Learn how to become licensed as a freight broker in Ohio, 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?
Freight brokers in the United States are registered, not licensed. The result of that process is a freight broker that results in the issuance of a freight broker operating authority by the Federal Motor Carrier Safety Administration (FMCSA). Learn more about what being a freight broker entails and what is involved in becoming one.
What Are the Steps in the Licensing Process?
There are a few important tasks you must take care of before you begin your application for a freight broker operating authority.
- If you will be launching your own firm, you must set up a legal business entity and register it with the Ohio Secretary of State and the Ohio Department of Taxation.
- Decide which of the two types of operating authority you will apply for��Broker of Household Goods� or �Broker of Property (except Household Goods).� You may apply for both, if you prefer.
- Select a process agent in every state where you will maintain an office or write contracts. A process agent is someone authorized to accept legal service on your behalf if you are sued by a shipper or carrier. You have the option of using a blanket process service company that can represent you in any state. Either you or your selected blanket company must complete a single Form BOC-3�(Designation of Process Agents) lifting all of your process agents and file it with FMCSA.
- Purchase a freight broker bond (Form BMC-84) in the amount of $75,000, with FMCSA as the “obligee.” This is much more popular with freight brokers than the other option, which is to establish a Trust Fund Agreement (Form BMC-85), which requires tying up $75,000 in cash.
When you�ve completed all of the above off, you�re ready to create an account on the Unified Registration System (URS). You’ll use this account to complete an online application, upload supporting documents, and pay the registration fee (currently $300). Once your payment has been processed, the system will generate your MC number (MCN). It will take about 10 business days for your operating authority documents arrive in the mail.
Why Is a Freight Broker Surety Bond Required?
A BMC-84 freight broker bond is your pledge to do business in accordance with all applicable FMCSA regulations and pay any resulting claims if you don�t. Any noncompliant action on your part that is verified to have caused FMCSA or a shipper or carrier to experience a monetary loss is grounds for a claim 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 the freight broker as the principal, there is a third party to every freight broker bond�the bond�s guarantor, known as the �surety.� Although the principal is legally obligated to pay all legitimate claims, the surety guarantees their payment. Consequently, the usual practice is for the surety to pay a claim initially and then be reimbursed for that amount by the principal. Not being reimbursed can result in the surety taking legal action against the principal to recover the amount of the claim.
What Are the Costs of Obtaining a Freight Broker License and Bond?
The annual premium rate for a freight broker bond is determined by the surety through an underwriting assessment of the risk that the principal may not repay the surety for claims paid on the principal�s behalf. If the principal�s personal credit score is high, the risk to the surety is low, and the premium rate should be no more than 2% to 4%. A principal with a low credit score presents a higher level of risk 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.