Blog Posts Categorized: Freight Broker - Page 3

Who Needs a Freight Forwarder�s License?

Freight forwarders play an essential role in the transportation of goods within the U.S. and between the U.S. and other countries. They arrange for the storage and shipping of freight. Unlike freight brokers, freight forwarders take physical custody of the goods being shipped, and they�re sometimes referred to as �cargo agents� or �freight agents.�

Freight forwarders don�t move freight themselves, but rather are logistical experts who:

-������ Develop and maintain a network of trusted carriers who do move freight (trucking companies, air freighters, ocean liners, railroad companies. etc.)

-������ Negotiate freight transportation rates

-������ Advise importers and exporters on how best to move their freight

-������ Complete necessary import/export documentation

-������ Arrange warehousing of freight to be transported

-������ Handle insurance to cover freight while in transit

-������ Ensure import/export regulatory compliance, and much more

If you want to operate in this capacity, you will need to be properly licensed or registered at the federal level and perhaps meet some state-specific requirements.

What Does the Licensing Process Involve?

The licensing/registration process and requirements differ not only by state but also by mode of transportation: land, air, or sea. This article focuses on the process for becoming a trucking freight forwarder handling domestic freight, which requires registration with the Federal Motor Carrier Safety Administration (FMCSA).

The following is a streamlined overview of the process for obtaining an interstate freight forwarder authority (the official term for a freight forwarder license):

1.������ You will first need to obtain a USDOT number from the Department of Transportation if you will function as a carrier as well as a freight forwarder.

2.������ Register with the FMCSA by submitting Form OP1- (FF), indicating whether you will be handling property, household goods, or both.

3.������ Wait to receive a grant letter from FMCSA containing your FF number.

4.������ Use your FF number to purchase the necessary insurance, and submit proof of insurance to FMCSA.

5.������ Designate a process agent in each state in which you will operate.

6.������ Purchase a $75,000 BMC-84 freight broker surety bond (despite its name, a BMC-84 bond also is required from freight forwarders).

7.������ Submit the bond to FMCSA.

Of course, you�ll also need to take all of the steps necessary to set yourself up as a legitimate business under the laws of your state.

Why Is a Surety Bond Required?

The surety bond serves as your guarantee to conduct your business in accordance with all applicable laws and regulations. It also ensures that funds will be available to compensate any party that suffers a financial loss as a result of unlawful or unethical actions on your part.

Understanding How Surety Bonds Work for Freight Brokers

A BMC-84 freight forwarder surety bond agreement brings together three parties in a legally binding contract:

-������ FMCSA�the �obligee� requiring the bond

-������ The freight forwarder�the �principal� purchasing the bond

-������ The surety bond company�the �surety� underwriting and issuing the bond.

If the principal fails to live up to the terms of the surety bond agreement, any injured party has the right to file a claim against the bond for damages and be compensated. The surety will verify the claim�s validity and try to negotiate a settlement. But if no settlement is possible, the claim will be paid.

Paying claims is the legal obligation of the principal. However, the surety will typically pay a claim up front on behalf of the principal and then collect reimbursement form the principal.

What Does It Cost?

To purchase a BMC-84 surety bond, you�ll pay an annual premium that is a small percentage of the bond�s $75,000 penal amount (the maximum amount that will be paid on a claim). �That percentage�the premium rate�is set by the surety, taking into account the principal�s personal credit score. Those with good credit will pay the standard market rate of 1.25% to 5%, or $937.50 to $3,750. Those with poor credit may pay as much as 13%, or $9,750.

Get Bonded Today

Request an online quote today for the BMC-84 bond you will need to operate as a freight forwarder. Or, call and discuss your surety bond needs with one of our seasoned professionals.

Who Needs a Trucking Broker�s License?

Freight brokers take care of the logistics of moving freight from one point to another. They serve as intermediaries between shippers who need to have freight moved and carriers who can do the moving.

They negotiate shipping fees with reliable carriers and track shipments from their starting point to their destination. Shippers rely on them for information about the status of their freight while it�s in transit.

