Federal Motor Carrier Safety Administration (FMCSA) regulations state that freight brokers who arrange transportation in or through the U.S. are required to possess a Motor Carrier Number (MC#) backed by a minimum $10,000 US surety bond or registered trust fund.
The U.S. FMCSA regulation refers to load brokers as Motor Carrier Property Brokers. Information on registration in the U.S. can be obtained through the Federal Motor Carrier Safety Administration website. Confirmation of proper registration by a freight broker or carrier can be confirmed using the search tools on the website.
Really, the requirements for qualification is to have $75K working capital. In my opinion, even $75K isn't really enough working capital to carry accounts receivable .... decent brokers are generally paying out before they are collecting. The only brokers who won't qualify are the onesy twosies working from their basements in their underwear, and good riddance really.
Our broker has informed us that the underwriters he deals with are looking for approx. 200K in working capital, cash retained in the company and profitability. The rate will be approx. $40 per $1000, for an estimated annual cost of $3000.00. This represents an increase of approx. 5 times what our rate was for a 10K surety bond. All things considered, an amount we can deal with.
That's right. However, when you think of it in terms of "insurance", it's very expensive. I drive approx. 40,000kms. per year, and although I am a safe and cautious driver, my chances of being involved in an accident are considerably higher than the chance of my business failing and my suppliers not being paid. The cost of vehicle insurance, including liability limits in excess of 1 million dollars, is just over 1K per year. Although I think the higher bond limit is good for our industry, it disturbs me that the insurance industry looks upon the new regulation as an easy way to increase profits.
The point is, the cost of "insuring" my payables in the event of bankruptcy to a limit of 75K, is considerably higher than the cost of "insuring" my liability while operating a motor vehicle on the road to a limit of 1M. Not only is the cost higher, but the chances of bankruptcy, compared to being involved in an accident, are considerably less. One can only assume that the cost differential is due to there being a limited number of customers for the surety bond policy, compared to the extremely large numbers of vehicle operators requiring auto insurance.
July 2013 - The Association of Independent Property Brokers & Agents has filed a federal lawsuit against the $75,000 bond provision of the Moving Ahead for Progress in the 21st Century Act, commonly referred to as MAP-21.
Part of MAP-21, which was signed into law on July 6 and will take effect on Oct. 1, was amended to require each broker to have “minimum financial security” of $75,000, versus the currently required $10,000, and to enable the Department of Transportation’s Federal Motor Carrier Safety Administration, which regulates property brokers, to set the actual amount of the bond through rulemaking.
As a result, AIPBA, which represents small to mid-sized property brokers, is arguing that the $75,000 bond amount required is unconstitutional.
“Today we made good on our promise to AIPBA members and supporters to follow through and legally challenge the anti-competitive $75,000 broker bond,” said James Lamb, AIPBA’s president, when he announced the lawsuit. “Simply stated, we believe this is a matter of collusion by other trade groups who effected this law under the guise of ‘fighting fraud,’ who pulled a sham on the United States government.”
Lamb said the new bond is “not related to any legitimate government purpose”; is at odds with the National Transportation Policy (49 U.S.C., section 13101); and violates AIPBA’s due process rights under the Fifth Amendment, and that the FMCSA violated the Administrative Procedure Act by not engaging in “bona fide rulemaking” to set the new bond amount.
“We are seeking justice through the federal court system for the various small business players in the trucking industry that would otherwise be adversely affected by the impact of the arbitrary new bond,” Lamb explained. “We are confident the U.S. District Court will determine this section of MAP-21 is, in fact, unconstitutional, and will issue an injunction shortly, preventing the Oct. 1 implementation by FMCSA.”