How to Get a Freight Broker License?

Because they are federally regulated under The Federal Motor Carrier Safety Administration (FMCSA) means that the procedure of getting a freight broker license could be confusing, if not even daunting. This guide will simplify the process by breaking it down into five steps that offer appl

Because they are federally regulated under Federal regulators, the Federal Motor Carrier Safety Administration (FMCSA) The procedure of getting a freight broker license may sometimes seem confusing, if not completely daunting. But, this guide will simplify the process into five steps that offer applicants the required details to start their own business as a freight broker!

Defining Freight and ICC Brokers

Before making the necessary registrations for becoming a broker it is crucial for those who are interested to understand what a freight broker is. In essence, a freight broker is an intermediary between a business that requires the transportation of goods and a licensed motor carrier. While they don't transport any goods, they collect information about the needs of the business that requires the items and put them connected with the right carrier to offer transportation for the items for a reasonable cost. To get a better understanding of the definition of a freight broker one of the most sought-after professions, many applicants choose to attend courses for brokers before making an application for their permit.

5 Steps to Become a Licensed Freight Broker

Establish a Business Structure

The first step in being licensed is for an applicant to decide on the way they would like their business to be organized. It is highly recommended to consult an accountant or lawyer before making this choice since they can consider the pros and cons of different business structures and the licensee. If the applicant decides that a consultation is required and they'll have to choose one of the three options for their permit as a broker of freight:

  • Individual/Sole Proprietor
  • Partnership
  • Corporation

Submit an OP-1 Form

Once your company's structure is in place it is now time to get the motor carrier's number by submitting the FMCSA with a Form OP-1. It is the primary application form that applicants must submit to the FMCSA with their basic business information (company type address, name, and types of operational authority as well as other pertinent information.) In Section III for Type of Operating Authority on the OP-1 form applicants must choose either"Broker of Household Goods" or "Broker of Property (except Household Goods)." Candidates are also required to pay the filing fee of $300 per the type of license they're applying for.

If you're seeking an official motor carrier number, you can get it as soon as you apply, and those who choose to send in their applications by mail could need to wait for up to 4 weeks. The number of motor carriers is needed to begin the process of obtaining a freight broker license and also grants the business official the right to operate. After the motor carrier number is granted the number is subject to a 10-day appeal period. In this period, the application can be challenged by a different company. The applicant can pursue the process of obtaining their freight broker's license during the period of protest.

Get a Surety Bond (BMC-84)

In all the steps to become licensed the requirement for a surety bond is usually the most difficult. A majority of applicants aren't familiar with surety bonds before discovering they require one to become licensed. In addition, Federal freight broker bonds can be more difficult to obtain than the other types of bond. The bond's approval is based on the individual background of the applicant, in addition to other aspects due to the higher level of risk in the industry of freight brokerage.

Despite the confusion that is often related to surety bonds they're relatively straightforward contracts in a wide range of industries to ensure that the entity that is the one that gets the bond the principal--does business in a way that they comply with all applicable laws and rules. The obligee will be the person who needs the bond. They are in a position to assert a claim if the principal fails to adhere to the conditions set out in the contract. The third-party in the contract is the surety who issues the bond following the receipt of a premium given to them through the principal. The amount of the premium is a percentage of the total bond amount, and the surety promises to pay to the obligee in case of an eventual claim. If there is a claim and the company pays the amount for the settlement of the dispute it is the obligation of the principal - or the freight agent in this instance-- to pay back the surety for the amount paid to settle the demand.

Before July 2012, applicants for licenses as freight brokers were required to submit a surety bond for $10,000. But, the passing of The Moving Ahead for Progress in the 21st Century Act (MAP-21) raised the bond required of freight brokers to $75,000 as of October 2013. This increase was the consequence of the high number of claims filed against the bonds due to misconduct by principals. The intention was to establish a stricter obligation to ensure only applicants who are qualified receive the license of a freight broker.

Since the bonds of freight brokers are based on credit and are subject to underwriting requirements, applicants are required to submit financial information to apply to purchase their bonds. For additional details on the BMC-84 freight broker bond, please go to the dedicated page on bonds which will provide information on the freight broker bond in all its entirety and how the cost is determined and the amount you will be charged.

Select a Process Agent

The FMCSA defines the term process agent in the sense of "a representative upon whom the court papers may be served in any proceeding brought against a motor carrier, broker, or freight forwarder."

To comply with the requirements of 49 CFR 366, each licensed freight broker has to identify a process agent in each state where they have an office and create contracts. After receiving your motor carrier's number, freight brokers can appoint several process agents or could choose to collaborate with a firm that offers broad coverage. This allows an individual to be an agent for process in several states. No matter how many process agents will be appointed the freight broker, or the designated process agent, acting on behalf of the freight broker complete Form BOC-3 and send it to the FMCSA. FMCSA.

Register the Brokerage

The final stage of the process of licensing requires every freight broker to participate in the Unified Carrier Registration. This is the contract that was drafted in the Unified Carrier Registration Plan governing the distribution and collection of registration as well as financial responsibility information and fees that brokers pay. It provides guidelines and rules for every freight broker, which includes fees to be paid out to the broker's base state, or the state in which their principal office is located.

In addition to participating in taking part in the Unified Carrier Registration, brokers should also be aware of local regulations for interstate businesses for each state in which they are operating by contacting the state's transport regulation agency.