Co-Broker Agreement: Complete Template & Guide for Freight Brokers
Below is a co-broker agreement template. For legal protection, have your attorney review any agreement before implementation.
CO-BROKER AGREEMENT
This Co-Broker Agreement (the "Agreement") is made effective as of [DATE] by and between:
PRIMARY BROKER: [COMPANY NAME], MC# [NUMBER], a licensed property broker pursuant to FMCSA regulations.
Address: [ADDRESS]
Contact: [NAME, PHONE, EMAIL]
CO-BROKER: [COMPANY NAME], MC# [NUMBER], a licensed property broker pursuant to FMCSA regulations.
Address: [ADDRESS]
Contact: [NAME, PHONE, EMAIL]
1. PURPOSE
This Agreement establishes the terms under which the parties will co-broker freight shipments.
2. TERM AND TERMINATION
This Agreement shall remain in effect for one year from the effective date and shall automatically renew for successive one-year periods unless either party provides 30 days written notice of termination. Either party may terminate this Agreement immediately if the other party breaches any material term.
3. BROKER AUTHORITY
Both parties represent and warrant that they are duly authorized property brokers licensed by the FMCSA, that they have secured and maintain a surety bond or trust fund as required by 49 C.F.R. §387.307, and that they will maintain their authority during the term of this Agreement.
4. RELATIONSHIP OF PARTIES
The relationship between the parties is that of independent contractors. Nothing in this Agreement shall be construed to create a partnership, joint venture, or agency relationship.
5. CO-BROKERING PROCEDURE
a) Primary Broker may offer freight to Co-Broker for arrangement of transportation.
b) Co-Broker shall provide written acceptance of offered freight via email or electronic load tender.
c) Each accepted shipment shall be confirmed with a Rate Confirmation Sheet specifying all shipment details and compensation.
6. COMPENSATION AND PAYMENT
a) Primary Broker shall pay Co-Broker [X%] of the gross revenue received from the shipper, or as specified in individual Rate Confirmations.
b) Payment shall be made within [X] days after Primary Broker receives necessary shipping documents and invoice from Co-Broker.
c) Payment is not contingent upon Primary Broker receiving payment from its customer.
7. CARRIER SELECTION AND OVERSIGHT
a) Co-Broker shall select only carriers that:
i. Have active operating authority
ii. Have adequate insurance (minimum $1,000,000 auto liability, $100,000 cargo)
iii. Have a satisfactory safety rating or no rating
iv. Have executed a written agreement with Co-Broker
b) Co-Broker shall provide carrier documentation upon request by Primary Broker.
c) Co-Broker remains solely responsible for paying all carriers it engages.
8. INSURANCE
Both parties shall maintain commercial general liability insurance of at least $1,000,000 per occurrence and contingent cargo insurance of at least $100,000 per occurrence.
9. CONFIDENTIALITY
Each party agrees to maintain the confidentiality of the other's customer information and rates, and shall not use such information for any purpose other than performing under this Agreement.
10. NON-SOLICITATION
a) Co-Broker shall not solicit or accept traffic directly from any shipper introduced by Primary Broker for a period of two years following the last shipment handled under this Agreement.
b) Primary Broker shall not solicit or engage directly with carriers introduced by Co-Broker for a period of one year following the last shipment handled under this Agreement.
11. INDEMNIFICATION
Each party shall indemnify, defend and hold harmless the other from any claims, damages, liabilities, and expenses arising from its breach of this Agreement or its negligent acts or omissions.
12. DISPUTE RESOLUTION
Any disputes arising under this Agreement shall first be addressed through good faith negotiation between the parties. If no resolution is reached within 30 days, disputes shall be resolved through binding arbitration in [LOCATION] according to the rules of the Transportation Arbitration Board.
13. GOVERNING LAW
This Agreement shall be governed by the laws of [STATE] without regard to its conflict of laws principles.
14. ENTIRE AGREEMENT
This Agreement constitutes the entire understanding between the parties and supersedes all prior agreements, representations, and understandings.
