By Jim Casey
Though there's occasionally 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 make sure that carriers deliver the goods to where they are meant to go.
Due to this huge responsibility and the aptitude for great business loss should freight brokers not do their duty, the industry is regulated by the United States government. Each freight broker wanting to enter the business has to satisfy 3 legal necessities to become a licensed property broker - the DOT official name for freight brokers.
Freight Broker Authority
It's the Fed. Motor Carrier Safety Administration (FMCSA), an agency of the Office of Transportation, that receives and helps the application for and grants freight brokers the authority to operate. You must fill out the OP-1 form with the "broker of property" selected. Some of the info you'll be providing includes your organization name, contact info and a USDOT number. The USDOT number isn't mandatory to being a freight broker but you need one so that you can file an application with the FMCSA for a property broker license.
Once your freight broker application has entered the FMCSA system, you will 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 whole process of granting you the license.
There are instances when FMCSA may dismiss your claim for an operating authority. You may have stalled at some specific point and failed to complete the whole licensing process, surety bond information was missing, or some other information was lacking. Be aware of these factors so you will not have any headaches later.
Freight Broker Surety Bond
You must submit proof of a surety bond before the FMCSA can issue an operating authority to you, filing a BMC-84 or BMC-85 form together 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 necessity for a surety bond? Although it is not insurance per se, the freight broker's surety bond guarantees that carriers are compensated for moving loads. If shippers default on this requirement, freight brokers will need to pay carriers in the red for services rendered. Freight brokers typically do not have the available money to settle this need so 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 United States government to operate across the nation but like any business, they require a point of contact to operate in individual states. Here's where process agents come in.
Simply, process agents act as legal delegates 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 process agent will be the legal contact point or illustration in the area. Instead of a single individual in each state, you might like to consider engaging the services of a legal company with branches in the states where you will be operating.
A freight broker will have to register these process agents for each state where the freight brokerage firm will do business. You'll use the BOC-3 form (Identification for Process Agent) to list your legal members. Once the fee has been paid, FMCSA deems the application complete. Your operating authority should be issued within four to 6 weeks of submitting this last form.
Due to this huge responsibility and the aptitude for great business loss should freight brokers not do their duty, the industry is regulated by the United States government. Each freight broker wanting to enter the business has to satisfy 3 legal necessities to become a licensed property broker - the DOT official name for freight brokers.
Freight Broker Authority
It's the Fed. Motor Carrier Safety Administration (FMCSA), an agency of the Office of Transportation, that receives and helps the application for and grants freight brokers the authority to operate. You must fill out the OP-1 form with the "broker of property" selected. Some of the info you'll be providing includes your organization name, contact info and a USDOT number. The USDOT number isn't mandatory to being a freight broker but you need one so that you can file an application with the FMCSA for a property broker license.
Once your freight broker application has entered the FMCSA system, you will 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 whole process of granting you the license.
There are instances when FMCSA may dismiss your claim for an operating authority. You may have stalled at some specific point and failed to complete the whole licensing process, surety bond information was missing, or some other information was lacking. Be aware of these factors so you will not have any headaches later.
Freight Broker Surety Bond
You must submit proof of a surety bond before the FMCSA can issue an operating authority to you, filing a BMC-84 or BMC-85 form together 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 necessity for a surety bond? Although it is not insurance per se, the freight broker's surety bond guarantees that carriers are compensated for moving loads. If shippers default on this requirement, freight brokers will need to pay carriers in the red for services rendered. Freight brokers typically do not have the available money to settle this need so 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 United States government to operate across the nation but like any business, they require a point of contact to operate in individual states. Here's where process agents come in.
Simply, process agents act as legal delegates 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 process agent will be the legal contact point or illustration in the area. Instead of a single individual in each state, you might like to consider engaging the services of a legal company with branches in the states where you will be operating.
A freight broker will have to register these process agents for each state where the freight brokerage firm will do business. You'll use the BOC-3 form (Identification for Process Agent) to list your legal members. Once the fee has been paid, FMCSA deems the application complete. Your operating authority should be issued within four to 6 weeks of submitting this last form.
About the Author:
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