Freight Broker (BMC-84) Bonds
Propeller Bonds has become a heavily sought out surety for securing Freight Broker (BMC-84) bonds. As a type of surety used for shippers/motor carriers, a BMC-84 bond safeguards you, as the broker, from a costly issue regulated by the Federal Motor Carrier Safety Administration (FMCSA), and it can put your brokerage at risk. For these reasons, it is essential to understand what a BMC-84 is and how it works in practice. Propeller offers a new way to amplify returns in this demanding sector for minimal effort. Propeller Bonds’ platform currently houses over 7,000 Contract, Commercial, and Fidelity surety bonds. Propeller private labels the platform for agencies, allowing agents to purchase bonds for clients or empower clients to purchase bonds directly. Agents are compensated for all purchases via their unique site link. The company partners with highly respected "A" rated carriers.
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What is a BMC-84 Bond?
In the US, a Freight Broker bond is required by the FMCSA in order to obtain brokerage authority and is issued in the form of a $75,000 bond. The bond is a guarantee of payment between the broker, the Surety company, and the motor carriers and shippers if the broker fails to comply or remit payment for services rendered, per contractual agreements.
A Freight Broker bond is also known as a BMC-84 bond, a Property Broker bond, an Interstate Commerce Commission bond, or a Transportation Broker bond.
How does a BMC-84 Bond work?
The BMC-84 is a surety bond that must be issued by a company authorized by the Secretary of Treasury. It acts as a form of credit whereas principals are required to provide payment for claims. When a principal fails to meet its contractual obligations, the surety company will intervene to ensure the client suffers no losses, however, the principal is still required to pay the full amount of the claim.
This binding agreement between three parties (principal, surety, obligee) essentially allows the freight company (principal) to provide indemnity through the surety company to the obligee (FMCSA). It is the FMCSA who regulates the industry and ensures customers do not suffer financial harm because of negligent practice or dereliction of contract.
A BMC-84 surety bond requires a monthly payment (premium), removing the need for principals to provide collateral, as with Trust Fund, and freeing up capital for other purposes. When a freight company purchases a bond and pays the premium, the surety extends credit that assures the obligee that this project/shipment is guaranteed. Assuming the principal follows the terms to completion, there will be no claims and no further payments for the principal.
If a claim is made, the principal must contact the bond agent who should be able to provide more information on the claim. Next, the principal should contact the claimant to see if the issue is able to be resolved. If the claim remains valid, as stated in the bond indemnity agreement which you are required to sign when obtaining your freight broker bond, compensatory payments must be agreed and paid.
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Importance of having BMC-84 Bonds
Also known as an Interstate Commerce Commission (ICC) bond, Property Broker bond, and Transportation Broker bond, the BMC-84 Freight Broker bond is a necessary requirement for operating as a licensed freight broker or freight forwarder in the United States. Essentially, any company moving property such as household goods or freight and motor cargo must have a BMC-84 or BMC-85 in order to legally provide these services.
For freight brokers or freight forwarders that may have previously used a Freight Broker Trust Fund (BMC-85), it’s worth noting some of the advantages of a freight broker surety bond. They include:
- Removes the need for capital investment upfront
- Only pay a percentage of the $75,000 rather than requiring the full amount
- Costs significantly less if no claims are made
- Provides flexibility and increased protection
- Surety bond companies share liability and are, subsequently, invested in claims
