Freight 360
Supply Chain 101 | Episode 258
Join us in an episode about the complex web of international supply chains, providing a high-level overview from raw materials to finished goods. We explore the roles of bonded carriers and warehouses, and how they help companies manage costs and defer taxes. You’ll gain a foundational understanding of how goods move efficiently across borders, touching on everything from ocean shipping to customs clearance. We wrap up with a practical look at the logistics of shipping products through various freight options and the benefits of expanding beyond full truckload brokerage. This episode is a must-listen if you want to stay informed and ahead in the freight and supply chain industry.
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Join us in an episode about the complex web of international supply chains, providing a high-level overview from raw materials to finished goods. We explore the roles of bonded carriers and warehouses, and how they help companies manage costs and defer taxes. You’ll gain a foundational understanding of how goods move efficiently across borders, touching on everything from ocean shipping to customs clearance. We wrap up with a practical look at the logistics of shipping products through various freight options and the benefits of expanding beyond full truckload brokerage. This episode is a must-listen if you want to stay informed and ahead in the freight and supply chain industry.
Support Our Sponsors:
QuikSkope - Get a Free Trial: Click Here
Levity: Click Here
Bluebook Services: Click Here
DAT Freight & Analytics - Get 10% off your first year!
DAT Power - Brokers & Carriers: Click Here
DAT Express - Brokers: Click Here
Truckers Edge - Carriers: Click Here
Recommended Products: Click Here
Freight Broker Basics Course: Click Here
Join Our Facebook Group: Click Here
Check out all of our content online: Click Here
Welcome back for another episode of the Freight360 podcast. We're up to 258 this week and we're going to be doing a little bit of a one-on-one style episode for anyone newer to the industry, or just a more broad discussion on supply chain, since we're normally very niche focused on brokerage. But if you are brand new, make sure to check out all of our other content. You can go to freight360.net to see all of our blogs, our videos, our downloadable content and, while you're there, check out the Freight Broker Basics course. If you're looking for an educational option and leave us a comment, you can do it on YouTube. Leave us a review on your podcast platform, share us with your friends, and that helps us continue to grow this channel organically. Ben, how's it going in Florida?
Speaker 2:today Weather's nice. I mean, that's about all I can say about Florida. I mean, as it relates to how everything's been going, it's just what I was telling you right before we jumped on the air had a double brokered load working through some scenarios with the client of ours and yeah just part of the business.
Speaker 1:Nice, yeah, we'll double broker story in just a minute here, because I think that's uh, it's good learning for folks out there. Um, we've had kind of a cold week in buffalo man. It's like been in the 50s, it feels like fall, but it's supposed to warm up and we'll see how that pans out.
Speaker 2:But that's super nice, right Football. I feel like when the seasons change around preseason. To me, living up north, that's my favorite time of year, but again. I had a birthday in the fall and loved Halloween, so fall and winter are some of my favorite holidays.
Speaker 1:Yeah, for sure I love fall, but we only get whoa. My camera just went nuts there on me. It did, you got it on, follow so you got to hit that little button.
Speaker 1:I'll get it fixed. Anyway, in Buffalo here we only have so much summer, know, summer warm weather and all that, so it's. It's definitely a little bit depressing when the the weather starts to cool off and it's just a cold front that came through, so nothing too crazy. But you know, it is what it is. I was golfing on Monday for my men's golf league and it was like raining the whole time and like you had to wear long sleeves. It was just for like the middle of august, just kind of like ick.
Speaker 2:you know what I mean, but again, anyway, I am super excited for fall we just had. We didn't have a cold spell but we had a humidity reprieve, I would call it, where the humidity went from like 98 which basically it stays that for three months to like normal and it felt like I was like, oh, it's like in the seventies. I looked at my phone I was like, oh, it's still 89, but just noticeably not sticky, where I didn't feel like I needed to change my shirt just walking out to the mailbox.
Speaker 1:So welcome change. Fair enough. Well, I got. I'm taking my car in to get the AC fixed finally today, even though it's like cold. So that's like the irony of all of this. But anyway, it is what it is Sports real quick. The preseason football continues on. The Bills and Steelers faced off last weekend on Saturday night. I don't think there was a single touchdown. I think the final score was 9-3, if I remember correctly. But the Bills did take a win. Russell Wilson, I don't know, Did you watch the game at all? I couldn't.
Speaker 2:And that was super. I was really looking forward to it. I set a reminder on my phone and then the Dolphins preseason game was aired. I don't know. My TV is like they're getting set up Friday with cable and everything. I'm going to get the NFL package this year, but I just completely forgot that I didn't do it. And then I was like for some reason expecting to be able to watch it, even though I haven't been able to watch preseason games in 10 years.
Speaker 1:You'd think I'd remember, yeah, so I mean, like Russell Wilson started for Pittsburgh and he got sacked twice by Greg Russo from the Bills Bills defense looked really good, Obviously holding Pittsburgh to three points Offense. You know Josh Allen didn't play but didn't, you know, didn't put together a whole lot, but still, you know, I heard the a whole lot, but still, you know I heard the way, the way they did.
Speaker 2:I heard the recap. I still listen to sports radio in pittsburgh, so I heard the you know commentary the next morning and like the biggest takeaways were they've spent years developing the o-line for the steelers, spent a lot of money, a lot of draft picks and to see that basically neither quarterback had any type of protection in any way. They went through the coverages and how it was like six on four in a lot of these and they still weren't able to be able to protect the quarterback for more than a moment or two. They were just getting hammered.
