Obtaining a Freight Broker License in Indiana
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 Indiana BMC-84 bond needs.
Who Needs a Freight Broker License?
If you want to operate anywhere in the United States as a freight broker, you must obtain an “operating authority” from the Federal Motor Carrier Safety Administration (FMCSA). While it’s not called a license, that’s essentially what an operating authority is.
What Are the Steps in the Licensing Process?
The process for obtaining an operating authority is referred to as registration rather than licensing and is executed through the federal Unified Registration System (URS). Before accessing URS to complete an online application, you will need to accomplish these preliminary steps:
- Create a legal business entity if your plan is to establish a freight brokerage firm. The state of Indiana has a website that will help you determine how to register your particular type of business at the state level.
- Decide whether you will be operating as a “Broker of Household Goods” or “Broker of Property (except Household Goods),” or as both.
- Choose a process agent to accept legal service on your behalf in every state where you will have an office or write contracts. You have the option of choosing a blanket process agent company that can represent you in any state. FMCSA maintains a list of approved blanket process companies.
- List all of your designated process agents on a single Form BOC-3, and file it with FMCSA. If designating a blanket company, they can complete and file the form for you.
- Purchase a $75,000 BMC-84 freight broker bond or furnish a BMC-85 Trust Fund Agreement to FMCA.
Your final step is to submit an online application to the Unified Registration System, or URS, and pay the registration fee (currently $300). When you’re done, URS will generate your MCN immediately, and your operating authority documents should arrive in the mail in about 10 business days.
Why Is a Freight Broker Surety Bond Required?
In purchasing a BMC-84 bond, a freight broker (the bond’s “principal”) is guaranteed to abide by all FMCSA regulations and to compensate any party that can substantiate a final loss resulting from a violation. In this manner, a BMC-84 bond protects FMCSA (the “obligee” requiring the bond) against liability for such damages as well as shippers and carriers.
How Are Freight Broker Bond Claims Paid?
A BMC-85 bond creates a legally binding contract between FMCSA as the obligee, the freight broker as the principal, and a third party—the bond’s guarantor, (the “surety”). The terms of the surety bond obligate the principal to pay all claims that the surety finds to be valid. But having guaranteed the payment of claims, the surety will pay a legitimate claim initially and then be repaid by the principal. A principal who does not repay the surety can expect to be sued and can end up paying court costs and legal fees as well as the debt owed to the surety.
What Do They Cost?
A BMC-84 freight broker bond is purchased for an annual premium that is only a small percentage of the $75,000 bond amount. That’s why most freight brokers choose to purchase a BMC-84 bond rather than set up a BMC-85 trust fund, which ties up $75,000 in cash and/or credit.
The surety assigns a premium rate on a case-by-case basis after an underwriting assessment of the risk involved in paying claims on the principal’s behalf. The main factor considered is the principal’s personal credit score, which is a good indication as to how readily the principal would repay the surety. Bond applicants with good credit typically pay a premium rate that’s somewhere between one and four percent.
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