The Highway Reauthorization Bill passed on June 29, 2012, calls for an increase to broker surety bond requirements. The legislation raises the minimum bond requirement from $10,000 to $75,000.
Why does this matter? Because it will push out the vast majority of “small brokers” (which represent 80%+ of freight brokers in the country) and funnel the business to the larger brokers (like Interstate Transport) that are able and eligible to get a $75,000 bond.
It will also force a lot of small brokers to align with the large brokers as an agent or employee so they have a place for their book of business yet are relieved of the financial responsibilities and back office functions.
Capacity will tighten further due to this law which means shippers will have to scramble to find capacity from the larger brokers that remain. Read more below in the article from The Journal of Commerce.
Transport Bill Raises Forwarder, Broker Surety Bond Requirement
Increased bond surety to $75,000 aimed at preventing fraud
The newly-passed surface transportation bill requires freight brokers and forwarders to have a $75,000 surety bond, a mandate that supporters said will help prevent fraud in the industry.
Transportation Intermediaries Association President and CEO Bob Voltmann said the requirement will help prevent “underfunded companies” that have given the industry a “black eye.” TIA backed language in the House and Senate bill versions calling for a $100,000 surety bond requirement, but Voltmann said the slightly smaller bond minimum “is still a significant improvement.”
The Association of Independent Property Brokers and Agents opposed the raising of the surety bond from the existing $10,000 level, saying it would put thousands of small brokers out of business. The $75,000 surety bond requirement mirrors that required of non-vessel operating common carriers.
The transport bill also tightens regulations on brokers, forwarders and trust companies, and it forbids motor carriers from from re-brokering freight without proper broker authority and bond. Customs brokers and air freight forwarders will remain exempt from such changes.