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The freight forwarder transports and assumes responsibility for property and thereby has an obligation to issue a through bill of lading to the shipper for each shipment the freight forwarder handles. The freight forwarder assumes responsibility for the shipment(s) from the time it is in receipt of the goods to be transported and up to the point of destination. This includes any loss, damage, and filing of claims with other carriers involved in the transportation of the goods.
Scope
A freight forwarder is useful for companies who transport goods, especially internationally, and prefer an intermediary to handle the processing, insurance, customs, and documentation required for transport.
Regulatory citations
- 49 CFR 373.201 — Receipts and bills of lading for freight forwarders
- 49 CFR 387.303 — Security for the protection of the public
Key definitions
- Freight forwarder: A person or entity that holds itself out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for compensation. In the ordinary course of its business, a freight forwarder:
- Assembles and consolidates, or provides for assembling and consolidating, shipments and performs or provides for break-bulk and distribution operations of the shipments;
- Assumes responsibility for the transportation from the place of receipt to the place of destination; and
- Uses for any part of the transportation a carrier subject to jurisdiction of either the Federal Motor Carrier Safety Administration (FMCSA) or the Surface Transportation Board.
Summary of requirements
Obtaining authority to operate as a freight forwarder. Freight forwarders are required to have a United States Department of Transportation (USDOT) number and register for freight forwarder operating authority with FMCSA. Freight forwarders that perform both freight forwarder services and motor carrier services must obtain both freight forwarder and motor carrier authority. This requirement is similar to motor carriers who broker loads, even occasionally. They also must have both motor carrier and broker authority.
There are two types of freight forwarder authority: Freight Forwarder of Property (except household goods) and Freight Forwarder of Household Goods. Both are required to file Form OP-1(FF) to be granted authority. Companies with existing motor carrier authority should include their current USDOT number on the OP-1(FF) form but leave the motor carrier (MC) number field blank. FMCSA will issue a separate MC Number for the freight forwarder authority.
Freight forwarder security. Freight forwarders are required to have on file with the FMCSA a surety bond, trust fund agreement, or public liability insurance. Freight forwarders that operate vehicles and perform transfer, collection, and delivery services are required to carry the minimum amounts of cargo and public liability security identical to those prescribed for motor carriers in 387.303.
These minimum amounts will vary, depending on gross vehicle weight rating (GVWR) and the commodity being transported (hazardous or non-hazardous). Minimum limits of security range from $300,000 up to $5,000,000.
Freight forwarders of household goods. Household goods motor carriers are required to carry cargo insurance to compensate individual shippers for loss or damage to property in connection with their transportation service:
- For loss or damage to household goods carried on any one motor vehicle —$5,000.
- For loss or damage to, or aggregate losses or damages to, household goods occurring at any one time and place —$10,000.
Freight forwarders with no vehicles. Freight forwarders that operate with no vehicles are required to have on file with the FMCSA a surety bond or trust fund agreement in the minimum amount of $75,000. Applicants must seek a waiver of bodily injury and public liability (BI & PD) insurance coverage and certify in its forwarding operations that:
- It will not own or operate any motor vehicles upon highways in the transportation of property;
- It will not perform transfer, collection, or delivery services; and
- It will not have vehicles operated under its direction and control in the performance of transfer, collection, or delivery services.
Broker AND freight forwarder authority.The main distinction between a broker and a freight forwarder is that a broker does not transport property and does not assume responsibility for the property. For a company having both broker and freight forwarder authority, one $75,000 bond and trust fund is sufficient as long as the legal entity holding the authorities is the same. This company would need to file separate BMC-84/BMC-85 forms for the broker and freight forwarder operations. However, the underlying bond or trust fund can be the same for both operations. If the broker and freight forwarder operations are conducted under separate but affiliated companies, each entity must have a separate bond or trust fund.
Form BOC-3. Another important part of the application is the Form BOC-3, Designation of Agent for Service of Process (often referred to as a process agent). A process agent is an individual who will accept legal process on behalf of the carrier and forward it to the carrier for response. For example, a freight forwarder in Illinois with offices in Wisconsin, Indiana, and Iowa must designate process agents in all three states to be in compliance with the regulation. Also, if a freight forwarder has written agreements or contracts with motor carriers in other states, the freight forwarder must also designate process agents in those states as well.
The freight forwarder may use a blanket designation company listed on the FMCSA website to arrange their process agents.