Arkansas Freight Broker License Bonds
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your BMC-84 bond needs.
Who Needs a Freight Broker License?
Throughout the United States, freight brokers must obtain an “operating authority” from the Federal Motor Carrier Safety Administration (FMCSA).
What Are the Steps in the Licensing Process?
While an FMCSA operating authority functions as a license, it’s the result of a registration process rather than licensing. At the end of the registration process, a freight broker receives an MCN, or motor carrier number, which is evidence of the operating authority, which will arrive in the mail about 10 business days later.
Freight broker registrations are submitted and processed online, through the Unified Registration System (URS). Before beginning an application, you will need to:
- Establish a legal structure (e.g., sole proprietorship, partnership, LLC, corporation) if you will be operating your own freight brokerage.
- Register the business with the Internal Revenue Service to obtain an employer identification number (EIN).
- Register the business with the Arkansas Secretary of State.
- Decide whether you are applying for registration as a “Broker of Household Goods” or “Broker of Property (except Household Goods),” or both.
- Choose a process agent in every state where you will have an office or write contracts, or select a blanket process agent company approved by FMCSA to provide representation in every state.
- Complete a single Form BOC-3 (Designation of Process Agents) listing all of your process agents and file it with FMCSA. If using a blanket process agency, that company can file the form for you.
- Purchase a $75,000 BMC-84 freight broker bond or furnish FMCSA with a BMC-85 Trust Fund Agreement. (Most freight brokers chose to purchase a BMC-84 bond because it doesn’t tie up $75,000 of their capital as a BMC-85 agreement does.
When you have completed all of the above tasks, apply for your operating authority online through URS, the Unified Registration System, and pay the $300 registration fee. Your MCN will be generated immediately by the system.
Why Is a Freight Broker Surety Bond Required?
FMCSA requires freight brokers to provide a surety bond or trust fund as a guarantee that they will operate in full compliance with all FMCSA regulations and to compensate any shipper, carrier, or other party that can document a financial loss resulting from their noncompliance.
How Are Freight Broker Bond Claims Paid?
There are three parties to the surety bond agreement:
- the “obligee” requiring the bond (FMCSA),
- the “principal” (the freight broker) purchasing the bond and legally obligated to pay valid claims, and
- the bond’s “surety” (the company guaranteeing the bond).
Although the principal is legally responsible for paying valid claims, the surety has guaranteed their payment. Consequently, the surety typically pays a claim initially, but the principal must then reimburse the surety. The surety can pursue the matter in court if the principal fails to repay that debt.
What Do They Cost?
The annual premium for a BMC-84 freight broker bond is only a small percentage of the $75,000 bond amount, that percentage being the premium rate. The surety assigns each principal a premium rate that reflects an underwriting assessment of the risk that the principal won’t readily reimburse the surety for claims paid on the principal’s behalf.
That assessment is based largely on the principal’s personal credit score. A high score suggests a low risk level and a low score is a red flag for a high risk level. Those with good credit normally are assigned a premium rate in the range of one to four percent.
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Our surety bond professionals will get you the Arkansas freight broker license bond you need at a competitive rate.