The Auto Transport Broker

1. Requirements for licensing
2. Regulations from 2012
3. Reactions within the industry

An auto transport broker is a cargo broker specialized in the transportation and shipping of different kinds of vehicles. Most automobiles shipped within the United States are trucks and cars, but many auto transport brokers also handle RVs, motorcycles, boats, etc. Motor transportation is defined as “professional freight” under the code 484230 within NAICS.

Vehicle shipping brokers are a component in the industrial chain of the personal auto freight business. In the United States, these brokerage companies must obtain appropriate licenses and authorization from the FMCSA in order to broker cars for clients. Individuals or businesses that move cars or other vehicles are shippers. They contact brokers to take on requests from their clients. When a broker gets booked, it becomes his job to contract a carrier, who is a company that hires a driver and controls the auto transport equipment. It can also be an individual with a truck.

Brokers may facilitate the access to car load boards such as Central Dispatch by posting jobs and finding carriers in a designated area. They can obtain lower shipping costs as well by getting bids from competing companies. However, carriers and brokers are not separate entities at all times – many car shipping companies handle both the transport and the brokerage part of the deal.

Statistics of cargo shipping provided by the Department of Transportation show that in 2007 trucks and other motor vehicles (including parts) were worth more than $651 billion. Among them, 452 billion US dollars of goods were transported by lease trucks. The DOT has not kept official statistics on the size of the market for used car transportation, the no. of commercial cars on the road and the number of automobiles moved.

With the rise of the online market, new brokers have emerged in the automobile shipping industry, due to the lower cost of conducting brokerage business over the Internet. Although this has encouraged lower costs and greater competition within the industry, agencies of the U.S. government have equally noticed that complaints against auto shipping companies and auto shipping brokers have increased dramatically due to online fraud.

Requirements for licensing

U.S. brokers must obtain licensing from the government. Candidates have to receive a bureau registration from the FMCSA by completing the document on the Federal Motor Vehicle Safety Administration website. The application fee is not high. The broker also needs to make a deposit. A freight broker's bond is meant to make up for the losses caused by the car carrier to prevent mistakes or even fraud. Before 2012, there was a minimum of $10,000 for each bond, but most brokers tried to get a higher sum.

Regulations from 2012

One of President Obama’s movements for progress, signed in July 2012, introduced many new obligations for auto transport brokers. The minimum of a broker bond is raised up to $75,000 from the initial $10,000 by the person in charge. The new regulations came into effect on 1^st of October in 2013 and were applied retroactively to each existing broker.

BMC freight broker bonds are paid annually. The freight broker’s deposit cost is expressed in a percentile of the bond amount depending on the credit score of the owner, his business experience, and even financials.

Other regulations include:

• The Federal Motor Vehicle Safety Administration reviews the status of the license every 5 years; the Federal Motor Vehicle Safety Administration also has the right to revoke the broker’s license in the event of unethical behavior.
• 3 years of experience and certification training are required to get a broker’s license, so the qualification requirements for auto brokers are aligned with industry rules.
• Stricter rules on “interlining”, the employment of other carrier firms to execute either part or all of the transport that the freight carrier was contracted to provide. Nowadays, carriers that choose to contract part or all of the work to different carriers need to obtain a separate broker authorization from the United States government. The shipping company must also inform its customers of the role (broker, freight forwarder or carrier) at every step of the job, and of which body of the USDOT is supervising the activity.

Reactions within the industry

The AIPBA (Association of Independent Property Brokers and Agents), a 1,400-member real-estate brokerage trade organization, has lobbied and petitioned against these higher requirements. They harshly criticized the new regulations. James Lamb, the president and founder of AIPBA, called the rules an attempt driven by lobbyists to dismiss small brokerage firms and create an oligopoly to pay carriers less and charge clients higher fees.

The NAfMT (National Association for Minority Truckers) also opposed the requirements for higher bonds. Kevin Reid, the NAfMT CEO, called out the $75,000 bond as an unreasonable entry barrier for entrepreneurs. He even expressed his opposition to the newer restrictions on ship owners that broker out excess freight. NAfMT and AIPBA work together to abolish stricter guarantee requirements.

Other associations within the industry also support the new regulations. The OOIDA (Owner-Operator Independent Drivers Association) has always been an important advocate of the new law. Although the final regulations of MAP-21 failed to meet OIDA’s wishes, the organization’s executive vice-president (Todd Spencer) advertised them as win/win for legitimate brokers and truck drivers.

The main third-party trade and logistics organization, TIA (Transportation Intermediaries Association), advocates the establishment of new FMCSA rules through its lobbying agency TIAPAC in order to protect auto transport operators from incompetent and unethical brokers. Ken Lund, a board member of TIA, admitted that smaller brokers may have difficulty paying for new bonds, but defended their reasonable pricing and their usefulness in fraud prevention.