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It’s Almost Time for Freight Broker Surety Bond Renewal: What you Need to Know

Managing a freight broker or forwarding company is a very communicative job, which requires you to keep many things under control. You have to communicate between many clients and transportation service providers, research and evaluate market options, be up-to-date with all the laws and regulations (national and international), which may apply to your client’s cargo, and more.

So, we thought that it might be a good idea to take your mind off all that multi-tasking and remind you that it is probably time to take care of your freight broker surety bond renewal. You only have until October 1st!

Changes in the Freight Broker Surety Bond

Most of you, if you have been in the freight broker business for a while, should already know the Moving Ahead for Progress in the 21st Century Act (MAP-21) mandated changes in the old BMC-84 and BMC-85 surety bonds.

The MAP-21 transportation bill was signed in to law by President Obama on the 6th of July 2012. Funding surface transportation programs at over $105 billion for fiscal years 2013 and 2014, MAP-21 is the first long-term highway authorization enacted since 2005.

With the passing of the transportation bill, many and grave changes were made to the law, the biggest of which is the increased bond requirement. For over 30 years it was $10,000, but ever since October 2013, freight brokers need to obtain and file a $75,000 surety bond with the Federal Motor Carrier Safety Administration (FMCSA) and must keep up their freight broker surety bond renewal year to year.

Freight forwarders are now also obligated to file for the same bond.

Why Was the Bond Changed?

The main purpose for obtaining a freight broker surety bond renewal and/or establishing for the first time is to ensure your clients and your partners that you are a legitimate professional in your field and that you will keep the contractual agreement you have with them. The surety bond does not protect you! It is an assurance that you will pay your transportation service provider in full and in a timely manner, and that the end client is going to get the service you were hired for.

freight broker surety bond renewal DOTWith more than 21,000 freight brokers before the bill was passed, the increase of the freight broker bond amount had the goal to minimize fraud in the industry.

The higher $75,000 surety bond requirement is expected to be a red-flag to all under-funded freight broker companies, which have been failing to pay their cargo carriers and giving the industry a “black eye.” The proceeds will go toward enhancing the quality of US highways, establishing a performance-based program, creating jobs to boost economic growth, supporting the Department of Transportation’s safety agenda, streamlining federal highway transportation programs, and accelerating project delivery and promoting innovation.

How to Get Bonded

If you are a freight broker or forwarder you need to obtain a BMC-84 or BMC-85 surety bond or have freight broker surety bond renewal by October 1st. Those who fail to do so will have their bonds cancelled. If you do not or cannot secure a surety bond meeting the $75,000 requirement within 30 days of cancellation, you will no longer be able to broker freight loads.

For those of you who are just getting into the freight brokering business, you need to know that you cannot obtain a practicing license without obtaining a surety bond.

However, getting a freight broker bond can be an easy task when done on time. You can set up your freight broker surety bond renewal at a surety agency. It only takes a couple of minutes, if you do it online.

Keep in mind that when getting bonded you will need to pay a premium, which is a certain percentage of the bond requirement. With the recent increase in bond amount, prices currently range between $750 and $7,500.

There are many good surety bond agencies which you can look for online. Some of them even tend to overlook bad personal credit and do not require collateral. You also do not need to have a Motor Carrier Number before applying. You can apply with the FMCSA for one later in order to be allowed to operate as a “for-hire” carrier in interstate commerce.

The most important thing you need to remember to get bonded on time!

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Lachezar Stamatov
Lachezar Stamatov is a recent Psychology graduate with interests spanning across various fields – health, technology, surety bonds, you name it. He blogs about freight and surety bond regulations. He’s also a contributor for the Lance Surety Bonds blog.
Lachezar Stamatov
  • Ai Pba

    First, the $75,000 was required as of Oct 1st, 2013 and enforcement was stayed until Dec 2, 2013.

    Second, the real purpose behind raising the bond was for the bigger brokers to defeat competition.

    Third, there are no longer 21,000 brokers but more like 14,000 because the higher bond put 40% of surface transportation intermediaries out of business

    Fourth, we should expect to see another wave of brokers put out of business when they are not offered renewals by year one predator bond suppliers or their premiums are drastically increased due to the end of year one actuarial risk-versus-reward computations by bond providers.

