was rampant excessive speculation set the price in the oil contract futures market causing irreparable damage to thousands of trucking companies who were forced into insolvency since they could not afford to fill their tanks with fuel as the price rose faster than they could collect on their accounts receivable.  This affected the balance of loads vs. capacity and shipping rates rose dramatically.  Airlines that were on the verge of profitability (for once) suddenly were hit with quickly rising fuel prices that they could not pass back to their passengers who had already prepaid for their tickets.  Everyone suffered—except the Speculators! So the proposed new rule by the CFTC would put position limits on the amount of trading that speculators are allowed to make for a given commodity such as oil.

This is not a new law but only a proposed rule.  Some people are saying that it is about time.  Others are concerned because the comment period for everyone to submit their comments to the CFTC ends on April 26th and the proposed new rule has limits that would only affect the top ten traders and leave a host of smaller traders untouched as long as they did not speculate beyond certain limits.  When asked by critics why the limits were so high, a spokesman for the CFTC said that the reasoning behind keeping the limits high was the concern that by setting the limits low, most traders would go to the unregulated markets.  This, of course, poses the question:  What will keep the top 10 speculators who the proposed new rule is supposed to keep from over-speculating from doing the same thing in the unregulated markets?

The system is still broke! Oil contract futures are also bought and sold in the international market place.  Although the proposed new rule might help if the top 10 speculators agree not to go to the unregulated markets (ie, the unregulated world markets not controlled by the CFTC), we are still at risk to the same thing happening again and oil suddenly rising to $150 barrel in the future.

Customers Talk, so make sure you do a Great Job.

Each of us are reminded daily that Customers Talk.  If you do a great job, or a poor job, your customers will tell you – but probably won’t tell you to your face.  They’ll tell you, by telling others.

Here is an excellent quote from Jeffrey Gitomer:

Customers talk…to their associates, friends, and neighbors. Here is the number of people they will talk to based upon how well you handle their complaint.

3 if you do a good job
10 if you do a great job
25 if you do a bad job
50 if you get into an argument

[…]

How are your customers talking about you?

– Jeffrey Gitomer, Customer Satisfaction is Worthless Customer Loyalty is Priceless

Freight Tec strives for excellent service, 100% of the time.  That is what keeps our customers coming back, and provides new business opportunities from referrals.

Make sure you’re Always Doing a Great Job, and you’ll build your business.

Agents Liable for Customer Bad Debt?

Should Agents be 100% liable for their customer’s Bad Debts?

Imagine one of your largest customers going belly up… and they owe you and your Broker company $50,000.00…

You soon learn there is no hope of collecting any of the money owed…

Who should pay for that bad debt?

It should be split the same way your commission was paid out between you and your Broker. If you are on a 50% / 50% split with your Broker, then you should both pay $25,000.00 of the bad debt.  If you are on a 60%/40% split, you would pay $30,000, and the Broker would pay $20,000.

Why?

Its fair. Its ethical. And both parties always have great interest in doing business with customers who will pay you.

I’ve heard of Brokers paying 100% of any bad debts from their Agents… They are CRAZY !

Lets me share a story with you…

I know of a company who practiced the policy of paying 100% of any bad debts from their agents. They did it because they thought it would lure agents into their company, and you what? They were right! They did lure a lot of agents into their company!

A few years down the road, they were hit for a $400,000.00 bad debt from one customer, then another one for 109,000.00, then another one for $55,000.00. The agent (who’s customers they were) didn’t care… he didn’t have to pay any of that $500,000.00+ back. No worries for him…

But there was great pain and anguish for all the other agents, and the broker. The broker was not in position to handle these rapidly mounting bad debts (there were more that rolled in). The broker tried to work things out… but the hole they were in got deeper and deeper too fast.

The broker quit paying the carriers.

The carriers sued all of the customers (and I mean EVERY single customer).

The customers had to pay all the freight bills again. (after already paying the broker months ago).

