Getting Set-up With Brokers: Compliance Requirements (Part 2)

You’ve found the load, you’re ready to book, and you’ve submitted the required broker-setup documents. How do you know the compliance team will approve your application?

Broker-setups can get stuck with the compliance department and languish there. Asking for the brokers’ help to resolve an application sitting somewhere in the compliance queue is a futile event. Every carrier needs to learn what and how compliance is done in order to advocate for itself. Learn how to navigate the complex maze of compliance requirements based on our learnings.

Compliance Requirements

The primary purpose of the broker’s set-up process is to vet the carrier before accepting them to haul any freight. This is a compliance requirement to ensure if any issues come up during delivery that the broker is protected for doing their due diligence before letting a carrier haul a load. Here are some common questions related to meeting broker’s compliance requirements.

What carrier authority age is required to work with brokers?

Brokers typically favor aged authorities. Some brokers will require that carriers are at least 180 days old in order to work with brokers such as Arrive Logistics and J.B. Hunt, as examples. The requirement for carrier age authority is sometimes listed at the start of the set-up as part of the requirements. However, sometimes brokers will opt to leave it out. We’ve seen some brokers be flexible about the age authority if they get internal approval or if there are other considerations.

Brokers can also relax age authority requirements depending on market conditions. For example, if there’s a high demand for carriers during peak freight season, then those requirements may be lessened since it’s a discretionary one.

Before initiating the set-up process, you can call the broker to confirm. If you have a broker agent, you should consider asking them to see if any requirements may be waived. During the set-up process, take note of any

What carrier safety score do brokers require?

Most brokers require a minimum safety score (or lack of a bad one) in order to accept working with a carrier. A poor safety score is a surefire way to get rejected by brokers.

The common wording safety score requirement is: “satisfactory or no rating.”

What equipment is permitted?

This is a relatively known one where the equipment must meet the requirements for the load hauled. The broker set-up questionnaire may have extensive questions on this and be prepared to answer appropriately, so that:

The broker accepts the application for the correct equipment the carrier has, and
Sends the carrier ongoing recommendations that are relevant

Carriers with trailers should be sure to provide appropriate information also about their trailer. In most cases, there are additional set-up steps and potentially a different sign-up flow for carriers without trailers. For carriers with trailers, don't mistakenly state “no trailer” or “power-only” which can hinder the approval process.

What about power only carriers?

Not all brokers will have options for Power Only carriers, but some brokers make it a core part of their offering. For example, Uber, Schneider, and USA Truck all offer power only loads. Carriers hauling power only loads will have additional set-up steps. Typically, there’s an additional trailer interchange agreement and required trailer interchange insurance coverage. They may also need to download a different load board from the broker that has power only loads.

What carrier insurance coverage is required?

All brokers will require carriers to have sufficient insurance coverage in order to haul loads. If you’re not sure what insurance coverage is needed, read more from our blog on insurance coverage for owner-operators and new motor carrier authorities.

Large brokers will require carriers to have more insurance coverage than a carrier may have purchased it. For example, the minimum required for auto-liability insurance is $750,000. Typical large broker insurance requirements are:

$100,000 cargo insurance
$1,000,000 auto insurance
$1,000,000 general liability

The broker's insurance requirement is usually stated at the start of the set-up. If the required insurance level is not stated anywhere, be sure to confirm with the broker during the set-up process.

What other operating authority compliance do carriers have to meet?

The carrier must have an active and operating motor carrier authority. The FMCSA information on your carrier should be up to date and consistent with any information the carrier provides. If the broker is doing checks to validate the carrier provided data and what’s reported on the FMCSA, that can cause delays in approval. If there are issues with the FMCSA information, that may also affect the carrier’s approval such as getting the authority revoked then reinstated.

To ensure you meet this requirement, check your FMCSA profile to ensure that everything is up to date by going to the FMCSA’s SAFER Web’s Company Snapshots. From the Company Snapshot, navigate to the various subpages (particularly the “Licensings & Insurance”) to verify information is up-to-date.

Paperwork Requirements

In the previous articles on “What’s a Broker Set-up?”, we outlined the required paperwork for a broker set-up. This time we’re going to go one level deeper on the specifics to watch out for on the most important documents requested: W9, COI, and COA.

What is a W9?

W9 is formally a request for tax identification information. Brokers are required to report to the IRS payments to contractors, in this case carriers under certain conditions. The broker will need this information to issue a 1099 to carriers, if it applies.

Brokers are also expected to verify the information they received when reporting to the IRS. Therefore, some brokers will do TIN (i.e. Tax Identification Number) matching. TIN Matching is a process where vendors verify the information they received from W9s match what is on the IRS’ database. In some broker set-ups, a failed TIN matching will cause the carrier to be rejected.

What is the Certificate of Insurance (COI)?

The Certificate of Insurance (COI) is a document issued by the insurer to the insured outlining the insured’s coverage type, amounts, and coverage periods. There will also be agent information and the insured’s information, in this case the carrier.

Brokers will typically request that carriers add the broker as additional insured on the insurance. This is done by requesting the insurance provider to add the broker and then provide back an updated Certificate of Insurance showing the broker as the additional insured. To avoid any fraudulent activities, brokers will expect the updated COI to come directly from the insurance company.

Brokers that use software like RMIS or MyCarrierPackets do not need to request this. The carrier will list RMIS or MyCarrierPackets (under the name Assure Assist) as the additional insured once and that will apply to any other broker in the system.

What is the Certificate of Authority (COA)?

The Certificate of Authority (COA) is a formal letter issued by the FMCSA that shows pertinent information about the carrier’s operating authority such as MC #, entity name, address, etc. This is often requested as part of completing a paper or PDF broker set-up. Electronic set-ups tend to pull this information directly from the FMCSA.

One drawback is that the FMCSA physically mails out this letter to carriers. It’s typically done 3-4 business days after the authority has been issued and then can take up to 10 additional business days to arrive. This can leave a new authority in need of business 2-3 weeks waiting for a letter. New letters have to be requested via an online ticketing system.

Got Through Compliance?

If you’ve made it this far, congratulations, you’ve gone through the most challenging aspect of the broker set-up steps. If a broker has approved you once to work with them, it’s unlikely you will need to go through the approval process again.

However, there are a few things to note. If any of the critical compliance requirements are not met at any time, the broker can remove your access to their loads and freeze your account. Stay on top of your carrier’s compliance and coverage requirements to stay actively hauling with brokers.

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June 4, 2024