Speaker 1:From what I heard, yeah, yeah, I guess the silver lining is you know it's preseason and you're you're glad to see where you can, you know, find weaknesses when it doesn't count, Right, Because you know what to focus on for the next week and then obviously the following week going into the regular season. So we'll see. I don't have anything else in sports for for news. I don't have anything else in sports for for news.
Speaker 1:The Canadian Railway Strike is kind of the hot topic we record middle of the week. So when this releases at the end of the week or whenever you're listening, we'll, we'll probably know more about what's going on. But the big takeaway here is if the Canadian railroads go on strike it will have like ripple effects, especially south of the border into the United States. And the big takeaway was like there is like we talk about capacity and truckload and it's very loose and there's an oversupply but there's not nearly enough to make up for if the railroads go on strike. So you might see a little bit of a short period of tightening until Teamsters get everything worked out with the railroad strike, if that happens. But that's kind of like the hot pressing issue this week. I don't know about anything else.
Speaker 2:I read too, just for some more on. That is, I think the shipping line stopped recently last week or the week before accepting import business business into the US that needs to go to Canada because they don't know if they can actually get out of the ports and into Canada. So I know that's already at least occurred. And the other thing I dug into is what are the commodities that actually get on rail and go up through these corridors right and again think railroad versus truck, go up through these corridors right and again think railroad versus truck. What I would have expected to see are heavier things, right, that move cheaper and slower on a railroad Like that's the trade-off usually between truck and rail and like that's what most of the commodities were. If anyone wants a deep dive into this, check out Jason Miller on LinkedIn. I think. He's University of Michigan. He's a professor up there, but he did a really great article on this that he posted. It's mostly like iron ore lots of different metals, just a lot of like bulk raw materials right.
Speaker 2:Yeah, bulk raw materials, really heavy things, and I really should have saved it for the show today. But I mean there are going to be impacts. It will impact trucking, if this occurs. For sure We'll likely put upward pressure on rates, because even if all of those goods don't still go up by train, it doesn't mean all of them are going to go by truck. They will probably go up by truck in different volumes, different weights, at slower paces, because you can't put as much on a truck as you can a train. So I mean I'm expecting to see some rates shift and some of the carriers grabbing some freight heading up there that wouldn't otherwise which will shift things in the market and create more opportunities in our industry.
Speaker 1:So yeah, that's how it works, all right. Well, we're going to do a. Oh, we got, oh, yeah.
Speaker 2:From Stephen here, stephen, and that's the other good point. The other, the other port strike that we're waiting to hear updates on, is the East Coast sports strike, which is I think I thought it was scheduled like late September, but it is definitely between now and the election and I don't know what the exact dates are on it. But I mean, there's a lot happening on the international side and that for sure will affect things domestically, truckload wise.
Speaker 1:For sure, for sure, you got anything else in news.
Speaker 2:No, I was trying to see if I could find that really quick on what he said commodities were. But when I find it I'll share it later in the show.
Speaker 1:All right. Well, we're going to do a little special segment called let's talk about double brokering. I guess yeah, so Ben, take me through what happened yesterday with your load. I guess yeah, so Ben, take me through what happened yesterday with your load.
Speaker 2:So it wasn't my load. It was a client I worked with that reached out for some help. But here was the situation where their customer actually just called and said hey, needed an update on a load. They called the dispatcher that booked the truck on the load and when they called the dispatcher for an update, the dispatcher was like I didn't Was this an independent dispatcher for a trucking company. This is a dispatcher working for a trucking company.
Speaker 2:Okay, so, like normal scenario like, hey, like tried to call the driver. No one answered. So your second phone call was just to the dispatcher hey, shipper, we're just looking for an ETA. How's the guy doing? Is he close? Is he there, right? That dispatcher tells them hey, I didn't book this load with you. And oh, by the way, somebody hacked our email. We had a freight guard reported a few days ago. Check it out. It's on care 411, but for sure that's not us. We didn't book this load with you. It's not on our schedule and we don't have it. This load with you. It's not on our schedule and we don't have it.
Speaker 1:It's the first thing that happened. That is wild, Okay. So, and again we talk about this.
Speaker 2:Right, we've seen this before. Step one was you know, client calls me. Hey, I think we got a double brokered load over here. I'm not really sure what I can do. What are next steps?
Speaker 2:And I'm like, okay, well, step one is you just try to assess what's happened without freaking anybody out, because you just really don't know. And it's like, okay, well, did someone else pick up the load? Is someone else planning to pick up the load? Is that carrier involved with the fraud? Are they an innocent truck that was booked on the load with another company that defrauded them? There's so many different things that could be happening. If you overreact, it's harder to get information right. So step one was hey, take a deep breath, let's work through this step by step. Let's first contact the shipper and see if anyone has arrived to pick up the load. So they did. What they found out was the load was picked up about 45 or an hour before they found this out right Now. Luckily, that shipper got the driver's name, the MC number, the plate number and the driver name of who they did load.
Speaker 2:Okay, which is great because now we know who actually has the load, has the freight. So that is huge. Because oftentimes and I've worked through a few of these this year with guys that you and I know that we work with where it took hours to try to find out who actually loaded the truck and who actually got loaded right, whether it's looking at security cameras. If they don't write this down like that is the first hardest step, sometimes so great, got a carrier name, got an MC, okay. I said next step you want to do is reach out to the driver calmly, do? I said next step you want to do is reach out to the driver calmly. Do not be accusatory. You don't know if they did anything wrong at all. They might be a victim of fraud as well and just picked up the load and genuinely don't know what's happening.
