FMC Proposes Rule to Amend NVOCC Bonding Provisions to Reflect Recent U.S.-China Maritime Agreement
The Federal Maritime Commission (FMC) has issued a proposed rule which would amend its regulations governing proof of financial responsibility for ocean transportation intermediaries (OTIs) by allowing an optional rider for additional coverage to be filed with a licensed non-vessel operating common carrier's (NVOCC's) proof of financial responsibility for such carriers serving the U.S. oceanborne trade with China.
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The FMC has previously stated that the proposed rule would provide NVOCCs with an alternative to China's new Regulations on International Maritime Transportation (RIMT) requirement for a deposit of at least $96,000 in a Chinese bank. (See ITT's Online Archives or 01/23/04 news, 04012310, for BP summary of FMC's intention to issue this proposed rule.)
Proposed Rule Reflects FMC Action Granting NCBFAA Petition in Part
This proposed rule is the result of a January 22, 2004 FMC order which granted in part and denied in part a petition filed by the National Customs Brokers and Forwarders Association of America, Inc. (NCBFAA) which requested that the FMC change its rules to effectuate concessions made by China in the recently concluded U.S.-China Agreement on Maritime Transport (AMT). (See ITT's Online Archives or 12/12/03 news, 03121215, for most recent BP summary on the AMT.)
(The AMT's Memorandum of Consultations provides that the Chinese government will not require U.S. NVOCCs to make a cash deposit in a Chinese bank, as long as the NVOCC: (1) is a legal person registered by U.S. authorities, (2) obtains an FMC license as an NVOCC; and (3) provides evidence of financial responsibility in the total amount of RMB 800,000 (or $96,000).
Because the current FMC regulations do not provide any mechanism for NVOCCs to furnish a bond amount greater than the base of $75,000 required under 46 CFR 515.21(a)(2) (other than for branch offices), the NCBFAA asked that the FMC amend its regulations to permit NVOCCs to modify the FMC bonds by obtaining 'riders' that add an additional $21,000 of bond amount available to pay any fines and penalties that might be imposed by Chinese authorities pursuant to RIMT (thereby meeting China's $96,000 requirement).
Highlights of Changes That Would be Made by FMC's Proposed Rule
The regulatory changes proposed in the FMC's final rule include the following (partial list):
Two new optional riders for additional NVOCC financial responsibility. The proposed rule would add a new Appendix E to Subpart C of 46 CFR Part 515 which would contain the text of a rider entitled, Optional Rider for Additional NVOCC Financial Responsibility (Optional Rider to Form FMC-48). This rider would be designated as Form FMC-48A. In addition, the proposed rule also contains the text of another rider in new Appendix F of the same Subpart, which would be entitled, Optional Rider for Additional NVOCC Financial Responsibility for Group Bonds (Optional Rider to Form FMC-69). This rider would be designated as Form FMC-69A.
These proposed riders would contain space in which the Principal and Surety would be designated, as well as spaces for the existing bond number, effective date of the rider, dollar amount of the rider, etc. Both proposed riders would enumerate the conditions which would be added to the specified bond they are modifying.
FMC would not serve as depository or distributor to third parties of optional bond riders. The FMC would add a new subsection (d) to 46 CFR 515.23 which would state that it shall not serve as depository or distributor to third parties of optional bond riders as described in new Appendix E (Optional Rider to Form FMC-48), or new Appendix F (Optional Rider to Form FMC-69). Administration of claims against such optional bond riders would be pursuant to the terms of the optional bond rider itself.
(Although the FMC granted the NCBFAA's petition in most substantive respects, the FMC states it has declined to propose (partial list): 1) rider coverage for reparation awards imposed by China (the rider is proposed to only cover fines and penalties imposed by China), 2) that the FMC administer the payment of claims against the optional rider, 3) etc.
-written comments must be received no later than February 20, 2004
-requests for meetings to make oral presentations to individual FMC Commissioners must be received and the meetings completed by February 20, 2004
FMC Contact - Amy Larson (202) 523-5740
FMC Proposed Rule (D/N 04-02, dated 01/23/04) available at http://www.fmc.gov/Dockets/04-02%20notice%20of%20proposed%20rulemaking.htm
FMC Order (Petition No. P10-03, dated 01/22/04) available at http://www.fmc.gov/Dockets/P10-03%20order%20granting%20in%20part.htm