The $75,000 surety bond requirement is only six months away. Freight brokers, 3PLs, freight forwarders, for-hire carriers and private fleets who broker freight -- even once a year -- will be required to secure a surety bond at the new level before October 1. The penalty for non-compliance is closing the business, according to the Highway Bill, called Moving Ahead for Progress in the 21st Century (MAP-21.)
In raising the bond amount, it seems that Congress was swayed by a very vocal group that claimed there was rampant and widespread fraud in the industry. The bill attempts to address some of the fraud by requiring that a broker has the funds to cover any claims against his bond. While fraud does pose challenges to the industry, the new requirements may have negative consequences.
The new requirement has spurred problems -- or at least fears -- for some brokers, especially smaller companies. Larger brokers will likely have no problem qualifying for the higher bond amount, but thousands of smaller brokers tend not to have a lot of cash on hand. If they don't have the assets or cash flow required to secure a bond, they may be forced to close their operations.
The U.S. Department of Transportation has notified all sureties that brokers who do not meet the new requirement by October 1 must have their bonds cancelled. At that time brokers will have 30 days to find and secure a new bond that meets the $75,000 requirement or lose their business. Although the deadline is only six months away, freight brokers do not seem to be overly concerned. Either they believe that the bill will not be implemented or they just don't know a lot about the provisions of the new law.
Brokers book loads and hire authorized motor carriers to move the freight, but as of October 1, this act will be deemed illegal without the new bond. Even so, we have not yet seen a huge increase in brokers and authorized motor carriers rushing to meet the new requirement. Nor have we seen the sureties making it known that the new requirements are coming.
Any company that wishes to continue brokering freight after October 1 should begin now to secure a new bond. Six months can go by pretty fast.
Categories: Broker News