Ulhas Sukhare · Updated August 8, 2023
Most things that take time and effort lead to excellent rewards. Freight shipping is no exception. First of all, let’s get straight what a freight forwarder is and does. If you’ve heard of freight shipping industry before, you’ll know the role is similar to that of a broker. You’re in charge of connecting sellers and buyers, resolving differences and making sure a fair deal is reached by both parties. Like any brokering position, it suits people with a minimum of social skill, people who keep their eye on the bottom line and don’t lose sight of advantages of a good deal. If you balance your own accounts without trouble, you’re probably suited to this line of work.
Freight forwarding is a step beyond regular brokering. The buyer in the exchange is a shipper of goods. That’s the ‘freight’ part of it. The later part relates to the seller: a service provider or carrier, ie a shipping company, a trucking collective, a group of aligned shipping services with a legally recognised name. In short, you are the go-between. Connecting freight forwarders who come from, in some cases, overseas with domestic transporters like the drivers at CitizenShipper.
(If shipping is more your skill, you can apply your talents to the profitable driving industry instead.)
Shipper-to-shipper liaising is the main trade-skill of a freight forwarder. Import and export are your bread and butter. Freight forwarders needs to have their fingertips the cost of transportation, transportation charges, port charges, insurance, handling, documentation and other legal fees. That much you can research online. No profitable role is without homework!
Shippers rely on freight forwarders to know the best means of cargo-transport. A freight forwarder will be able to reserve space on the right transport for the freight in question. In this sense a freight forward is no different from a corporate broker, except that their knowledge applies to the real-world business of shipping, and not the insubstantial gambling of financiers.
That’s what’s meant by ‘beyond brokering’. A freight forwarder must also have skills and capital that regular brokers do not. For international transportation, a freight forwarder must be fully versed in export documentation and communication with customs offices, and up to date on international regulations.
Here’s How to Become a Freight Forwarder
1. Getting Started as a Freight Forwarder
Ever heard of the Federal Motor Carrier Safety Administration? The FMCSA are your ticket to legal certification. The first step of becoming a freight forwarder is registering, which you can do here.
That’s for beginner freight forwarders. Next you’ll need to obtain an interstate operating authority, which is designated as an FF number in the case of forwarders. The name of the form is OP1-(FF), and you can view it here. Registering online is much faster. The fee for the operating authority application is $300.
If you plan to take on the operation of an interstate motor carrier, you will need a US Department of Transportation number, as do all cargo carriers in America. However, it’s no barrier to becoming a freight forwarder, if your eye is more on the brokering side of things. The way you want to operate is your free choice.
2. I’m FMCSA Approved. Now What?
Your approval is called a grant letter, and it contains an FF number. You’ll need that for the next steps towards gaining an operating authority. (Please note an insurance surety bond are required.) If you have one already, you’ll still need to wait for official registration before you begin.
Your FF number resides in the FMCSA Register. There is a period of ten days during which any negative party can lodge a protest against your registration. Unless you have enemies with time on their hands to take this step, after ten days your registration will be issued.
Meanwhile, you’ll need to get in touch with your insurance company. A minimum of cargo insurance is required: $5,000 for loss of or damage to property carried on a motor vehicle, and
$10,000 for loss of or damage to property.
Within 90 days of your registration, your insurance provider needs to file Form BMC-34 on your behalf.
A few more bits of insurance you need to obtain: bodily injury and property damage. And, if you’re to transport cargo yourself, you’ll require environmental restoration coverage too. These forms are either BMC-91 or BMC-91X, but if you don’t need that kind of coverage, choose to waive them on the application form.
In each state you plan to work in, you’ll also require a separate Process Agent to look after operations. File form BOC-3 online for each, and now you’re ready. Freight forwarding business is now your legally endorsed profession.
3. Freight Broker Bond
As mentioned, you’ll need to provide a surety bond to gain your all-important FF number.The form is BMC-84, and the amount is $7,500. It’s mostly called a freight broker bond, but it applies to freight shipping business as well. You can learn more about BMC-84 here.
A freight broker bond is essentially a three-party contract between your freight shipping company and the FMCSA (the obligee). The surety constitutes the glue between them. It is a guarantee that, in your capacity as a freight forwarder, you will abide by all regulations that apply to every facet of your operations.
If $75,000 seems like a scary figure, you can relax.
The cost levied to a freight broker is only a percentage of $75,000. This is called the bonding premium. It’s usually between 1% to 12% of the full cost. This figure will depend on your credit rating and a few other factors. To understand how the percentage is calculated you can take a look at this freight broker bond cost guide.
Other Options
If transportation is more your interest, and the costs of becoming a freight forwarder are out of your price range right now, you can start funding this career move by shipping with CitizenShipper. Depending on what you can ship, there are profitable options open to you that can put you in the position of becoming a freight forwarder. Google started in a garage. Freight forwarders often begin with a truck.
So don’t waste these seconds, second-guessing a dream. Get involved with CitizenShipper and earn good money to get you there.
How to get started?