The Significance of Trucking Bonds

Trucking bonds are essential tools motor carriers and shippers need to safeguard against potential risks associated with transporting goods. As such, they play a critical role in the trucking industry. Any business that uses trucks to transport goods or provide services needs trucking bonds to finance operations safely.

Trucking bonds provide a guaranteed third-party assurance that truckers will perform the service, deliver the goods or repay their obligations. When a claimant demands payment against your bond, the insurer attempts to have you reimburse legitimate claims and will pay off if you fail to comply. However, since bonds operate like a loan, you need to understand that it takes a good business reputation and solid credit to obtain them.

How Trucking Bonds Impact Your Business

Trucking bonds safeguard your business and finances while boosting your company’s reputation because they support your business and help you fulfill contractual obligations. Remember, other than your collections and credit score, delivering as promised is the key to lowering the costs of your trucking bonds and maintaining a good standing with government regulators.

Types of Trucking Bonds

Business operations determine the type of trucking bonds you need. Among various trucking bonds, these are the most popular types:

Freight Broker Bond

US Customs Bond

Fuel Tax License Bond

COD Delivery Bond

What Is a Freight Broker Bond?

A freight broker bond provides a guarantee that motor carrier truckers contracted by the freight broker will be paid by the broker. However, the Federal Motor Carrier Safety Administration (FMCSA) requires a $75,000 surety bond in order to be a licensed Freight Broker of Property. The bonds ensure brokers follow through on their contracts with shippers and carriers.

Freight Broker Bonds are also known as:

  • BMC-84 surety bond. This is the FMCSA required form.
  • Trucking surety bond.
  • Transportation broker surety bond.

When Do Truckers Need a US Customs Bond?

A trucker may apply for, and receive, permission to transport imported goods that have not yet cleared Customs.  This is typical when the transportation involves container freight from the Port.  The bond is required by US Customs, as a guarantee of payment to US Customs,  in the event that fines and penalties are imposed due to the trucker not following the required protocol in the transportation.  Transportation of In-Bond freight, prior to Customs clearance is necessary to keep the freight moving off the ships and into bonded warehouses.

What Is a Fuel Tax License Bond?

Truckers that travel out of state are required to pay their share of taxes for the use of the highways in each state.  Ultimately, those taxes are generally collected based upon the mileage and fuel used in the state.  Most of these taxes are handled by the IRP registration process but there are some states, and circumstances, where the state will require the trucker post a bond for that state’s taxes.  Oregon is one such state. This bond is usually for a very small amount ($2500), is very easy to obtain, and cost very little.

What Is a COD Delivery Bond?

Collect on Delivery bonds assure the faithful remittance of sums collected by the Trucker for  deliveries requiring cash payment. Subsequently, the Trucker receives cash for the delivery and then must pay the shipper the amount they collected. This bond guarantees that the Trucker will pay the shipper.

Western Truck Insurance has a 30-year history of delivering top-notch coverage for commercial vehicle owners and drivers. We respect your business’s importance to your family, employees, and clients. Our mission is to safeguard you and your business with the best protection and competitive rates. Our staff uses our industry expertise and independent agent status to shop the marketplace to find affordable, comprehensive coverage for your trucking bonds and insurance needs.


Explaining the Most Important Trucking Bonds

As a trucking company, depending on your state and the type of trucking business you operate, you may be required to be issued one of a variety of bonds, also known as a “surety” bond. Four of the most common trucking bonds are C.O.D. bonds, motor vehicle registration bonds, U.S. Customs bonds, and freight broker bonds. The following information will give you a basic overview of those types of bonds and when they would be necessary for your operation.

COD Bond

COD bonds are also known as Collect on Delivery bonds. With a COD bond, a surety company will provide the obligee a guarantee that clients, vendors, customers and employees will provide payment for financial damages in the event that a licensed business violates licensing laws. The purpose of these bonds is to allow the trucker to deliver freight and collect the shipers payment for the goods being delivered from the consignee (also known as the receiver).

Here’s how these bonds work. The bond will pay up to the bond amount stipulated on the bond form. The surety company reviews claims from the public to determine the validity of their claim, however, the licensed business owner is still responsible for their actions and must reimburse the bond company for payments made of face license suspension. The bond company also directly receives claims from the public and determines the validity of claims.

Ultimately, the licensed business owners are responsible for their actions and required by law to reimburse the surety company for any payments made under the bond or face indefinite license suspension.

Motor Vehicle Registration Bond

Motor Vehicle Registration bonds, also called service bonds, must be issued by an insurance carrier admitted by your specific state. The insurance company issuing any surety bond is referred to as the “bond company” or “surety company”. The trucking company business is called the Principal, the bond company is known as the Obligor and the State Department of Motor Vehicles is the Obligee.

In the event that the Principal violates licensing law, the bond pays the vendors, employees, and customers financial damages up to the amount stated on the surety form. The purpose of this bond is providing the shippers with a guarantee of them receiving their payment from the trucking company.

U.S. Customs Bond

U.S. Customs bond is a financial guaranty between 3 parties: the Principal filing the bond, the Insurance company issuing the bond, and Customs & Border Protection (CBP). The bond is a guarantee to Customs & Border Protection that they can seek financial compensation up to the bond amount in the event that they aren’t able to collect money due from the Principal. The bond indemnifies the surety company, which allows them to collect from the Principal any money that was paid to CBP on the Principal’s behalf, using any legal means.

Freight Broker Bond

The Federal Motor Carrier Safety Administration (FMCSA) has a requirement that forwarders and freight brokers secure a freight broker bond as part of their freight brokerage licensing process. The bond is meant to protect motor carriers and shippers and the contractual obligations they have with freight brokers.  For example, if a freight broker refuses or delays payment unreasonably, the freight broker bond ensures that shippers and carriers receive compensation.

If you have questions about trucking bonds or any other truck insurance needs, we have the answers. Give us a call today for more information about these forms of coverage.

About Western Truck Insurance Services

Western Truck Insurance Services is much more than a commercial truck insurance agency. Since 1954, we have provided our clients with unparalleled service for truck insurance quotes, customer service, coverage charges, insurance certificates, and more. We are committed to providing our clients with the service to keep their costs to the minimum and their opportunities to the maximum. For more information about our products and services, give us a call at (800) 937-8785 to speak with one of our experts.