Low Rates, Claims, & More Q&A | Final Mile 79

Nate Cross & Ben Kowalski answer your freight brokering questions and discuss:

• Working as a Freight Broker as a Foreigner
• Low Rates Explained
• Freight Claims with a Co-Broker Arrangement

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Chapters

• 0:00 Foreign Ownership in Freight Brokerage
• 10:44 Market Analysis and Co-Broker Claims

Transcript

Speaker 1: 0:19

All right, Welcome back for Final Mile. We've got three listener questions today. These come from YouTube and Facebook, I believe this week. But first, if you are new, make sure to check out all of our content Freight360.net, including the Freight Broker Basics course for a full length educational option. Share it to their friends, leave a comment, review all that good stuff and please check out our lovely sponsors. We've got Quickscope, Levity, Bluebook and DAT that will help support this channel, and thanks to our sponsors for sponsoring us All. Right, Ben, our first question today is can I become a freight broker without being a US citizen? Short answer is yes, but I wanted to break this down a little bit because I've had a lot of people ask about the legality Define freight broker right.

Speaker 2: 1:12

Can you own a freight brokerage as a foreign yes or non-US citizen?

Speaker 1: 1:19

Yes, you can open up a US-based business and get a tax ID number as a foreigner.

Speaker 2: 1:26

Don't you need to have a green card or a visa? In some ways, most of the clients I've worked to either had visas or they had someone in the United States that was able to establish a bank account. I don't know how you do it if you are completely outside of the US, how that works.

Speaker 1: 1:43

Well, you can be, and, uh, you can 1099 under a us brokerage and run your brokerage agency that way for sure. Um, you can be an employee as a foreigner. Um, so, oh, you're saying, can they go get their authority, can they? Own, get their authority I think your authority is tied to a social or hold on a second.

Speaker 2: 2:04

Let me think here, or a tax ID Like doesn't it have to be? Yeah, but you can get a tax now.

Speaker 1: 2:07

We're man.

Speaker 2: 2:09

I picked a question.

Speaker 1: 2:10

I don't know if we have the answer to it.

Speaker 2: 2:12

I don't think you can get, I don't think you can necessarily establish. At least it's if there is a way it is not straightforward to being able to have a US bank account and an LLC in the United States.

Speaker 1: 2:23

Well, let's look right here the.

Speaker 1: 2:25

Unified Registration System right here To get started, click here Proceed. It takes you to log oh, they updated it. Logingov Ooh. So there you go. Dot gov Ooh. So there you go. Well, in my experience, here's how I've seen most people do it. If they're, if they're outside the US, they're usually contracting as a, as an agent for a licensed brokerage, and again, you're going to operate the same way. You're going to operate independently and run your book of business and you just have a different, you know arrangement on the commission and who does what. But yeah, I mean, by no means do you have to be a US citizen to work in freight brokerage. There's actually a lot of companies that intentionally use labor from different countries for various reasons. Excuse me, labor from different countries for various reasons. Excuse me, obviously, cheaper cost is one. But there's a lot in like Mexico, where you can get like dual, you know bilingual, and it's very effective. What do you got?

Speaker 2: 3:34

So, yes, as a 1099 agent, but this was the piece that I remembered. Ok, you can you bridge business structure and registration? You can register an LLC or C Corp or S Corp in the US, but most non-US citizens opt for an LLC because it's simpler. However, you do need a registered agent with a US address and some states require additional documentation for foreign owners. So where you set your LLC up is dependent on the state, because they're in a state, not in a national database. So each state has different requirements. Most require a registered agent with a US address and mostly that's for like legal reasons, like if they sue somebody, they need somebody in the United States, I guess, to serve the papers to in some ways. But you would need a registered agent with that US address.

Speaker 2: 4:23

Now an EIN or a tax ID. You need to open a US bank account. Non-citizens can obtain an EIN from the IRS, even if they don't have a social security number, by filing a Form SS-4. Now for the MC through the FMCSA you can apply. That's not the issue. So getting your authority number doesn't have any additional steps. But then when you get into getting your bond, many non-US citizens face challenges, because getting a bond without US credit history is very difficult, but some bond companies will allow international applicants, and then the bank account becomes an issue, right? Because, like you, do need an EIN, which is a tax ID for your business from the IRS, to be able to handle payments inside of the United States.

Speaker 1: 5:16

So here's and I've done this for agents and I just looked it up too and it seems to check out. It should be the same for getting your own authority. There are companies you can just looked it up too and it seems to check out. It should be the same for getting your own authority. There are companies you can just Google it, like establishing a US business as a foreigner. There are companies that will literally do everything for you. They will get you a PO box, they will file your paperwork to get your tax ID number, they will assist you in getting a US bank account opened up and do all of that and that way because I mean, yeah, they probably provide the registered agent.

