The oceans in the world serve as a way of transportation from one country to another. Maritime transports are waterborne transports that carry passengers or goods from one country to another. However, oceans are divided under nations as well. So, when an ocean transport of one region enters another region, they need to abide by the rules of that nation or government.
The Federal Maritime Commission (FMC) is the ocean governing authority of the U.S. They regulate the national and international oceanic trade and transportation of the U.S. This regulation also protects the public and the government of the U.S. through OTI (Ocean Transport Intermediaries).
What is the Federal Maritime Commission and FMC Bond?
The Federal Maritime Commission is a U.S. agency. Their primary responsibility is to regulate the U.S maritime supply chain and international marine shipping, and their regulatory area is within the U.S maritime boundary.
Federal Maritime Commission (FMC) is a regulatory authority that ensures the maritime trades are obliging to the legal standards, and the OTIs (Ocean Transport Intermediaries) have FMC bonds.
There are two forms of this surety bond.
1. Form FMC-48: This is for individual OTIs.
2. Form FMC-69: This is for a group of OTIs.
Some things are required in both forms. They are,
● Number of the bond
● It is OFF or NVOCC
● Legal Name
● Trade Name
● Bond amount
● Effective duration of the bond
● Signature of OTI
● Signature of surety representative
● Signature of the current attorney
Who Needs the Federal Maritime Commission Bond?
To become licensed, all the ocean freight forwarders (OFF) based in the US and non-vessel-operating common carrier (NVOCC) need to have a surety bond. FMC provides this OTI bond.
Here, OFF is a U.S.-based company or person that makes the arrangements to move cargo from the U.S. to a foreign destination. This can include shipping them by common carriers or being the intermediary between common carriers and shippers, getting the required paperwork processed, and helping with the shipments.
An NVOCC is a common carrier that provides ocean transportation to the public and issues the necessary documentation, such as bills of lading, but does not operate any vessels.
OFF and NVOCC need surety bonds or OT bonds to obtain a license. Apart from the consent of obliging the regulations of FMC, they need this bond to ensure financial strength as well.
How Does A Surety Bond Work?
Surety bond is a financial assurance ensuring the OTIs will operate by following the Federal Maritime Commission and Ocean Shipping Reform Act regulations. If failing to do so, the OTI has to give a penalty of the bond money.
There are three parties involved, the FMC, the surety company, and the OTI. If an OTI acts against the rules and regulations of the bond and harms a person or a group, the harmed party can file a claim against the OTI’s bond.
If the claim turns out to be valid, the surety company will pay the total bond amount. Then the OTI must repay the full bond amount to the surety company.
Cost of the Federal Maritime Commission Bond
The FMC sets the bond amount for OTIs. For different types of OTIs, the bond amount is different. Here are the bond amounts for various OTIs.
● For OFFS – $50,000
● For licensed NVOCCs based in the U.S. – $75,000
● For licensed NVOCCs based outside of the U.S. – $75,000
● For unlicensed NVOCC based outside of the U.S. – $150,000
While applying for the bond, the applicant has to pay a percentage of the bond amount as the annual premium of the FMC bond. The applicant’s credits will be speculated, and usually, 1 to 3 percent of the bond amount is set to be paid.
Some other factors that influence the annual premium amount for the bond can be whether the OTI has previous bond claims against them, whether their license was suspended or revoked, their qualifying reports and scores, and the duration of their business.
In general, the premium includes the cost of issuing the bond and keeping it active. There could be additional costs, too if FMC deems them necessary. The license stays valid with the annual premium payment until the expiry date or cancellation.
Cancellation of FMC Surety Bond
The OTI or the surety company can cancel the surety bond. The cancellation will be effective 30 days after the notice of cancellation. If an OTI has an absence of active acceptable proof of financial responsibility, their license will be canceled, which will be ineffective after 30days from the decision.
The Federal Maritime Commission will revoke the issued license cancellation after getting the notice to the Federal Register. The revoke will be executed by removing the OTI’s name from the active OTI’s lists.
● If the OTI is an NVOCC, its name will be removed from the Commission’s Form FMC-1 list.
● If the bond is for an unlicensed non-U.S. based NVOCC, the NVOCC’s name will be removed from the Commission’s Form FMC-1 list and OTI list. However, in this case,there will be no license to revoke.
Once OTI’s license is canceled, they no longer have the right to continue their business in the U.S maritime. If they continue to do so after the cancellation, the OTI has to face penalties.
How to Apply for FMC Surety Bond?
The application process for an OTI is completed via a surety bond company. The OTI will ask for a quote from the surety agency. They will provide a quote to the OTI based on risk factors. The OTI can accept or deny the quote.
If OTI accepts the quote, the surety company does the paperwork and sends it to OTI. The OTI license application process initiates with signatures from the authorities, FMC, and surety company.
Waterborne transports need a license to transport people or goods in the ocean. The Federal Maritime Commission provides the license for transporting in the U.S. region of the ocean. In addition to providing licenses, they also regulate Ocean Transport Intermediaries and can suspend or revoke licenses.
You can contact surety bond agencies to learn about the FMC bond application or processes further.