Launching your own freight brokerage might be the most successful decision in your professional path. Yet, the many steps you need to undertake may be challenging.
Prior to starting your business, you need to make a number of legal requirements. Unfortunately, the legal efforts don’t stop just there. Freight brokers must stay fully legally compliant during your freight brokering operations or else you risk losing operating authority, potentially even face penalties and financial claims.
Here are some of the most important compliance factors that new brokers shouldn’t forget.
Thorough record keeping
As a freight broker, you are required to save the records of any transaction or shipment that you organized transportation for, as part of the Code of Federal Regulations which is in effect for three years.
Your records must be thorough. The most important details to have documented are the parties involved in the deals, USDOT number of the carrier, freight bill number and brokering fees or compensation for any non-brokering services you may have executed.
Updating your information with the FMCSA
In order to keep your registration as a freight broker running, you need to update your data with the Federal Motor Carrier Safety Administration regularly. If your brokerage undergoes any sort of changes, or if you revoke or reinstate your authority, it must be communicated to the FMCSA.
Every two years there is a mandatory update of all brokers’ data, which you have to comply with. Even if you have not amended anything you still have to confirm the validity with the FMCSA.
Yearly freight broker bond renewal
When you get your authority from the FMCSA, you have to provide a $75,000 freight broker bond as a part of the process. This surety bond has to be renewed every year. Without it, you cannot stay compliant, and can lead to a license revocation or suspension.
The renewal date for your bond is the same as the one on which you obtained it from your surety. You will typically get a reminder about 90 days before it bond expires.
Proper handling of accounting and advertising activities
There are clear rules about the functioning of your brokerage in terms of accounting and representation that you should assemble with. If you operate your brokering business together with other businesses, the financial records should not be mixed. In case revenues and expenses are shared between your businesses, they should be accounted for on an equal basis.
As for the representation of your brokerage, you can only work under the business name you have registered with the FMCSA. Always clarify in advertisements that you offer brokering rather than carrier services. It is required that you take care not to misguide your customers regarding your business activities.
Food safety rules compliance
Freight brokers now have to comply with a new rule set by the Food and Drug Administration (FDA) - the Sanitary Transportation of Human and Animal Food Rule. It is not directed at brokers specifically, but some regulations pertaining to transportation equipment, transportation operations, employee training and record keeping may affect your operations..
Most importantly, you will have to ensure that employees are familiar with the rule and enforce it in their daily work. You also need to set your own procedures to ensure you partner with compliant businesses.