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Surety Bond

Discussion in 'Insurance' started by loaders, Aug 1, 2012.

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  1. theman

    theman Well-Known Member

    I know that every place I have ever worked had one. Actually, the last place I was posted a $300K bond not because they had to, but as a statement.

    The bond company can audit you at any time, but it's kind of like customs ... the likelihood is pretty low, but there's always the risk. But to get the $75K bond initially, it means you have to show $75K capital which at least is something. Nothing is perfect though.
     
  2. ShawnR

    ShawnR Site Supporter

    yeah, Brokers, Carriers, & Forwarders will now need to have the Bond.

    But I believe legislation now allows for a group bond.

    SEC. 32918. FINANCIAL SECURITY OF BROKERS AND FREIGHT FORWARDERS.

    ‘(B) USE OF A GROUP SURETY BOND, TRUST FUND, OR OTHER SURETY- In implementing the standards established by subparagraph (A), the Secretary may authorize the use of a group surety bond, trust fund, or other financial security, or a combination thereof, that meets the requirements of this subsection.
     
  3. PackRat

    PackRat Site Supporter

    Thanks all for the input. Appreciate it. This may spiral out of control, but how many carriers actually post the bond?
     
  4. loaders

    loaders Site Supporter

    I don't mean to belabour this point, nor do I have a copy of the relevant legislation in front of me, but from what I do understand, all that has happened is the limit of the required surety bond has been raised from $10,000.00 to $75,000.00. There has been no mention of any other changes. They did however, make mention that "anyone" who brokers freight, including carriers, must have a bond in this new amount. So although we might wish otherwise, don't expect the world to change too dramatically with this minor adjustment.
     
  5. ShawnR

    ShawnR Site Supporter

    not arguing how it was, but now it should be different.

    you should have some sort of a points system (depends on the bonding company) that will result in how much it will cost you, etc.
     
  6. loaders

    loaders Site Supporter

    No, my experience has been only to submit your current year financials and pay the invoice for the bond. Now when it comes to purchasing contingency cargo insurance, the insurance company is more interested in how your business operates on a day-to-day basis because that is where their exposure lies. Things like carrier selection, etc. For a surety bond to be called on by debtors, usually the broker has simply gone out of business.
     
  7. ShawnR

    ShawnR Site Supporter

    it isn't only based on the balance sheet.

    they will take into consideration a bunch of other things too.

    carrier selection process, due diligence, etc, etc, etc.
     
  8. loaders

    loaders Site Supporter

    I too have read the claims of the fellow you speak of, preposterous at best. I don't think we should confuse being well capitalized with having a larger surety bond. Granted, the surety bond issuer, usually an insurance company, will look at a brokers financials to determine if they are worthy of the larger amount, but it is not an indication of how well they run the company or how much available cash they have on hand over a long period of time. In other words, one year of good numbers, buy the higher surety bond, then suck out all the money. In my case, after purchasing my initial surety bond over 20 years ago, I have never been asked to submit a financial report again at renewal time. Perhaps that will change with the higher amount, who knows.
     
  9. theman

    theman Well-Known Member

    I was in a few. He's one nasty guy, a couple of times he's even thrown out the odd slur.

    The fear mongering is mind-boggling. Says that everyone is going to pay more and brokers are going to make more margin because they'll be fewer of them, and thousands out of work ... really???

    Hopefully he doesn't get a serious ear from anyone of importance. While I agree with loaders that I don't necessarily like regulation, I think there is something to be said for checks and balances. Brokers in other industries are regulated and forced to be capitalized too. This isn't something unique to transportation.
     
  10. lowmiler88

    lowmiler88 Site Supporter

    theman, I think I was in that same discussion, when you check that guy out his website says "Train to be a load broker from your home" so of course he is against it. The bigger the better as far as I'm concerned.
     
    Last edited by a moderator: Jul 31, 2012
  11. loaders

    loaders Site Supporter

    Yes, the AIPBA does represent the smaller US property brokers and they did fight to prevent the increase of the US surety bond provision.
    While I don't have a problem with the new increased limit, I don't welcome yet another government intrusion into private enterprise.
     
  12. theman

    theman Well-Known Member

    I think it's a good step in the right direction as far as making sure that businesses are capitalized well enough to sustain themselves. It's never perfect though.

    I've gotten into debates on Linkedin about this because there is a guy in the US trying to start this new sort of association called AIPBA, sticking up for the little guys who don't want to pay for the increased bond.

    What a joke, actually.
     
  13. ShawnR

    ShawnR Site Supporter

    google H.R. 4348
     
  14. loaders

    loaders Site Supporter

    Packrat, go to www.joc.com/regulation and look for the article published June 29, 2012 which outlines the new surety bond regulations in the US. It is the Journal of Commerce website.
     
  15. PackRat

    PackRat Site Supporter

    Good afternoon all,

    Does anyone (G Roch) have a link to the new Surety Bond regulations? Any help would be appreciated. Yes...we do have one (before anyone asks! LOL):D:D
     

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