Freight Broker is ,according to the FMCSA,

  • A broker is a person or an entity which arranges for the transportation of property by a motor carrier for compensation. A broker does not transport the property and does not assume responsibility for the property

The Brokers that want to do higher paying loads, typically have a contingency policy.  Covering over the standard $100,000 minimum cargo requirement.  A just in case to protect the clients, from any losses for declared value over the $100,000 minimum cargo insurance requirement….

Brokers do have a few requirements—

All brokers and freight
forwarders subject to FMCSA
jurisdiction must file new BMC–84 or
BMC–85 forms reflecting the new
minimum financial security amount of
$75,000 as of October 1, 2013. FMCSA
will develop new BMC forms for use by
surety bonding companies and trust
fund institutions

§371.3   Records to be kept by brokers.

(a) A broker shall keep a record of each transaction. For purposes of this section, brokers may keep master lists of consignors and the address and registration number of the carrier, rather than repeating this information for each transaction. The record shall show:

(1) The name and address of the consignor;

(2) The name, address, and registration number of the originating motor carrier;

(3) The bill of lading or freight bill number;

(4) The amount of compensation received by the broker for the brokerage service performed and the name of the payer;

(5) A description of any non-brokerage service performed in connection with each shipment or other activity, the amount of compensation received for the service, and the name of the payer; and

(6) The amount of any freight charges collected by the broker and the date of payment to the carrier.

(b) Brokers shall keep the records required by this section for a period of three years.

(c) Each party to a brokered transaction has the right to review the record of the transaction required to be kept by these rules.

[45 FR 68942, Oct. 17, 1980. Redesignated at 61 FR 54707, Oct. 21, 1996, as amended at 62 FR 15421, Apr. 1, 1997]

§371.7   Misrepresentation.

(a) A broker shall not perform or offer to perform any brokerage service (including advertising), in any name other than that in which its registration is issued.

(b) A broker shall not, directly or indirectly, represent its operations to be that of a carrier. Any advertising shall show the broker status of the operation.

[45 FR 68942, Oct. 17, 1980. Redesignated at 61 FR 54707, Oct. 21, 1996, as amended at 62 FR 15421, Apr. 1, 1997]

§371.9   Rebating and compensation.

(a) A broker shall not charge or receive compensation from a motor carrier for brokerage service where:

(1) The broker owns or has a material beneficial interest in the shipment or

(2) The broker is able to exercise control over the shipment because the broker owns the shipper, the shipper owns the broker, or there is common ownership of the two.

(b) A broker shall not give or offer to give anything of value to any shipper, consignor or consignee (or their officers or employees) except inexpensive advertising items given for promotional purposes.

§371.10   Duties and obligations of brokers.

Where the broker acts on behalf of a person bound by law or the FMCSA regulation as to the transmittal of bills or payments, the broker must also abide by the law or regulations which apply to that person.

[45 FR 68943, Oct. 17, 1980, as amended at 62 FR 15421, Apr. 1, 1997]

§371.13   Accounting.

Each broker who engages in any other business shall maintain accounts so that the revenues and expenses relating to the brokerage portion of its business are segregated from its other activities. Expenses that are common shall be allocated on an equitable basis; however, the broker must be prepared to explain the basis for the allocation.

[45 FR 68943, Oct. 17, 1980]

Subpart B—Special Rules for Household Goods Brokers

Source: 75 FR 72996, Nov. 29, 2010, unless otherwise noted.

§371.101   If I operate as a household goods broker in interstate or foreign commerce, must I comply with subpart B of this part?

Yes, you must comply with all regulations in this subpart when you operate as a household goods broker offering services to individual shippers in interstate or foreign commerce. The regulations in this subpart do not apply to a household goods broker when providing services to commercial or government shippers in interstate or foreign commerce.

§371.103   What are the definitions of terms used in this subpart?

FMCSA means the Federal Motor Carrier Safety Administration within the U.S. Department of Transportation.

Household goods has the same meaning as the term is defined in §375.103 of this subchapter.

Household goods broker means a person, other than a motor carrier or an employee or bona fide agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation of household goods by motor carrier for compensation.

Individual shipper has the same meaning as the term is defined in §375.103 of this subchapter.

