Learn how to become licensed as a freight broker, and speak with an Single Source Insurance agent today about purchasing the BMC-84 bond you�ll need to operate as a freight broker.
Who Needs a Freight Broker License?
Anyone who will be working as a freight broker in Alabama will need to apply for and receive an �operating authority� from the Federal Motor Carrier Safety Administration (FMCSA). Click here to learn what freight brokers do and the procedure or becoming a freight broker anywhere in the country.
What Are the Steps in the Licensing Process?
Before you apply for your freight broker operating authority, you will need to decide whether you will be opening your own brokerage or working as a freight broker in a firm owned by someone else.
If you will be establishing your own freight brokerage, you�ll need to create a legal business entity and register it with the IRS, the Alabama Department of Revenue and the Alabama Secretary of State.
All prospective freight brokers must decide which of the two types of freight broker operating authority they will apply for: �Broker of Household Goods� or �Broker of Property (except Household Goods),� or both. They must also select a process agent in every state where they will have an office or write contracts. Alternatively, they may choose a blanket process agent company that can represent them in any state. If you choose a blanket agent, they can complete the required Form BOC-3�(Designation of Process Agents) for you and file it with FMCSA on your behalf. Otherwise, you’ll need to list all of your process agents on a single form and submit it with your application.
All freight brokers also are required to purchase a $75,000 freight broker bond (Form BMC-84). You have the option of providing FMCSA with a Trust Fund Agreement (Form BMC-85) instead of a bond, but most applicants don�t want to tie up that much cash.
When you have everything you need, sign in to the Unified Registration System (URS), follow the instructions for submitting your application, and pay the registration fee (currently $300). The system will generate your MC number (MCN) immediately as evidence of your operating authority. The operating authority documents will arrive in the mail within a few days.
Why Is a Freight Broker Surety Bond Required?
A BMC-84 surety bond is your guarantee to do business in compliance with FMCSA regulations and to pay all valid claims filed by shippers, carriers, and others financially harmed as a result of your violation of any of those regulations.
How Are Freight Broker Bond Claims Paid?
There are three parties to a BMC-84 freight broker bond, which is a legally binding contract among them. �FMCSA is the �obligee� requiring the bond. The freight broker is the �principal,� who is legally obligated to pay all valid claims. The bond�s guarantor is the �surety� and has guaranteed the payment of claims. Therefore, the surety will pay a claim initially and be reimbursed later by the principal. Failing to reimburse the surety can result in legal action against the principal.
Cost of Obtaining a Freight Broker License in Alabama
The annual premium for a BMC-84 freight broker bond is a small percentage of the $75,000 bond amount. That percentage is the premium rate, which the surety sets through an underwriting evaluation of the risk of not being repaid by the principal for claims paid on the principal�s behalf.
The primary consideration is the principal�s personal credit score. For the average bond applicant with good credit, the premium rate should be between 2% and 4%. A principal with a low credit score could be a greater risk to the surety and will pay a higher premium rate.
Our surety bond professionals will get you the freight broker (BMC-84) bond you need at a competitive rate.