What Is Freight Broker Bond

Q: What are the legal requirements to operate as a Freight Broker?

You must submit your Freight Broker Registration application to the Federal Motor Carrier Safety Administration (FMCSA) through their Unified Registration System. Upon receiving your pending US DOT number you’ll also need to meet the additional requirements of proof of financial responsibility by posting a $75,000 Surety Bond or $75,000 trust fund, filing your BOC-3, and filing a yearly Unified Carrier Registration.

Q: What's the difference in being a Freight Broker and Freight Broker Agent?

The first one works on his own, runs his company. The second one is an employee of a brokerage company and gets a commission percentage of the brokerage fee.

Q: Can I work at home?

You not just 'can' but you 'must' work at home at the beginning in order to save money, keep your expenses low while you grow and develop your business.

Q: What is a Freight Broker (Property Broker)?

Property Broker is the correct terminology for many names used in the business to identify what we do. Truck Broker, Freight Broker, Load Broker, Freight Agent, Transportation Broker or simply Broker or Agent are all interchangeable terms synonymous with ‘Property Broker’. An active FMCSA registration to operate as a Property Broker allows a third-party to arrange pick-up and delivery of a Shipper's product by a Carrier without ever having physical control of the shipment.

Q: Does a Freight Broker need a broker’s license specific to their state or in each state?

Freight Brokers are regulated by the Federal Motor Carrier Safety Administration (FMCSA). The Freight Broker registration with the FMCSA allows us to make arrangement for the transportation of freight anywhere within the United States. So, no, you will not need a separate freight broker’s license for each state.

Q: How much does it cost to apply for your Freight Broker Registration / US DOT # with the FMCSA?

The FMCSA charges $300.00 to apply for a registration with an operating status of a motor property carrier, motor passenger carrier, freight forwarder or freight broker. The FMCSA does require all new applicants to complete their registration application online through their Unified Registration system. No new applications by mail. If you’d like, a Freight Broker Training filing specialists will file for your Freight Broker Registration on your behalf with the FMCSA for $450.00 (includes the $300.00 fee charged by the FMCSA). Plus, our course graduates are eligible for one Freight Broker Registration filing service included in their course cost ($150 value, filing service does not include the $300.00 fee charged by the FMCSA).

Q: What is a BOC-3 and how much does one cost?

A BOC-3 form is provided by a process agent. It’s a blanket form of coverage that designates a representative in each individual state upon whom court papers may be served in any proceeding brought against a motor carrier, broker or freight forwarder. A BOC-3 form and filing is usually priced between $25 to $150, depending on the process agent providing the form.

Q: What is the difference in being a Freight Broker or a Freight Broker Agent?

A broker is the owner of his or her own company. They are required to meet all legal requirements (FMCSA Registration, Bond/Trust Fund, BOC-3) to operate as a broker. An agent works under the umbrella of the registered broker and typically receives a commission percentage of the brokerage fee.

Q: Is Freight Broker training school required?

Currently the answer is “Not yet”. Soon, the FMCSA will be establishing new rules requiring brokers to show proof of knowledge or have relevant experience. However, whether training is required by law or not, the reality is that the failure rate for those who attempt this business without freight broker training is high. In order for a broker to be successful in any industry (stock broker, real estate broker, etc.), formal training is a must. Freight Mover School will prepare you to perform broker duties in a profitable, ethical manner, giving you the tools needed to be successful in the field.

Q: Should a Freight Broker school be affiliated with a freight brokerage?

Yes! And the instructors should be actively engaged in brokering freight. How can an instructor teach something they don’t do themselves? When a school tells you they are affiliated with a brokerage ask for the brokerage name and US DOT # or MC # so you can check their FMCSA registration or authority and make sure it is current.

Are you the owner of the cargo and don`t know how to securely make a deal with the shipping company? In this case, a freight broker bond and the services of the specialist himself are a must-have. But what is the meaning of this document? And how must it be formatted? Let’s understand it together!

What Is a Freight Broker Bond?

So simply put, a freight broker bond is an agreement that is serves to prevent fraudulent activities on the part of a freight broker. The importance of this paper is that the issuer of the bond guarantees that he will shoulder all his responsibilities without further delay.

Thus the bond protects cargo owner from losses and gives a guarantee to the carrier that he will be paid in a timely manner.

In the event that a broker refuses pay a carrier for work performed, the carrier can initiate proceedings with a view to receive the monies that the broker owes to them. In a result, if the surety reviews the case and it will valid they will pay out the value of the claim (estimated cost a bond) to the carrier. Then the broker would be responsible for the payment reimbursing the surety for the cost of the claim.

How Much Does a Freight Broker Bond Cost?

In general, the price of a freight broker bond (named as the bond premium) is a percentage of the $75,000 bond amount. However, this percent isn`t permanent and it will vary depending on the experience and level of expertise of the freight broker.

So freight broker bond cost depends on the following main factors:

experience and skills in this area;
fixed and liquid asset;
current or previous bond requirements;
business financials.

A company with good financial standing may offer a freight broker a bond worth $1,500 per year. Thus, it will be an advantage for the broker if he lowers the value of his bond and demonstrates his assets and liquidity and by improving his credit.

What Are the Types of Freight Broker Bond?

Before applying for a freight broker bond, a broker should understand what option of it he will choose. Today the most popular way is the BMC-84 bond. However, there is one more method to fulfill that requirement, and that is the BMC-85 trust fund.

The main difference between the two types is that the BMC-84 Bond is managed by surety defined company and the BMC-85 is created with the help of the government.

What Is Necessary to Obtain a Freight Broker Bond?

And now that you know what a freight broker bond is and when it is used in business, it is important to understand the process for getting a bond.

Obtaining a freight broker bond is possible in any insurance agency or firm associated with this industry. Having chosen a firm, the broker provides information related to the contract:

the name of the owner of the cargo;
the clear value of the bond in dollars;
business address and other financial data.

Then the broker must pay a percentage of the freight broker bond up front before the firm will process it. As a rule, payment occurs with a credit card or a check. And its processing will be not more than 24 hours.

The bond needs to be renewed.

It`s important to know that any bond is valid for only 1 year from the issue date. So, timely renewal is required to prevent revocation of the band.

Can a Broker Get a Freight Broker Bond with Poor Credit?

Bad credit history does not prevent you from getting a bond. However, it must be taken into account and in this case the cost will be higher.

In general, brokers with a credit score below 650 and they haven`t got any credit history are considered high-risk candidates. Thus, this is the reason for the variation of the rate with a bad credit history from 5% to 12%.