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What Is an Auto Transport Broker?

Updated on May 26, 2017

Between a car buyer and the motor carrier tasked at shipping the purchased car is an auto transport broker whose primary task is in the shipping and transportation of vehicles. Auto transport falls under the category of "specialized freight trucking" because they additionally deal in boats, RVs, motorcycles, and the many different vehicles.

How it Works

The personal vehicle freight industry is quite big and even includes auto transport brokers. While they cover an integral portion of the industry, all broker companies aren't legally allowed to operate unless they have a proper licensing from the FMCSA. Brokers are part of the industry because they can access freight load boards where the posting of jobs and location of carriers within a particular locality is done.

A shipper is a term used to refer to the car buyer who needs the vehicle moved. As such, the shipper liaise with the broker to have it transported after purchase. The broker is thus expected to locate the shipping firm (a carrier). The shipping firm will then carry the new vehicle to the buyer.

When they access the freight load boards, brokers can view the current bids from carriers and will have the benefit of comparing them to the best suitable and economical options available for the client. A broker will also verify insurance holding certificates are up to date and carrier operating authority is valid.

Numbers & Figures

It is mandate of the US Department of Transportation to ensure that statistics on cargo shipments are kept. In 2007 alone, over $651 billion worth of vehicles, including the motorized ones were moved by truck. From that cost, a whopping $452 billion of cargo used the for-hire trucks. Of course, the figures have exceeded that right now, partly because of the advent of the internet.

The web has ushered in a lot of avenues and opportunities in the auto transport industry, creating a route for the emergence of new brokers. The influx majorly motivated by the low cost of starting a brokerage firm online means that the cut-throat competition, while encouraging lower expenses in the industry. The practice has also initiated an increase in the number of fraudulent cases and complaints surrounding the entire auto transporters and auto transport brokers industries.

Licensing Requirements

As aforementioned, no single auto broker is legalized to transact without a proper license from the FMCSA. The Federal Motor Carrier Safety Administration is a government agency that vets candidates wishing to become vehicle shipping brokers, usually for a small fee. The process ends with the agent getting an Operating Authority number, a permit for the job.

It's important to mention that Brokers obtain a bond, officially called a Freight Broker Bond, that serves to cushion against any losses incurred by the motor carrier. In case the carrier commits a fraud, the bond will be used to compensate the shipper. Before 2012, the minimum bond was $10,000, although it wasn't surprising to see a broker choosing higher amounts than that.

The 2012 Regulations

The Moving Ahead for Progress in the 21st Century Act passed by the then President Obama brought in a lot of regulations. The amount in minimum broker bond was raised from $10,000 to $75,000, and currently, the rule applies to all brokers retroactively.

The BMC-84 Freight Broker Bond is annually paid for and the freight broker bond cost calculated as a percentage of the amount in broker bond. The final figure obtained depends on:

  1. Years of existence in business
  2. Amount of experience
  3. Financials
  4. The credit of ownership - credit score, the age of any existing records, etc.

Additional Rules

The status of the FMCSA license - it is reviewed after every five years.

The mandatory 3-year experience and certified training requirement prior to getting the certificate. It likens the auto shipping broker qualification requirements to those of the ocean shipping sector.

Tighter rules regarding "interlining" - this is the illegal task of freight carriers hiring other carriers to do part or the entire services the original carrier is entitled to offer. Auto shipping firms wishing to do that must first contact government authorities and procure separate broker authorities. The same carrier will be expected to notify the client and be clear in the role the original carrier will play.

Reactions from the industry...

There's an Association of Independent Property Brokers & Agents that brings together over 1,400 members in the US. This group has always protested the raised broker bond fees and harshly criticized the new law.

At the forefront of the vehemence are the group's founder and president, James Lamb who has severally termed the rules an attempt to drive small brokers from the market for the benefit of certain individuals. In support of the criticism is the National Association for Minority Truckers who also disagreed with the new broker bond fees.

But some groups have also supported the new move, including the Owner-Operator Independent Drivers Association that thinks the final rules presents a win-win for legitimate brokers and truckers. Another third-party logistics trade organization called the Transportation Intermediaries Association acknowledged that indeed the costs are way too high, but will keep incompetent and unscrupulous brokers out of the industry.

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