How to Check If Your Freight Broker is Legitimate

Article courtesy Aaron Anderson at JW Surety Bonds. Links provided:

Freight brokers and forwarders are an important piece of the transportation puzzle. However, knowing how credible a freight forwarder is can be easier than checking the legitimacy of a freight broker. A forwarder takes possession of the goods being sent from one place to the next, while brokers simply work as intermediaries between carriers and shippers. Most freight forwarders are large companies, making it easier to vet their history and industry experience. Brokers, on the other hand, may be smaller companies or individuals.

The good news is that licensed freight brokers are required to follow certain steps to operate in the market, which means carriers and shippers have an opportunity to determine which brokers are best to work with over time. Here are a few guidelines for checking the legitimacy of a freight broker.

Industry Experience and References

There are more than 17,000 licensed freight brokers operating in the US today, with even more entering the market each year. This is because starting a freight brokerage business does not take a significant amount of capital or business know-how. However, even new freight brokers should have some experience in the transportation, shipping, or logistics industry. Checking for this experience either through a resume, work history, or business references can make all the difference in hiring a credible freight broker and one with little industry knowledge.

Licensing and Registration Requirements

In addition to evaluating a freight broker’s industry experience, it is essential to check his or her licensing and registration. All legitimate freight brokers must have applied for a license and registered to operate in the US under federal law, through the Federal Motor Carrier Safety Administration, or FMCSA. The application process is relatively painless, but doing so means the FMCSA is able to keep an up-to-date database on all freight brokers. Checking the licensing and registration of a freight broker can be done easily online through the FMCSA website.

Bonding and Insurance

Above and beyond licensing and registration requirements, legitimate freight brokers also follow the rules as it relates to bonding and insurance mandates. Under federal law, all licensed freight brokers must have a freight broker bond in place of no less than $75,000. This protects carriers and shippers from non-payment, or a broker not abiding by the regulations set forth by FMCSA.
In addition, freight brokers may also be required to carry certain liability insurance coverage for operating a business, either as an individual or a larger company. While these regulations are dictated by the state and vary greatly, checking the bond and insurance details for a freight broker is beneficial in evaluating his or her legitimacy.

Trust Your Instincts

Checking a freight broker’s industry experience and business references, licensing and registration, and insurance and bond details is crucial to making the right decision on who to partner with as a carrier or shipper. However, it is also important to go with your gut when determining which freight broker is a good fit for the business. If there is any sort of doubt that the freight broker will deliver on his promise, or if the details relating to any of the other factors surrounding the brokerage business do not add up, select a different broker. Freight brokers play an important role in transportation and shipping, but they are only beneficial when they have the right credentials and trust to get the job done right.