Speaker 1:That's usually what it is right. They're usually an innocent bystander who just happens to get roped into it.
Speaker 2:Exactly. I'm like if you freak them out like you could make this worse, they might not answer the phone and then Lord knows what's going to happen from that point, right, so call the driver. Driver said no, I didn't work with you and I didn't book this load with you, and hung up. Okay, not a great start. I was like, okay, step two, reach out to everybody you can at that company, the MC that actually picked up the load, call a dispatcher, call the owner. Call and make phone calls until you reach somebody and try to ask questions to understand where this load came from. Right? So, luckily, we're able to reach a dispatcher and the dispatcher was like oh yeah, we booked this load with this brokerage.
Speaker 2:I don't want to tell you who this brokerage was, but like they're pretty big and they were like, yeah, we got a rate con. We got a rate con for, call it, 2,500. Well, our client booked the original carrier for like 1,600, let's say right. So now at least we know that that legitimate carrier doesn't seem like they were involved in the fraud. It seems like they were also a victim, but we also don't know this yet right, but pause, right there, look at the numbers alone.
Speaker 1:Right, the rate was too good to be true, right they're, they're, they're brokering this load for way more money than the actual broker had in it. So that's, that's the red flag, right there. And again, if you're a, if you're a carrier, and you're getting a rate offered to you that seems way too high or way higher than market average, your spidey senses should kick in there, right?
Speaker 2:So next step is I'm like okay, ask them to send you all the paperwork, the paperwork and the rate con that the truck that has this load right was sent, who they booked it with. Have them forward all this information to you, right, and then you can start working through actually what happened. And then the next call is they called me back and said, okay, well, like, what do I do with this carrier that actually has the load? Because they want paid $2,300, right, or 25, whatever it was the higher rate, and they're like you know, I only have this amount in it. What should I do? And I think this is worth pausing on for a moment, because this can go either way, because the reality is is you don't have to pay that carrier what they were offered by the fake company, because we've seen scenarios like this where they're offered thousands of dollars more, like it's a $3,000 load and they've been booked for $7,500 and they think they hit the lottery. And criminals know that, because if they do that, then the drivers and the carrier that actually has the load tend to trust the guy who said they'll pay them more because it's, you know, the green-eyed monster. Oh, we're going to make so much money. They just so much want to believe that they're getting $7,000 for a $3,000 load that even when they're called by the shipper later and I've been involved in those like the driver's like no man, I'm getting seven grand and you're like, well, hey, it's not supposed to deliver in Memphis, it's going to LA. And they're like no man, this is what my rate con says. And I'm getting seven grand and they literally will continue taking it and then have it stolen and then they don't get paid at all. So this is how these the other is.
Speaker 2:Sometimes a double broker tries to steal the funds and actually have the load delivered, because if they actually want to steal the money and not the freight, the load actually has to be delivered in order for them to get the bill of lading to invoice the company to steal the money for the load In this case whatever $1,700 or $1,600, right. So when we get the information back and they call me back, it looked like they didn't change the delivery address. It didn't look like they were trying to divert it to steal the cargo. And then when we looked at the Raycon we could see by the email addresses that the broker that booked the real carrier on this. The email was wrong, right, it was so-and-so brokeragenet.
Speaker 2:And then when I looked in Highway and RMIS that brokerage's MC are all coms, I'm like, okay, well, here's our first point of evidence that this is the impersonation and where it's happening. The second place, or the first place we found it was the carrier that was originally booked had said like someone hacked our email. We know that's true and there's a few takeaways to both of these, because when we researched this it was reported on carrier 411 a few days ago was not yet on highway because there is some lag, and RMIS said that person hadn't verified their identity yet and that process involves literally a photo ID, their identity yet, and that process involves literally a photo ID. But there's so many carriers that it's not uncommon to have a legitimate carrier not have their ID verified on RMIS and it's not uncommon for a few of these things to look like this. But when you take it all together you start to get this picture right.
Speaker 2:And again, I think the bigger takeaways too is had that broker made their check calls the way we talk about, meaning like before you dispatch the truck yeah, you booked them on the load. You should not be giving them the physical address when you book them on the load, you shouldn't be giving them the pickup number. Hence quick scope and why we talk about that. What you should be doing is, in the Raycon should just be the rate, the city and the state to where the city and state is, and then, once you call them back a few hours before the load to verify that driver is empty, you should be asking that driver hey, wanted to verify your equipment, what are you rolling with? You don't ever say you got a reefer, because everyone says yes, you let them tell you and then you hear oh okay, you got a reefer. Oh, is it? You know? Whatever your requirements are. Hey, by the way, what's the color of your truck? What's the MC on the side of it? I got to make sure the shipper knows you're on your way.
Speaker 2:Most oftentimes, like they'll tell you the truth because they're a victim too, and in this scenario that would have caught this. Like, literally, that phone call would have prevented this from going any further. Right, but it is really a good example as to why simple things and attention to detail. I know we're always busy and I know you know it's hard to keep up with everything, but these are vital, like to me, these are like the core responsibilities of a freight broker. We don't own trucks, we don't own these things, we've got it. We deal in information and communication and if we're not specific and we don't do that well, we open ourselves to liability in a lot of ways so I'm curious.
