What Are BMC-84 Surety Bonds? A Guide for Freight Brokers
If you're a freight broker or freight forwarder operating in the United States, you’ve likely heard of the BMC-84 surety bond. This bond is a crucial requirement imposed by the Federal Motor Carrier Safety Administration (FMCSA) to ensure financial accountability and protect carriers and shippers from potential losses. Here is everything you need to know about BMC-84 surety bonds, their purpose, and why they matter.
What is a BMC-84 Surety Bond?
BMC-84 surety bonds, also referred to as freight broker bonds, property broker bonds, Interstate Commerce Commission (ICC) bonds, or transportation broker bonds, is a type of license and permit bond required by the FMCSA for all freight brokers and forwarders. Its primary purpose is to ensure that brokers adhere to FMCSA regulations and fulfill their financial obligations to shippers and carriers.
When a freight broker fails to pay carriers or violates contractual agreements, the bond provides a mechanism for affected parties to recover their losses. This regulatory safeguard promotes trust and reliability in the freight brokerage industry.
How Does a BMC-84 Bond work?
A surety bond is a three-party agreement that ensures the fulfillment of a commitment or contract. The three parties involved in a BMC-84 bond include:
- The Principal: the freight broker or forwarder obtaining the bond.
- The Obligee: the FMCSA, which requires the bond to ensure compliance.
- The Surety Company: the issuer of the bond that guarantees compensation to claimants in valid disputes.
If a broker breaches their obligations, such as failing to pay carriers for services, the harmed party can file a claim against the bond. The surety company investigates the claim, and if it’s deemed valid, the surety compensates the claimant—up to the bond’s full value. The broker, in turn, is responsible for reimbursing the surety for any payouts.
In order to obtain this bond, you’ll need to contact your local insurance agent or utilize our Find an Agent tool to locate an insurance agency in your area. From there, the agent will guide you through the process, informing you of what documents and information is required by the surety to underwrite your bond.
Commonly Asked Questions Related to BMC-84 Bonds
| Who is Required to Obtain a BMC-84 Surety Bond? |
| This bond is required for anyone who acts as a freight forwarder or property broker operating in the United States. Additionally, a BMC-84 bond is required in order to maintain broker authority under the FMCSA. |
| How Much Does a BMC-84 Surety Bond Cost? |
| The bond amount set by the FMCSA is $75,000. Brokers will pay an annual premium that varies depending on certain factors such as the broker’s credit score, financial history, and industry experience. Merchants offers a standard rate and a preferred rate to customers that are dependent on their net worth and credit. |
| What is the Difference Between a BMC-84 Bond and a BMC-85 Trust Fund? |
- BMC-84 Bond: Brokers pay an annual premium, making it a more accessible and flexible option.
- BMC-85 Trust Fund: Brokers must deposit the full $75,000 upfront into a trust fund, which ties up significant capital. This option removes the need for a surety's involvement.
Most brokers choose the BMC-84 bond due to its affordability and minimal upfront financial burden.
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| Can I Operate as a Freight Broker Without a BMC-84 Bond? |
| No, freight brokers cannot legally operate with broker authority without securing the FMCSA’s $75,000 financial security requirement, either through a BMC-84 bond or a BMC-85 trust fund. |
| How Long Does it Take to get a BMC-84 Bond? |
| With Merchants, most BMC-84 bonds can be secured on the same day given that the necessary documentation is provided in a timely manner and meet all of the requirements. By utilizing the Merchants Bonding Company Hub, appointed agencies are able to view instant pricing for these bonds, simplifying the process of ordering the bond. |
| Does the Bond Renew Annually? |
| Yes, the BMC-84 bond is renewable annually. Freight brokers must pay their premium each year to keep the bond active and maintain compliance with FMCSA regulations. |
| What are the Penalties for Operating Without a BMC-84 Bond? |
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Operating without the bond can result in:
- License suspension or revocation
- Fines or penalties
- Legal action from shippers or carriers
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Trust Merchants with your BMC-84 Bond
With over 90 years of experience in the surety industry, Merchants is solely focused on your surety needs. With dedicated underwriting teams around the country, each account will be assigned and managed by a knowledgeable team of underwriters who will prioritize same-day turnaround for submissions and bond requests. We utilize a common sense approach to underwriting which allows our underwriters the ability to evaluate each account based on its own merits.
Merchants prioritizes a first class experience for all our agent partners and we’re here to make sure your bonding process is smooth and successful. Contact us today to get started!