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Although there's sometimes a love-hate relationship between freight brokers and carriers, companies who have to to ship freight cannot do without the former. That is because freight brokers ensure that carriers deliver the goods to where they are supposed to go.
Because of this huge responsibility and the aptitude for great business loss should freight brokers not do their duty, the industry is regulated by the federal government. Every freight broker wanting to enter the business has to satisfy three legal requirements to become a licensed property broker - the DOT official designation for freight brokers.
Freight Broker Authority
It is the Federal Motor Carrier Safety Administration (FMCSA), an agency of the Department of Transport, that receives and facilitates the application for and grants freight brokers the authority to operate. You'll have to fill out the OP-1 form with the "broker of property" selected. Some of the data you'll be providing includes your company name, contact information and a USDOT number. The USDOT number is not mandatory to being a freight broker but you want one so you can file an application with the FMCSA for a property broker license.
Once your freight broker application has entered the FMCSA system, you'll be allotted a motor carrier (MC) number. The MC number will be instrumental in taking a surety bond, which is the second part of the entire process of granting you the license.
There are examples when FMCSA may dismiss your application for an operating authority. Maybe you have stalled at some specific point and did not complete the whole licensing process, surety bond information was missing, or some other information was lacking. Be aware of these elements so you won't have any headaches later on.
Freight Broker Surety Bond
You have to submit proof of a surety bond before the FMCSA can issue an operating authority to you, filing a BMC-84 or BMC-85 form along with it. Customarily, the surety bond is for $10,000 but dependent on a credit and background investigation on you by the bonding company, this amount could increase.
Why the requirement for a surety bond? Though it's not insurance per se, the freight broker's surety bond guarantees that carriers are compensated for moving loads. If and when shippers default on this duty, freight brokers will have to pay carriers in the red for services provided. Freight brokers typically do not have the available cash to settle this duty so that the bonding company will take on the role of creditor and settle the carrier's costs as much as the amount of the bond.
Legal Process Agent for Freight Brokers
Freight brokers have the one license granted by the government to operate across the country but just like with any business, they want a contact point to operate in individual states. This is where process agents come in.
Simply, process agents act as legal members for freight brokers in the states where the brokerage plans to operate. Should claims or other legal actions arise against the freight broker in a state, the method agent will be the legal point of contact or representation in the area. Rather than a single individual in each state, you might want to consider engaging the services of a legal company with branches in the states where you'll be operating.
A freight broker will need to register these process agents for each state where the freight brokerage firm will do business. You'll use the BOC-3 form (Designation for Process Agent) to list your legal members. Once the charge has been paid, FMCSA deems the application complete. Your operating authority should be issued within 4 to 6 weeks of submitting this final form.
Because of this huge responsibility and the aptitude for great business loss should freight brokers not do their duty, the industry is regulated by the federal government. Every freight broker wanting to enter the business has to satisfy three legal requirements to become a licensed property broker - the DOT official designation for freight brokers.
Freight Broker Authority
It is the Federal Motor Carrier Safety Administration (FMCSA), an agency of the Department of Transport, that receives and facilitates the application for and grants freight brokers the authority to operate. You'll have to fill out the OP-1 form with the "broker of property" selected. Some of the data you'll be providing includes your company name, contact information and a USDOT number. The USDOT number is not mandatory to being a freight broker but you want one so you can file an application with the FMCSA for a property broker license.
Once your freight broker application has entered the FMCSA system, you'll be allotted a motor carrier (MC) number. The MC number will be instrumental in taking a surety bond, which is the second part of the entire process of granting you the license.
There are examples when FMCSA may dismiss your application for an operating authority. Maybe you have stalled at some specific point and did not complete the whole licensing process, surety bond information was missing, or some other information was lacking. Be aware of these elements so you won't have any headaches later on.
Freight Broker Surety Bond
You have to submit proof of a surety bond before the FMCSA can issue an operating authority to you, filing a BMC-84 or BMC-85 form along with it. Customarily, the surety bond is for $10,000 but dependent on a credit and background investigation on you by the bonding company, this amount could increase.
Why the requirement for a surety bond? Though it's not insurance per se, the freight broker's surety bond guarantees that carriers are compensated for moving loads. If and when shippers default on this duty, freight brokers will have to pay carriers in the red for services provided. Freight brokers typically do not have the available cash to settle this duty so that the bonding company will take on the role of creditor and settle the carrier's costs as much as the amount of the bond.
Legal Process Agent for Freight Brokers
Freight brokers have the one license granted by the government to operate across the country but just like with any business, they want a contact point to operate in individual states. This is where process agents come in.
Simply, process agents act as legal members for freight brokers in the states where the brokerage plans to operate. Should claims or other legal actions arise against the freight broker in a state, the method agent will be the legal point of contact or representation in the area. Rather than a single individual in each state, you might want to consider engaging the services of a legal company with branches in the states where you'll be operating.
A freight broker will need to register these process agents for each state where the freight brokerage firm will do business. You'll use the BOC-3 form (Designation for Process Agent) to list your legal members. Once the charge has been paid, FMCSA deems the application complete. Your operating authority should be issued within 4 to 6 weeks of submitting this final form.
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