How to Become a Freight Forwarder
Editor’s Note: This is a guest blog from Bryant Surety Bonds. Cerasis is not a freight forwarder, but technically a freight broker/transportation intermediary who specializes in North American Transportation Mangement primarily for less than truckload shipping, truckload, and small package. Cerasis does work with many freight forwarders who import into the US and need trucks to move from the port inland. We hope this post is helpful for those looking to become a freight forwarder but also for shippers wanting to know how it works.
Thinking about entering the freight movers field? Becoming a freight forwarder is a great option to join this business.
While the process of starting your career as a freight forwarder takes some time and effort, it is definitely worthwhile, as the field offers plenty of opportunities for development. But before we get into the nitty-gritty details of how to become a freight forwarder, let’s take a look at what a freight forwarder actually does.
Often, a freight forwarder is thought to be similar to a broker. However, a freight forwarder has a different role in the freight-moving business than the freight broker does. A broker acts as an intermediary between sellers and buyers. In this case, the buyer of services is the shipper of goods, and the seller is the service provider, or carrier, such as a trucking company.
A freight forwarder,on the other hand, works on behalf of importers and exporters, or the people securing the freight. He or she is an expert on every aspect of freight costs, including transportation, port charges, insurance, handling, documentation and any other legal fees. He or she also advises on the best method for cargo moving, and reserves the space on the chosen mode of transportation. In this sense, a forwarder also acts as a broker, but must have skills and capital beyond what is usually required of brokers.
In the case of international shipping, the freight forwarder is in charge of export documentation, and communication with international customs brokers, in order to determine compliance with all regulations.
So, how does the registration process work? Let’s get you started on how to become a freight forwarder.
How to get started
To start your legal operations as a freight forwarder, you have to register with the Federal Motor Carrier Safety Administration. You can consult the initial steps of the FMCSA registration here.
The registration with FMCSA actually entails obtaining an interstate operating authority, which is designated as an FF number in the case of forwarders. The applicable form is OP1-(FF).
The best approach is to start your registration online, which will make the process much faster and easier . The fee for the operating authority application is $300.
Freight forwarders don’t need to obtain a USDOT number like most other freight professionals, but if you’re planning to operate as an interstate motor carrier, you will need to get one.
After application approval
When you get the approval on your application – called the grant letter – you will be provided with your FF number. You need this number to complete the next steps of getting your operating authority, especially for the insurance and surety bond, which are required. Even though you’ve gotten the number already, you may not start operations. You’ll have to wait until you receive the official registration.
Once your FF number is issued, it’s published in the FMCSA Register, and any individual can file a protest against your registration within 10 days. Once this period has passed, your registration can be issued.
In the meantime, you need to start the insurance process with your insurance company. You are required to maintain the following minimum levels of cargo insurance:
- $5,000 for loss of or damage to property carried on a motor vehicle
- $10,000 for loss of or damage to property
The insurance provider has to file Form BMC-34 on your behalf within 90 days of the time when your application was entered in the FMCSA Register.
You also need to get bodily injury and property damage insurance, plus environmental restoration coverage, in case you will operate commercial motor vehicles (CMV). Your insurance company needs to file form BMC-91 or BMC-91X on your behalf. If you don’t need that coverage, you have to select the waiver for it in the application form.
Another step you need to take care of once you have your FF number is to designate a Process Agent for each state you operate in. You can do so by filing application form BOC-3, best done online.
Getting your freight broker bond
One of the requirements for getting your FF number from the FMCSA is obtaining a surety bond (Form BMC-84) in the amount of $75,000. The bond is often referred to as freight broker bond, but it is also applicable for forwarders.
The bond, in essence, is a three-party contract between your freight forwarding company as the principal, the FMCSA as the obligee, and the surety provides the bonding. It acts as a guarantee to the authority that requires it that you will comply with all applicable regulations in your operations.
Don’t be alarmed by the bond amount. The actual cost of your freight broker bond is only a percentage of $75,000, which is called the bonding premium. It’s usually in the range of 1%-12%, depending on your credit score and other factors. You can read this freight broker bond cost guide to understand how the bond cost is calculated.
Already in the business? We would happy to hear your tips on becoming a freight forwarder. Plus, if you have any questions about the licensing and bonding process, feel free to comment below!