Speaker 1:So what was the actual intent? Like what? So somebody stole a carrier's identity and got the load and then what were they? Were they trying? Like normally with a double broker, they try to resell the load at a way above market rate, with no intent to pay it, but with an intent to take a quick pay, or even just a standard pay, from the broker who gave it to them. So what was their actual play?
Speaker 2:in this one.
Speaker 1:I'm still not.
Speaker 2:I still don't really grasp it. You don't know for sure, because they're just a bad double broker, like they're a bad scammer.
Speaker 2:Well, that's what I thought at first. I was kind of laughing. I'm like this is either the worst criminal in the world or they're just starting their criminal enterprise, or like we just caught it before they did it. And like my guess is, one of two things probably would have happened. The one is what you said they would have tried to invoice for the load with a POD so that they got paid, and then they wouldn't have paid the real truck and we would have found out. You know, the client would have found out whatever, like 40 days later, because we've seen this happen a lot.
Speaker 1:They were impersonating an actual carrier. So how would they have gotten paid?
Speaker 2:That's the thing that doesn't make sense, because I'm like the client that I was working with, like they use a factoring company to process all their payments and I'm like the money wouldn't even have gone to them, it would have went to the company they pretended to be because of the MC and their billing, like they would have never got that money. The only thing and like the client called me this morning, I was talking to him right before this they talked to the real brokerage that was impersonated, right, that had the net instead of the com. They got ahold of them and they were like hey, we found out about this too. Our dat login was hacked and we know this was happening. We're trying to figure out what's going on. And then they had said you know what they think was happening and it happened on.
Speaker 2:Another one of the situations after they were, you know, phished was that the load was held hostage for a quick pay to get half the money and basically in that scenario the broker just cut the check for whatever two or three grand to make sure the load got delivered. And that's probably what they would have tried to do, is my guess. But again, they caught it, thankfully soon enough, and worked through it to be able to avoid the disaster. But it's a really good learning experience, I think, for everybody out there, on why check calls are not. They're there for a reason. It's not just to know where the driver is, it's also to make sure that you know who is who and who's picking up your load. Like that is literally what we're paid to do yeah, wow, that's.
Speaker 1:Uh, that's a pretty complex one. I'm still not sure if they're just a bad criminal like a, or a failed criminal or an experienced criminal or what, but it just goes back to the whole point of double triple check everything. Have a good standard operating procedure in place for your organization that covers vetting of carriers prior to using them, as well as the load level verification. I have a question.
Speaker 2:What's that? So I have a question too, and this is when I'm looking to get clarification, because I'm not sure I'm fairly certain I know the answer to, but I definitely want to check this. In a scenario like that, where a broker books a carrier, thinks they do the due diligence, however, that carrier was impersonated. So they're using their vetting tools, right, but someone gets through and that still happens, right. If that load, for instance, is taken hostage and they don't pay it and the load never gets delivered and just disappears, okay, in that scenario, right, does any insurance come into play? I?
Speaker 1:don't think so. Like stolen cargo, I don't think whose insurance would cover it. The customer is whoever owns the freight which would be in most cases the shipper, unless it's. Fob, like we've talked about in other episodes, but I don't think the customer's insurance would cover stolen. I mean, maybe I guess it depends.
Speaker 2:But contingent cargo certainly is not going to come into play, no, you know the only other question.
Speaker 1:Even a cargo policy is not going to cover that A cargo policy isn't going to come into play either.
Speaker 2:The only question I was thinking is is there some liability or culpability between the shipper and the freight broker for the broker being defrauded Like? Would errors in emissions insurance come into play in that scenario? I doubt it, dan.
Speaker 1:Do you remember the situation I gave you about a month ago?
Speaker 2:The data. That's what I was thinking of.
Speaker 1:So basically, if you didn't hear the episode, we had an instance where someone posed as a brokerage took a load, gave it to an independent or, like an owner operator, changed the BOL to have it delivered to some random warehouse in LA instead of a Costco in Maryland. And we got ahold of the shipper, got ahold of the receiver and after a couple of weeks they like verified yeah, it never arrived. So they acknowledged that the goods were stolen and it was hundreds of thousands of like verified yeah, it never arrived. So they acknowledged that the goods were stolen and it was hundreds of thousands of dollars worth of adidas apparel and legitimately, like they just kind of accepted it as part of like cost of doing business. Like stolen goods like hundreds of thousands of dollars worth. So they weren't going to try and pursue any kind of like insurance claim. They weren't going to try and pursue any kind of like insurance claim. They weren't trying to pursue any criminal action. They literally were just like yeah, I never showed up. Here's another example Like that's insane to me.
Speaker 2:And I remember that too, because the other thing I was thinking and again, like there are some other guys, that clients that you and I both worked with, where this has happened to and they've been able to recover some of it. But again I mean, if you're doing a lot of business with a shipper let's just say this is one of your largest customers and they end up losing $100,000 because the broker was defrauded. I got to imagine that shipper is probably not going to want to do business with that freight brokerage anymore unless they either pay some of it, maybe all of it, maybe withhold the accounts payable to that brokerage, like in a claim scenario.
Speaker 2:Like I haven't seen You're probably losing a customer over this. Correct, yeah. But here's the next thing. Then Do you end up in litigation, I guess because they're not going to want to pay the money owed. Even though these are different scenarios, it's super common for a shipper not to pay their past invoices until a claim is resolved. Sometimes, right, yeah, yeah, yeah. It's not legal, but they do it.
