Approval of Carriers Becomes Increasingly Important
Shipper freight fraud losses reached an all-time high of over $455 million in 2024. Identity theft and double brokering increased 400%, which has caused shippers to strengthen carrier qualification standards. Approval of a new carrier is no longer just about lost shipments; it can also increase liability, damage business relationships, and create potential litigation problems. The U.S. Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) will enforce even stricter identity verification for carriers in 2025, making the approval process a key part of compliance for shippers.
A General Description of the Carrier Approval Process
Transportation managers, procurement staff, and compliance staff typically make up the general onboarding team when a shipper approves a new carrier. Approval time frames vary between 2 days to 2 weeks based upon the specific requirements of each shipper. For larger shippers, the carrier may have to obtain approvals from several different departments prior to transporting its first load of freight.
What Shippers Look at When Evaluating Carriers Before Approval
Operating Authority and FMCSA Compliance
Shippers review the USDOT and MC number, via the FMCSA’s SAFER System, to confirm the carrier’s operating authority remains active. Additionally, they check the carrier’s CSA (Compliance, Safety Accountability) rating and out-of-service rate. Any recent changes to the carrier’s operating authority raises concerns regarding the carrier’s previous safety record or if the carrier was involved in any fraud. The frequency of name changes or the transfer of ownership of a carrier will also result in additional scrutiny.
Insurance Coverage and Policy Validation
Shippers typically expect the approved carrier to provide a minimum of $750,000 to $5 million dollars in liability coverage and sufficient cargo insurance. Problems with insurance coverage that can cause delays in the approval process include: expired Certificate of Insurance (COI), insufficient coverage amount and exclusions within the COI. The smartest shippers verify the COI directly with the insurance provider since fake COIs are a common method used by thieves to commit freight fraud.
Freight History and Performance Data
Claims history shows a carrier’s ability to handle claims resulting from damaged or lost cargo. Shippers expect on-time pickup and delivery percentages of 95% or better. An incomplete performance data set negatively affects a carrier’s ability to demonstrate reliability. New carriers with no history of delivering freight will experience longer approval processes and may be restricted to smaller loads until a history of performance can be developed.
Business Validity and Identity Verification
Consistent address and contact information across FMCSA records, insurance documents, and W-9 forms is necessary for a carrier to establish legitimacy. Use of free email services such as Google Mail (Gmail) or Yahoo Mail will raise concerns of possible identity theft or fraud. To mitigate this increased risk, shippers are implementing multi-factor verification techniques to identify carriers prior to the onboarding process.
Why Carriers Are Denied (Even Though They Feel They Meet All Requirements)
Documentation missing from a carrier’s application is the most common reason for denial. Discrepancies in data between the FMCSA profile of the carrier and the insurance certificate are another major concern for shippers. Poor communication during the onboarding process can indicate operational challenges for the carrier. Failure to comply with specific requirements of the shipper (i.e., GPS tracking for certain types of freight) denies the carrier the opportunity to haul those types of freight.
How Carriers Can Increase Their Chances of Approval
Carriers who prepare their required documentation in advance of the onboarding process will generally have a faster approval process. Carriers maintaining valid and current operating authority and insurance certificates reduce the likelihood of delays. Awareness of how the carrier appears in a shipper’s screening tool allows the carrier to correct any issues that could impact future shipping opportunities. Consistency in contact information by the carrier demonstrates professionalism and reduces the potential of identity theft concerns.
How FreightCheckers Assists in Carrier Approval Decisions
FreightCheckers continuously verifies the credentials of carriers, including insurance status and operating authority updates. FreightCheckers cross-checks identity with multiple data sets and alerts shippers to any unusual behavior, contact changes made by the FMCSA, or cancellation of insurance prior to assignment of a load to a potentially compromised carrier. This meets the need of previously approved carriers becoming compromised.
Developing Long-Term Relationships between Shippers and Carriers
The approval process is the beginning of developing long-term freight relationships between shippers and carriers. The speed of the approval process is less important than transparency, as one compromised carrier can cost more than a year’s worth of expediting the onboarding process. Better data creates mutual benefit between the shipper and carrier by creating less friction for qualified carriers and protection for qualified carriers from unqualified carriers. Contact FreightCheckers to learn how our carrier verification solutions support your approval process.
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