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A “Freight Broker” is any person who sells transportation services to a shipper on behalf of a transportation carrier. The term usually refers to an agent for TL or LTL shipments, matching small to medium sized shippers with carriers. A freight broker is a company that arranges for trucking transportation of cargo for a shipper. Freight brokers utilize established carriers to provide transportation and logistics. Freight brokers do not assume responsibility for the cargo and do not take possession of the cargo, however brokers must be register with Federal Highway Administration (FHWA) as a freight broker for either household goods or non-household goods or both and they must obtain a surety bond (BMC-84) or Trust Fund Agreement (BMC-85) in the amount of $10,000 must be on file at FHWA. Freight brokers must also receive a MC number from the FHWA.
A freight forwarder is a company that consolidates freight for many shippers, arranges for shipment and delivery via LTL carriers. FHWA defines freight forwarder as a company that arranges for the transportation of cargo belonging to others, utilizing for-hire carriers to provide the actual truck transportation. Freight forwarders do assume responsibility for the cargo from origin to destination and usually does take possession of the cargo at some point during the transportation. This is one of the main differences between a freight broker and a freight forwarder. Forwarders typically assemble and consolidate less-than-truckload (LTL) shipments into truckload shipments at origin and disassemble and deliver LTL shipments at destination. Forwarders must register with FHWA by filing Form OP-1 FF.
Forwarders must also carry a lot more insurance than brokers since they are handling the cargo. For freight forwarders that perform transfer, collection and delivery service must have on file evidence of appropriate levels of bodily injury and property damage (BI&PD) (BMC91 or BMC-91X) insurance and environmental restoration coverage. The amount of insurance a freight forwarder needs is as follows: A freight forwarder that operates vehicles that have gross vehicle weight ratings (GVWR) of 10,000 pounds or more they must have $750,000 to $5,000,000 worth of coverage and $300,000 for vehicles under 10,000 lbs. and for non-hazardous freight. The variation the amount of insurance is based on the type of cargo transported by the forwarder. Forwarders must also carry cargo insurance (BMC-34) must be on file at FHWA with a minimum of $10,000.
Both freight brokers and freight forwarders will provide quotes to the shipping company and they will get lower rates than the shippers could obtain on their own based on volume discounts they receive from the transportation carriers. It is important to know the difference between a freight forwarder and a freight broker when you decide to let a third party handle the transportation of your cargo. To summarize, the main difference between a freight forwarder and a freight broker is that the freight forwarder will consolidate smaller shipments into larger shipments. The freight forwarder will handle your cargo whereas a freight broker will not. A freight forwarder may warehouse your cargo until other shipments can be consolidated to make one, whereas a freight broker will not. Depending on what you are shipping and how quickly you need your cargo to arrive at its destination make sure you check with both freight forwarders and freight brokers to see which one can supply you with the greatest transportation services you deserve. In any case, make sure to reference the freight forwarders and freight brokers before you decide to use one to handle the transportation and logistics of your cargo.
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