A Step-by-Step Guide on How to Become a Freight Forwarder in 2021
To act as a trucking or road freight forwarder, you need to apply for Operating Authority from the Federal Motor Carrier Safety Administration (FMCSA).
There are two types of freight forwarder authority (FF) that you can apply for:
- Freight Forwarder of Property (except Household Goods) – arranges interstate transportation of property belonging to others
- Freight Forwarder of Household Goods – arranges interstate transportation of household goods, unaccompanied baggage, or used automobiles belonging to others
Depending on the type of business you intend to conduct, you have to get one of these two types of authority. You can also get both but have to pay a separate licensing fee for each.
**NEW:** If you are also interested in becoming a freight broker, be sure to download our FREE guide on getting licensed and staying compliant!
1. The Freight Forwarder License Requirements
Freight forwarders are licensed at the federal level and must meet the FMCSA requirements in order to get licensed. These requirements are as follows:
Business and Tax Registration
In order to operate as a freight forwarder, you will need to register your business entity in the state in which you reside and operate. Business entities are typically registered with the Secretary of State.
In addition, you may need to obtain tax registration from your local Department of Revenue. Make sure to contact the Department to find out if you need a tax number to operate as a freight forwarder in the state.
As a freight forwarder, you are required to meet several insurance requirements. Freight forwarders must at all times maintain a $5,000 cargo insurance for loss of or damage to property per vehicle, and a $10,000 for loss of or damage to property per occurrence.
Your insurance policy (Form BMC-34) must be submitted to the FMCSA by your insurance provider within 90 days of you applying for your freight forwarder authority.
In addition, if you plan on operating commercial motor vehicles (CMVs), you must also obtain bodily injury and property damage (BI & PD) insurance and environmental restoration coverage.
If you will not operate CMVs, you can seek a waiver of this requirement by completing the relevant section in your application for freight forwarder authority.
If you have more than two employees, you will also need to get workers’ compensation insurance. This type of insurance is required by your state and is not part of the licensing process for freight forwarders.
Once you receive your FF number (operating authority), you will need to designate process agents in each state in which you have an office and establish contracts. In the state in which you maintain a physical office, you can act as your own process agent.
To designate agents, you will need to complete form BOC-3 and submit it to the FMCSA. Don’t forget that you must first complete the freight forwarder authority application form and be approved before you can submit this form.
2. Complete the Freight Forwarder License Application
To get started with the licensing process, you need to complete the online registration process for freight forwarder (FF) operating authority. The registration is conducted through the Unified Registration System (URS).
During the registration process, you will need to complete form OP-1(FF). If you wish to obtain both types of freight forwarder authority (property and household goods), you can apply for both of them at that time but keep in mind that you will need to pay a separate fee for each.
If you need help with completing the online application for your license, see the detailed instructions for form OP-1(FF), provided by the FMCSA.
The licensing fee per operating authority is $300. If you wish to obtain two types of authority, you can combine the fees into a single payment.
10-day Protest Period
After you apply for your operating authority, you will be issued your freight forwarder number. Your application for operating authority will also be published in the FMCSA Register.
Once your number is issued, a 10-day protest period follows during which anybody who disagrees with your registration can protest against it by contacting the FMCSA. If no protests are made, your registration is secure.
3. Provide a Surety Bond
Along with the insurance that you need to obtain once your FF number is issued, you will also need to provide financial security in the form of a surety bond or a trust fund in the amount of $75,000.
Since trust funds are much more expensive, and create more complications for forwarders, freight broker bonds are usually a better option for fulfilling this FMCSA requirement.
To get a $75,000 freight forwarder bond you only need to pay a premium which is equal to a small percentage of the total amount of the bond.
Applicants with a good credit score of 700 FICO or higher can pay as little as 1.25% of the total bond amount. At this bonding rate, you will only need to pay $937.5 to get bonded!
This bond serves as a financial guarantee to motor carriers and shippers that they will be paid if you fail to comply with your contractual obligations.
4. Receive Your Freight Forwarder License
After you have completed the application form, provided insurance policies and a surety bond, and designated your process agents you will be issued your freight forwarder operating authority.
Congratulations, you can now begin to operate as a freight forwarder!
5. License Expiration and Renewal
Unlike with other business license types, freight forwarder licenses do not expire yearly. Instead, what you must do is make sure that you update your records with the FMCSA anytime there are changes in your operations. Such changes may include your name, address or changes to the status of your authority.
While you do not need to renew your license, you are required to update your information every two years, even if no changes to your information have occurred. This is part of the biennial update requirement and there are fines associated with failing to do so.
You must also renew your freight forwarder bond yearly no later than 30 days prior to its expiration! You will be notified by the surety well in advance that your bond is about to expire.
Do you have any questions about the bonding requirements for freight forwarders? Call us at 877.514.5146 anytime to speak to one of our experts!If, apart from becoming a freight forwarder, you also want to become a freight broker, make sure to see our ultimate guide on How to Become a Freight Broker!