California-based freight brokers are licensed by the federal government, not by the state. The Federal Motor Carrier Safety Administration (FMCSA) issues freight broker licenses, which are called operating authorities. FMCSA is part of the U.S. Department of Transportation (USDOT), which regulates interstate commerce in the country.

What Does the Licensing Process Involve?

To get the operating authority you�ll need to work as a freight broker in California, you�ll need to accomplish the following steps:

1. Create a legal business entity in California, such as a sole proprietorship, partnership, LLC, or corporation. You’ll need to register your business with the California Secretary of State.
2. Apply for a (USDOT) number from the U.S. Department of Transportation. You’ll need to enter this DOT number in the next step.
3. Use the Unified Registration System to apply for an operating authority from FMCSA. You’ll need to enter your DOT number to access the system. Fulfill all FMCSA licensing requirements, including obtaining a $75,000 freight broker bond, providing proof of proper insurance coverage, and paying the license application fee.
4. Name a process agent. This will be the person the court can serve papers to if you are sued in your role as a freight broker. You must have a process agent in every state in which you do business. Process agent information is submitted to the FMCSA using form BOC-3.
5. Within 4-6 weeks you should have your operating authority from FMCSA.

Why is a Surety Bond Required?

FMCSA requires freight brokers to purchase a $75,000 bond known as a BMC-84 bond. Alternatively, you can set up a $75,000 trust fund, if you don�t mind typing up your cash and assets.

The bond serves as your guarantee to do business in a completely lawful and ethical manner. It also provides financial protection for shippers and carriers who could suffer a financial loss if you violate the terms of a contract with them.

Understanding How Surety Bonds Work for Freight Brokers

The surety bond agreement is a legally binding contract. The three parties to the contract include the USDOT (the obligee), the freight broker (the principal ), and the company that underwrites and issues the bond (the surety).

As the obligee, the USDOT has set the required (penal) bond amount at $75,000 for all freight brokers. The surety assigns a premium rate for each applicant approved and investigates claims. But it�s the principal who has full legal responsibility for paying claims against the bond.

When a claim is filed and found by the surety to be valid, the surety typically will pay it right away rather than wait for the principal to come up with the funds. However, the principal is legally obligated to reimburse the surety.

What Does It Cost?

The annual premium for a freight broker�s bond is calculated by multiplying the bond�s penal amount by a premium rate established on a case-by-case basis by the surety. The surety bases the premium rate primarily on the principal�s personal credit score.

The premium rate is set by the surety based largely on the principal�s personal credit score. If your credit is very good, you�ll be assigned a premium rate in the range of about 1% to 3%.� If your credit is poor, you�ll pay a higher premium rate.

Get Bonded Today

Give us a call or request a quote for the BMC-84 bond you�ll need to become licensed as a freight broker in California.

Who Needs a Trucking Broker�s License?

The terms �trucking broker� and �freight broker� are often used interchangeably. They both refer to people who handle the logistical aspects of moving freight from one part of the country to another. Their role is to play �matchmaker� between shippers who have freight and carriers who can move it.

Trucking brokers save shippers money by negotiating shipping fees with reputable, reliable carriers. They also track shipments from one point to the next and keep shippers informed of the status of their freight while it�s in transit.

Trucking brokers are licensed by the federal government, not by individual states. Licenses, which are called operating authorities, are issued by the Federal Motor Carrier Safety Administration (FMCSA). This is the part of the U.S. Department of Transportation (USDOT) that regulates interstate commerce.

What Does the Licensing Process Involve?

To obtain an operating authority to do business as a trucking broker in Georgia, you�ll need to accomplish the following:

1. Create a legal business entity in Georgia. This can be a sole proprietorship, partnership, LLC, or corporation. You’ll need to register your business with the Georgia Department of Revenue.
2. Obtain a (USDOT) numberfrom the U.S. Department of Transportation.
3. Apply to the FMCSA for an operating authority through the Unified Registration System. You’ll need to enter your DOT number to access the system. Be sure to fulfill all of the FMCSA licensing requirements including purchasing a $75,000 freight broker bond, providing proof of the necessary insurance, and paying the license application fee.
4. Designate a process agent. This is the person the court can serve papers to if you are sued in your capacity as a trucking broker.You must have a process agent in every state you do business in. Submit a completed form BOC-3 providing this information to the FMCSA.
5. It takes 4-6 weeks for DOT toapprove and issue a new operating authority.