Speaker 2: 5:49

They probably have a service just like the BOC3s or like hey, this person will operate as your US based registered agent and then once you have that, then it's easier to get the tax ID and get the bank account open, because like yeah, the hard part is the credit history for the bond really, and getting a bank account which requires an EIN. And to get your LLC you probably need somebody with the US address to be a registered agent. Every client I've worked with had a registered agent. There was someone in their company that operated as their agent in the United States. That address became was applied for the LLC and then to get the tax ID and then they opened the bank account with that person and that business. There you go.

Speaker 1: 6:31

So a lot of options there. Path of least resistance is probably to work underneath somebody and figure out if you want to do this long-term, because otherwise you're going through a whole lot of steps just to get into an industry that you may or may not want to pursue long term. Yes, All right.

Speaker 1: 6:45

Next question let's see here Ooh, why do some lanes only pay 80 cents per mile? How do you make money that way? I actually read into that yesterday as well. I don't know if it was 80. Actually, I think it was around 80. It was Florida outbound. I saw 70.

Speaker 2: 7:01

I saw 70 cents come in Florida outbound. I saw 65 cents but they were mostly day rates. They were stuff less than 600 bucks and it was stuff going from Florida to like Georgia that was paying 60 cents a mile and 70 cents a mile.

Speaker 1: 7:13

So I had some, that was, it was Florida to Alabama and this was not including fuel. Fyi, this was line haul only. But the question came up and that's why I chose this one, because I was like I literally just explained this, because the lady was asking me yesterday she's like or no? I wasn't, it wasn't, it was somebody else. I was explaining to somebody and he was asking me like 80 cents a mile, like how, how do people, how do they get, make money? And I'm like florida outbound right now is the opposite of what Florida outbound will be in four months. And I said Florida outbound right now is exactly what Florida inbound will look like in four months. So you think about the supply and demand, right, and so what. But you know, if you're a carrier and you see this, it's like triggering, like 80 cents a mile, those brokers are, they're raping us and it's like no, here's why's why.

Speaker 1: 8:05

Okay, somebody paid you a lot of money to go into florida. Clearly, because going out of florida there's no freight relatively, so people will take whatever they can get and that's why it's cheap to get out of florida, take a ship out of florida, um, but if I'm trying to get something delivered into florida, like, for example, the one I looked at yesterday was um in the orlando area, um, but let's say you live down in South Florida. Let's say I'm sending a truck down to Fort Lauderdale. Ok, like now, in the current it's January. Well, it's probably February when this releases. But either way, same difference there is very, very little shipping out of Florida right now that I'm going to have to pay someone a lot of money to entice them like probably $3, $3.50 a mile to go down to Florida, knowing that they're going to probably either take cheap freight out or deadhead up to Georgia before they get some kind of load.

Speaker 1: 8:58

And that is just supply and demand. It's not that like, oh, it's super low paying to drive trucks in Florida. It's like, no, it just depends on the season and you know, and all that stuff. And it's going to also change based off of the equipment type. So, like reefers, think about what they're used for. Right, they can cool and they can heat. So in the dead cold of winter up north, reefers will be in higher demand and in Florida in the summertime, the, you know they're higher demand for refrigeration. So your, your rate heavily depends on supply and demand. That's why. So how do you make money that way. You made it on the other leg of your trip.

Speaker 2: 9:39

So you have to get familiar with the markets and again think of it even more simply. Right, if you're. There were only two, three cities in the United States. One city had a whole bunch of freight that needed moved to no trucks. Right, that's a very tight market. If you are a truck there, you are going to make above market rates when you leave because there's more loads and there are trucks. So in theory, if it should be two bucks a mile, you'd get like 350 a mile to take a load out of there. If you're going to another city that has no loads but the company in that city you picked up from needs their load to go to Florida and there's no freight coming out of it, you're going to get paid maybe $3.50 to $4 a mile to go into Florida because they know they've got to pay you to incentivize you to go somewhere where you won't get any freight coming out. And if you go to a market that has just as many trucks and loads, you should theoretically be at like two bucks a mile going in and two bucks a mile going out, unless you're going to a market where there's nothing. That's why you pay above market rates to go to sometimes very rural areas in, like South Dakota and Iowa, because there's not a lot of things made there that ship out of it. And then in markets where there's a lot and then a little, they go up and down, meaning the inbound rate never really gets to equilibrium. It'll be four bucks to get in and 80 cents to go out and then it'll flip and then you'll get four bucks to go out and people will pay you 80 cents to come in because everybody wants to get down here to get the four bucks a mile to leave, right. So they're always equilibrium.

Speaker 2: 11:05

And the reason it's not just like super easy to keep in your head is all these cities and little markets have different loads that get made and need shipped out every day and there's different trucks, amounts of trucks, every day. So they go up and down and they change. So if, like you really want to run a profitable trucking company, you got to familiarize yourself with, like, the heat map on DAT to see where are there more loads in their trucks. I will make more money if I can get my truck into that market. If they want to pay me to go into a market where there's no freight and a lot of trucks, I better get a lot of money to go there, because I am going to have to leave empty or drive to the next state before I can find a real load that's going to pay me any money. And that's the whole way the entire thing functions from the trucking point of view.

