Compliance Regulations Every Freight Broker Must Know

Maintaining connections with customers and carriers, as well as being current on industry developments and advertising one’s firm, are just two of a freight broker’s numerous tasks. Brokers must adhere to compliance requirements to maintain corporate integrity, safety, and ethical behavior. The Federal Motor Carrier Safety Administration (FMCSA) must confirm your license to become a certified freight broker. Compliance responsibilities, such as renewing the broker bond annually and maintaining current on new rules, guarantee that his license remains valid. According to the FMCSA, failure to comply with regulations can result in fines of up to $250,000.

As a result, if you get a Notice of Violation or a Notice of Claims, you may risk a fine of up to $1,100 and the termination of your broker license. In the United States, the Department of Justice and other law enforcement organizations can pursue serious crimes. While FMCSA regulation investigations and statutory felony prosecution continue, your brokerage may also face civil lawsuits.

Part 371 of the Code of Federal Regulations (CFR) – Property Brokers – provides the essential compliance regulations that each freight broker must understand from the start. Residential item brokers are subject to extra rules not listed in the CFR, including several requirements.

Brokers’ obligations may be summarized as the requirement to maintain correct records of all transactions, protect themselves from fraud, avoid charging carriers where appropriate, and adequately account for all of their revenues and costs.

Consider that brokers are classified into two categories: those specializing in freight or real estate and those specializing in home products. We’ll discuss freight brokers and regulatory compliance in this piece. As a result, we’ve created the following information on freight broker compliance to assist you in maximizing its value.

There must be an audit trail for all transactions and shipments that transportation brokers arrange for their clients. Suppose you want to minimize duplication of information and save time and effort. In that case, you may bundle these papers into master lists that include your consignors and the motor carriers that delivered their products.

Each transaction record or master list of transactions must provide the following information:

• Providing a listing of the consignor’s contact details.
• A list of the original motor carrier’s name, address, and registration or USDOT number is included.
• BOL/Bill of Lading/Freight Bill Identification Number.
• What you got in compensation for the brokerage services you provided, as well as the name of the party that compensated you.
• This document should include payment for non-brokerage services, the amount of remuneration you received, and the name of the person who received the money.
• In this section, you can see the total amount of freight expenditures collected and the date on which those costs were paid to the carrier. When information is well described, you have entire flexibility to arrange the information in any way you see fit. These documents must be maintained on file for a minimum of three years after they are created.

As a broker, your clients have the right to inspect the documentation about the transactions you facilitate. As a result, you must grant access to carriers that participated in your brokered transactions.

You are not permitted to conduct broker business using a name different than the one specified on your registration or operating authorization. This category encompasses advertising and marketing. Your broker authorization number must be included in the “doing business as” or “dba” name under which you do business with shippers. The registered name of your brokerage must correspond to the name that appears on your advertising materials and vice versa.

It would be best to exercise caution not to portray your firm as a motor carrier. Brokers must make it very apparent that they act as brokers, not as motor carriers. To avoid fines, website operators must reveal their broker registration number, MC docket number, and statements indicating brokers.

If you own other companies, such as a motor carrier, you must keep the revenue and expenses of your brokerage distinct from those of the other firms. Accounting records must indicate which costs are your brokerage’s responsibility if you and the other firms split expenditures.

The FMCSA changed the regulations on January 28, 2011, to a SAFETY-Household LU and an AMSA petition. The amendments place a greater emphasis on home goods sellers’ responsibility to avoid misleading practices and to enhance consumer protection. 371 of 49 CFR Subpart B, titled “Special Rules for Household Goods Brokers,” comprises most amendments.

A home goods broker may only transact business with motor carriers that possess a valid USDOT number and authorization to transport household products. You may not engage motor carriers whose authority to transport property or household products has been suspended or revoked to transport your things. It is necessary to verify the license status of motor carriers with whom you do business regularly. You can verify the status of a motor carrier’s operating licenses and insurance coverage by visiting http://li-public.fsa.dot.gov. Continue to scroll down the page until you reach the bottom. Select “Choose Menu Option.” from the drop-down menu in the upper right corner of the next screen. A drop-down menu option called “Carrier Search” allows you to search for carriers. When you enter the motor carrier’s USDOT or MC number and then click “Search,” a search screen will appear on your screen. If the motor carrier is registered with the FMCSA, you will be able to see your search results. If the airline you’re searching for is displayed, you may obtain a status report by selecting “HTML” or “PDF” from the drop-down menu.  

As a home goods broker, any advertising you undertake or web pages on your site should display the following facts:

• The headquarters address of your business.
• Using a motor carrier licensed to transport household products will lower your shipping expenses, which will be determined by the carrier’s tariff and the MC Docket number granted by the Federal Motor Carrier Safety Administration.

The list of all the licensed household goods motor carriers you use together with their USDOT and MC numbers must be provided to a shipper every time they contact you. You have the option of submitting this list electronically or on paper. Your status as an unregistered home goods carrier must be communicated to any potential clients who contact you for service and inquire about your availability. If transportation or other services are required, it is necessary to employ a certified transport company. In response to inquiries from potential shippers, you may provide this statement as well as a list of licensed home goods motor carriers in your response

When working as a home goods broker, you can estimate shipping and accessory fees to individual shipping companies. Written estimates may only be created once a physical inspection of the items to be given has been completed. To produce a more accurate estimate, a biological survey is carried out at the shipper’s departure location. Depending on the circumstances, the physical survey may be performed by you, your broker, or the home goods motor carrier for whom the estimate was generated. If you and the domestic goods motor carrier transporting the cargo are more than 50 miles apart, a physical examination of the shipment is not required to be performed. When shipping anything more than 50 miles from your office, it is strongly suggested that you choose a home goods carrier that is within a 50-mile radius of your business to prevent substantially erroneous quotations and client complaints. Always inform prospective consumers about the registered household goods motor carriers you use. ‘ In some cases, such as when a home goods motor carrier transfers your household items outside of the 50-mile radius, there may be ethical issues to consider. This may harm your organization as a result.

An uninspected consignment of household goods may be transferred without being discovered. A liability waiver must be signed and submitted by the shipper. It is recommended that a minimum font size of 7 points be used for the releases printed in the Universe typeface. When a bill of lading is issued, it includes a waiver agreement. Both you and the household goods motor carrier who will be conveying the consignment must retain a copy of the waiver agreement on their respective computers. Maintaining a copy of this agreement for three years is a requirement for brokers.

Your cancellation, deposit, and refund policies must be clearly stated on your websites and in any contracts you enter into with prospective shippers. You must save three years’ worth of cancellation requests from individual shippers, along with how your brokerage dealt with them. Each shipper is responsible for keeping track of the reimbursements received. If a financial institution provides written proof that a refund has been received, deposited, or transferred directly to the shipper, you must include that information in your records. These contracts will safeguard your brokerage in the case of a conflict with a shipper over a cancellation or deposit.