With the ports of Long Beach and San Pedro readily accessible and serving as a key hub for international manufacturers and domestic importers, freight forwarding is a major industry in Southern California. But before a newly established freight broker begins to handle and move freight through air, land, sea, or rail, they must secure a Freight Forwarder Bond.

What’s Needed to Secure a Freight Forwarder Bond?

Regardless of where you are operating and handling cargo and goods, the Federal Motor Carrier Safety Association (FMCSA) requires all freight forwarders to secure Freight Forwarder Bonds.   This freight surety bond, or BMC-84 broker bond helps protect shippers and motor carriers in the event that you fail to fulfill the terms of your contract. There are three parties to the agreement:

  • The Principal: The freight broker
  • The Obligee: The broker requiring the bond
  • The Surety: The bond producer

The price of the bond used to be $10,000 annually, but in 2013 the Moving Ahead for Progress in the 21st Century (Map-21) took effect, which raised the bond to $75,000.   But freight brokers will typically pay an annual premium based on several factors including:

  • Years in business
  • The financial stature of your company
  • The company’s credit score

Also note that if your company has brother broker and freight forwarder authority, you must secure two surety bonds.

Case Study

 A popular South Korean multinational automotive company recently signed with Johnson Transport Worldwide to internationally ship its automotive products. The contract specified that over 50,000 vehicles would be transported throughout the next year.

Johnson Transport Worldwide has made a strong name for itself in the freight forwarding community, and after executing a well-planned shipping strategy, JTW was able to transport over 5,000 more vehicles than was initially asked for in the binding contract.

Unfortunately, the automotive company that held a valid freight broker bond experienced a financial setback and was not able to pay JTW for another six months after what was promised in the initial contract.

JTW experienced heavy loss due to the delay in payment and chose to move forward with a claim against the automotive company.

Thankfully, JTW was able to adjust their loss thanks to the compensation they received from the bond held by the automotive company, who was held liable by the Surety company that granted the bond.

It is due to situations such as this that bonds are required for all freight brokers and freight carriers by the Federal Motor Carrier Safety Administration (FMCSA).

Talk With an Expert

With all of the regulations, licensing, and permits your business needs to secure before you begin operations, your attention can be pulled in many different directions.

That’s where we can help. We can eliminate the burden you might feel when deciding between your Freight Forwarder Bond needs.

Surety Bond Authority possesses more than 20 years of experience in the industry and can provide a thorough overview of the surety bonds you may need, with fast delivery of services at a rate that fits within your budget. We’d be happy to answer any of your questions. Give us a call at 800-333-7800.

Greg Rynerson, CPCU

Greg Rynerson, CPCU

Backed by 30 years of experience, I spent my career in the surety bond and insurance industries. Throughout the course of my professional life, I've been proud to execute bonds at the state and federal level for various clients.

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