    Fifth, proceeds of bond premiums do NOT go toward enhancing the quality of US highways and zero jobs were created by the bond increase; rather, tens of thousands of jobs were lost.

    Sixth, there is currently a lawsuit challenging the new bond pending in the US Court of Appeals for the 11th Circuit

    Seventh, there is currently an application proceeding to exempt all brokers and forwarders pending before the FMCSA

    Eighth, this matter is currently “under review” bu the US Dept of Justice’s Anti trust Division in so far as collusion may be concerned.

    Ninth, Fox News recently covered this story:

    http://www.foxnews.com/politics/2014/03/31/federal-fee-hike-putting-thousands-freight-brokers-out-business-industry-says/

    Tenth, Watchdog.org had this to say:

    http://watchdog.org/135095/federal-business-regulations/

    For more info on this, watch the First Business News Interview on the Property Broker Bond Crisis: http://firstbusinessnews.com/roadkill41614-5/

    • Lachezar Stamatov

      Hi,

      When it comes to the decreased number of brokers, you appear to be 100% right. We also fell for all those freight broker firms that had no other choice but to shut down and let go of their employees.

      And while we absolutely agree that the increased freight broker surety bond drove a lot of companies ”in the red,” the main point of the article was simply to inform all those broker firms, which are still operating, to renew their bond on time.

      The quoted facts, regarding why the bill was passed and what its scope is, we have taken from the FMCSA website. The American Trucking Associations, theTransportation Intermediaries Association and the Owner-Operator Independent Drivers Association all insist that higher bonds will cut down on the incidents of fraud and indicated as the main reason for the increase.

      We are also eagerly anticipating what the US Dept of Justice’s Anti trust Division decision will be!

  • James P. Lamb

    First, the $75,000 was required as of Oct 1st, 2013 and enforcement was stayed until Dec 2, 2013.

    Second, the real purpose behind raising the bond was for the bigger brokers to defeat competition.

    Third, there are no longer 21,000 brokers but more like 14,000 because the higher bond put 40% of surface transportation intermediaries out of business

    Fourth, we should expect to see another wave of brokers put out of business when they are not offered renewals by year one predator bond suppliers or their premiums are drastically increased due to the end of year one actuarial risk-versus-reward computations by bond providers.

    Fifth, proceeds of bond premiums do NOT go toward enhancing the quality of US highways and zero jobs were created by the bond increase; rather, tens of thousands of jobs were lost.

    Sixth, there is currently a lawsuit challenging the new bond pending in the US Court of Appeals for the 11th Circuit

    Seventh, there is currently an application proceeding to exempt all brokers and forwarders pending before the FMCSA

    Eighth, this matter is currently “under review” bu the US Dept of Justice’s Anti trust Division in so far as collusion may be concerned.

    Ninth, Fox News recently covered this story:

    http://www.foxnews.com/politics/2014/03/31/federal-fee-hike-putting-thousands-freight-brokers-out-business-industry-says/

    Tenth, Watchdog.org had this to say:

    http://watchdog.org/135095/federal-business-regulations/

    For more info on this, watch the First Business News Interview on the Property Broker Bond Crisis: http://firstbusinessnews.com/roadkill41614-5/
    James Lamb
    AIPBA.org President

    • Cerasis

      James,

      Definitely will send back to author for some clarification. You are a known expert in this field, so we need to make sure that facts are correct! Appreciate it!

      ^Adam

      • James P. Lamb

        Thanks, Adam!

    • Lachezar Stamatov

      Hi Adam,

      When it comes to the decreased number of brokers, you appear to be 100% right. We also fell for all those freight broker firms that had no other choice but to shut down and let go of their employees.

      And while we absolutely agree that the increased freight broker surety bond drove a lot of companies ”in the red,” the main point of the article was simply to inform all those broker firms, which are still operating, to renew their bond on time.

      The quoted facts, regarding why the bill was passed and what its scope is, we have taken from the FMCSA website. The American Trucking Associations, the Transportation Intermediaries Association and the Owner-Operator Independent Drivers Association all insist that higher bonds will cut down on the incidents of fraud and indicated as the main reason for the increase.

      We are also eagerly anticipating what the US Dept of Justice’s Anti Trust Division decision will be!

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