A freight broker acts as an intermediary that connects its shipper customers — that have goods to transport — with motor carriers, who have the capacity to move those goods. A freight broker’s value lies in its ensuring that the nexus between shipper and motor carrier remains reliable and efficient from both a logistics and cost perspective. 

As a broker, the importance of vetting carrier partners cannot be overstated. Fraud is rampant in the industry. The broker is responsible for engaging an appropriate carrier and relaying accurate shipper instructions. Not doing so can lead to liability where the shipment is compromised.

For instance, liability may flow to a broker in circumstances where a broker engages a carrier, that is not fully vetted, and then the carrier is involved in a motor vehicle accident or other in-transit incident, resulting in the freight being lost, damaged, or stolen while under the care, custody, or control of that carrier. 

The quality of a broker’s carrier partners can either make or break their business. Selecting reliable carriers is a decision not simply premised on liability, but also on reputation. 

How to vet carriers

The following are examples of some of the many steps that ought to be considered by freight brokers doing business in Canada as it relates to vetting motor carriers: 

Credibility: Brokers are advised to examine a carrier’s track record and performance history, including years in operation and general reputation within the industry.

A proven, long-standing track record is often indicative of reliability. Industry certifications similarly evidence credibility. A credibility check can begin with something as simple as a basic internet search on the company, including searching for its address, website, and phone number.

Brokers are well advised to cross-reference the information provided by the carrier with applicable authorities, including the Ministry of Transportation in Ontario or the Federal Motor Carrier Safety Administration (FMCSA) in circumstances where the carrier carries on business in the U.S. 

Verify insurance: Motor carriers are required to hold various forms of cargo insurance depending on their respective classifications. 

Freight brokers should obtain a valid, current certificate of insurance or other form of insurance coverage certificate, including all policy declaration pages, from any and all carriers they are looking to partner with. 

Brokers should take this a step further and contact the listed insurance agent for verification using independent contact particulars — not the ones conveniently located on the documentation supplied by the carrier. Making certain that adequate and verifiable coverages are in place are one way for a broker to protect against potential liabilities. 

Financial health: The financial health of a potential carrier partner can have a direct impact on the financial standing of a broker looking to engage its services. 

Carriers with solvency or cash flow issues run the risk of their operations being compromised and suddenly out of business, leaving the broker, its shipper customer, and the end user consignee receiver all hanging out to dry. 

Similarly, carriers in precarious financial positions may be more prone to cutting corners from an operational perspective, which can lead to other service disruptions in the form of late deliveries or damaged, stolen, or otherwise compromised freight. As unjust as it may seem, failures on the part of carriers are often seen as failures on the part of brokers, which can serve to impair or undermine their relationships with shippers.  

Broker-Carrier Agreements: Freight brokers may negotiate and enter into agreements with their carrier partners – called Broker-Carrier Agreements – which contain language on important issues including limitations of liability, liability, and indemnity. 

This agreement should be signed, sealed, and dated prior to a broker assigning freight of any kind to a carrier. At their core, Broker-Carrier Agreements are a communication exercise between a broker and their partner carrier. Having such an agreement in place serves to ensure that both the broker and carrier have a clear understanding of what their respective roles and responsibilities are. 

Transparency with shipper: In an industry troubled with fraud and unauthorized double brokering, brokers should always alert their shipper customers of who the attending carrier will be at the point and time of loading the freight. Having shippers verify the identity of an incoming carrier and/or driver is another safety mechanism which reduces the risk of a shipper transferring freight to an unauthorized carrier. 

Be proactive

In practice, monetary, scale, and logistics limitations associated with any carrier vetting process, does not mean that the process should be ignored altogether or not be treated seriously. 

Though a broker cannot control a carrier’s actions, they can control which carriers they partner with. Being proactive with respect to vetting carriers prior to working with them may lead to increased revenue, mitigated risk to the brokerage, and will serve to further a broker’s reputation in the eyes of shipper customers, both old and new.