What is a Freight Broker Bond?

A Freight Broker Bond is a requirement of the Federal Motor Carrier Safety Administration (FCMSA) and must be obtained before a license is issued to the freight broker.

The FMCSA is a division of the U.S. Department of Transportation that regulates interstate commerce and imposes safety rules.

A freight broker bond is also known as a BMC-84 surety bond, property broker bond, trucking surety bond or transportation broker surety bond.


What is a Freight Broker?

A freight broker, sometimes referred to as a third-party logistic firm, is a regulated company licensed to contract with motor carriers to move freight for their shipping customers. They do the negotiating and transacting and delivers the freight where it needs to be.

Some of the duties of freight brokers include:

  • Finding shippers and carriers
  • Keeping records of each transaction (contracts, payables, receivables, etc.)
  • Setting appropriate rates for each freight load
  • Moving freight

Freight brokers are not the same as freight agents. A freight agent is an individual who acts as an independent contractor salesperson for a freight broker.

Freight brokerage firms can be publicly-traded asset-based or family-owned companies, limited liability corporations (LLCs), partnerships, or even start-ups. All freight brokers and forwarders must complete the Unified Carrier Registration and pay an annual fee. The current fee for brokers is $76 per year.

How do Freight Broker Bonds work?

The FMCSA requires that all freight brokers either purchase a freight bond, also called BMC-84 or complete a trust find agreement (BMC-85). With the BMC-85, the broker is required to place $75,000 into a trust. Since this is often not an option for smaller freight brokers and those just getting started, the other option is to obtain the BMC-84 bond, which requires only a percentage to be paid upfront as the premium.

The freight broker is known as the Principal, the FMCSA is the Obligee, and the Surety company is the underwriter of the bond. If the freight brokers fail to meet their obligations, then the FCMSA can file a claim against the bond. The surety company will investigate the claim, and if it is found to be valid, then payment will be made to the FMCSA. The freight broker will be responsible for paying back the surety company for the amount that was paid out of the claim.

Freight broker bonds are valid for one full year from the issue date. The broker will be responsible for renewing their bond each year or risk losing their licensing with the FMCSA.


Why do you need a Freight Broker Bond?

The freight broker bond aims to ensure that freight brokers and forwarders maintain certain standards and follow the regulations of the FMCSA. It serves to prevent fraudulent activities and guarantees timely payments and compensation to motor carriers and shippers.

If freight brokers or forwarders violate FMCSA regulations that caused injuries or financial damages, the harmed party can make a claim up to the full amount of the bond. When the claim has been resolved, the responsible freight broker or forwarder will reimburse the surety for the full amount of the damages and any resulting legal fees.

The bond is written to assure compliance by the Principal as either a licensed Broker or a licensed Freight Forwarder of Transportation by motor vehicle with 49 U.S.C. 13906(b), and the rules and regulations of the FMCSA relating to insurance or other security for the protection of motor carriers and shippers, and shall inure to the benefit of any and all motor carriers or shippers.


What are the Freight Broker Bond conditions?

  • The bond should be issued by a state-authorized surety bond company.
  • The bond will guarantee financial responsibility and the supplying of transportation and shipments subject to the ICC Termination Act of 1995.
  • The Principal shall adhere to the rules and regulations of the FMCSA.
  • The Principal will be held responsible for any damages and violations committed during the term of the bond.
  • The Bond will be used to pay any claim made against the freight broker from the freight broker’s failure to pay freight charges stated in its contract.
  • The bond will remain valid until canceled. In case of cancellation, a 30-day notice is required. The Principal or the Surety may at any time cancel this bond by written notice to the FMCSA.

The goal of freight broker bonds is to guarantee that brokering is an ethical and fair industry where the people involved earn rightful payments for their work. At the same time, surety bonds offer a positive indication for freight brokers that demonstrate they are financially capable and safe to conduct business with.


How much does a Freight Broker Bond cost?

The bond cost (referred to as the bond premium) is only a fraction (percentage) of the bond amount, which can typically range between 1%-5%. The cost is based on the applicant's credit standing and financial and professional capacity. The percentages are in the range of 6-13 percent for freight brokers with bad credit.

For finances with good standing, bond premiums can be as low as $1,500 per year. You can lower your bond cost by showcasing your assets and liquidity and by improving your credit.

For the bond amount, freight broker and freight forwarding companies are often required to purchase a bond in an amount no less than $75,000 in order to guarantee that they will perform their duties in accordance with the regulations that have been set by the shippers and carriers.

To learn more about your bond costs and requirements, submit your request for a free freight broker bond quote HERE.

How do I apply for a freight broker bond?

Find a trusted and experienced surety bond provider that offers this type of surety bond. A surety underwriter will conduct an exhaustive review of your financial capacity.

The application is simple and a surety agent will contact you to go over any necessary documents to complete the bond paperwork.

Documents include:

  • Completed bond application
  • Bond form (a copy can be obtained from the FMCSA)
  • Financial documents (income statements, bank balances, statement of changes in equity, statement of cash flows, etc.)

You will pay your premium via one of our convenient payment options. Finally, we will get your bond documents and will send it to you right away.

To get you the most accurate quote, we will need a completed quote request form. Pricing for freight broker bonds can vary based on submitted requirements and other factors. We will be ready to answer any questions you have about the freight broker bond process as well as any other bonds you may need for your business. Contact us today to get started!

Learn more about Freight Broker Bonds by watching the video below.

Check out this Infographic!

Have a better view of Freight Broker Bonds through this infographic.

Freight Broker Bond