A freight broker can refer to any person who sells transportation without actually providing this transportation. This individual usually acts as a liaison between an authorized transporter and an individual or business that requires some type of shipping service. It is the job of the freight broker to match those who are looking for transportation with the service provider who is able to provide the best solution to their needs. Even though this broker doesn’t actually provide and transportation directly they are still viewed as having an important role in the movement of cargo.
How a Freight Broker Business Works
In the US there are certain regulations that need to be adhered to before a freight broker can start up a business. They must first obtain a license from the Federal Motor Carrier Safety Administration (FMCSA). It is also usually necessary for them to have insurance that will cover those using their services although they will usually forward any claims about damage to cargo on to those who have provided the transportation. In some states it may also be necessary for the freight broker to have some type of surety bond. A surety bond is provided by a third party (usually an insurance company), and it means that a certain amount will be paid should the freight broker break their promises. The brokers make their money through commission.
While it may seem to some that a freight broker is an unnecessary middleman they actually provide a very worthwhile service. It can take a lot of time and effort for a business or individual to find the best shipping solution for their needs. In a lot of cases the time it takes to do the research will end up costing money and even then they still might find the best solution because of lack of knowledge about the available options. A broker not only has a lot of expert knowledge but they also benefit from the best in technology to help them perform their work. Their services helps the transportations service provider as well because it helps them to fill up any spare capacity they might have; for instance if a shipping company has half empty trucks then the freight broker can find somebody willing to pay for this surplus space.
The Difference between a Freight Broker and a Forwarder
It is understandable that people will sometimes get confused between the role of a freight forwarder and a freight broker. In some ways the two jobs are quite similar; both have a role in arranging for transportation for those who are in need of it. The freight forwarder though, will actually accept the goods that need to be transported and then arrange for them to be sent. This is the main difference between them; the broker won’t have any actual contact with the goods in question as they are just a go between. A freight forwarder can also provide additional services like preparing bills of landing.