According to the U.S. Bureau of Labor Statistics (BLS), freight brokers contribute substantially to economic growth by moving goods across the supply chain. For example, shippers, brokers and freight agents coordinate the movement of goods between Hawaiian destinations such as Kahului, Lihue, Kauai, Honolulu, and Hilo. Hawaiian freight brokers must rely heavily on maritime transport and air for sending and receiving shipments.
Freight brokers ensure that the transportation industry delivers freight safely and efficiently. However, the broker never physically handles the shipments; that is the job of freight forwarders. A freight broker must be bonded and insured, but a freight broker agent is not required to obtain these items.
Continue reading to learn everything you need to know about becoming a successful freight broker in Hawaii.
Requirements to Become a Freight Broker in Hawaii
Hawaii does not require a license from the state in order to operate legally. However, you must apply to the U.S. Department of Transportation to obtain the necessary permits. This can be done through the website of the Federal Motor Carrier Safety Administration (FMCSA).
To become a freight broker in Hawaii, you must:
- Have a high school diploma or GED
- Be at least 18 years of age
- File for USDOT and Motor Carrier numbers
- Carry general liability and cargo insurance
- Have a process agent for every state where operating
- Have obtained a surety bond of $75,000 by filling out form BMC-84
- Pay the application fee
Steps to Get a Freight Broker License in Hawaii
Obtaining the FMCSA-issued broker license will enable any freight broker to operate without formal training. However, many freight brokers choose to enroll in training courses and sit for the Transportation Intermediaries Association’s Certified Transportation Broker exam. This is a valuable credential that can be useful when soliciting clients.
Step 1. Register a Business Entity in Hawaii
Hawaiian law requires freight brokers to register a business with the state, and this entity carries financial and legal implications. The most popular business structure for freight brokers is the limited liability company, or LLC. Other options include the partnership, corporation and workers’ cooperative enterprise. Each business structure has advantages and drawbacks, so consult with a professional advisor if necessary.
Step 2. Apply to FMCSA
The Federal Motor Carrier Safety Administration issues operating authority to first-time freight broker applicants through the Unified Registration System, or URS. You need to apply for USDOT and Motor Carrier numbers. These numbers serve as a license because you gain your operating authority at the federal level.
Step 3. Get a Legal Agent
The legal agent is your representative in the event of a dispute. You must have a legal agent for each state that your business plans to operate.
Step 4. Secure Liability and Cargo Insurance
Liability and cargo insurance are necessary for operating your freight broker business in Hawaii. This protects the shipper and carrier, but it also protects your business in the event of a loss. This includes any trucking issues during transport.
Freight Broker Bonds vs. Insurance
Freight broker bonds protect shippers/motor carriers, not freight brokers.However, freight broker insurance does protect freight brokers.
Many new freight brokers that invest the bare minimum on insurance coverage quickly realize they are disqualified from working with larger shippers. Each year, more freight brokers are pulled into litigation, and ultimately go out of business due to huge judgments and legal fees they can’t afford.
Although insurance is not required to operate, the most important reasons to have it in place are to:
- Protect your bottom line
- Create increased security around your bond, and avoid leaving yourself open to paying legal fees by not purchasing insurance.
- Increase top line: by having insurance, you become more attractive in today's marketplace to shippers and wholesalers.
Freight Broker Insurance Types
There are several types of insurance coverages that are recommended for freight brokers; please see the list below:
- Business owner’s policy (BOP)
- General liability
- Workers' compensation
- Commercial auto
- Professional liability/errors and omissions (E&O)
- Contingent cargo
- Contingent auto liability
If you’d like to learn more about all of the insurance coverages available to you, please read our freight broker insurance guide.
Step 5. Obtain a Surety Bond
Hawaii requires freight broker companies to carry a surety bond in the amount of $75,000. However, the amount charged to the company is only a small fraction of the total freight broker bond amount. The rate is calculated as a percentage of the total bond value. The actual amount is determined by the applicant's credit score, financial statements, previous business dealings and other details.
Hawaii Freight Broker Training Programs
Training programs are optional; however, many brokers consider enrolling in a professional freight broker training course from providers like ed2go. Your negotiation skills will determine your future pay rate, so consider investing in education. A good freight broker training program can prepare you for the most common job situations.
Consider taking a freight broker course offered at one of Hawaii’s community college programs, for example. Transportation law, invoicing, rate quotes and record keeping are just a few of the topics covered. Freight broker agent enrollment can also be done through an online freight broker training program. Although taking an online course is not required, enrollment in one of these freight agent training programs will prepare you for the industry.
Freight brokers need to handle a variety of administrative tasks:
- Generating sales leads, cold-calling prospective clients and giving rate quotes
- Recordkeeping, invoicing and retrieving information about shipped items
- Tracking deliveries and ensuring any emergencies are handled
- Monitoring shipping industry lanes and reducing costs when possible
- Maintaining relationships with multiple parties and business entities
The salary of a freight broker depends on the amount of commission earned from transactions. For example, the average salary for a freight broker in 2022 was $53,372, but the average commission was $33,000. Education, location and experience affect the total salary. Freight broker jobs that require a degree or certificate tend to offer higher pay. Freight brokers make more money than freight broker agents, but there are also additional expenses involved in starting up a freight brokerage in Hawaii.
States like Hawaii and California tend to offer higher salary rates than other states. The BLS estimates that Hawaii’s average salary range for freight brokers is between $50,000 and $60,000. However, since freight brokers are often independent contractors, actual earnings will depend on the individual's negotiating skills. Freight brokers who can convince shippers to pay more while getting the lowest rate for the freight company will earn the highest freight broker salary.
FAQs
How Much Does It Cost to Become a Freight Broker in Hawaii?
The total cost of becoming a freight broker in Hawaii depends on the applicant’s credit score, financial statements, background and other factors. There are some fixed costs involved as well.
- The Operating Authority filing fee is $300.
- The legal agent filing fee is $50.
- Surety bond quotes typically range from $500 to $2,500.
- Obtain insurance rate quotes for liability and carrier insurance.
How Long Does It Take to Become a Freight Broker in Hawaii?
Applications normally process within four to six weeks.
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