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.
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!