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:
- 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.
- 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.
- 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.