Why is a Surety Bond Required?

The $75,000 bond, known as a BMC-84 bond, is an alternative to establishing a $75,000 trust fund. Most brokers don�t want to do establish a trust fund because it ties up their cash and/or assets. The bond, however, provides financial protection for shippers and carriers who could suffer a loss if you fail to live up to the terms of a contract with them. The bond is your guarantee to conduct business in a completely lawful and ethical manner.

Understanding How Surety Bonds Work for Freight Brokers

The surety bond agreement is a legally binding contract involving three parties. The USDOT is the obligee requiring the bond, the trucking broker is the principal required to purchase the bond, and the company that underwrites and issues the bond is the surety. Each party has specific rights and responsibilities.

The obligee has set the required bond amount (also known as the bond�s penal amount) at $75,000 and established the conduct that would be considered a violation. The surety sets the bond�s premium rate for each applicant approved, and investigates any claims to make sure they are valid. The principal bears full legal responsibility for paying claims against the bond.

When a claim is filed and the surety determines that it is valid, often times, the surety will pay it rather than waiting for the principal to do so. This gives the principal a little time to gather the funds to cover the claim. However, the principal is legally required to repay the surety for any such advance payments to claimants.

What Does It Cost?

The principal pays an annual bond premium that is only a small percentage of the bond�s full penal amount, which is the maximum amount that will be paid on a claim. The premium rate is set by the surety based largely on the principal�s personal credit score. Those with excellent credit will typically be assigned a premium rate of no more than 3%, but those with lesser credit will pay a higher rate.

Get Bonded Today

When you�re ready to apply for licensing as a trucking broker in Georgia, contact us or request a quote for the BMC-84 bond you need!

Who Needs a Trucking Broker�s License?

Trucking brokers, also known as freight brokers, play an important logistical role in the movement of freight throughout the country. They match shippers with motor carriers who can move their freight.

Shippers pay for this service because freight brokers save them money by negotiating shipping fees, selecting only reputable carriers, tracking the movement of freight, and keeping shippers updated on the status of their loads.

Anyone who wants to work as a trucking broker must be licensed by the Federal Motor Carrier Safety Administration (FMCSA). This is the part of the U.S. Department of Transportation that is responsible for regulating interstate commerce and enforcing safety rules.

What Does the Licensing Process Involve?

The steps in the licensing process are as follows:

1. Establish a business entity in Texas. This can be a sole proprietorship, partnership, LLC, or corporation. Register it with the Office of the Texas Secretary of State.
2. Obtain a US Department of Transportation (USDOT) number.
3. Apply to the FMCSA for an operating authority (the official term for a broker’s license) through the Unified Registration System. You’ll need to enter your USDOT number and fulfill all of the FMCSA licensing requirements. These include obtaining a $75,000 freight broker bond, having the necessary insurance (cargo, bodily injury, and property damage coverages), and paying the license fee.
4. Designate a process agent to whom court papers may be served in the event that you are sued in your capacity as a trucking broker.You must have a process agent in every state where you do business. Submit a completed form BOC-3 to the FMCSA.
5. It takes 4-6 weeks for DOT to approve and issue a new operating authority.

Why is a Surety Bond Required?

Every trucking broker must establish a $75,000 trust fund or purchase a $75,000 surety bond as part of the process of obtaining the necessary operating authority. The advantage of choosing the surety bond option is that it doesn�t tie up your cash or assets. The specific bond for obtaining a trucking broker�s license is called a BMC-84 bond.

The purpose of the bond is to ensure that funds will be available to compensate the shipper or carrier if you fail to meet the terms of a contract or otherwise cause them to suffer a financial loss. Thus, the bond serves as the broker�s guarantee to operate in a completely lawful and ethical manner.

Understanding How Surety Bonds Work for Freight Brokers

The surety bond agreement is a legally binding contract that entitles an injured party to file a claim against the trucking broker�s surety bond and be compensated for their loss. There are three parties in the agreement. These are the obligee that requires the bond (USDOT), the principal required to purchase the bond (the broker), and the surety that underwrites and issues the bond.