§371.105   Must I use a motor carrier that has a valid U.S. DOT number and valid operating authority issued by FMCSA to transport household goods in interstate or foreign commerce?

You may only act as a household goods broker for a motor carrier that has a valid, active U.S. DOT number and valid operating authority issued by FMCSA to transport household goods in interstate or foreign commerce.

§371.107   What information must I display in my advertisements and Internet Web homepage?

(a) You must prominently display in your advertisements and Internet Web homepage(s) the physical location(s) (street or highway address, city, and State) where you conduct business.

(b) You must prominently display your U.S. DOT registration number(s) and MC license number issued by the FMCSA in your advertisements and Internet Web homepage(s).

(c) You must prominently display in your advertisements and Internet Web site(s) your status as a household goods broker and the statement that you will not transport an individual shipper’s household goods, but that you will arrange for the transportation of the household goods by an FMCSA-authorized household goods motor carrier, whose charges will be determined by its published tariff.

(d) If you provide estimates on any carrier’s behalf pursuant to §371.113(b), you must prominently display in your Internet Web site(s) that the estimate must be based on the carrier’s tariff and that the carrier is required to make its tariff available for public inspection upon a reasonable request.

(e) You may only include in your advertisements or Internet Web site(s) the names or logos of FMCSA-authorized household goods motor carriers with whom you have a written agreement as specified in §371.115 of this part.

§371.109   Must I inform individual shippers which motor carriers I use?

Link to an amendment published at 83 FR 16224, Apr. 16, 2018.

(a) You must provide to each potential individual shipper who contacts you a list of all authorized household goods motor carriers you use, including their U.S. DOT registration number(s) and MC license numbers. You may provide the list electronically or on paper.

(b) You must provide to each potential individual shipper who contacts you a statement indicating that you are not a motor carrier authorized by the Federal Government to transport the individual shipper’s household goods, and you are only arranging for an authorized household goods motor carrier to perform the transportation services and, if applicable, additional services. You may provide the statement electronically or on paper.

§371.111   Must I provide individual shippers with Federal consumer protection information?

Link to an amendment published at 83 FR 16224, Apr. 16, 2018.

(a) You must provide potential individual shippers with Federal consumer protection information by one of the following three methods:

(1) Provide a hyperlink on your Internet Web site to the FMCSA Web site containing the information in FMCSA’s publications “Ready to Move?—Tips for a Successful Interstate Move” and “Your Rights and Responsibilities When You Move.”

(2) Distribute to each shipper and potential shipper at the time you provide an estimate, copies of FMCSA’s publications “Ready to Move?—Tips for a Successful Interstate Move” and “Your Rights and Responsibilities When You Move.”

(3) Distribute to each shipper and potential shipper at the time you provide an estimate, copies of “Ready to Move?—Tips for a Successful Interstate Move” and “Your Rights and Responsibilities When You Move” as modified and produced by the authorized, lawful motor carrier to which you intend to provide the shipment under your written agreement required by §371.115.

(b) If an individual shipper elects to waive physical receipt of the Federal consumer protection information by one of the methods described in paragraphs (a)(2) and (a)(3) of this section, and elects to access the same information via the hyperlink on the Internet as provided in paragraph (a)(1) of this section, you must include a clear and concise statement on the written estimate described in §371.113 that the individual shipper expressly agreed to access the Federal consumer protection information on the Internet.

(c) You must obtain a signed, dated, electronic or paper receipt showing the individual shipper has received both booklets that includes, if applicable, verification of the shipper’s agreement to access the Federal consumer protection information on the Internet.

(d) You must maintain the signed receipt required by paragraph (c) of this section for three years from the date the individual shipper signs the receipt.

§371.113   May I provide individual shippers with a written estimate?

(a) You may provide each individual shipper with an estimate of transportation and accessorial charges. If you provide an estimate, it must be in writing and must be based on a physical survey of the household goods conducted by the authorized motor carrier on whose behalf the estimate is provided if the goods are located within a 50-mile radius of the motor carrier’s or its agent’s location, whichever is closer. The estimate must be prepared in accordance with a signed, written agreement, as specified in §371.115 of this subpart.