Speaker 2:And I'm like yeah, and I'm like I feel like this is probably likely what would happen in these scenarios. But if anyone out there has run into this with a large customer of theirs and the load was stolen, I'd be curious to hear if or how. And I've got calls this afternoon with a few people like various cargo net and I'm really curious to see how and what happens after these things. Right From an insurance perspective, what can, does or won't cover anybody, who, why and when?
Speaker 1:Yeah, interesting. It reminds me of an article I read. It was like a year ago, but it was basically businesses, whether it's retail or grocery, they have an expected line item in their budget or their projections for shrinkage like loss, theft, spoilage, whatever. For example, self-checkout at grocery stores. They know that, either intentionally or by mistake, not everything is getting scanned Right, that either intentionally or by mistake, not everything's getting scanned right. I remember during the peak of COVID when the grocery chain in my area, wegmans, they offered this service where you could scan on your phone and basically scan on your phone and load your reusable bag in your cart and then never have to scan at the checkout. So it was basically honor system. There's no scale waiting for you to scan it and put it down to make sure the weight is there. And they got rid of it after like a year Cause they're like, yeah, we've had, you know, too much loss, so but anyway, interesting story. Should we get into a supply chain One-on-one Ben? So interesting story. Should we get into supply chain 101,?
Speaker 2:Ben.
Speaker 1:Let's jump into it. So we wanted to have an episode today where we just kind of break down our supply chain at a 40,000 foot view, because for a lot of people that are new to brokerage, you're also very likely new to logistics or supply chain in general and it's good to get an understanding of where we fall in the big scope of things. Right, because with domestic freight brokerage we're typically dealing with truckloads of freight being moved from one location to another, but what we don't really think about normally is well, where did it come from before, right? Where does it go afterward? Normally is well, where did it come from before, right, where does it go afterward? You know well, you know we could talk about things like warehousing or imports, exports, the sourcing of raw materials, the distribution network, things of that nature.
Speaker 2:Where do we want to start here? I think we start at kind of the beginning and walk through it, like where most cargo originates, and kind of work through maybe an example yeah, that sounds good.
Speaker 1:So, um, obviously and we've talked about um raw material to finish goods and in various other um bits of content so your raw material has two options either comes from within the United States or it's imported. There's no other options, right? So if it comes from within the United States, it's pretty simple. But let's talk about the importing side of things. So oftentimes, whether it's due to cost or just availability of the product, companies will source their materials from outside of the United States, and it doesn't have to be raw material. It could be a partially finished product or components, things of that nature that maybe are made in Asia or they're made in some other part of the world and they're going to come in Typically.
Speaker 1:We had a great episode with Sal Mercogliano, who I don't know if you saw it. He was like on national news this week about that little yacht, that or that big yacht that sank off of Italy. We talked about ocean shipping. So your materials typically will come in on a boat into the United States through a port. Materials typically will come in on a boat into the United States through a port, right, and there's a whole process of you know the raw material or those components are produced or sourced and then they're transported to a port. They're loaded on to a ship, typically in a container, for weeks across the ocean, and they're going to get to a port in the United States, at which point they then have to get offloaded and loaded then onto a truck or onto a rail line, or there's a lot of different options here. What do you got?
Speaker 2:So let's walk through this too, and how and who's involved, right? So everyone always kind of asks how industries work together, right? So for the overseas piece, right, we do not have a license to move freight outside of North America to Canada, into Mexico, because of NAFTA North American Free Trade Agreement we can send trucks back and forth.
Speaker 1:And you're dating yourself right now it's the USMCA as of like seven years ago. Then I am, that's Canada-Mexico Agreement. But yeah, nafta is you're dating yourself. Right now it's the usmca as of like seven years ago, then I'm canada mexico agreement. But yeah, that is a replacement either way purchase the clarity.
Speaker 2:So you can send trucks up to canada, you can send them into mexico, right, and vice versa. But in order to move goods internationally right across the ocean or anywhere outside of those two examples, right, you need a freight forwarding license, right, or what's called an NVOC, a non-vessel owning common carrier, right. That's the license that I think sits under the FMC, which is the Federal Maritime Commission, and also somehow reports or needs to follow the guidelines of the. It's not border protection, it's the um, and I have this in my other notes um, they handle all of the international regulations related to international, like commerce. No, it's um. I will find it in one second, but i'll'll circle back to that because I know Stephen put this in the notes for a training I did a while ago and I will have it in one second.
Speaker 1:The first thing we didn't mention, too, is the customs clearance process.
Speaker 2:Correct. Now, the customs piece right, they're typically handled by a customs brokerage. The customs piece right, they're typically handled by a customs brokerage. So the overseas piece usually the freight forwarders are negotiating prices with the vessel owning companies like Maersk, cma, msc, right, because those companies don't typically do business with a few containers. They work with companies that do more volume for obvious reasons. So freight forwarders tend to work with the big vessel owning carriers. The same way, freight brokers operate with trucking companies and their license allows them to create bills of lading to import goods into the United States. That's how that business functions and, as freight forwarders, how they work with freight brokers is they'll quote all the overseas piece.
Speaker 2:Like I got a freight forwarder. They do a lot of business in Turkey, so they'll talk to their customers and shippers in Turkey and go okay, I got six containers coming into the US. They'll send it to me and go here's what's coming in, can you quote it? Here's the destination. Say it's going to Memphis. They'll go I'm looking at either bringing this in in New Jersey or possibly in Charlotte or in Miami, and they'll ask me to quote the truckload price to pick it up from the port and take it to the destination. They compare each of the truckload rates to the overseas rate. They pick the cheapest. Sometimes they pick the fastest. So they're either looking at price or time.
