The Difference Between a Freight Forwarder and a Broker: Why It Matters
by Tim Taylor, President
Network F.O.B is a freight forwarder, not a broker. There is an important distinction between the two.
A forwarder is a Common Carrier under the law and, as such, a forwarder must file evidence of cargo insurance coverage with the Federal Motor Carrier Safety Administration (FMCSA), including BMC 32 financial responsibility filings.
Forwarders must also adhere to Carmack amendment liability requiring proper claims handling. A forwarder has the same cargo claims and cargo insurance responsibility as that of a motor carrier.
Brokers, on the other hand, do not have a statutory freight claims (Carmack) liability and can get by with contingent coverage (less than half the cost of primary coverage) because they’re not liable in the event of a loss, absent negligence on the broker’s part.
A broker is not a carrier. 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 their own bills of lading with their name in the carrier field.
Brokers typically forward freight claims onto the carrier for handling. Some brokers carry contingent cargo insurance—not the more comprehensive primary cargo coverage as required for forwarders.
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 your 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, would the contingent cargo insurance that the broker might carry step into the breach and fulfill the carrier’s obligation? Probably not.
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.
The important part of the process here is responsibility and the approach to the application of that responsibility.
A shipper using 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 in a timely and satisfactory way.