The Growing Need for Freight Broker Bonds
We have recently been approached by a few Canadian freight carriers with long term operations in the US inquiring about the Freight Broker Bond. This bond, also known as the BMC-84 Freight Broker Surety Bond, is a requirement from the Federal Motor Carrier Safety Administration (FMCSA) in the United States. Our clients are long term freight brokers who have only recently been advised that they now need to provide this bond in the amount of $75,000 to continue their operations in the US. Since these are Canadian companies operating in the US, these bonds need to be issued through Canadian surety companies.
What is a Freight Broker Bond or BMC-84?
The Freight Broker Bond (BMC-84) is a license surety bond required by the Federal Motor Carrier Safety Administration (FMCSA). The freight broker surety license bond is required of businesses intent on obtaining a property broker license, from the FMCSA. The bond provides a form of protection for motor carriers hired by the licensed broker. The bond protects the payments due to the motor carrier for jobs completed for the broker. The FMCSA Freight Broker surety bond requirement is continuous, meaning that as long as the operating authority is in place, the surety bond requirement remains as well.
What does the Freight Broker Bond do?
Freight broker bonds provide a form of recourse for a motor carrier hired by a broker. If a motor carrier has not received payment for a job for which payment is due, potentially, a claim can be made on the surety bond. The Surety, the company providing the guarantee behind the bond, if unable to remedy the situation, would be required to make payment up to the bond penalty amount. The surety would then attempt to collect the paid claim amount from the broker. Ultimately, the broker is responsible for any amount paid out on a claim.
Terms of the BMC-84 Freight Broker Bond
Freight broker surety license bonds are valid for one year from the date it is issued. If either the broker or surety wishes to terminate the bond during that year, a 30-day notice of cancellation must be sent to the FMCSA. During the 30 days prior to cancellation, the surety remains liable for any claims filed against the bond.
How much does a Freight Broker Bond cost?
The cost of your freight broker bond is a percentage of the $75,000 bond amount as determined by a surety company but generally speaking they range from 3-4% of the bond value. In certain cases, FCA Surety is able to negotiate lower rates. Freight brokers wanting to renew their surety bond may qualify for a lower rate after a year or two of conducting business without having any claims filed against the bond.
What is required to apply for a Freight Broker Bond?
In order to apply for a BMC-84 bond, we require a completed application form and the most recent financial year-end statements of the company. In certain cases, bond companies may also enquire about the personal financial situation of the principal or principals of the company as well.
About FCA Surety
FCA Surety is a surety bond broker and has been providing surety expertise to the freight industry for over 99 years. We offer a dedicated and seasoned surety department, so you can depend on the expert underwriting experience of our senior team. Our priority is taking care of our client’s needs first and foremost and helping drive results and profitability in every way we can.