How to Determine Whether Your Freight Broker Is Legitimate
Wouldn’t it be great if you did your business trusting all of the parties involved 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.
What Are the Benefits of Using a Freight Broker?
A good broker knows the shipping industry in and out, uses the latest technology to accomplish client goals, and works with reliable carriers that otherwise may be hard to locate.
The benefits of using a freight broker include:
- 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. A good broker will approach each load with equal amounts of attention and diligence, and make sure you get the best possible price on the carrier services.
- Transporting goods interstate or even overseas involves many state and federal regulations. An experienced freight broker will know what those regulations are, and the paperwork required.
- Freight brokers are troubleshooters. They should be able to find a solution to your most complex shipping needs. Brokers can take care of any size, weight, or specific measurement issues you may have to consider when dealing with a traditional shipping company. Presumably, the freight broker has an extensive network of contacts in the shipping industry, and will know who 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.
Check the Broker’s Credentials Online
In order to operate, freight brokers must be licensed and bonded. All freight brokers are regulated by the Federal Motor Carrier Safety Administration (FMCSA).
Visit 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The website will also provide you with additional information, such as whether the license has ever been revoked and later reinstated, and how many times that has happened.
Even if the broker checks out online, it’s always a good idea to request a copy of its 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 ensure a broker is legitimate, ask these three key questions:
- Is the broker registered with the Unified Carrier Registration (UCR) program? UCR is a federal, but state-administered, program that became effective in 2007. It requires that states collect fees from motor carriers, freight forwarders and brokers, and leasing companies, based on the number of commercial motor vehicles in their fleets.
- Is the broker insured?
- Is the freight broker bonded?
The registration is mandatory. If a broker or carrier does not register but engages in interstate commerce, it 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.
Every freight broker must have an insurance certificate, and you should make sure to obtain a copy for your files.
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.
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 rose 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 more complete view of each one, to better help you decide who to call again.
Make sure to include all contact details such as phone and fax numbers, valid email addresses, 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.
Freight fraud doesn’t happen every day, but it does happen. It is also true that good partnerships are nurtured with trust and mutual understanding.
However, if you’re operating your own business, it is wise to take all necessary precautions, and carefully verify the information a broker provides.
Above all, be sure the broker is compliant with all federal and state licensing and registration requirements.