A central question that shippers are almost always faced with is – how to choose a freight broker? Pick the wrong one and you’re running the risk of having your goods picked up with a delay, lost or damaged. Of course, part of the responsibility lies with carriers but that’s exactly the point of selecting a freight broker who is reliable and knows their craft.
A good freight broker will always have a number of options to offer, they will be licensed and bonded with a freight broker bond and they will pick their carriers carefully.
Here’s a list of criteria for you to apply when you’re looking for a freight broker and want to pick the right one.
1. Is the freight broker licensed and bonded?
When selecting a freight broker you should always begin with the mandatory before getting to the optional. According to federal law, anyone doing work as a freight broker must be licensed with the Federal Motor Carrier Safety Administration (FMCSA).
To check whether a freight broker is licensed, you can look them up on the FMCSA website. You can do a search for licensed freight brokers if you know their USDOT Number or Docket Number. If you don’t have these, you can use their Legal Name or DBA Name, as well as their location to narrow the search down.
In order for freight brokers to be licensed, they also need to be bonded with a $75,000 freight broker bond. Any freight broker who has no bond but claims to be licensed is clearly not reliable. The bond is there to guarantee that freight brokers operate according to federal law and regulations, as well as to compensate shippers or carriers in cases of fraud.
Conversely, if your freight broker is bonded and licensed, that in itself already signals that they have fulfilled the licensing requirements of the FMCSA and you can check this item off the list.
2. Does the freight broker have contingent cargo insurance?
While freight brokers are not obliged by law to have insurance, they are by far more reliable if they do. Sometimes when a shipment is damaged or lost, the carrier or their insurance company may refuse to pay.
In this situation a freight broker’s contingent cargo insurance provides additional protection by covering your losses, as long as the claim is valid. When picking your freight broker, you should also check whether they have general liability insurance and whether they would be willing to list you specifically as an additional insured.
3. Is the freight broker financially stable?
Financial stability is the next most important factor in your list of requirements for the freight brokers you want to work with. Questions that you should ask your potential freight brokers concern their profitability, how fast they pay carriers, what their payment methods are and how good their billing department is.
Furthermore, you should run a credit check to be sure that they are financially solvent and actually capable of paying their carriers. If all of the above can be answered positively, you should consider working with those freight brokers.
4. How does the freight broker select their carriers?
When selecting a freight broker business you should ask how the business chooses its carriers. The carrier selection and management process is important because it says a lot about how precise and diligent freight brokers are and whom they are willing to work with.
While you should request that freight brokers have insurance, you should also ask whether the carriers that freight brokers are representing have insurance and what kind of insurance it is.
Other important considerations to have are carriers’ safety records, their reputation and how long they have been in the business, how old their equipment is and how many vehicles they have at their disposal. Finally, make sure to check whether freight brokers have signed agreements with their carriers and don’t just have a verbal agreement.
5. Does the freight broker provide different types of transportation?
If a freight broker is multi-modal and offers more than just truckload motor carrier services – such as air freight, rail intermodal, ocean shipping, vans, LTL and others – this makes them a potentially better partner for you.
Freight brokers who have access to a variety of transport solutions and are flexible can offer various ways of executing a job and will often be able to resolve problems faster. Furthermore, if a broker is multi-modal, this is also a sign of their network size – further proof of their reliability.
6. Does the freight broker provide the price in writing?
Though this may seem like an unimportant detail, especially if you’ve already agreed on a price, you should still be careful. This is not to say that freight brokers will try to trick you but that there’s more to a price than you may think.
When negotiating a price and requesting a quote, make sure to also request that charges and fees for different types of transport are accounted for and clarified. You also want to clearly specify who, between you, the customer and the freight broker, will be responsible for the fees, especially on international shipments. Since taxes can add up to 1/3 to the total cost of a shipment, that’s not something you want to disregard.
How Do You Pick Your Freight Brokers?
When picking a freight broker, what are your criteria? What else do you think is important and can have a significant impact on doing business with a freight broker? Let us know in the comments, we’d like to hear about your experience!
Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps freight brokers get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.