Wouldn’t it be great if you did your business trusting all of the parties involved in freight without a shadow of a doubt?
Sometimes this is indeed possible – when you’ve worked with the same partners for years and you’ve managed to build a work environment of mutual trust and cooperation.
Most of the time, however, it’s not a bad idea to use available channels to check if the freight broker whose services you are about to use is legitimate.
Let’s review the basics, and see what you can do to ensure that the person you’re dealing with is really who he says he is.
What Are the Benefits of Using a Freight Broker?
Usually, the freight broker services are highly appreciated, because a good broker knows the shipping industry in and out, uses the latest technology to accomplish his clients’ goals, and works with reliable carriers that otherwise may be hard to locate.
Let’s review the benefits of using a freight broker:
Benefit #1: The freight broker can find the best shipping option for you and save you time and money. He will seek out bids from a variety of companies that you may not consider otherwise, simply because you are unaware they exist. The good broker will approach each load with equal amount of attention and diligence, and make sure you get the best possible price on the carrier services.
Benefit #2: Transporting goods interstate or even overseas is connected with a lot of state and federal regulations. An experienced freight broker will know what those regulations are, what’s the necessary paperwork to be filled out along with anything else you need to consider when shipping internationally, for instance.
Benefit #3: Freight brokers are troubleshooters. They should be able to find a solution even to your most complex shipping needs. Large or heavy shipments, the broker can take care of any size, weight or specific measurements issues that you may have to consider when dealing with a traditional shipping company. Presumably, the freight broker has a extensive network of contacts in the shipping industry, and will know whom to call and what to do.
It’s not a rare practice nowadays, however, for a company to act as its own freight broker to save some money. But even such companies reach out to brokers from time to time to secure an important load.
Now, in order to operate, a freight broker needs to be licensed and bonded.
Here is how you can check if your broker is legitimate.
Check the Broker’s Credentials Online
All freight brokers are regulated by the Federal Motor Carrier Safety Administration (FMCSA).
Just go to the agency’s website to check whether the broker you are working with has a valid license. Make sure that it’s been renewed on time and the required surety bond hasn’t been cancelled.
The website will also provide you with additional information, such as whether the license has ever been revoked, and perhaps later reinstated, and how many times has that happened.
Even if the broker checks out online, it’s always a good idea to request a copy of the broker’s operating authority. Compare whether the name, motor carrier number and all dates appear the same as the ones in the FMCSA database. If there are discrepancies, ask why and use extra caution.
To make sure your broker is legitimate, ask these three key questions:
#1 Is your broker REGISTERED with the Unified Carrier Registration (UCR) Program?
UCR is a federal, but state-administered program that became effective in 2007. It says that states must collect fees from motor carriers, freight forwarders and brokers, and leasing companies, based on the number of commercial motor vehicles in their fleets.
The registration is mandatory. If a broker or carrier does not register but engages in interstate commerce, they may become subject to law enforcement action. Steer away from legal troubles when possible, and check in advance to see if a broker has a current registration.
#2 Is your broker INSURED? EDITED
Every freight broker must have an insurance certificate (but not required by law, but to show MORE legitimacy due to the investment in risk mitigation for themselves and their shipper clients) and you should make sure to obtain a copy for your files. Once in your hands, verify all the information on the certificate.
Pay special attention to whether the insurance company is the same as the one listed on the FMCSA website. Along with that, all other information you find on the agency’s site should match with the certificate. Double check the insured name, policy numbers and effective dates.
Even better, you can contact the insurance company and ask them if the policies are still in effect.
#3 Is your freight broker BONDED?
Freight brokers are obliged to purchase a surety bond in order to be licensed and operate legally. The bond, also known as BMC-84, is required by FMCSA and it’s placed to ensure fair play. If a carrier isn’t paid as agreed, they can make a claim against the bond and receive all due payments.
Prior to Oct. 1, 2013, the minimum bond requirement was $10,000, but then it hiked to $75,000. Losses up to $75,000 will be compensated fully!
Again, you can use FMCSA’s website to find out whether a broker’s surety bond is active.
Keep a Broker Database
If you keep a record of all the freight brokers your company ever works with, you can create something like a work history for each one. This profile doesn’t need to be limited to technical document verification.
You can also include details about the broker’s overall approach to the work load, if they’re capable of meeting deadlines, if they have a good business ethic and so on. This will give you a better-rounded image of each one, to better help you decide who to call again.
Much like dating, in order to build trust and feel comfortable with each broker, you can ask the broker about any social media accounts, where you can see activities and interests outside work. This will not only help you bond, but also build a strong long-term relationship.
In addition, make sure to include all contact details such as phone and fax numbers, valid emails and even physical addresses so you can easily get in touch. Keep a record of the payment and transaction history for each load and update the database regularly.
And why not take advantage of what technology has to offer? You can use tools for data organizing such as Access or Zoho Creator, to help you keep track of everything.
Freight fraud and identity theft don’t happen every day, but they do happen.
It is also true that good partnerships are nurtured with trust and mutual understanding.
However, if you’re operating your own business it would be wise to take all necessary precautions and carefully verify the information a broker provides for you.
Above all, be sure that the broker is compliant with all federal and state licensing and registration requirements.
Have you ever had any bad experience with an unlicensed broker? Share with us below.
And did we cover everything? Tell us in the comment section if you apply any other practices to ensure that the broker you work with is legitimate!
Written by Svetlana Guineva
Svetlana Guineva is a contributor for Bryant Surety Bonds blog. She is a graduate of Metropolitan State University of Denver and is an expert in the field of surety bonds and licensing. She has written numerous articles on the topic of Freight Broker Bonds and Auto Dealer Licensing.