(b) You must base your estimate upon the published tariffs of the authorized motor carrier who will transport the shipper’s household goods.

(c)(1) A shipper may elect to waive the physical survey required in paragraph (a) of this section by written agreement signed by the shipper before the shipment is loaded.

(2) The household goods broker must explain the physical survey waiver agreement to the individual shipper in plain English. The physical survey waiver agreement must be printed on the written estimate and must be printed at no less than 7-point font size and with the font typeface Universe.

(3) A copy of the waiver agreement must be retained as an addendum to the bill of lading and is subject to the same record inspection and preservation requirements as are applicable to bills of lading.

(d) You must keep the records required by this section for three years following the date you provide the written estimate for an individual shipper who accepts the estimate and has you procure the transportation.

§371.115   Must I maintain agreements with motor carriers before providing written estimates on behalf of these carriers?

(a) In order to provide estimates of charges for the transportation of household goods, you must do so in accordance with the written agreement required by §375.409 of this subchapter. Your written agreement with the motor carrier(s) must include the following items:

(1) Your broker name as shown on your FMCSA registration, your physical address, and your U.S. DOT registration number and MC license number;

(2) The authorized motor carrier’s name as shown on its FMCSA registration, its physical address, and its U.S. DOT registration number and MC license number;

(3) A concise, easy to understand statement that your written estimate to the individual shipper:

(i) Will be exclusively on behalf of the authorized household goods motor carrier;

(ii) Will be based on the authorized household goods motor carrier’s published tariff; and

(iii) Will serve as the authorized household goods motor carrier’s estimate for purposes of complying with the requirements of part 375 of this chapter, including the requirement that the authorized household goods motor carrier relinquishes possession of the shipment upon payment of no more than 110 percent of a non-binding estimate at the time of delivery;

(4) Your owner’s, corporate officer’s, or corporate director’s signature lawfully representing your household goods broker operation and the date;

(5) The signature of the authorized household goods motor carrier’s owner, corporate officer, or corporate director lawfully representing the household goods motor carrier’s operation and the date; and

(b) The signed written agreement required by this section is public information and you must produce it for review upon reasonable request by a member of the public.

(c) You must keep copies of the agreements required by this section for as long as you provide estimates on behalf of the authorized household goods motor carrier and for three years thereafter.

§371.117   Must I provide individual shippers with my policies concerning cancellation, deposits, and refunds?

(a) You must disclose prominently on your Internet Web site and in your agreements with prospective shippers your cancellation policy, deposit policy, and policy for refunding deposited funds in the event the shipper cancels an order for service before the date an authorized household goods motor carrier has been scheduled to pick up the shipper’s property.

(b) You must maintain records showing each individual shipper’s request to cancel a shipment and the disposition of each request for a period of three years after the date of a shipper’s cancellation request. If you refunded a deposit, your records must include:

(1) Proof that the individual shipper cashed or deposited the check or money order, if the financial institution provides documentary evidence; or

(2) Proof that you delivered the refund check or money order to the individual shipper.

§371.121   What penalties may FMCSA impose for violations of this part?

The penalty provisions of 49 U.S.C. chapter 149, Civil and Criminal Penalties apply to this subpart. These penalties do not overlap. Notwithstanding these civil penalties, nothing in this section deprives an individual shipper of any remedy or right of action under existing law.

Oh,  Wait hang on— that is not all of them–  They have a few more…..

however,  I do not need to process that much of their FMCSA rulemaking.  Just know you have a minimum bond, Business Account- and some fees and paperwork.  Annual Bond is cool, It does cost you.  However, I prefer to have someone who invested in the organization underwrite the bond– securing the account.  It allows them to make some interest at reasonable rates, while allowing lowered costs from the normal Institutional costs of funding.

When Capital is in place-such as freight broker has a factor–or financial pockets—-They can sell and float their funding ………..Hence, why they may take a 3% recourse vs a 5% non-recourse.  They hold as much paper in house to preserve capital and risk on the net 30 costs. They may only fund 70% of the bill—Holding 30% on the top……maximize the 30% without the cost of immediate funds and profit.

