Watch Who Books Your Loads
By Henry E. Seaton

April 1999
Reprinted from

The word logistics describes a variety of services - everything from warehousing to transportation to freight payment. There is no statutory definition for a logistics company. When dealing with one, it's important to know the company's legal status because your own legal rights may vary depending on whether you deal with a property broker or a freight forwarder.


A property broker is a company, other than a carrier, that for compensation arranges for authorized motor carriers to provide transportation. Depending on the situation, the broker can be the agent of either the shipper or the carrier or it can be an independent contractor. In the absence of a contractual obligation, a broker isn't ordinarily responsible for cargo loss or damage or for paying a carrier's freight bills unless the shipper has paid.

Brokers must file $10,000 bonds or bank trust agreements with the Federal Highway Administration. Unless you sign away your collection rights in a broker/carrier contract or otherwise lead the shipper into believing it can pay the broker without recourse, you can use the bill of lading and your tariff provisions to enforce payment from the shipper. There are several steps you should take to protect yourself with brokers:

*check credit references;
*make sure the bond is in place;
*read the contract closely to ensure proper claims-handling procedures will be followed;
*make sure you don't surrender the right to obtain payment from the shipper should the broker default; and
scrutinize the broker's indemnification provisions.

Freight forwarders

A freight forwarder is a company that assembles, break-bulks, consolidates and distributes less-than-truckload shipments and accepts carrier duties and responsibilities. The freight forwarder is both carrier and shipper. To the "actual" shipper, the freight forwarder acts like a carrier and should be so listed on the bill of lading. Under newly proposed FHWA rules, a freight forwarder would be required to have both cargo and liability insurance. To you, the freight forwarder acts as a shipper. Case law suggests a carrier may seek payment from a freight forwarder's shipper if necessary, although many freight forwarders insist that their designation as carriers prevents this.

Increasingly, intermediaries claim freight-forwarder status on truckload and stop-off truckload traffic. While freight forwarders can handle such volume shipments, the company is not, under the law, a freight forwarder unless it assembles and distributes LTL traffic in the ordinary course of its business. In other words, a freight forwarder can handle both LTL and truckload freight, but it can't handle truckload only. Because freight forwarders are principals in both the payment and liability chain, review their contracts very carefully.

Provisions allowing freight forwarders to offset unliquidated cargo claims against freight charges can deprive you of proper claims adjustment. As with broker contracts, broadly worded indemnity provisions should be modified.

By statute and regulation, brokers must keep accounting records showing receipt of freight charges and payment to the carrier. And they must keep separate books so that these payments are segregated from their other businesses. Legally, a broker should be an agent for passing the shipper's money to the carrier, and there is a minimal bond to ensure they do so. But the freight forwarder is not prevented by transportation law from commingling freight charge payments, and the carrier with which it contracts may be left without bill-of-lading recourse to the shipper if the forwarder defaults.

All things being equal, if an intermediary arranging truckload shipments is not a property broker, examine its operations very closely.
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