According to some industry estimates, half of the 21,000 freight brokers in the States are still not compliant with the new $75,000 surety bond requirement. More importantly, after the 60-day grace period ended on Dec. 1, close to 3,000 have had their licenses revoked.
The previous bond requirement was set at $10,000. The increased freight broker bond (BMC-84), set at $75,000, is supposed to safeguard carriers and shippers from infringements such as untimely payments. It is meant to improve the safety and control over the process of cargo delivery, and it also included freight forwarders in the new rule.
The increased freight broker bond requirement that was set in motion with the MAP-21 legislation in July 2012. The Congress passed the new legislation and later signed it into law. It is fair to say that adapting to the new bonding situation has not been easy and smooth for all operators. Due to various complaints, the Federal Motor Carrier Safety Administration (FMCSA) extended the deadline for compliance with the new rule by 60 days until Dec. 1.
The 60-day grace period for Freight Brokers
The FMCSA decided to provide a two-month period for compliance because it received numerous complaints and even a lawsuit, which was unsuccessful. Freight brokers could still operate until Dec. 1 with their old bond.
Warning notices were sent out on Nov. 1, informing the parties concerned that if they didn’t pay the higher bond their operational authorities would be revoked. The estimates are that some 9,000 brokers have received such notices. It is hard to measure, however, whether they have had their license revoked, or decided to surrender it because they couldn’t pay the bond.
Starting Dec. 1, FMCSA allowed another 30 days until the beginning of 2014, for those who waited to the very last minute to give them a last chance to renew their license.
Options for compliance
To comply with the new requirements of the FMCSA, freight brokers need to either obtain a freight broker bond (BMC-84) or a trust fund (BMC-85).
The trust fund option is less favorable for small and mid-sized freight brokers. The BMC-85 means that you have to deposit $75,000 in a bank in order to guarantee your license. This can be cumbersome or even impossible for some brokers. Borrowing such an amount can also affect negatively the broker’s credit score.
Some surety bond agencies might not agree to backdate the bond, which can seriously jeopardize the functioning of the freight broker. Obtaining a bond as soon as possible also means that brokers might still find surety bond agencies such as Bryant Surety Bonds that offer good deals for the bond price. The agency can write these bonds year round, and even backdate the bond to an Oct. 1, 2013 effective date.
It is preferable that the bond is written with a back date to eliminate any questions of compliance and an unnecessary risk. Bryant Surety don’t require collateral, and most applications get approved, with good or bad credit. The only exceptions are open bankruptcy and unpaid child support. Apply today!