Carriers have a few more rules to follow– cross mingle of funds from carrier to brokerage is not allowed both must have separate accounts as not to risk each other financially.  Brokerage must bill for the Brokerage Freight to customer, just as a separate entity.

Always understand the rules and operations in full…..please consult an attorney for any advice as to licensing and operational rules.

I think you are starting to understand why teams are very important for the operational standpoint.  They must operate as one plus operate as separate entities…..Proper Utilization is key….even trying to operate from the Truck……That gets harder especially with all the ELD and requirements in place…..ELD is a good safety idea– however the over regulation, and constant rulemaking the makes the operations of the small fleets harder and harder which if you do not understand—runs about 81% of the market…. the Independents and the Small fleets—15 or less, with most being 6 or less.

The Agent/Agency of the Broker

This is the contractual relationship between the Broker and the Agent or Agency.  They are granted the right via contractual responsibility and contractual obligation to the Broker, from the Broker, through a Broker Agent or Brokerage Agency agreement.  This is the responsibility and the authorization to operate on the Brokerage’s behalf, under their Name and FMCSA license, by their rules and requirements, for a percentage of the profit that is produced from the Agent or Agency work and contacts.

Typical, relationships can be exclusive or non-exclusive, and typically the Agency or Agent is paid a percentage of profits that range from the 40/60 Agent/Brokerage split- to as high as 75/25 Agent/Brokerage split.

The Agency versus the Agent-

The Agreement is typically called the Agency Agreement for the Brokerage, and Agency and Agent are typically used in correlation with each other as far as the Brokerage is concerned.  However, there are a few differences in my opinion that we should cover.

The Agency is typically a company contracted and has a few to as many people working on the Agencies jobs from Accounting, Sales – Freight and Truck, and has the potential to have a multiple subagents through the Agency network, usually established and with a customer bases with the truck network that they have culminated over the years.

The Agent is the Actual one that is the responsible party for the Agency Contract.  They are the final between the Brokerage and the actual Agency.  If something goes wrong they are the one left responsible to the Brokerage.

Most relationships Contracted by the Brokerage, are responsible for any losses in Full.  They look at it like they are your customers, however, in reality the brokerage takes the customers contingent upon approval for their financial score found on a multitude of credit scoring agencies across the USA.  The Agent can be given final yes or no if they do not fit in parameters, with most Brokerages due to the Agent taking the financial risk.  What most Contractual obligations show in the Agreement is that all information from the Brokerage Agency become property of Brokerage, since the customers are contracting through the Broker, under the licensure approval of the Broker.

Some Brokerages will supply Contingency Policies for Cargo or Liability and could both….however this licensure has the minimum requirements of $75,000 Bond, to ensure that the Carriers will get paid, and the approval of the FMCSA.  The Bond gives the minimum coverage of financial responsibility, and allows them to sell their freight services anywhere in the USA.  Does the $75,000 Bond really cover insolvency—-Not when the brokerage is doing that per month average per agent/Agency—

Carrier – Broker

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These guys use the Broker side as a additional revenue stream.  Think about it for a second.  They have all the approval and licensure, but the influx of Carrier freight may produce a small excess that they would typically have to give away, without a Broker Licensure.

A single Broker Agent under a Brokerage of the Carrier—Can sell $75,000 to as high as $1,00,000 in sales gross per month……I have only seen one that does $1,000,000 …….but for the most part on the $75,000 monthly sales can produce and typically does produce in the 16% to as high as 45% margins from the Brokerage Agent base if they are established and have a customer base.

16%- of $75,000 Monthly Sales— $12,000 Gross Profit before split.  When you sell freight that has an average price of $2,500 per long haul, and $1000 average short haul— you can see it does not take very long to get to the $75,000 monthly gross.

This relationship can produce in the $6,000- to as high as $160,000 in monthly profits gross between the Brokerage and the Agency.  I care not what Carrier you are—–$6,000 per month in profits once established, helps the bottom line……that is just one Agency——Consider how much JBHunt and Schneider—–amongst the huge brokerages that are across this country–like Coyote, CHRobinson, Convoy, and Independents alike.

