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?
The Federal Motor Carrier Safety Administration (FMCSA) registers all U.S. freight brokers, issuing them a freight broker operating authority, which is the equivalent of a license. Learn more about what freight brokers do to keep cargo moving throughout the country and what it takes to become one.
What Are the Steps in the Licensing Process?
Most of the effort required to get a freight broker operating authority goes into preparing to apply for one. You�ll need to accomplish all of the following before you sit down to complete your application.
- If you will be working as a freight broker in a firm owned by someone else, you can skip to Step 2. If you will be launching your own freight brokerage, you must first set up a legal business entity, register it with The Michigan Secretary of State and obtain a Nevada state business license.
- Make a decision as to whether you want to operate as a �Broker of Household Goods� or �Broker of Property (except Household Goods),� or perhaps as both.
- You will need to name a process agent in every state where you will have an office or write contracts. (A process agent is someone who will accept legal service on your behalf if you are sued.) Or you may choose to be represented by a blanket process service company that has agents in all states. Either you or your blanket process company, if you go that route, must complete a single Form BOC-3�(Designation of Process Agents)and file it with FMCSA.
- Obtain a $75,000 freight broker bond (Form BMC-84) with FMCSA listed as the bond’s “obligee.” Alternatively, you could establish a Trust Fund Agreement (Form BMC-85), but that would require you to tie up $75,000 in cash, which is unnecessary.
When you�ve done all of the above, you will have what you need to apply for registration through the Unified Registration System (URS). You’ll set up an URS account, complete the online application, upload all required documents, and pay the registration fee (currently $300). At that point, URS will generate your MC number (MCN), which is your proof of registration. You should receive your operating authority documents by mail within 10 business days.
Why Is a Freight Broker Surety Bond Required?
When you purchase a BMC-84 freight broker bond, you guarantee that you will comply with all applicable FMCSA regulations. Any act of noncompliance that causes financial harm to FMCSA, a shipper, or a carrier can result in a claim being filed against your bond�a claim that you, as the bond�s �principal,� are legally obligated to pay.
How Are Freight Broker Bond Claims Paid?
In addition to FMCSA as the obligee and you as the principal, there is a third party to the legally binding freight broker bond contract: �the bond�s guarantor, referred to as the �surety.� While you are legally obligated to pay all valid claims, the surety has guaranteed their payment. Because of that guarantee, the surety will pay a claim up front, but you must then reimburse the surety for the claim amount. If you don�t, the surety can take legal action against you to secure repayment.
Understanding the Costs of Freight Broker Licensing and Bonds
The annual premium for a BMC-84 bond is calculated by multiplying the $75,000 bond amount by the premium rate assigned by the surety through underwriting. That premium rate will be based largely on your personal credit score, which is a good measure of the risk that you might not repay the surety for claims paid on your behalf.
If your credit is good, the risk to the surety is low, and your premium rate should be in the range of two to four percent. A lower credit score will result in a higher premium rate.
Our surety bond professionals will get you the freight broker (BMC-84) bond you need at a competitive rate.