The obligee establishes the required bond amount ($75,000) and the conduct that would constitute a violation of the surety bond agreement. The surety determines what a given broker will pay for a bond, and the principal is legally obligated to pay all valid claims against the bond.

The surety will often pay a claim on behalf of the principal to give the principal time to gather the funds to cover the claim. The principal is legally obligated to reimburse the surety for any such advance claims payment. The terms of the surety bond agreement indemnify the surety against any legal responsibility for paying claims.

What Does It Cost?

The annual premium for any type of surety bond is a small percentage of the required bond amount, also known as the bond�s penal amount. This is the maximum amount that will be paid on a claim.

The surety bases the premium rate primarily on the principal�s personal credit score, though other factors may also be considered. The higher the principal�s credit score, the lower the premium rate and vice versa.

Get Bonded Today

Request an online quote today for the surety bond you need to obtain your operating authority as a trucking broker. Or, give us a call to discuss your bonding needs with one of our experienced surety bond professionals. We look forward to serving you.

Freight brokers are licensed by the Federal Motor Carrier Safety Administration (FMCSA). The license is referred to as a Motor Carrier Operating Authority, or MC Authority. Anybody who wants to operate as a freight broker must first obtain an MC Authority. Here�s everything you need to know about how to get a freight broker license.

What are Freight Brokers?

Freight brokers link shippers and carriers to play a vital role in moving goods from one point to another. Their responsibilities include:

• Connecting businesses that need to move goods with the carriers who transport cargo
• Negotiating the best possible shipping rates and delivery schedules
• Recordkeeping to facilitate tracking of freight
• Ensuring compliance with shipping regulations

What Does the Licensing Process Involve?

The following steps are required to become licensed as a freight broker by the FMCSA:

• Decide whether you will operate as an individual/sole proprietor, partnership, or corporation.
• Download and complete the freight broker application (OP-1) form available on the FMCSA website, and pay the application fee (currently $300).
• If the FMCSA approves your application, you�ll receive your MC number in the mail. However, you cannot start doing business as a freight broker until you receive your MC authority. This will be granted ten days after the FMCSA posts your registration on its Register page as long as no one contests it.
• Purchase a BMC-84 freight broker bond in the amount of $75,000.
• Select a process agent in each state where you will maintain an office. This is the person upon whom court papers will be served in the event that your business is sued.
• Complete the Unified Carrier Registration process, which governs the collection and distribution of the information provided by freight brokers and the fees they pay.

Once all of these steps have been completed, you�re ready to do business.

Why Is a Surety Bond Required?

The BMC-84 freight broker bond is your guarantee that you will do business in accordance with all applicable laws and regulations. Anyone who suffers a financial loss as a result of your noncompliance has the right to file a claim against the bond.

Understanding How Surety Bonds Work for Freight Brokers

A BMC-84 bond is a legally binding contract between the FMCSA, the freight broker, and the surety company that underwrites and issues the bond. That contract makes the freight broker legally responsible for paying all claims against the bond.

However, when a valid claim is filed, the surety company often pays the claim up front on behalf of the freight broker. The freight broker must then reimburse the surety company.

What Does It Cost?

The cost of any surety bond is a small percentage of the required bond amount. The surety company determines what that percentage, the premium rate, will be based on the freight broker�s personal credit score and financial circumstances.

Freight brokers with good credit typically pay a premium rate of between 1% and 3%, which makes the annual premium for the $75,000 BMC-84 bond somewhere between $750 and $2,250.� Applicants with poor credit may pay a higher premium.

Get Bonded Today

Apply online or call today to discuss your BMC-84 bonding needs with one of our experienced surety bond agents.

What Is a Freight Broker License and Who Needs One?

Freight brokers are the middlemen between businesses that need to move goods from one location to another and the carriers that do the actual moving. They are experts in the legalities of moving cargo and provide vital services such as obtaining good shipping rates and delivery dates for shippers, helping carriers optimize their loads and routes, and tracking the movement of goods from departure to receipt at the intended destination.