Speaker 1: 11:47

So if you guys don't have DAT, we have a link in our description to get you 10% off your first year. Check it out. But DatIQ, their analytics tool, has a market conditions map. This thing is golden. You can look at inbound and outbound. So, like right now, outbound, like your tight markets right now that are probably high paying going out of, like the New York City area, chicago, dallas, houston, la, southern California. Right, if I look at inbound, where is it tight? South Florida or not? Where is it? It's considered a tight inbound market, meaning that, um, exactly what we just outlined right there, it's going to be expensive to send someone there because there is um, not the amount of outbound freight um versus the inbound. So, um, yeah, good stuff, check that out, use the link, support your boys all our last question how do I handle a claim in a co-broker situation?

Speaker 1: 12:55

I used another broker to book an LTL carrier and the carrier caused damage at the receiver. I've had this happen. Okay, the answer is it depends, but this is very, very important when you're entering into a co-broker agreement, have a contract and part of that contract should be a clause that establishes the SOP. In the event of a claim, standard procedure would be. If I'm broker A and I'm giving my load to broker B, ben, and Ben hires Steven Trucking Company, ok, the standard would be since Ben's hiring the truck, ben should handle the claim, and that's how I've always done it and I've literally had this. I've literally had an LTL one that happened where we used Global Trans and the carrier knocked something over like spilled something at the receiver. Global Trans will file the claim on the carrier to make my customer whole.

Speaker 1: 13:48

But it's important to have that conversation because who cares the most about the claim? It's my customer, so I really care about it for them. Ben, does he care about the claim as much? I mean, if he runs a good business, sure he wants to keep me happy, but it's not his customer, what does he really care? You know what I mean. If he runs a good business, sure he wants to keep me happy, but it's not his customer, what does he really care? You know what I mean.

Speaker 1: 14:06

So that's why it's really important to have that contractual language in place to make sure that that's all done. You want to make sure that who's handling the claim, who's responsible to make sure the carrier has the proper amount of insurance and it's not excluded commodities, et cetera. That's why you have those conversations Double check them. Don't just hop into double or to co-broker situations blindly or without paperwork involved and definitely don't double broker knowingly Like I. I I literally talked to a guy the other day and was like, yeah, he's like can I like I just grab loads off the load boards and give them to a truck and I'm like no, that is the definition of double brokering, man. So yeah, you got anything else on the co-broker claim.

Speaker 2: 14:51

I don't, but you really, just to point out, like you got to make sure you look at the contract on. The person that asked this question is going to expect you to be responsible for it because you're the one they're doing business with. Even though your contract requires the LTL company to deal with the carrier and file it and it ultimately fall on that carrier's insurance. You're going to be responsible and in practice, a lot of shippers are going to withhold your accounts receivable until you get that resolved, which means you are taking that risk.

Speaker 1: 15:28

Which then means sure you can just withhold it from the co-brokers pay, I suppose.

Speaker 2: 15:32

But you are probably not doing that much business with them, right? Like I can't imagine like if this is a customer you've done a lot of business with, they might owe you 50 grand you might have ran one load and you're going to hold what?

Speaker 1: 15:42

three thousand dollars and expect that to offset it like so here's the other thing to note on this situation, because the question was asked about damage at the receiver. So, uh, we explained if it was damage of the of the product at the receiver, um, let's say, because I've had this happen, let's say they physically damage the property at the receiver or the shipper, for that matter. I've've had both happen. I've had um, the driver hits something and damages it. I've had the, uh, I've had driver hits a power line, um pulling in, um.

Speaker 1: 16:14

So these are interesting ones. Like, yeah, a carrier's insurance, like their, their, um auto policy covers damage. Like same thing if they crashed into someone else, right, so it will happen. But I had one that was like it was five hundred dollars in damage and literally the easiest way to get it settled was like the owner operator just like settled it, like via cash to the receiver because he like hit something and dinged it up and he's like I'm'm not gonna file my insurance, it's gonna, it's cheaper to just pay you out of my pocket than to have my rates go up, um. So yeah, those are interesting when, when something little like that happens I've had also had like the um the shipper or the receiver puts a forklift tying through the the side of the van, it's like side of the trailer.

Speaker 1: 17:05

Those are wild. Yeah, you get those weird disputes Because then you're like well, who covers that? It was the shipper was loading me. Do they have an insurance policy that's going to pay me? Do they have to sue him for it? It gets messy. Anyway, hope that this stuff doesn't happen to you. But in the reality is claims and stuff will happen. Good questions, but in the reality is claims and stuff will happen. So good questions, appreciate you guys.

Speaker 2: 17:29

All right, man, final thoughts we got whether you believe you can or believe you can't, you're right.

Speaker 1: 17:34

And until next time, fly Eagles, fly and go bills.