The $75K Freight Broker Bond: Deadlines and Implications

Published: Oct 16, 2013
By now anyone in the freight broker industry must have heard of the $75K freight broker bond increase. This new requirement is a part of a big piece of legislation called Moving Ahead for Progress in the 21st Century Act (MAP-21). Signed into law last July, MAP-21 brought a wide array of changes in the way surface transportation programs are funded. A lot of these policies affect freight brokers, freight forwarders and motors carriers. So let’s examine them more closely and mark some important deadlines.


RyanP77 / Foter / CC BY-NC-SA

What’s going to change

First of all, it’s important to note that the measures set out in MAP-21 are already in effect. The most widely discussed stipulation states that as of October 1st all freight brokers must now post a $75K freight broker bond if they want to continue operations. Freight broker bonds are required as a safety measure, protecting motor carriers and the end customer. If a freight broker fails to pay truckers on time, the freight broker bond will come into effect and cover the losses. Moreover, this rule extends to freight forwarders as well. Even if they do brokering only occasionally, they will still have to get the $75K freight broker bond.

The increase was no small thing. The previous amount of the cost of the freight broker bond was $10K and that had been the case for more than 30 years. In light of this, it’s understandable that the unexpected jump in the price of the bond took many people aback. Lots of people voiced their discontent in blogs and forums. Small and mid-sized brokers were especially vocal as they felt the new requirement might force them out of business or destroy their independence by making them join larger freight brokerages. The Association of Independent Property Brokers & Agents even filed a federal lawsuit against the $75K freight broker bond requirement on the grounds that it was anti-competitive and favored large-scale freight brokers.

For good or for worse, the price of the bond remained the same, yet all the commotion was not in vain. The Federal Motor Carrier Safety Administration (FMCSA) granted freight brokers with a 60-day grace period, during which they could try to find a good deal and renew their license. Thus, there are three important dates in the freight broker calendar. October 1st was the official deadline for freight brokers and forwarders to post the bond. On November 1st, all non-compliant brokers and forwarders will receive a warning letter from the FMCSA. And finally, all brokers and forwarders who fail to comply with the $75K freight broker requirement by December 1st can have their operating authorities terminated by the FMCSA.

Some more implications

Although the $75K freight broker bond increase was definitely the hottest issue, MAP-21 brings some other important changes that are not to be neglected. First of all, FMCSA is granted with much more authority than before and has already reacted to the new legislation by increasing fines for certain violations.

A really important change is the termination of a controversial practice that is colloquially known as “double brokering”. Double brokering occurs when a trucker receives freight but then hands it to another trucker. It’s considered an unfair practice because it makes tracking cargo more difficult, so clients don’t know who is handling their possessions. It’s also dangerous for the initial broker because he’d still be the one liable for lost or damaged property even if it was caused by somebody else down the chain.

That being said, the FMCSA hasn’t imposed any restrictions on “interlining”. That is, a trucker can be responsible for a piece of cargo from point A to B, but can then tender it to a different motor carrier.

The bottom line

The grace period is not over yet and it will take a few months of operation under the new rules before we can make conclusions about the effects of MAP-21. Yet, despite the $75K freight broker bond increase, the FMCSA said that the number of renewed freight broker registration increased in September. The figures are a bit skewed because some of the new applications come from motor carriers that are listed as freight brokers, but estimates shows that the number of actual brokers is also on the rise.

The cloud surrounding the $75K freight broker bond has another silver lining. The past few months saw a softening of the freight broker bond market and bonding companies became more generous when underwriting the bonds. Lance Surety Bonds can provide instant quotes and approval to brokers without requiring collateral. High-risk applicants (with low credit score or no credit history) are also welcome to apply. And even though they will file your bonds with the FMCSA right away, it’s better not to wait until the last moment so you can find a good deal and sleep easy that you are compliant with all the regulations.

The following two tabs change content below.
Victor Lance is the founder and president of Lance Surety Bond Associates, Inc. He began his career as an officer in the U.S. Marine Corps, serving two combat tours. As president of Lance Surety, he now focuses on educating and assisting small businesses throughout the country with various license and bond requirements. Victor graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan's Ross School of Business.