To perform these important services, freight brokers must be licensed by the Federal Motor Carrier Safety Administration (FMCSA). A freight broker�s license is also referred to as a Motor Carrier Operating Authority, or MC Authority. The proof of this license or authority is the MC number that is issued upon approval of a freight broker�s license.

What Does the Licensing Process Involve?

Of course, becoming a freight broker involves certain professional preparation in advance of applying for a license, such as acquiring the necessary knowledge through a freight broker school or training program, setting up a business entity (e.g., sole proprietorship, LLC, corporation, etc.), and registering to do business in your state and/or municipality.

The actual licensing process involves these key steps:

1. Obtain a US Department of Transportation (USDOT) number by registering on the FMCSA website. You will need to enter your USDOT number on your application for a freight broker license.
2. Complete the freight broker license application form, OP-1, which you will also find on the FMCSA website, and pay the application fee (currently $300). You will also need to submit the required $75,000 freight broker surety bond, also known as a BMC-84 bond.
3. Wait for your MC (Motor Carrier) number to arrive in the mail in roughly six to eight weeks. It will be posted on the FMCSA�s Register page when it is issued, and there is a 10-day period during which anyone who has reason to protest your licensing can do so. At the end of that 10-day period, you are granted your freight broker license�your MC Authority�evidenced by your MC number.

Why is a Freight Broker Bond Required?

A freight broker bond is a freight broker’s guarantee to abide by all applicable rules and regulations and uphold the standards of the freight brokerage industry. It provides protection for your customers against financial loss due to any unethical or unlawful activities on your part.

How Does the Bond Work?

Any party that suffers a financial loss because you have violated the surety bond contract has the right to file a claim against your bond. The surety company that issued the bond will investigate to ensure the validity of the claim before paying it. That payment will give you some time to come up with the funds to cover the claim amount and reimburse the surety company. An indemnification clause in the surety bond contract ensures that the surety company is held harmless and that you, as the bonded individual, are legally responsible for paying claims.

How Much Does a Freight Broker Bond Cost?

You will pay only a small percentage of the $75,000 bond amount as your annual premium for the bond. That percentage is determine by the surety company based on your personal credit score and your personal and business finances. If your credit is good (700 or above), you will be assigned a premium rate of as little as 1%. Applicants with lower credit scores will pay more.

Get The Bond You Need

Request a quote today for the surety bond you need to obtain your federal license as a freight broker. Our knowledgeable agents are ready to answer any questions you may have.

BMC-84 surety bonds and BMC-85 lines of credit have some things in common, but it�s important to understand their differences. Learn more about these bonds below, and contact Single Source Insurance today to speak with an agent regarding your bonding needs or to apply for a bond.

What Are They?

The U.S. government, specifically the Federal Motor Carrier Safety Administration, or FMCSA (an agency of the Department of Transportation), gives freight brokers and freight forwarders two options for meeting its $75,000 requirement for funds to cover possible claims made against them by shippers or carriers. Meeting this requirement is a condition for obtaining and keeping a license to operate legally within the United States. The two options are:

• A surety bond (known as BMC-84) in the amount of $75,000.
• A trust (BMC-85) secured by $75,000 in cash, an irrevocable letter or credit or line of credit, or a combination of cash and LOC

The names �BMC-84� and �BMC-85� come from the names of the forms that must be filed with the FMCSA.

BMC-84 and BMC-85 solutions do not protect a freight broker or freight forwarder from liability. There is liability insurance for that purpose. Rather, BMC-84 and BMC-85 instruments protect truckers and shippers against nonpayment by freight brokers or forwarders that owe them money.

Who Needs Them?

Since BMC-84 or BMC-85 coverage for claims is a federal licensing requirement, purchasing it is mandatory for freight brokers and forwarders doing business in the United States. Because BMC-85�s require a large amount of cash, smaller freight brokers and carriers typically opt for the BMC-84 surety bond instead.

How Do They Work?

