Are you about starting a trucking business and you need trucking authority? If YES, here is a guide on how to get a trucking authority and how much it cost.
There comes a point in your business life as a freight mover when you would decide to become independent in order to expand your profit base. But before you can cut out the middleman and take over the reins of your trucking business, there are several things you need to take note of, and several requirements you need to meet up with. One of such requirements is to get a trucking authority.
What is Trucking Authority?
A trucking authority is a document representing the permission granted by the Federal Motor Carriers Safety Administration (FMSCA) to a trucking company to transport goods on a for-profit basis.
There are different types of trucking authorities available to a trucking company but it is not compulsory that a company acquires everything. You may have to get just one or more depending on whether you own your trucks or whether you are going to operate on lease basis. The various types of trucking authority available may include;
5 Types of Trucking Authority
Table of Content
- a. Motor Carrier Authority
- b. Private Carrier Authority
- c. For-hire Carrier
- d. Freight Forwarder
- e. Broker Authority
- 1. Register your business
- 2. Get an EIN
- 3. Motor carrier number
- 4. USDOT number
- 5. BOC 3 Process Agents
- 6. Insurance
- 7. IFTA
- 8. IRP
- 9. UCRA
- 10. SCAC
- 11. HVUT
- 12. Drug and alcohol test
- 13. Simple state permits
A motor carrier authority is required by companies that transport passengers and goods for a fee. It takes between 5 to 7 weeks to complete a motor carrier (MC) authority.
A private carrier authority is obtained by a company that transports its own goods, especially if the business produces or uses the goods or cargo it transports.
c. For-hire Carrier
This authority is one that is obtained by a company that provides transportation for the goods of other companies. That is, the company ship’s cargo belonging to another company or individual and they get paid for doing so. This authority is of two types, common and contract carrier.
A contract carrier transports goods only for firms it has an established contact with, while a common carrier can haul freight for anyone wishing to transport goods, whether or not it has a contract with them, but the goods must be legal. Both carriers are required to have a minimum liability insurance of $750,000, and common carriers should in addition take out a cargo insurance policy.
d. Freight Forwarder
A freight forwarder is a company that takes charge of transporting goods from the point of receipt to the point of delivery through rail, motor or water.
A broker is an entity that arranges for the transportation of goods for compensation. A broker doesn’t transport goods but he arranges for a haul-for-hire to transport goods on behalf of his clients. You would need a trucking authority if you…
- Operate as a for-hire carrier that transports goods for a fee.
- If you transport federally regulated commodities or if you arrange for their transport in interstate commerce.
- If you transport passengers or if you arrange for their transport via interstate commerce.
Being an independent trucker also comes with its benefits as you would get to keep most of the profit you make; you can work with various brokers as you please; and you can decide what you get to carry.
But there are equally drawbacks to getting an authority. One of them is expense. You can run up a lot of expenses in form of fees when you start processing your trucking authority. Example, your insurance premiums can be anywhere from $6,000 to $10,000 annually, and that is not counting other fees and miscellaneous expenses.
How to Get Trucking Authority
The following are steps you have to take to complete your application for a trucking authority with the Federal Motor Carriers Safety Administration (FMCSA).
1. Register your business
In order to get your trucking authority, you have to first of all register your business. Before you can do this, you have to acquire a legal entity, that is decide if you wish to operate as a sole proprietor, Limited Liability Company or a corporation. Once you have decided, then you need to file your paperwork and obtain your certificate.
2. Get an EIN
If your business is registered as an LLC or corporation, then you must get an Employer Identification Number (EIN).
3. Motor carrier number
This number gives a for-hire motor carrier the authority to cross state lines. This number is assigned by the FMCSA.
4. USDOT number
This number acts as a tracking number for a trucking company and it is issued by the United Stated Department of Transportation (USDOT). This number is used to access all vehicles in your company, your cargo and your compliance information. The USDOT number needs to be renewed every two years or anytime you make any changes to your company information.