What Separates the Big Boys versus the Little Brokers—

I call this the Call Center Action—-

Small Brokers– with a few people do not quite have the phone muscle, if you will, like the big brokers.  The small guys might have two or three in house sales guys who make their 2-300 calls a day—and 150-200 calls to the Carrier side.  While these guys typically have a few established clients that regularly supply them with freight, these smaller firms haven’t learned the Volume of Calls actually make the Volume with a typical higher margins.

Coyote and CHRobinson–amongst others…….will have two sides in house—–Carrier side, and the freight side.  The freight side will find the freight while the Carrier side will call the carrier to produce the hook and booking.  These centers are like little brokerages, and are done based on offering to the Carrier…..based on their criteria.

More established typically get the better freight versus the new Carrier just signing in because the profits over the established is way more than the new guy……..That is why CHRobinson will book a Older Established Carrier with higher rates than the new guys………they desire the long term relationships……….With solid track records for delivery success and minimal issues.  Do not think they do not take notes on the Carrier and Customer base for the CRM they established for the network to see.

Book the Carrier once and Keep pushing until he finds better rates–is the Ideal way to safely and consistently book profits for the brokerage…..Book the Carrier, with a two day headstart on delivery, call the Carrier a day out with 3 loads from their delivery area……plus deadhead to another location that the brokerage desires Carrier to run…..do that 3-4 times and you can lock in good margins with a happy Carrier, with minimal deadhead, and a check for the service rendered..

How I would set up a Brokerage or a Brokerage Agency-

If I were going to set up a Sales Brokerage or Brokerage Agency again.  I would establish one, with about 10 phone lines, minimum.   I would have a Carrier Side and a Freight Side.  I would hire on a 10 phone line system, 3/4 for the Booking or Carrier side, to sell, and I would hire the same 3/4 for the freight side.

The Carrier side would  call he carriers and book freight from Customer base.  The Freight side would call nothing but known or listed Shippers and Receivers to lock in freight.

At first, yes I would factor my bills through a factoring company at 5% nonrecourse; or 3% recourse.  Which would give my Brokerage a prepay option that I could earn a split from the difference………Volume is the key.

These 8 people would have about 6 weeks for training unless they were established.  Established would be like a agent, and would obtain 75% of their profits from the Brokerage profits they produce.  These 8 in house people would have a 2 week classroom training, before they are on the phones.  They may rotate between each side of the house…….however, those that excelled at either side will naturally stay at the profitable location they are best…..

I would recruit for at least 3 outside Agents—to add to the inhouse call center—just to get some established money and customer base with these Agents—they will carry the call center while training the new people.

Why have training?

Training is key with any Sales Organization—You must have weekly sales training, for all Agents and Inhouse Sales.  This not only gives them outlines on their performance, but also shows them that the Corporate looks at them as a team for the end result desired, from the Corporate Entity.

At least have a weekly required Sales Meeting and Training for the Network, during normal hours.—I like the establishment of a daily inhouse session before they begin the day……Make it required so that the Brokerage can a) understand the concerns or issues daily with the personnel and can attack issues that may be limiting their scope–b) cover topics that help the team close more deals.

In the end, it is your profits—-show them you care and are fighting the fight with them……..

New Agents– What to expect—

New Agents just entering into the world, without a good clientele base, established—should look at the long term versus the Short term profits of bookings—This is due to the Bell Curve to establish a knowledgeable and actionable success ratio—-The more you book, the more you learn, the more you will be able to book and lock in from both the customer side and the Carrier side.  Simple as that.

What new agents fail to realize, unless they are properly trained——-it will take you 6-12 months to establish a customer base that produces enough profits that the agent can live……..it took me 6 months the first time, and it took me 8 the second time—and I was experienced.

New Agents typically have a hard time with the constant barrage of “No’s”.  This is with any sales organization.  The “No’s” if given much juice if you will will kill a new sales guy…..they do not understand the basics of a sales professional.  They should get a minimum week of starter training in basic sales and closes.  Sales professionals overlook the new Sales Person, when they should be training and assisting in Training these guys to be best for the organization.

Additional Resources:

Want to Learn How to be a broker or broker agent from the Pro’s? Ever want to earn additional income with the trucking industry but not sure how? Click here to learn from a leading broker the in’s, out’s, and secrets to one of the oldest professions in the industry TODAY!

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