A BMC-84 bond works like other surety bonds that are categorized as license and permit bonds. There are three parties involved in the surety bond agreement:

• The obligee that requires the purchase of a bond (FMCSA)
• The principal required to purchase a bond (the freight broker or forwarder)
• The company that issues the bond (the surety)

The bond obligates the principal to abide by all applicable laws and industry standards, including payment of fees owed to truckers and shippers. Failure to comply with the terms of a BMC-84 bond related to payment of transportation fees can result in a trucker or shipper filing a claim against the bond.

The surety will investigate each claim and make sure it is valid and then try to negotiate a settlement with the claimant. If no settlement is reach, the surety will pay the claim on behalf of the principal, but the principal must subsequently reimburse the surety. An indemnification clause in the surety bond contract makes the principal solely responsible for paying valid claims.

The main difference for freight brokers and forwarders who establish a BMC-85 trust instead of purchasing a BMC-84 surety bond is that the cash or LOC needed to pay claims is already held in the trust and is used for direct claims payments by the trust company to truckers and shippers with valid nonpayment claims.

What Do They Cost?

The annual premium payment for a BMC-84 bond is a small percentage of the required $75,000 bond amount. The surety sets that percentage based largely on the applicant�s credit score. For people with acceptable credit, the premium rate will typically be from 1% to 5%. People with serious credit challenges can still get a bond but may pay a higher premium rate.

If you choose the BMC-85 option, in addition to funding the required trust with $75,000 up front, you�ll also pay an annual administrative fee to the bank or trust company. This fee is generally in the neighborhood of $1,500 per year.

Get Bonded Today

If you�ve decided that a BMC-84 bond is right for you, apply online today with Single Source Insurance. Our experienced agents can also help to discuss your needs so you can decide between a BMC-84 and BMC-85.

In 2012, President Obama signed the Moving Ahead for Progress in the 21st Century (MAP-21) Act into law, introducing many new regulations for the transportation industry. Among those was a $75,000 surety bond requirement for freight brokers, a huge increase from the previously required $10,000 bond. Keep reading for a crash course on these surety bonds.

What is a freight broker?

Freight brokers arrange the transport of goods between shippers providing the goods and carriers who can move them. They don’t take on any responsibility for the freight, solely facilitating arrangements between shippers and carriers.

Freight forwarders are often mentioned in conjunction with brokers, but they are not the same thing. Freight forwarders provide transportation for goods and take responsibility for the goods while they are being transported. Freight forwarders also need a $75,000 surety bond and register in much the same way as brokers.

What does MAP-21 mean for brokers?

The biggest impact on freight brokers following MAP-21’s passage was the surety bond increase from $10,000 to $75,000. The Federal Motor Carrier Safety Administration (FMCSA) increased the bond amount to make it more difficult for unqualified brokers to enter the industry, concurrently raising freight broker standards.

A big factor in increasing the freight broker surety bond was the fact that claims were often filed on these bonds, making them high-risk. A larger bond amount allows for more claims to be paid out and puts more liability on the broker, encouraging them not to commit fraud or any take any unethical action that might cause a claim to be filed. An example of when claims are often filed on freight broker bonds are when the broker fails to pay the freight carrier.

The higher bond amount both encourages freight brokers to conduct business lawfully and makes it harder for an inexperienced broker to become one in the first place.

How to become a registered freight broker

Freight brokers register with the FMCSA to begin legally conducting business operations. Before applying, brokers need to obtain a motor carrier (MC) number by filling out Form OP-1. New freight broker registrants use the Unified Registration System (URS) to get started. Brokers can specify if they want to be licensed as a broker of property or a broker of household goods or both—a $300 filing fee is attached to each type.

Freight brokers do not have legal insurance or security requirements beyond the surety bond, also called a BMC-84 bond. After brokers receive their MC number and obtain the surety bond, the FMCSA asks for more information:

• Form BOC-3—Designation of process agent for each state in which the broker operates
• Nonrefundable $300 application processing fee

Applications take four to six weeks to process. Surety bonds must be renewed annually. The surety bond increase went into effect in October 2013, with a full compliance delay into December 2013, meaning a majority of freight broker bonds expire each year during that period.

Be sure to apply for your freight broker bond renewal with plenty of time to spare! Single Source Insurance can help you get the best rate for your bond—call and request a quote today!