If you’re thinking of obtaining your freight broker license, there’s no better state to do business than California. With an economy larger than most countries, the state always stays busy in terms of shipping and freight.
Like it is all over America, the process of obtaining your California freight broker license can seem complicated. In addition to the legally-required freight broker bond, you’re bound to other requirements to stay in business, as well. We’ve broken down the freight broker license requirements, step by step, to guide you along the way:
STEP #1: Get Your USDOT Number
Before you get started, it’s best to have an ID number from the US Department of Transportation. This number is required for some application materials. What’s more, attaching your USDOT ID number to all of your paperwork can greatly streamline the process.
STEP #2: Apply With The FMCSA
Unlike many business owners, freight brokers are regulated primarily at the federal – rather than state – level. This means you’ll be dealing with the Federal Motor Carrier Safety Administration first and foremost.
Your first step is the fill out the FMCSA’s application for motor property carrier and broker authority (also known as the OP-1 Form). After submitting the form, and paying the $300 application fee, the FMCSA can issue your Motor Carrier Number (MC). To speed up the application processing, apply online rather than by mail.
Once you receive this number, you’ll be subjected to a 10-day protest period, during which a company can file a protest to your application. The protest period can be nerve-wracking, but it doesn’t halt the application process. You can continue with the other steps, and, if you have good relationships and adhere to good business practices in the world of shipping and freight, you shouldn’t have anything to worry about.
STEP #3: Get Your Freight Broker Bond
To legally operate as a California freight broker, you’ll need a freight broker bond. The surety bond does not act as your personal insurance. Rather, the bond is in place to protect any carriers you work with, should you fail to pay them. This surety bond fulfills the FMCSA’s registration requirements according to Form BMC-84.
The minimum bond requirement for freight brokers is currently $75,000. Your freight broker bond cost, however, will only be a small fraction of that amount, depending on your credit score and personal history. Generally, the bond premium is between 1,25%-4% of the total bond amount, for freight brokers with good credit and a clean bill of financial health. The final bond premium can vary a lot.
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Contrary to popular belief, it’s still possible to get bonded even with bad credit. Your premium will be higher, between 5% and 12%, but this still offers the opportunity to obtain your freight broker license and operate legally. Then, you can work on improving your financials, and lowering your premium, over time. For a general estimate of how high your premium will be, use our Surety Bond Cost Calculator as a guide.
STEP #4: Designate Your California Process Agent
Generally, you’ll be required to pick a legal process agent in any state where you do business. This agent will be able to receive and process legal actions on your behalf. The FMCSA requires you to designate your process agent, or agents, using Form BOC-3. You should also check California’s state insurance requirements for transportation brokers and other business entities to make sure you’re properly covered.
STEP #5: Study Up
While not legally required for operation, most freight brokers opt to take a freight broker training course. There are several options out there, including online courses, and some that are offered by public universities in California, so shop around to find a reputable program that offers you the best value. Remember, as well, that training is an ongoing process. Throughout your career, you’ll be expected to stay up-to-date on all the developments in your industry.
Do you have questions about your freight broker license and bond? Want to talk about California’s requirements in particular? Bryant Surety Bonds can guide you through the process, and use our exclusive relationships with the best surety companies to get you the best deal on your bond. Contact one of our surety bond experts now, or give us a call at (866) 450-3412.