Speaker 2:The way we do Add those together. They hand and tender me the load. They handle the BOLs. That's how that freight gets handed off. That's how freight brokers assist. We give it to the carriers and manage that to the delivery. We invoice the freight forwarders. The freight forwarders then invoice the customers, usually the beneficial cargo owners. That's how like that international piece tends to function. The only other thing is like they mostly come in containers. Sometimes they come in bulk. Literally they just literally crane bulk steel or bulk pipe onto different kinds of boats or they have roll on, roll off, which is literally what it sounds like.
Speaker 2:There's literally rolling stock militaries a very common one tractors that were coming into Baltimore when that bridge collapsed. A lot of rolling stock comes in through the Baltimore market. Right, that's really how the international piece happens. Right, the customs piece, to your point, like freight brokers don't handle customs. In fact, we don't have the notice of assignment or the. You know what is it. It's the attorney form where power of attorney that's typically more the international piece, because they deal with the customs brokers Usually as a freight broker, whoever is shipping this or working with the BCO for the international piece, they just tell us who the customs broker is. They go here's the customs broker. We tell the trucking company hey, here's the customs broker for this load. When they get to, usually, canada or Mexico, the customs broker just handles that piece of it and then they just keep going.
Speaker 1:Right, something in your experience with any of the stuff coming in and out of so the I actually had one a situation this morning that was interesting because when you're clearing the border, yes, you have to have customs documentation and the customs process with a customs broker themselves. One of our guys is dealing directly with a customs broker and he's preparing the import paperwork and the customs invoice. So I'm no expert in the import-export game, but there are certain parts of that process that freight brokers themselves can take on. I would say, rule of thumb, leave it to the experts who that's their job when it comes to getting things clear to come into the country and there's costs associated with all of this. In the example that I dealt with this morning the broker is going to be paying roughly and it's going to range roughly about $100 a load just to get the customs part cleared. So that's your import side of it.
Speaker 1:Steven actually had an interesting note and I'll read it off. But he's talking about tariffs and I'll read it verbatim. But he said tariffs will dictate the amount of certain items that can come in from certain regions per year. To avoid tariffs, companies will utilize bonded warehouses in the United States to hold the product and release it at the first of the year. Imported beef is a big one. Brazil and Ireland, share a tariff and will have exceed and will have exceeded the limit as of October 1st and they believe that the total amount for next year is already sitting in bonded warehouses and will be released January 1st 2025. So if you don't know what bonded means, basically we talk about bonded carriers, bonded warehouses. These are basically to give it a very, very you know watered-down explanation.
Speaker 1:They're secure where they're not subject to customs inspection while they're in that custody, and some right, and I'll find this too.
Speaker 2:Like they have, like you said, like they literally don't get taxed, they basically sit in like what I would call like purgatory. They're like in limbo. They're not really there, they're not where they came from, so they're not taxed yet, which allows these companies to let them sit there, lock in the price of their goods, not pay the taxes because they're not delivered, and they just sit there in limbo until they're ready to take them out. Then they incur the taxing and basically the transaction just gets a pause and there's some costs to use those. They're also involved heavily sometimes in fraud. There's a good billions episode on this where, like they do this with paintings, where, like, billionaires literally take $100 million painting, they put them in these and then they just sit there because they don't actually receive them, they don't have to pay taxes on it yet, but yet they still own it and they just try to move them around.
Speaker 2:There's a name for that too, stephen, if you can look that up I can't find it in my notes right now, but it is. There's another name for that and I found the other one too, for NVOCCs. So they report to the Federal Maritime Commission, the primary government agency responsible for regulating activities of NVOCCs in the US right. They have to obtain an ocean transportation intermediary license, an OTI, from the FMC to operate legally. The FMC also requires NVOCCs to provide proof of financial responsibility like a surety bond, because if they break these it's not like in our industry you get a $10,000 fine no one enforces. They're much higher fines If I remember they were like 75 grand or higher. Right of violations. The other thing was the CBP, us Customs and Border Protection. While the CBP does not directly license NVOCCs, they play a significant role in the import-export process because the NVOCCs have to comply with the CBP regulations and ensure that all shipments meet the necessary customs requirements. Interesting, that was a lot, but yeah, no, that's good.
Speaker 1:That's some good knowledge right there, though we don't think this is the stuff we don't think about. But if you are like I know we were talking supply chain 101, but if you're a freight broker, there is an entire market of customers that are just the freight forwarding industry. Right, these are the companies that a lot of times deal with importing goods and they have their own customers. So, for example, the Adidas shipment that we talked about earlier, the actual shipper was a freight forwarder. It wasn't Adidas, it was a freight forwarder whose customer was Adidas and they were the ones that brought their goods in't Adidas. It was a freight forwarder whose customer was Adidas and they were the ones that brought their goods in, because Adidas manufactures their stuff overseas. They had it sourced from overseas, it was brought in, the freight forwarder had it in their warehouse, which is where it was shipping out of to go to the Costco in Maryland, all right, so that's your import part, and actually the example I just gave kind of touched on a bunch of different parts of supply chain, which is like the warehousing, the distribution of all of it, and what's really cool about this and we won't get too thick in the weeds about it is every step of this process once it's in the States is an opportunity for a freight broker to be involved, right?
