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) issues freight broker operating authorities (the freight broker equivalent of a license) through a registration process. All freight brokers are registered at the federal level. Learn more about the role freight brokers play in moving cargo in the United States and what it takes to become one.
What Are the Steps in the Licensing Process?
While freight broker operating authorities are issued at the federal level, you will need to establish and register your business at the state level if you plan to operate your own brokerage firm. In North Carolina, that means registering your new business with the Secretary of State and obtaining a sales and use tax number form the North Carolina Department of Revenue.
Whether you plan to operate your own brokerage or work as a freight broker in someone else�s firm, there are a few steps you�ll need to take in preparation for applying for a freight broker operating authority:
- Decide which type of operating authority you will be registering for��Broker of Household Goods� or �Broker of Property (except Household Goods),� or perhaps both.
- Identify a process agent (someone who can accept legal service on your behalf if you�re sued) in every state where you will have an office or write contracts. Or, you can identify a blanket process service company that can represent you in any state.
- List all of your process agents on a single Form BOC-3�(Designation of Process Agents) to file with FMCSA. (If you opt for a blanket process agent, the company can do that for you.)
- Obtain a $75,000 freight broker bond (Form BMC-84) from an FMCSA-approved surety bond company, with FMCSA as the bond’s “obligee.” Alternatively, you could set up a Trust Fund Agreement (Form BMC-85) instead of purchasing a surety bond, but that would mean tying up much more money than it will cost you to furnish FMCSA with a surety bond.
You�ll apply for your operating authority through the Unified Registration System (URS). Create an URS account, complete the online application in its entirety, upload the required documents, and pay the registration fee (currently $300). As soon as your payment is processed, URS will give you your MC number (MCN), which is proof of your operating authority, although the operating authority documents won’t arrive in the mail for about 10 business days.
Why Is a Freight Broker Surety Bond Required?
A BMC-84 bond is a freight broker�s guarantee to operate in full compliance with FMCSA regulations. Any violation, such as failing to pay a shipper or carrier, that causes FMCSA or a shipper or carrier to experience a financial loss, can result in the injured party filing a claim against the bond. As the bond�s �principal,� you are legally obligated to pay all valid claims.
How Are Freight Broker Bond Claims Paid?
There is a third party to a freight broker bond in addition to the principal and the obligee, and that�s the �surety��the bond�s guarantor. The terms of the legally binding surety bond agreement obligate the principal to pay all valid claims, but that payment is guaranteed by the surety. Therefore, the surety will pay a valid claim initially, on the principal�s behalf, and be reimbursed by the principal. Not repaying the claim amount can result in the surety taking legal action against the principal.
Understanding the Cost of a Freight Broker License and BMC-84 Bond
The annual premium for a freight broker bond is calculated by multiplying the $75,000 bond amount by the premium rate established by the surety through underwriting. The primary underwriting consideration is the risk that the principal won�t repay the surety as required. That risk is measured by the principal�s personal credit score�the higher the score, the lower the risk to the surety.
The premium rate for someone with good credit should be in the range of two to four percent. An applicant with a lower credit score will be assigned a higher premium rate.
Our surety bond professionals will get you the freight broker (BMC-84) bond you need at a competitive rate.