FMC Amends its Regulations to Implement NVOCC Optional Bond Rider for the China Trade

The Federal Maritime Commission (FMC) has issued a final rule, effective April 6, 2004, that amends its regulations governing proof of financial responsibility for ocean transportation intermediaries (OTIs) to allow an $21,000 optional bond rider 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.

This final rule is the result of an FMC order which granted (in part) a petition requesting that the FMC change its rules to allow an $21,000 optional bond rider, in addition to the $75,000 base bond (in non-branch situations), to meet certain provisions in the U.S.-China bilateral Agreement on Maritime Transport (AMT) regarding China's $96,000 NVOCC financial responsibility requirement.

(The AMT states that the Chinese government will not require U.S. NVOCCs to provide security in the form of a $96,000 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 Renminbi Yuan (RMB) 800,000 (or U.S. $96,000).

This is Part I of a two-part series of summaries on this final rule, and focuses on the regulatory text of the final rule. See future issue of ITT for Part II.

Highlights of the Regulatory Text in the FMC's Final Rule

The following are highlights of the regulatory text in the FMC's final rule:

Optional bond rider for NVOCCs. A new paragraph (c) is added to 46 CFR 515.25 to state that any NVOCC as defined by 46 CFR 515.2(o)(2), in addition to a bond meeting the requirements of 46 CFR 515.21(a)(2), may obtain and file with the FMC proof of an optional bond rider, as provided for in new Appendix E or Appendix F of this part.

Two optional bond rider forms. New Appendix E is added to Subpart C of 46 CFR Part 515, containing the text of a rider entitled, Optional Rider for Additional NVOCC Financial Responsibility (Optional Rider to Form FMC-48). This rider is designated as Form FMC-48A.

New Appendix F is added to the same Subpart C, and contains the text of another rider entitled, Optional Rider for Additional NVOCC Financial Responsibility for Group Bonds (Optional Rider to Form FMC-69). This rider is designated as Form FMC-69A.

These riders contain space in which the Principal and Surety are designated, as well as spaces for the existing bond number, effective date of the rider, etc. Both riders enumerate the conditions which will be added to the specified bond they are modifying.

(The rider language reflects changes made by the FMC in response to comments on the proposed rule, including language noting that the optional riders' coverage is limited to the U.S.-China trade; listing the sum of $21,000 as the amount of the optional bond rider for each NVOCC; noting that either U.S. dollars or RMB may be used, at the option of the surety; etc.)

Group or association of OTIs may file optional riders. According to the FMC, this final rule adds a new sentence at the end of 46 CFR 515.21(b) which states that a group or association of OTIs may also file an optional bond rider as provided for by 46 CFR 515.25(c).

FMC will not serve as depository or distributor of funds to third parties. This final rule also adds a new paragraph (d) to 46 CFR 515.23 which states that the FMC shall not serve as depository or distributor to third parties of funds payable pursuant to the optional bond riders described in 46 CFR 515.25(c).

(See ITT's Online Archives or 01/28/04 and 02/23/04 news, 04012820 and 04022305, for BP summaries of the proposed rule and the extension of the comment period. See ITT's Online Archives or 01/23/04 news, 04012310, for BP summary of the FMC's determination to issue the proposed rule, as requested by the petition of the NCBFAA.)

- final rule effective April 6, 2004

FMC contact - Amy Larson (202) 523-5740

FMC final rule (D/N 04-02, issued 04/01/04) available at http://www.fmc.gov/Dockets/04-02%20FINAL%20RULE.htm