The Freight Broker Bond
A freight broker bond is a protection required by the FMCSA that secures against misrepresentation or untrustworthy activities by a transportation broker. Some might be permitted to utilize a BMC-85 trust finance rather than a funded freight broker bond.
All that You Need to Know About Freight Broker Bonds
Freight brokers are a critical safety net mostly for carriers. In many occasions, brokerage business that go belly-up can leave thousands of truck drivers without being paid. In this case, the bond can be issued a claim. It is a common mistake made by consumers that the bond protects the customer / buyer of the transport service. This is not the case. It has little to do with the client at all.
Auto transport companies are a form of freight broker. Before getting a permit as a freight broker, an auto transport company must acquire a freight broker surety bond, or place a guarantee of $75,000 to meet the requirement. For whatever length of time that this company wants to work as a freight broker for auto shipping, they have to keep up a surety bond. The motivation behind the surety bond is to give peace a mind to carriers that the broker will maintain payment agreements with the carriers that they contract.
If a broker does not pay a carrier for the work that has been done, the transporter can document a claim against the bond to get the monies that the broker owes to them. The surety will survey the case, and if it is substantial, pay out the estimation of the claim (up to the bond sum), to the carrier.. At that point, the broker would be in charge of repaying the surety for the cost of the claim.
What amount does a freight broker bond cost?
Just about everyone uses the BMC-85 The premium for the bond (which means the sum that you would pay) is by and large between 2% to 4% every year, given various variables, including reliability and company standing.
The procedure for getting a freight broker bond is mainly focused on verifying the company applying is legitimate and is not deceiving the bond company by closing one company that has defaulted and opening another. A common practice. Before transportation brokers can buy a surety bond from a provider, they will submit themselves to a credit check, have their application carefully reviewed, and experience in the industry measured before it is allowed to be approved. Freight brokers can move than just vehicles, but for the purpose of this definition we are only referring to vehicles. With this bond many different items can be transported by dispatching through air, ship, or truck.
Just being bonded is not enough for the consumer looking to secure shipping. At the end, researching MC Numbers, Verifying a bond, it’s all paperwork. The auto transport company’s reputation in the marketplace will always be the hallmark in judging what company will be best shipping a car.