15. MODIFICATIONS
No modification of this Agreement shall be valid unless made in writing and signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
PRIMARY BROKER CO-BROKER
_______________________ _______________________
By: [NAME] By: [NAME]
Title: [TITLE] Title: [TITLE]
Date: [DATE] Date: [DATE]
What Is Co-Brokering? (Definition & Legal Status)
Co-brokering occurs when one freight broker (the primary broker) engages another broker (the co-broker) to help arrange transportation for a shipper's freight. The primary broker maintains the relationship with the shipper, while the co-broker leverages their expertise, carrier relationships, or geographic focus to help move the load.
This practice is entirely legal under FMCSA regulations, provided both parties have active freight broker authority and the shipper's contract doesn't specifically prohibit it. The key distinction that makes co-brokering legal is transparency – all parties (including the shipper, when appropriate) are aware of the arrangement.
In my 30 years in logistics, I've seen co-brokering evolve from a practice viewed with suspicion to a strategic tool used by sophisticated brokerages to expand their service capabilities.
Co-Brokering vs. Double Brokering: Critical Differences
Many industry professionals confuse these terms, but the distinctions are crucial:
| Aspect | Co-Brokering | Double Brokering |
|---|---|---|
| Definition | A broker works with another broker to move freight, with all parties aware | A carrier accepts a load from a broker and re-brokers it to another carrier without disclosure |
| Legality | Legal when done properly | Illegal and violates FMCSA regulations |
| Transparency | Full disclosure between parties | Deceptive, hidden from original broker |
| Authority Required | Both parties must have broker authority | Often done by carriers without broker authority |
| Risk Level | Low when properly documented | High risk of non-payment, cargo claims, fraud |
| Insurance Coverage | Clear chain of liability | Insurance often won't cover undisclosed parties |
| Payment Structure | Clearly defined in contract | Often results in payment disputes |
The fundamental difference is transparency and consent. Co-brokering is an open partnership, while double brokering involves deception that can lead to significant legal and financial problems.
Benefits of Co-Brokering for Freight Brokers
When executed correctly, co-brokering offers several strategic advantages:
- Expanded Service Capabilities: Access specialized equipment or expertise you don't have in-house
- Geographic Expansion: Leverage a co-broker's strong presence in regions where you have limited carrier networks
- Customer Retention: Meet all customer needs rather than turning down challenging loads
- Niche Market Access: Partner with brokers specializing in hazmat, oversize, temperature-controlled, or other specialized freight
- Revenue from Otherwise Declined Loads: Generate at least partial revenue from loads you might otherwise decline
- Border Crossing Expertise: Work with brokers experienced in international shipments
- Peak Capacity Handling: Manage seasonal or unexpected volume surges
In 2020, one of my brokerage clients implemented a strategic co-brokering program and increased their annual revenue by 22% without adding staff, simply by being able to say "yes" to more customer requests.
Essential Elements of a Co-Broker Agreement
A comprehensive co-broker agreement must include these critical components:
1. Party Identification & Authority Verification
- Complete broker information for both parties
- MC numbers and verification of active authority
- Primary contacts and escalation procedures
2. Commission Structure & Payment Terms
- Clear percentage or flat fee commission breakdown
- Payment timing (regardless of carrier payment status)
- Invoice submission requirements
- Quickpay options and associated fees
- Dispute handling procedures
3. Operational Responsibilities
- Load tendering process
- Carrier selection standards
- Required carrier documentation
- Track and trace procedures
- Detention and accessorial handling
- Document collection and sharing
4. Legal Protections
- Non-solicitation clauses (protecting both the shipper and carrier relationships)
- Confidentiality provisions
- Indemnification clauses
- Insurance requirements
- Term and termination conditions
- Force majeure provisions
5. Communication Protocols
- Required touchpoints during shipment
- Systems access and technology usage
- After-hours contact procedures
- Issue escalation framework
Selecting Reliable Co-Broker Partners
Choosing the right co-broker is critical to successful partnerships. Before entering any agreement, conduct thorough due diligence:
- Verify active broker authority through the FMCSA website
- Check credit ratings (through services like DAT Authority or TIA Watchdog)
- Request peer references from other brokers who've worked with them
- Verify insurance coverage including contingent cargo and general liability
- Assess technological compatibility for load tracking and documentation
- Evaluate industry specialization and geographic expertise
- Review their carrier vetting procedures to ensure they meet your standards
In 2022, I worked with a mid-sized brokerage that lost over $75,000 due to a co-broker relationship entered without proper vetting. The co-broker had a history of payment issues that would have been revealed with basic due diligence.
