What is a freight broker surety bond?
The Federal Motor Carrier Safety Administration (FMCSA) requires U.S.-based transportation brokers to obtain a freight broker surety bond (or a trust fund agreement) as part of the licensing process. You must file this license and permit bond before receiving a license to operate as a freight broker or freight forwarder. The bond protects motor carriers that brokers hire to complete jobs for them, ensuring brokers compensate them fairly and honestly.
These are sometimes called ICC broker bonds, BMC-84 bonds, transportation broker bonds, or property broker bonds.
If you want to learn about surety bonds for ocean transportation businesses, read our guide on Federal Maritime Commission OTI Bonds.
What is the FMCSA?
The Federal Motor Carrier Safety Administration is the leading federal agency tasked with regulating and providing safety oversight of commercial vehicles. Its mission is to reduce injuries, crashes, and fatalities that involve buses and large trucks.
- The FMCSA requires U.S.-based transportation brokers to obtain a freight broker surety bond (or a trust fund agreement) as part of the licensing process.
- BMC-84 is the form you will file to obtain your freight broker bond. You may choose the trust fund option by filing Form BMC-85.
- To obtain a BMC-84 bond, you must pay a premium equal to a small percentage of the $75,000 bond.
BMC-84 Bonds vs. BMC-85 Trust Funds
Freight brokers have the option of filing a surety bond or obtaining a trust fund. BMC-84 is the form you will file to obtain your freight broker bond. You may choose the trust fund option by filing Form BMC-85. Whichever option you choose, you will need $75,000 worth of coverage.
The trust fund requires $75,000 worth of collateral, so it is generally only used when a surety bond cannot be obtained. A surety bond requires an annual premium – a small percentage of the total bond value – thus it is the preferred option of most companies.
How does a freight broker bond work?
This surety bond is a contract between three parties:
- Obligee: The U.S. government requires the bond
- Principal: The freight broker who needs the bond
- Surety: The company that issues the bond
The bond guarantees that the freight broker or forwarder will uphold industry standards, laws, and regulations. It protects motor carriers and shippers from fraud and unfair or untimely payment. If the principal fails to follow the bond agreement terms, a motor carrier (or another party who suffers damages) may file a claim against the bond.
If the claim is valid, the surety may settle the claim by paying the claimant up to the full bond amount. The principal must then repay the surety for covering for them. If someone files a false claim, you might want to fight it. The best way to avoid paying for a false claim is to understand what your bond covers and what it doesn’t.
These bonds help hold brokers accountable and eliminate some of the risks involved in hauling freight. They can also enhance the freight broker industry’s reputation by raising standards and building trust with haulers.
How to Get Your Freight Broker License
To obtain your freight broker surety bond and license, you’ll follow this general process. Note that you must have either three years of industry experience or evidence of industry knowledge for license approval.
- If you’re a new freight broker, you will need to register with the FMCSA to obtain broker authority and to get your motor carrier (MC) number. Submit Form OP-1 and pay the $300 fee.
- File your BMC-84 bond or BMC-85 trust fund in the amount of $75,000.
- File a BOC-3 form with the FMCSA, and designate a processing agent for each state in which you will operate.
- Get a Unified Carrier Registration (UCR).
If you want to obtain a property broker license from the FMCSA, you will need this bond. It’s required to operate legally in the U.S.
To obtain a BMC-84 bond, you must pay a premium equal to a small percentage of the $75,000 bond. The exact rate may depend on various factors, including your credit score, industry experience, and business and personal financial information. As a ballpark estimate, you might pay anywhere from 1-10%.
Freight broker bonds are valid for one year and then must be renewed. Freight brokers or the FMCSA may cancel the bond by giving a 30-day notice.
Freight brokers act as intermediaries – negotiating transactions between motor carriers and shippers. They don’t handle shipments or cargo. Rather, a freight forwarder handles shipments and coordinates shipment transportation. A single company may or may not manage both roles.
Freight broker bonds are sometimes called ICC broker bonds. However, the ICC (Interstate Commerce Commission) ended in the mid-90s, and the FMCSA took over.
How to Get a Freight Broker Surety Bond
We can help you find the right surety bond for your freight broker business and file it with the FMCSA for you. ZipBonds offers the fastest and most secure option for getting bonded. Our all-digital platform is intuitive and straightforward. Apply online or call us at 888-435-4191 to speak with an agent directly.
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.