It has often been asked here at Freight Forwarders, what exactly are freight brokers and what role they play in the industry as a whole.
Freight brokers are basically the go betweens acting for the persons requiring goods to be transported and the freight forwarders and transportation companies themselves. A freight broker could also be known as that which is legally termed a Property Broker. It is this term that has been established in the US by the FMCSA (Federal Motor Carrier Safety Administration). The FMCSA is a division of the Department of Transportation in the US.
A freight broker or property broker is therefore a term which is used to describe a licensed individual, or a corporation acting to assist in facilitating the successful transportation of goods undertaken by a freight shipper or authorized motor carrier and the customer.
Brokers are not, by law required to carry cargo or liability insurance. However, freight brokers are required to hold several legal documents which include:
- A Broker's Authority
- Surety Bond or Trust Fund
- Processing Agent
A Broker's Authority is obtained for a $300 fee (currently) through the FMCSA upon filing out the form OP-1 and filing for authority.
A Surety Bond or Trust Fund is obtained from either a bank or a bonding company. The form that is required to be filed with this is known as the BMC-84 or BMC-85. Each brokerage company or individual entity is required to prove they are able to pay the various truck lines, airlines, railroads, or any other entity being used by the broker. Before a bond is issued, the individual's credit and/or financial capacity is thoroughly investigated. This is because for some reason if the broker fails to pay the freight forwarder or transport company, the bonding company must instead pay.For this reason the bonding company is extremely cautious about who they decide to insure.
The Processing Agent is obtained by filling out form BOC-3 and costs $50.
A freight broker does not require a lawyer or other professional entity in order to file for a motor carrier or property broker authority. As for certification, there is actually only one level of broker, which is the Property Broker, or more commonly called the Freight Broker. The FMCSA does not recognize any other title.
That concludes this article, which we trust you found informative and useful.