Managing Co-Broker Relationships Successfully
Effective co-broker management requires:
Clear Communication Protocols
- Establish required check-call schedules
- Document all agreements in writing
- Create escalation procedures for issues
- Set expectations for after-hours availability
Performance Tracking
- Track on-time pickup and delivery percentages
- Monitor documentation submission timeliness
- Record issue frequency and resolution speed
- Evaluate carrier quality and compliance
Technology Integration
- Provide limited TMS access when possible
- Use shared tracking platforms
- Implement document sharing solutions
- Consider API connections for larger partners
Modern platforms like Foreigh can help streamline co-broker management through document automation and verification tools that ensure all parties maintain compliance with the agreement terms.
Common Co-Brokering Pitfalls and How to Avoid Them
| Pitfall | Prevention Strategy |
|---|---|
| Payment delays or disputes | Clearly document commission structure and payment timing in the agreement |
| Shipper relationship conflicts | Strong non-solicitation clauses with meaningful penalties |
| Poor carrier selection | Establish minimum vetting standards in the agreement |
| Communication breakdowns | Define communication expectations and escalation procedures |
| Unclear responsibility boundaries | Detail exactly which party handles each aspect of the shipment |
| Accessorial charge disputes | Specify in advance how detention, layovers, and other charges are handled |
| Document collection failures | Set clear expectations for POD and invoice submission timeframes |
How Foreigh Supports Effective Co-Brokering
Foreigh's platform includes several features that streamline co-broker relationships:
- Document management features that organize and automate co-broker agreements, making them easily accessible when needed
- Smart document parsing to extract key information from co-broker paperwork
- Carrier verification tools that help ensure all parties are using compliant carriers
- Automated document workflows to ensure all required paperwork is collected
While co-brokering offers significant benefits when done correctly, proper documentation and clear agreements are essential. The most successful brokers view co-brokering as a strategic tool to expand capabilities rather than a last resort when capacity is tight.
For more information on how to integrate co-broker agreements with your broader contract management strategy, visit our freight broker contracts guide or learn how to protect yourself from double brokering. You might also find our carrier onboarding guide helpful for establishing consistent vetting standards.
Frequently Asked Questions About Co-Broker Agreements
Is co-brokering legal? Yes, co-brokering is completely legal as long as both parties have active broker authority from the FMCSA and the shipper's contract doesn't specifically prohibit it.
How is payment typically structured in co-broker agreements? Most co-broker agreements use either a percentage split (typically 50-70% to the co-broker) or a flat fee arrangement. Payment terms usually range from 15-30 days after document submission.
Does the shipper need to know about co-brokering arrangements? While not always legally required, transparency is recommended. Some shippers specifically prohibit co-brokering in their contracts, so always check shipper agreements before co-brokering their freight.
What's the biggest risk in co-brokering? The primary risk is shipper relationship damage if the co-broker provides poor service. This can be mitigated with strong agreements, careful partner selection, and clear communication protocols.
Conclusion
A well-crafted co-broker agreement serves as the foundation for successful partnerships between freight brokers. By clearly defining responsibilities, payment terms, and operational expectations, these agreements protect both parties while enabling them to expand their service capabilities. Whether you're looking to access specialized equipment, extend your geographic reach, or simply handle overflow volume, strategic co-brokering relationships can be a valuable asset to your brokerage—provided they're built on proper documentation and clear communication protocols.