FMC Amends its Regulations to Implement NVOCC Optional Bond Rider for the China Trade (Part II - Final)
The Federal Maritime Commission (FMC) has issued a final rule, effective April 6, 2004, that amends its regulations to allow a $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.
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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 a $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.
This is Part II, the final part of a two-part series of summaries on this final rule, and primarily focuses on the explanatory text preceding the regulatory text of the final rule. (See ITT's Online Archives or 04/05/04 news, 04040505, for Part I.)
Highlights of the Explanatory Text in the FMC's Final Rule
Optional bond rider covers fines and penalties imposed by Chinese MOC. According to the FMC, the optional bond rider is to cover fines and penalties imposed by the Chinese Ministry of Communications (MOC). Therefore, the FMC states that the claim procedures at 46 CFR 515.23(b) are not applicable to the coverage provided by the optional bond rider.
Termination notices for main bonds with optional riders to be sent to Chinese MOC. The FMC states that if the main bond is terminated, which may be done by either the principal or surety, it follows that the optional bond rider would also be terminated.
According to the FMC, the present practice of the FMC's staff is to notify principals, sureties and tariff publishers when it receives termination notices for main bonds. This notice includes the date upon which termination of the main bond becomes effective. In a case in which a main bond also has an optional bond rider as described in this final rule, the FMC states that it will add MOC as a recipient of such termination notices.
Party terminating the optional bond rider must notify FMC and MOC. The FMC states that as it will serve as the principal point of contact for the effectiveness of the optional bond rider, and will indicate on its website the existence of optional bond riders, the FMC must have information regarding termination. However, as the Chinese Government is the likely claimant against and beneficiary of the optional bond rider, the FMC states that it also finds it reasonable to require that the party terminating the optional bond rider notify MOC of that termination as well.
Therefore, the procedure for termination shall be notification to the FMC accompanied by proof of transmission to MOC. Notification will not be deemed complete unless accompanied by proof of transmission of notice of termination to MOC, and the 30-day period for the termination to take effect will not begin until the FMC receives both notification and proof of transmission to MOC. The FMC states that the language in Appendices E and F in the final rule, requiring whichever party terminates the optional bond rider to provide proof that it has sent such notification also to MOC, addresses these concerns.
Exhaustion of optional bond rider amount will not effect main bond. The FMC states that the optional bond rider supplements the main bond. Therefore, the fact that the amount available to MOC under the optional bond rider may be exhausted will have no effect on the availability of coverage of the main bond. Unlike the optional bond rider, the main bond is not available to pay claims based solely upon Chinese law.
Information related to the filing of optional bond riders and the forms to be available on FMC Web site. The FMC states that it will indicate the filing of optional bond riders on its ocean transportation intermediary (OTI) list, located at www.fmc.gov/oti/oti_index2.htm, which includes all OTIs licensed by the FMC. The optional bond rider forms will also be available on the FMC's website at www.fmc.gov/Forms.htmFF.
(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