How the US Freight Broker Surety Bond Changed the 3PL Industry

This year, Mactrans is celebrating our 10th anniversary. While we’ve experienced a lot of changes internally, we’ve also seen a lot of disruption to the Freight Brokerage industry as a whole during that time. Over the course of the year, I will be writing a few blogs following our 10 for 10 series. Within this series of blogs, I will be outlining 10 major things that have changed in the transportation industry over the last ten years.

On July 6, 2012, President Obama signed the Moving Ahead for Progress in the 21st Century Act (MAP-21) From highway safety to pedestrian transportation, this multifaceted bill provided over $105 billion in surface transportation funding. Within this 600-page bill there was something that changed the freight brokerage industry significantly. The bill raised the surety bond that freight brokers must have from $10,000 to $75,000. It has been reported that when this law went into effect on October 1, 2013 over 10% of Freight Brokers in the US closed their doors, most Freight Brokers that closed their doors, said that “they just couldn’t afford the increase”.

There are two ways for a freight broker to obtain the bond. The first way is, they can post the $75,000 USD in cash. The second way is, they can pay an annual fee for that bond. More details are available in this post from DAT.

So, what does that mean for Canadian Freight Brokers? While it’s not mandatory for them have the bond for Canadian Domestic freight, the bond is mandatory for them to manage US Cross Border Freight.

The major question on Canadian Freight Brokers’ minds is whether or not paying this surety bond is required. Throughout the Canadian Brokers, there is a bit of uncertainty when it comes to answering this question. There are some Canadian Brokers who say that, “These are the U.S. laws and they don’t apply to Canadian 3PL’s”. According to the Canadian Trucking Alliance (CTA) and FMSCA, these brokers are wrong. The leading Freight Brokerage organizations agree. Both the Transportation Intermediaries Association (TIA) in the US and the National Transportation Brokers Association (NTBA) in Canada will only allow companies who possess this bond and an MC # to become members.  Their members are the top Freight Brokerage companies in North America and stand behind these standards. While to my knowledge, no one has ever been subject to a penalty by not possessing the bond, in The US carriers refuse to accept freight from brokers that don’t have it. Many cross-border Canadian carriers are following suit.

From the multi-billion dollar mega brokers to the smaller guys working out of their basement, there are advantages and disadvantages for shippers that choose to work with 3PL’s of all sizes.  With that being said, finding a broker that possesses the proper licenses to manage your cross-border freight shipping services should be one of the top determining factors on whether you choose to work with them.

To find out if your Freight Broker is licensed, you can visit the FMSCA website.

A complete list of the Mactrans’ licenses are available on our website.

This US Freight broker surety bond has been one of the major changes 3PL’s have faced over the last decade. Stay tuned for more of our 10 for 10 series about the changes that have affected the Transportation Industry.