The Freight Brokerage Business Basic Information and Licensing Requirements

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Freight brokers are basically middle-man between the shipper, buyer or owner of the product and the trucking company that moves the freight. Freight brokers will accept an order for a load to be moved from the customer and arrange for the transportation of the goods by locating a carrier to move the load. Freight brokers revenues are generated by the freight broker simple paying the carrier less than what they are being paid by their customer, which then becomes the freight brokers "Margin" or profit.

This freight broker business model, for all intents and purposes, sounds simple but in actual fact, it is not. There are freight broker licensing factors that need to be considered to become a freight broker that is not always apparent when first looking at it.

Freight Broker Licensing

Before you can start your freight broker business and actually brokering freight, you need to become established with the Federal Motor Carrier Safety Association which licenses freight brokers. Although there are very little regulations that are specific to freight brokers, there are some basic requirements. These would include a Freight Broker Motor Carrier (MC) number. This freight broker MC number is fairly easy to acquire by providing your incorporation papers and paying the application fee of approximately $500.00. This will almost immediately get you a freight broker MC # that is in pending status. In order to remove the pending status from your freight broker MC, you will need to file a freight broker Surety Bond of $10,000.00. A surety bond is basically security for carriers that in the event they are not paid for a load from the freight broker, they have the right to file a nonpayment complaint against the freight broker bond and will receive all or a portion of their payment from the bonding company. The bonding companies will then go after the freight broker to top the bond back up to the required $10,000. There are a number of bonding companies that will look after this for you and their services vary. Some require freight brokers to front the $10,000 up front while others will finance you until the total is reached. Along with the freight broker surety bond, these companies will also set you up with a "Process Agents" in each state. These process agents are where the carrier with the nonpayment complaint, will file their issue against the freight broker.

If you are a looking at being a freight broker out of the Canadian market then the above licensing is not required. Canadian based carriers will not ask for MC information from freight brokers nor will they be looking for a surety bond. Each province will have its own specific licensing requirements for being a freight broker but these are normally limited to business registrations and nothing more. As a Canadian based freight broker, if you chose to broker freight that originates in the US and is destined for the US and the final stop, it would be strongly suggested that you go after the US based MC authorities. US based carriers will never take a load from a freight broker that does not have a MC number and surety bond.