A freight broker acts as a middleman between an individual or company with property to ship and a motor carrier to transport it. The broker receives monetary compensation for arranging these shipments. Though freight brokers do not transport property and typically do most of their work via phones and computers, the law requires them to obtain federal licensing.
The Federal Motor Carrier Safety Administration (FMCSA) grants freight broker licenses. The licensing process begins with a visit the FMCSA website to file the OP-1 (P) form and pay the required fee. You can complete this form and pay your fee online or download and print it, mailing it to the address on the form. According to the FMCSA's Online Registration and Compliance Assistant, the application process can take four to six weeks if you mail this form, but online registration speeds the process.
You will have to complete Form BOC-3 to list a process agent for each state in which you will provide freight brokerage services, have an office and/or sign contracts. A process agent will have the responsibility of receiving court documents on behalf of your brokerage. For example, if you work primarily out of Pennsylvania but have contracts in New York, serving New York lawsuit papers on your company could prove difficult. In such a case, a New York process agent can facilitate the process by receiving the documents and delivering or sending them to you. The FMCSA website provides a list of companies that offer this service for a fee, though you are free to find your own process agent. You can include all of your process agents on one form.
You will need a surety bond to become a licensed freight broker. A surety bond is a sum of money you pay to a bond or insurance company. In return, the company agrees to pay claimants in the event that your freight brokerage causes an error. The bond company pays up to the amount of your bond, and then collects the amount it paid and any related fees from your freight brokerage. According to the FMCSA website, you will need a $10,000 bond as a basic property broker. If your brokerage will make transportation arrangements for household goods, you will need a $25,000 bond. File proof of your bond with the FMCSA.
People sometimes confuse freight brokers with freight forwarders. However, a freight broker acts as a liaison while a freight forwarder has a more hands-on role. A freight forwarder takes physical control of property and often splits it into smaller shipments. He then hands it over to a motor carrier for transportation. A freight broker does not take possession of the property. If you want to become a freight forwarder, complete FMCSA Form OP-1(FF) instead of Form OP-1 (P).