What can you do when a freight broker goes bust?


A lot of freight carriers have discovered themselves not paid for the loads they carried for a freight broker or a freight forwarder who has become bankrupt or, in rare instances there was no intention of paying in the first place. Sometimes, they may still get all or a small portion of th

A lot of freight carriers have discovered themselves not paid for the loads they carried for a freight broker or a freight forwarder who has become bankrupt or, in rare instances there was no intention of paying in the first place. Sometimes, they may still get all or a small portion of the freight bill that is not paid by other parties who are responsible for the payment.

1. What's the distinction between freight broker and forwarder?

Both have to be registered with The Federal Motor Carrier Safety Administration. While they typically work in the same manner but their legal obligations are different. Brokers act in the role of intermediary between the recipient or shipper and the vehicle that transports the cargo. Brokers are not responsible for damage or loss to the cargo, and therefore typically do not have insurance on cargo.

A freight forwarder through his relationship to a receiver or shipper acts as a transporter. As opposed to brokers and a broker, a forwarder is liable for any damage or loss that occurs in the transportation of freight. As carriers, a forwarder is an individual shipper. Imagine freight forwarders as transporter without trucks or trailers.

The reason for the legal difference is that truck carrying a load can depend on the receiver or shipper to pay. When a freight broker becomes out of business, the motor carrier can't depend on the freight forwarder's client to pay.

2. Can I inquire with the broker's client to make a payment?

Sometimes. When the broker was an agent of the shipper or receiver, then you can recuperate payment from a receiver or shipper. But, the proof that an agency relationship existed is dependent on certain circumstances.

The courts will consider the extent that the shipping company delegated responsibilities for shipping in the hands of the broker. When the broker acts as the transportation department of the shipper, there is a high possibility that a court will decide that the shipper is liable for the freight bill that has not been paid.

3. What is the importance of a bill of deeding contract as well as a master hauling agreement in determining whether a receiver or a shipper is responsible for a freight bill's cost?

Smart brokers create their master hauling agreements with carriers to stipulate that "the carrier agrees to look only to the broker for payment of freight bills," or in other words to the effect. With a clause such as this, a transporter is not able to look to the receiver or shipper for payment.

Bill of Ladings is a document of transportation. If you're the transporter be sure that your name appears in the document. This can prove your legal right to receive payment from the shipper unless you've agreed not to turn at the broker for payment.

The carrier must ensure that its name appears in the document of delivery so that it can ensure that it is entitled to pay the shipper should there be a disagreement between the broker.

The shipper must ensure that its name appears in the document of delivery so that it can ensure that it is entitled to payments from shippers in case there is a dispute in the relationship with the broker.

4. What is Section 7 of a Uniform Bill of Lading?

The majority of shippers use a shorter form bill of lading which includes by reference the provisions of the long-form Uniform Bill of Lading, released by the National Motor Freight Traffic Association. The long-form section 7 states that if it is signed by the "non-recourse" provision on the side of the short-form version is signed by the shipper, the shipper will not be liable to pay the freight cost. Instead, the obligation to pay is assigned to the receiver or any other person responsible. Smart Shippers must sign the non-recourse clause in the bill of lading when they use brokers.

5. In what circumstances is the bonding company of the broker or trust fund responsible to pay?

Both freight forwarders and brokers have to supply FMCSA with evidence of insurance in the shape of a certainty bond or trust fund to guarantee the payment of freight charges of up to $75,000. The address of the broker's forwarder's trust fund or bonding company can be found in FMCSA's SAFER Database. The claim against the trustor bond fund is made via post, and in some instances electronically, accompanied by evidence that the freight was delivered, and that the freight bill is still unpaid.

If there are other companies similarly due and the claims are greater than $75,000 and the trustor bond company is likely to deposit the money in the state court, thereby releasing its obligation to pay. The trust fund or bond company may also file a lawsuit that lists the parties and states, in essence, "We don't know whom to pay." The claimants may then file their claims an application with the courts, which decides how the money will be divided.

6. Can I get a refund from the bank that was defunct for the broker?

Brokers typically make pledges of their receivables to banks as collateral for loans. Other brokers sell the receivables to an entity called a factoring company, which ends having the receivables. A factoring or bank can only acquire the interest the broker possessed. At the very least, an appeals court in the United States has ruled that a lender to whom the broker has pledged receivables has only a lien on the broker's share of the receivable.

Also, the factoring or bank company could have the funds the broker owes you. In this case, you could be entitled to claim the amount. However, getting the money will likely require a civil lawsuit against the factoring company or the bank.