Surety Bonds for Canadian Brokers

ShawnR

Site Supporter
#2
if you handle freight moving into or out of US/Canada then yes. You'll need an MC from FMCSA also, but if you only broker freight within Canada then no.

p.s. the current bonding is $10,000, as of October 1 you'll need $75,000.
 

loaders

Site Supporter
#3
Yes, surety bonds are required for freight brokers if they engage in both interstate and US/Canada freight movements.
 
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ShawnR

Site Supporter
#6
yup:

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.
 

allfreight

Site Supporter
#9
I would start with your insurance agency that you use now. We use Dalton Timmis and that is who is obtaining ours for us. TIA also issues broker bonds.
 

ShawnR

Site Supporter
#10
Has anyone heard the number of company's that won't be able to qualify for the new requirements?
this is mostly myth, most brokers will be able to get it. yes the cost may be higher at first but in the end all will work out and hopefully the scum will have been eliminated.

the "scum" being the guys that you end up posting about not paying or taking 250 days to pay, etc
 

theman

Well-Known Member
#12
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.
 

PackRat

Site Supporter
#13
From what I hear, there are many that can't get the new coverage. Some of the underwriters are looking for 2 or 3 times bond working capital so 150K to 225K.
 

ShawnR

Site Supporter
#14
The only brokers who won't qualify are the onesy twosies working from their basements in their underwear, and good riddance really.
L O L, underwear reference makes me think of Walt in Breaking Bad or Cranston in Malcom in the Middle cleaning the house in his underwear hahah

and those who are asking for 2 or 3 times capital are probably: 1 - not the right surety providers, or 2 - broker looking for coverage is horrible and must "pay to play"
 

loaders

Site Supporter
#15
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.
 

loaders

Site Supporter
#17
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.
 

ShawnR

Site Supporter
#18
I don't know if that relates properly.

If someone sues you after a car accident or the government comes down on you the result won't be the same compared to you not paying a carrier...

I understand your point of view, however it's not apples to apples.
 

loaders

Site Supporter
#19
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.
 

SCAM CHASER

Site Supporter
#20
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.”
 

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