Speaker 1:So how did it get from the Ad? Is an opportunity for a freight broker to be involved, right? So how did it get from the adidas example? How did it get from the I'm guessing it probably came in like the port of la or long beach how did it get from there to a warehouse in tucson or phoenix, arizona? A freight forwarder could easily be involved in that, right. Yep, whether that's a there's dredge involved there or just a um you know, truckload, or it could be rail that it was taken there, or air.
Speaker 2:Or air, Just not ocean. Right, Like things coming by boat and plane right. So like if you're picking a product from an airport, it's likely tendered by a freight forwarder, not the beneficial cargo owner.
Speaker 1:For sure, and then the distribution For sure, and then the distribution. So I remember taking a logistics class in college or supply chain class, and it's really cool to see on a map. I think it showed like basically the was that spoken hub concept. Is that what it's called? We're like. You know, Amazon does like a really good job at this on a like micro level. Amazon does a really good job at this on a micro level, but basically to reduce the amount of transit time that goods have to go through or transit distance that goods have to go through to get to their destination. Distributors, manufacturers, whatever they will set up distribution centers throughout the country that serve as a general area.
Speaker 2:LTL is a great example. What's that? Ltl is a great example of that too.
Speaker 1:LTL is a great example of how it works, where, basically, you've got service centers all over the country and they're going to service a local we'll just call it a radius around that location and then they'll move it across their network to get to the destination service center, which then will get it delivered.
Speaker 1:But distribution centers or DCs as we call them for short, tend to be regionally based We'll just call them like giant warehouses stocked with goods, right, and the purpose of that is, if I need to get let's say I have you know, beer is a great example Right, we'll use beer. So if I want to get my beer, that's normally made in California. If I want to get it on the shelves in the northeast or in Florida, that's a really far distance from California, california. So what can they do? They can either produce all of it in California and then ship it out to distribution centers on the east coast, or they might pop up a contract brewing organization or location on the east coast that'll make it and then store it in a east coast distribution center which can then get it on the shelves in different locations.
Speaker 2:So yeah, I wanted to pick up on what you said too right, I think for anyone else listening out there, like and I know we're trying to cover a lot, maybe we make this a two-part episode because, like, as I'm thinking too right, like I think it's helpful for everyone out there to think about this too right, so anytime you buy something, if you've heard drop shipping in the past few years, those businesses popped up and were really popular right it track, you'll see it. You'll see it move really quick and then stop somewhere for like a day or two. Then it'll move very quickly across the country and then it'll stop. Like I live in South Florida. So, like I remembered, I ordered a surfboard, for example. Right, you could see it literally in California. You could see it sit there and then it moved like a few hundred miles and then it sat there for like two days, like it's on LTL, because it sat in that distribution center. Then all of a sudden, it moved very quickly like a truck, literally about 550 miles a day all the way to Northern Florida, like Gainesville, for example, right, then it sat there for two days. Then, as soon as it left there, it moved very quickly and was delivered to my house within like literally the drive time from here to Gainesville, right?
Speaker 2:This is exactly what we're talking about. That product came from a distribution center, moved to another one. They waited until they had enough product that needed to go to Northern Florida, filled up a truck, sent it to Gainesville. Then they waited until they had enough to probably fill, like a box truck, a smaller truck that needed to go to South Florida. Once they had enough, then they shipped all of that product at one time. So it's more efficient and cheaper to save on shipping, to make my surfboard actually reasonably priced. Then it gets to me, right? That's why it's very unpredictable from a timing standpoint when you use them, but it is effective from a cost perspective. We talk about cost versus time a lot. As a freight broker, this is an example where you see that in a network like LTL, right, but it also happens larger scales where companies do this with full truckloads as well.
Speaker 1:Yeah, and I want to being a one-on-one topic here, I want to kind of break down really quick the LTL versus full truckload versus partial, just to kind of clarify that.
Speaker 1:So LTL is less than truckload. So we're talking maybe a single pallet or three pallets or something like that, and what an LTL motor carrier will do is they will take pallets of goods or just you know, it doesn't have to be a pallet, it could be barrels of some kind of chemical, barrels of some kind of chemical, but they'll take, I'll just say, pallets of goods from multiple customers, consolidate them, put them on a truck and move them in a certain direction. That's the whole goal. There is, you're not using a dedicated truck and spending the money for a dedicated truck. You're sharing space with other shippers or customers on a shared trailer, whereas full truck load you're filling up the entire truck with one customer's freight. Then there's partial, which is somewhat of a hybrid in between, where maybe I'm going to use part of a truckload and share half of it with somebody else, versus LTL, where you might have 20 different shipments on one truck or on one trailer.
Speaker 2:I want to pause there because this is a great prospecting topic and strategy. What I did very early on in my career when it was really still hard to get customers to get trust and to find opportunities to move freight right, it is working between those three things and asking questions to determine what the customer really should be doing, because sometimes they don't understand the correlation between price and time and service, right. So, for instance, let's say you have two pallets that need shipped from Miami to Oregon, right To Portland, Oregon, right. Okay, If those two pallets don't need to be there by any certain time because they don't expire, they're not perishable and they literally aren't needed in any short time window. If they get there in the next week or two, like everybody's, okay, they care more about price. Usually LTL is the better way to move that.
