Frequently Asked Questions

Transportation Logistics 101 - FAQs on Freight Brokering

1What is a Transportation Freight Broker?
A Freight Broker contracts with Shippers for freight to be moved and then finds the appropriate Motor Carriers to transport the load(s). The Shipper pays the Freight Broker and the Freight Broker in turn pays the Motor Carrier, keeping a portion as payment for the arrangement of the contracted shipment. The Freight Broker is an important third party logistics component in a dynamic transportation industry that keeps our country supplied and running.
2What is the process to become a Freight Broker?
Individuals who are applying for the first time do so with the Federal Motor Carrier Safety Administration (FMCSA) via the Unified Registration System. Along with paying the FMCSA a $300 non-refundable fee and later receiving the USDOT and MC number assigned by the FMCSA, to complete the process, applicants must secure a $75,000 BMC-84 Surety Bond OR a BMC-85 Trust Fund Agreement. You must also have a BOC-3 Designation of Process Agent submitted (this lists an address within each state where legal paperwork may be served to your brokerage and then forwarded to you). PFA can walk you through the entire process AND provide everything you need to satisfy the FMCSA’s requirements.
3How long does the process take after applying with the FMCSA?
The FMCSA is able to activate your Freight Broker authority once you have met their bond/trust and BOC-3 filing requirements. There is a 21-day vetting/waiting period that the FMCSA will go through, prior to making the authority active. The 21 days begin accruing the first day you receive your USDOT number. When the broker bond and BOC-3 are filed electronically with the FMCSA, if you are still in the vetting period, then your authority will be granted an active authority status on or around the 21st day. Filing the bond is not what triggers the FMCSA to make the authority active. Their processes must be completed first, while you are submitting the requirements. Simply put, when you receive the USDOT number, you begin the 21-day vetting period and you should get the bond and BOC-3 on file within that time period. Once you are granted an active authority status by the FMCSA, you may start to legally broker loads for movement. After PFA files your bond with the FMCSA, we check with the FMCSA every day and notify you when your broker authority is active. We stay on it on your behalf until we know you are fully activated and then of course are here to serve you in a way that allows you to focus on your own business! We’ll give you What You Need. When You Need It.
4Why do you need a $75,000 BMC-84 or BMC-85 Freight Broker Bond?
The FMCSA requires you to have this financial guarantee in place to ensure the Motor Carriers that you contract with get paid to move the load. If you fail to pay the Motor Carrier for the load moved per the contract, the carrier may contact your bond provider and file a claim against your bond to get paid for that load.
5Why should you choose PFA to fulfill the FMCSA’s surety requirement?
PFA is the nation’s largest issuer of broker surety instruments! In 20+ years, we have issued tens of thousands of these instruments and we currently have well over 4,000 active brokers. Either instrument satisfies the FMCSA’s surety requirement. PFA offers unparalleled claims knowledge, experience, and service among the entire transportation surety industry. We handle all of our own investigations, communications, and verifications relating to claims against a trust agreement or bond issued by us. Through extensive legal expertise in the specifics of freight broker regulations, PFA expedites legitimate claims and quickly identifies non-valid claims thereby minimizing the impact on the trust account or bond. We are the most experienced company in this specialized field and can provide you with the best possible service in the industry! We also offer all transportation insurance products and other surety bonds (i.e. performance, customs, highway use, fuel tax) that you may need throughout the course of your business.
6Do you have to pay $75,000 to get a Freight Broker Bond?
NO! You can fulfill the FMCSA’s requirement in one of two ways, either a BMC-84 or BMC-85. Both of these surety instruments meet the federal government’s requirement in order to obtain active Freight Broker authority with the FMCSA. PFA is one of the very few and select companies in the country that sells both! Our extremely knowledgeable sales staff will help you determine which option is best for you.
  • BMC-84 Surety Bond - issued through a surety insurance company. PFA’s BMC-84 program does not hold collateral on a BMC-84. The premiums are based on credit worthiness and PFA offers many payment options on the premium amount.
  • BMC-85 Trust Fund Agreement - issued through a financial institution such as PFA. The FMCSA requires it to be funded with $75,000 Cash or Letter of Credit (LOC). PFA is the nation’s largest provider and has the ability to get you approved for a plan where PFA funds the trust on your behalf and will not require you to tie up your business capital in the trust fund. Our LOC will be placed in the trust on your behalf for an agreed upon fee. Again, PFA offers many payment options on the fee amount for funding the trust.
  • 7How do you apply for a BMC-84 or BMC-85 with PFA?
    Simply fill out our online application and we will have an approval for you within a couple of hours! Or, call us at 800-595-2615 and speak with one of our experienced sales representatives. They will be able to go over our options with you, e-mail our broker information packet which contains our application to you, and then help you fill it out. We are here to assist you every step of the way.
    8If you have less than perfect credit, can you still get approved?
    We are almost always able to approve you on some basis. We are more than willing to work with you to try to come up with an affordable solution! Being the only company to offer both BMC-84s and BMC-85s, we have unequaled ability to find a solution to get you approved and on your way to being an active freight broker. Your approval from PFA is good for 6 months from your approval date.
    9What are some things to consider when qualifying Motor Carriers whom you want to contract with?
    While there are many things to consider when contracting with Motor Carriers, one important part of your due diligence process as a Freight Broker is to ensure the Motor Carriers you contract with have the proper authority with the FMCSA and appropriate lines of insurance coverage. This is one of the most important priorities you may have for your business. The Motor Carrier should be appropriately licensed, authorized and insured to protect the load. It is essential to call the Motor Carrier's insurance provider to verify coverage listed on the Certificate of Insurance that you are provided. There are many instances in the industry of Freight Brokers being provided with a fake certificate from a fraudulent source. It is your responsibility as a Freight Broker to contact the insurance agent/office to verify the Motor Carrier’s insurance coverage is in place. You may also use the FMCSA Licensing and Insurance public page to search the authority status for any Motor Carriers you contract with. It is encouraged that you seek advice from qualified transportation legal counsel when preparing your due diligence strategies.
    10Are there any other insurance products that Freight Brokers are required to obtain?
    You are NOT required by the federal government to carry insurance as a Freight Broker. However, it is very common for Shippers to have insurance requirements as part of the Broker/Shipper contract. Many Shippers will not contract with a Freight Broker that does not have certain insurance coverages in place. PFA sells all insurance products that a Freight Broker may need to satisfy Shipper contracts. We can quickly quote you on those lines of coverage. We have experienced Commercial Insurance Advisors in our Insurance Department that can address your individual contract needs for coverage.
    11What are the most common insurance coverages asked for by Shippers and what do they cover?
    There are many different coverage options available, but the most commonly requested lines are: Contingent Cargo, Contingent Auto/Freight Broker Liability, and General Liability.

