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Understanding What A Surety Bond Is

What's in this article?
  1. New Surety Bond Requirements & Map-21
  2. What Do These Changes Mean For The Auto Shipping Industry?
  3. Motor Carriers
  4. Brokers
  5. Further Resources
Understanding A Surety Bond

Essentially, a surety bond guarantees completion of a contracted service in the event that the contractor does not hold up their end of the bargain. What this does is assure the auto transporter of compensation if they are not fully paid for the service they provide, or the terms or the contract are not upheld by the broker.

A surety bond, which may also be called a performance bond, is a form of consumer protection in that it serves as “insurance” against the job not being finished or a broker that doesn’t play by the rules. It also protects drivers from shady business practices by questionable auto transport brokers. A new law called the Moving Ahead for Progress in the 21st Century (or MAP-21) has significantly increased the minimum surety bond requirements, as well as the penalty against brokers that aren’t operating in line with the new regulations.

New Surety Bond Requirements & MAP-21

As of Oct. 1, 2013, auto transport brokers must carry a surety bond of $75,000, rather than the $10,000 amount that had previously been required. These changes are part of the MAP-21 legislation passed in 2012 that aims to improve safety and accountability within the transportation industry. Here are the main points of the new law as the state by the Federal Motor Carrier Safety Administration:

  • A higher barrier to entry into the business
  • Maintain the highest safety standards for carriers and drivers
  • Monitor and remove drivers, carriers, and vehicles that are unsafe

For those who have not made the change to be compliant with the new law, there is a grace period of 60 days (ending Dec. 1) in which you may still qualify. If qualification is not met during this 60 day phase-in period, brokers run the risk of having their licenses revoked by the FMCSA.

If the $75,000 surety bond is not meet by the Dec. 1 deadline, brokers and freight forwarders must then use a trust to meet the requirement, in which case the actual cash amount is needed, rather than just collateral as in the case of the surety bond.

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What Do These Changes Mean For the Auto Shipping Industry?

The idea behind the new requirements are that the higher barrier to entry will eliminate some of the more questionable auto transport brokers from joining the business. Additionally, the new law creates more oversight in the transportation industry as it inches toward firmer standards of regulations.

At least, in theory, the changes created by the new surety bond requirements would help protect auto carriers from unscrupulous brokers that take advantage of the lack of regulation within the auto transport industry. This should help combat the practice of brokers not paying carriers the full amount they are owed, or even worse, disappearing completely and leaving the carrier with no course of action to receive payment.

The new law doesn’t just apply to brokers, however. Carriers will also have to make some adjustments to stay compliant with the new regulations. Here’s a breakdown of the main points of MAP-21:

Auto-Transport Motor Carriers Companies

Motor Carriers

  • Carriers that subcontract work to other companies will need to acquire a broker’s license
  • A database will be kept that maintains records of drug and alcohol abuse by drivers
  • An electronic logging device will be required for all interstate carriers
  • New restrictions on time worked and breaks taken
  • Only companies with operating authority can provide brokerage services
  • Brokers and freight forwarders must obtain the $75,000 surety bond or face having their license revoked

Both brokers and carriers face stiff financial penalties if they are found to be noncompliant with the new regulations.

Further Resources

Rules and Regulations - Transport industry rules, regulations and resources from the FMCSA.

National Transportation Safety Board - The NTSB conducts transportation investigations and studies.

Surety Bonds - Information and resources about surety bonds from the U.S. Small Business Association.

Motor Carriers Companies
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Joe Webster always knew the auto transport industry would be a great career option. And with decades of experience, Joe is now an established consultant for A1 Auto Transport.

Joe was born in Santa Cruz, California. During high school, Joe worked as a mechanic; a job continued to work part-time during his bachelor's degree.

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A-1 Auto Transport is a disclosed agent for the following shipping companies:

Trans Global Auto Logistics, Inc.
3401 E Randol Mill Rd
Arlington, TX 76011
NO. 018191NF
CFR Rinkens
15501 Texaco Avenue
Paramount, CA 90723
NO. 013055NF
ABC Worldwide LLC
2840 NW 2nd Ave #105
Boca Raton, FL 33431
NO. 025472F
CSI Logistics
435 Division Street
Elizabeth, NJ 07201
FMC 22206
Intl Cargo
45 Campus Drive
Edison, NJ 08837
NO. 17858N
ShipYourCarNow LLC
1160 South Rogers Circle Suite 1
Boca Raton, FL 33487
NO. 025646
Merco Air & Ocean Cargo, Inc.
6 Fir Way
Cooper City, FL 33026
NO. 021869F
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