The customers were very angry.

The customers no longer trusted the agents they had worked with for years.

Good agents and several other good people lost their customer base – and their jobs. They could no longer provide for their families.

Agents now had to start over – their previous customer relationships were ruined because their broker ended up going belly up and not paying the carriers.

The criminal thing behind it all was this: There was a rotten apple agent who PURPOSELY did business with companies he knew were at risk of not paying their freight bills for one reason or another. Because he was paid his commission each week – he knew he would be paid before the bad debts hit the broker.  One bad apple spoiled the bunch… Actually, he put them out of business.

Shippers Can’t Be Too Careful in Qualifying Carriers

This is a True Story that happened on Feb. 1, 2010.   A carrier calls our office to book a load we had shared with our network.  We start our Carrier Qualification Process and find out that the Carrier wants to use an owner-operator.  We advised the Carrier that we needed to see their federal operating authority, Certificate of Insurance, W-9, and a signed copy of our Broker/Carrier Agreement.  When we receive everything back, we find that the Certificate of Insurance shows CARGO LIABILITY INSURANCE ONLY.

So, we called the Carrier back (Dispatcher was hard to understand with a heavy Eastern European accent) and asked if they had a separate Certificate of Insurance for Auto Liability.  He said, “No. Our owner operator carries Auto Liability Insurance.  All we provide is Cargo Insurance on the load and trailer.”   When we talked to the Owner-Operator, he forwarded to us a Certificate of Insurance showing Auto Liability Insurance.  At this point, most companies don’t check any further.  But our Carrier Qualification clerk, Kellie, called both of the insurance agents to verify insurance coverage.  This is what she found:

The Owner-Operator only had “Non-Loaded” Auto Liability insurance commonly referred to as “bobtail” insurance.  HE WAS NOT INSURED IF HE WAS HAULING A LOAD!!! The company for whom the Owner-Operator was hauling DID NOT HAVE AUTO LIABILITY INSURANCE.  Therefore, if we would have given this Carrier our load, our Shipper and us would have had a huge public liability risk since nobody was insured to protect the public. Imagine what would have happened if this truck was involved in an accident while hauling a load for one of our shippers.  The injured parties would have sued everybody—including our shipper and us—for damages.  The trucker and the company probably are “judgment proof” as all of their operating assets are most likely heavily financed with little or no equity.  That would leave only Freight Tec and its shipper liable.  As a result, we would have had to pay.  Freight Tec carries Professional Errors and Omissions Liability Insurance (the same insurance as medical doctors, lawyers, CPA’s, and engineers carry) in the event we make a mistake.  Fewer than 50 property brokers out of over 15,000 carry this insurance to protect their shippers.  Freight Tec is one of a select group of brokers who does.

BOTTOM LINE: You cannot be too careful in Qualifying Carriers.  Freight Tec does this every day on a FULL TIME basis to protect our Shippers and ourselves from potentially devastating lawsuits.  To further protect our Shippers, we also carry Professional Errors and Omissions Liability Insurance.

Valuable Freight Updates by Email

Stay current with valuable updates – simply by checking your email.

A great way to stay up-to-date on the transportation industry is by subscribing to Freight Tec’s Email Updates.  You’ll automatically get valuable updates from our blog delivered right to your Inbox.

Technology can be a great asset to your business.  Take advantage of this technology today and sit back and let the updates come to you.  You don’t have time to browse the web, you’re running a business – so let the web come to you.

So, how do you sign up?  I’m glad you asked.

In the upper-right corner of this blog, you’ll see an area that looks like this:

Simply follow these instructions:

  1. Enter your email in the top box, or click on Get Email Updates.
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  3. Then, check your email.  You should receive an email from us with a final link for you to activate your updates.
  4. That’s it! Enjoy!!

You’ll now receive updates whenever we post valuable information on our blog.

If you have any troubles at all, please Contact Freight Tec and we will be happy to help.