5. BOC 3 Process Agents
BOC 3 process agents are people stationed in different states to accept legal documents on behalf of their clients if the need arises, and return same to them in their home states. Note that any changes to your motor carrier number would affect your BOC3, so basically you need to get a new one whenever you make changes.
As regards insurance, a trucking company is expected to obtain general liability and cargo insurance. The law recommends a $1,000,000 liability insurance, and a $1,000,000 cargo policy. Insurance must be gotten within the first 60 days of your authority application or your application would be dismissed.
Trucks that weigh above 26,000 lbs operating interstate for-hire are required to get the International Fuel Tax Agreement (IFTA). To get this document, your company is required to keep track of all fuel purchases and the mileage traveled in each state.
The International Registration Plan (IRP) is a yearly fee charged for you to register and operate your truck in each state or province in the united states and the cost depends on your mileage in each state. The coverage cost is between $1,000 and $3,000.
Under the Unified Carrier Registration Agreement (UCRA), all motor carriers, freight forwarders and leasing companies are mandated to pay certain fees which are calculated per company based on the number of trucks it operates. You get to pay $76 if you have just 1 or 2 trucks, but you can pay up to $227 if you have more trucks in your fleet.
A Standard Carrier Alpha Code (SCAC) is a code that is used to identify transportation companies that haul military, government, international or intermodal cargo.
The heavy highway vehicle use tax is to be obtained by any truck or trailer weighing at least 55,000. The tax is $100 plus an extra $22 for every extra 1000 lbs.
12. Drug and alcohol test
Your company must pass through a drug and alcohol testing program, and all your drivers must be screened.
13. Simple state permits
Some states like Oregon, Kentucky, New York and New Mexico require special permits if you want to haul cargo in the various states.
For Kentucky, if your trailer weight is 60,000 pounds and above, then you have to obtain a Kentucky weight distance number. To obtain the number, you don’t have to pay a fee but you have to report your mileage quarterly.
If your truck travelling within New York State weighs 18,001 or more, then you need to obtain a New York Highway Use Tax also called HUT permit. The tax you have to pay is determined by the miles you travel and the weight of your carrier. It costs $15 to register a truck.
This is almost the same with New York. If your vehicle is 26,001 pounds or more, then you have to get the New Mexico weight distance tax permit. The fees paid for the tax permit is also based on the miles traveled in the state and the weight of the vehicle. New Mexico charges $7 per truck.
Oregon on its part charges a 2,000 security bond to register for the Oregon Weight and Distance Permit. The bond is normally returned back to the trucking company if the company complies with all the state rules and regulations for 2 years.
Applying for a trucking authority involves a mountain of paperwork, and you have to pay attention to the minutest of detail because any single paperwork you lose or misplace can set your deadline back. You equally have to keep track of dates for all your appointments so as to meet up with all of them. It is advisable to have the dates all marked up in a calendar that is kept within your sight, so you don’t get to forget.
If paying attention to all these details would be a lot of work for you, then you can consider hiring a trucking agency to help you file all the paperwork and get you registered in record time without errors, but you have to note that this would cost you extra money.
How Much Does It Cost to Get a Trucking Authority?
Listed below are the major expenses that are made while applying for a trucking authority according to Haulhound.
- sole proprietor or LLC registration: between $250 and $800 per year, but it varies by state.
- Unified carrier registration: $76
- Process agent designation: $35 to get a BOC-3 form and you have to pay $100 annually to your chosen agent.
- FMCSA permanent authority fee: $300
- International registration plan fee: it can be anywhere from $500 to $3,000 depending on how many states you plan to run.
- Base plate fees: it is about $275 to $1,000 annually and it varies by state.
- Heavy use vehicle tax (IRS form 2290): anywhere from $100 to $550 depending on state.
- Insurance: anywhere from $8,000 to $16,000 per year, but the premiums gradually decrease if your business is stable.
- Additional state permits: $500
In all, it is estimated that you would require at least from $4,000 to $10,000 to acquire a trucking authority in the United States. All these expenses and mountain of paperwork may seem daunting, but don’t worry, once your business levels out, you would really be pleased that you went independent.