James F. Mahoney, Attorney

March 2012

The Distinction Between "Carrier" and "Broker" in Cargo Losses

A discussion of brokering in the context of cargo liability

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The lines are blurring between motor carriers and freight brokers. How many entities are billing themselves as “logistics” providers,” or “3pl’s?” How many of them also run truck lines? How many are true freight forwarders or, even more rare, NVOCCs?

As a threshold matter, these logistic titles mean nothing, legally. It is critical to determine whether a participant in a transport movement was acting as a carrier or as a broker in relation to the particular shipment that may be damaged or lost. That’s what a court is supposed to look for. But courts cannot always determine whether an entity’s role in the shipment was as a carrier or as a broker, so they need some guidance. If a company acts as a broker, its liability for damaged or lost cargo may be determined by the law of the state, generally negligent entrustment, which is rare; if it is acting as a motor carrier, the process of the Carmack Amendment applies, 49 U.S.C. 14706 under which liability is near absolute, except for certain defenses and the skill of your lawyer.

Under the statute, a "broker" is "a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation." 49 U.S.C. § 13102(2).
In contrast, a "motor carrier" is "a person providing commercial motor vehicle . . . transportation for compensation." Id. § 13102(14).

The implementing regulation provides that:

“[m]otor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.” See 49 C.F.R. § 371.2(a).

It’s crucial to keep this in mind and get legal advice if a cargo claim is made against you.