A freight broker bond must be obtained by
freight brokers and
freight forwarders in the
United States
The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...
in order to obtain or renew their
license
A license (American English) or licence (Commonwealth English) is an official permission or permit to do, use, or own something (as well as the document of that permission or permit).
A license is granted by a party (licensor) to another part ...
.
In the United States, freight broker
surety
In finance, a surety , surety bond, or guaranty involves a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults. Usually, a surety bond or surety is a promise by a person or company (a ''sure ...
bonds are required by the
Federal Motor Carrier Safety Administration (FMCSA) to move property such as
household goods or freight and motor cargo (
vehicle
A vehicle () is a machine designed for self-propulsion, usually to transport people, cargo, or both. The term "vehicle" typically refers to land vehicles such as human-powered land vehicle, human-powered vehicles (e.g. bicycles, tricycles, velo ...
s). Their role is to guarantee that freight brokers and
auto transport broker
An auto transport broker is a type of cargo broker that specializes in the shipping and transportation of vehicles. Most vehicles shipped in the U.S. are cars and trucks, but many brokers handle boats, RVs, motorcycles and other types of vehicle ...
s will operate according to their agreements with shippers and motor carriers. If a freight broker or auto transport broker does not comply with their contract, the carrier or the shipper may file a claim.
The three parties to the agreement are:
* Principal: the freight broker / auto transport broker
* Obligee: the party requiring the bond (FMCSA)
* Surety: the surety company
A freight broker bond is also known as a BMC-84 surety bond, trucking surety bond, transportation broker surety bond, or property broker bond. FMCSA uses the term "property broker" instead of freight broker.
History
The first freight broker bond requirement came into effect in the 1930. In the 1970s, the bond amount was increased to $10,000 and was not changed until June 29, 2012, when
Congress
A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of ...
passed the ''
Moving Ahead for Progress in the 21st Century Act'' (MAP-21).
The two main changes that came with the MAP-21 were:
* the freight broker bond increased from $10,000 to $75,000
* freight forwarders must also meet the $75k requirement
The freight broker bond increase took effect on October 1, 2013. Many freight brokers were against this change because they expected they would not be able to meet the new requirement. It was a 7-fold increase and the previous price had not changed for about 40 years. According to FMCSA, there had been too many cases where shippers and carriers had been delayed (or entirely denied) payment so the bond increase was necessary.
One of the strongest objections to the changes came from the Association of Independent Property Brokers & Agents (AIBPA). It claimed that this would create a loss of 8,200 freight brokerages and tens of thousands of jobs.
Kevin Reid, who was
CEO of The National Association for Minority Truckers, also objected, saying it was an "unreasonable barrier to entry for would-be entrepreneurs".
Despite these objections, the provisions were passed into law.
References
{{reflist
External links
Freight Broker Registration - FMCSA
Trucking industry in the United States
Sureties
Freight transport