Speaker 2:Now let's go one step further. Let's say you really do need it there reasonably fast. You want some control and visibility into it moving, but you don't really want to go full truckload because it's two pallets. Now, if you understand this and they go, hey look, this load needs to pick up today. It's the 21st. I need it there really, probably in like five to six days and I know that's about the transit time. But I don't want to pay for a dedicated truckload. I don't want to pay for 40,000 square you know 40,000 pounds worth of space, or 53 square you know 53 feet of space, because I only need two pallets and I don't need to pay for the whole truck.
Speaker 2:So now the step above LTL is a partial option where you're going to look at and you price this basically what would it cost to do a whole truckload and then take that number and divide out the space in the truck you're using. To give you a starting point, you still got to post these loads up to get an idea if there's enough trucks that run partials from here to there would be willing to and what they would charge, Because some lanes there's lots of partial trucks that do this a lot and you get a decent rate because there's a lot of them. Some lanes there's almost no trucks going there. So getting a partial option in itself is very hard and you might not even be able to do it. You're shipping from the middle of nowhere to the middle of nowhere. You literally might not be able to find a truck willing to partial their space out. So there's no perfect way to price those. You really do have to post them and kind of do this to get some experience.
Speaker 1:It totally depends on a ton of other factors and how you go, what, how much space they have available, etc and the timing.
Speaker 2:So you need to post these and put in the comments. The weight, the size, the dimensions and dat will allow you to do this. Carriers know this is a partial load when you say that, but put it in the comments partial load, right, and then you'll get different phone calls and you'll get different pricing. Right. Then the one step above that is dedicated. Hey, this has to get from here to there. It has to deliver on this time. I can't have this truck stopping anywhere to pick up anything along the way. Now you're at full truckload, even though it's two pallets.
Speaker 1:Or you could do like a box truck, straight truck, sprinter van, something like that as an alternative option. If you can source one, you can.
Speaker 2:And I would say, though, that what we've seen recently in the market is a box truck isn't typically much cheaper than a full truck. Like most box trucks are running close to two bucks a mile, which in some lanes you can get a full truck load and a different market. There's usually a disparity between the two to your point where you get a cheaper running on a box truck, but you still can, and that still could save you some money because they're smaller carriers, they need to work. Sometimes you'll get a better rate, right. And then the other question you want to ask is okay, do you mind if your cargo is loaded with other cargo? There is some cargo that they want only loaded with their cargo for a number of reasons. Right, it could be kosher food, for example. It could be an expensive piece of equipment that they don't want anything else near it, and they don't want their cargo at another pickup and delivery with a door open for anyone to see it, because it's maybe high theft. It's high value. Don't break the seal, right, right? So these are questions to help really get your customer to understand. You know your job and industry and you can provide more than one option to get something from point A to B, but this is the caveat.
Speaker 2:If you ask the right questions, hey, tell me about this shipment. Tell me what's important to you. Is it being there on time? Do you have flexibility on delivery date? Do you mind it being loaded with other cargo? Do you have some flexibility on the service or the time? If they don't care about any of those, again, maybe you're at LTO, you can get it cheaper. Maybe, maybe you're at LTO, you can get it cheaper. Maybe all of these things, or some, are important and they fall in between. But in order to effectively be a good freight broker, you need to be communicating with your customer by asking them questions, not just telling them what they should be doing. This is going to help them learn, and also help them learn that you really do know how to do the job that you're asking them to hire you for.
Speaker 1:Yep of that. You're asking them to hire you for Yep. So all that to say, we kind of bounced around a lot in this episode. But there's opportunity out there in all these different sectors. So we kind of gave you a little bit of insight into the import process, some discussion on distribution, modes of transportation, things like that. But there's opportunity. From imported goods at the ports your customer could be a distribution center, a freight forwarder. It could be a retailer. It could be a distribution center, a freight forwarder, it could be a retailer. It could be a supplier of a certain product. It could be a raw material, someone who sources raw materials. It could be a fully produced end product that has to get to the end user. So it's a very, very broad landscape. As far as um, you know the reach of our industry. But that's a little one-on-one talk. On supply chain, we could definitely do a multi-part series to break down the different parts of it, because we kind of hopped around quite a bit there. But hopefully you learned something new. I definitely did.
Speaker 2:I think there were definitely a lot of takeaways that we were able to cover. I think. Think maybe if we do a part two like we can talk a little bit more about rail, a little bit more on how you choose intermodal versus full truckload. We talked about partials, LTLs versus, you know, dedicated, and a little bit about international. But these are all different options you really have available to you as a freight broker to utilize to offer to your customers. We have so many different options in our tool belt to be able to help and assist. That's where freight brokers add their value.
Speaker 2:It's not just doing what a trucking company does. Again, this is the thing that gets me the most is that I see this from trucking company owners. They're like, oh, I can do freight brokerage. I'll just get my brokerage license, tell my customers to send me loads, and they'll just do that. Freight brokerage I'll just get my brokerage license, tell my customers to send me loads, and they'll just do that. We don't offer the same service and we offer more of them. Our flexibility and understanding of these options is how you provide value and how you differentiate yourself as a broker, Because if you're just talking about trucks, you're missing a whole lot of opportunities to be able to expand your relationship with your customers and do more business together. For sure, For sure.
Speaker 1:Now the reality is truck. You know, the full truck load is where a lot of brokers start, but just don't limit your, your options, to just that. So well, good, good discussion. Any final thoughts?
Speaker 2:Yeah, whether you believe you can or believe you can't.
Speaker 1:You're right, and until next time, go bills.