Freight brokers work as intermediaries between shippers and carriers to effect a smooth transaction in transporting goods.
They are an integral part of the transportation industry, but it can be challenging to know whether the broker you hire is legitimate or not.
While brokers must be licensed in order to operate legally in the United States, there are other ways to ensure a broker is working in your best interest.
Before hiring a freight broker, be sure to follow the suggestions below to protect your business, customers, and freight from start to finish. From industry insights to actionable tips, arm yourself with the knowledge needed for a trustworthy partnership.
Freight Broker vs. Freight Forwarder
While the terms may be used interchangeably, there are significant differences between forwarders and brokers.
Freight forwarders physically take possession of the merchandise and are responsible for moving it from one location to the next.
Freight brokers, on the other hand, work as intermediaries between shippers and carriers to effect a smooth transaction in transporting goods.
Both forwarders and brokers are an integral part of the transportation industry, but it can be more challenging to know the broker you hire is legitimate.
Registration and Licensing Check
The first step in checking the legitimacy of a freight broker is gathering information on the broker’s licensing and registration.
All freight brokers operating in the US must have a license and be actively registered with the Federal Motor Carrier Safety Administration, or FMCSA.
Federal law requires that anyone assisting in the transportation of goods in exchange for compensation hold a valid license. A quick check of the broker’s information can be completed on the FMCSA website.
If a broker does not provide the details necessary to check his or her registration, utilize the services of a different broker.
Insurance and Bonding Details
In addition to federal registration and licensing guidelines, freight brokers must also have an appropriate bond to operate legally.
A freight broker bond of no less than $75,000 is required to be in place before receiving a valid license. This bond protects the shippers and carriers against a freight broker operating in a way that is not in line with FMCSA rules.
Bonds are often confused with insurance coverage, but they have distinct differences.
Freight broker bonds are a form of credit extended to the broker and any claims made against them that are legitimate must be repaid over time.
Insurance covers other risks, such as damage to the freight or liabilities incurred due to accidents or legal issues.
Freight brokers may have a combination of bonds and insurance to help protect customers, and the brokers that have these financial tools in place are likely to be trustworthy.
Industry Certifications and Training
Another method to ensure a freight broker you work with is credible is to ask for details about his or her industry certifications and training in the business.
There are several freight brokerage training courses available through colleges, universities, and online training schools that improve the overall knowledge of the industry among brokers who successfully complete them.
Ask a potential freight broker for information about completed courses or certifications, along with experience specific to the freight brokerage business.
Finally, one of the best ways to know if a licensed freight broker is legitimate is to check for business references.
Most freight brokers have a long history in the industry, and therefore, they have worked with a substantial number of carriers and shippers.
A freight broker should be able and willing to provide a list of past satisfied customers upon request. Those who do not may be lacking a strong track record in the business.
If a freight broker doesn’t have an extensive list of references, it’s an opportunity to engage in a more detailed conversation to gather additional insights. Start by inquiring about specific projects or clients they have worked with recently. While quantity is one aspect, the quality of the references is equally crucial. Request information on the nature of the collaborations, the types of shipments handled, and the overall satisfaction of those clients.
Additionally, explore their approach to building and maintaining relationships in the industry. A broker who may be newer to the field could still be reliable if they demonstrates a commitment to excellence and a proactive stance in ensuring customer satisfaction. In such cases, seek transparency in their communication and a willingness to share any available references, even if limited.
Consider looking for other indicators of legitimacy, such as their licensing and accreditation status, industry affiliations, and reviews from any available sources. A face-to-face meeting or virtual discussion can also provide a more comprehensive understanding of their operations and commitment to customer service. Ultimately, the key is to balance the available information with your comfort level and risk tolerance, ensuring that your freight partner aligns with your specific needs and expectations.
Hiring a freight broker as a carrier or a shipper can be incredibly beneficial in managing the logistics of transportation needs, however, freight brokers are only helpful when they are legitimate.
Be sure to do your homework on a broker’s license and registration through FMCSA, and ensure they have the appropriate bond and insurance in place.
Follow up with a check of certifications and training, and always ask for business references before hiring.
Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.