  • What is Contingent Cargo coverage? Contingent cargo insurance is coverage for when a primary (trucker’s) cargo policy does not respond to pay for a claim. It can provide “peace of mind” and it is frequently required under many Shipper agreements.

  • What is Contingent Auto/Freight Broker Liability? Contingent auto is for claims when the primary (trucker’s) liability does not respond to pay. This can be the defense coverage when an injured party sues for damages. The coverage is to address bodily injury or property damage claims from third-party claimants.
  • What is General Liability? General liability is often perceived to be the coverage for slip and trip mishaps of visitors on your property. But, this can also address certain contractual issues, charges of libel or slander, actions by employees, and more.
  • Most Freight Brokers often purchase Contingent Cargo insurance which is a great start. PFA offers many other options which may help increase your revenues by making you more marketable to Shippers. Shipper’s Interest and Excess Limits for Cargo are two additional coverage options that are worth considering. These two also tie to the basic demands of shippers to provide cargo protection per their contract.

    Be aware that an increasing number of Shippers are also requiring Professional Liability, also known as Errors & Omissions (E&O) coverage, in their contractual demands. While you may have confidence in your procedures and communication protocols, the Shippers are seeking this additional insurance as a manner to overcome another area where they see negligence can lead to problems.

    We often see companies realizing the win/win of protection and becoming more ‘marketable’ in the shipping community. Knowing these options are available and how you can plan to address them is another service the PFA Team can help you with What You Need. When You Need It.

    What You Need. When You Need It.

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