NVOCC Bonds

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about NVOCC bonds.  If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

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What Are NVOCC Bonds?

NVOCC stands for Non-Vessel Operating Common Carrier, which is a type of Ocean Transportation Intermediary, or OTI. An OTI operates much like the freight forwarders who serve as middlemen between shippers and trucking companies, who accept cargo on behalf of a shipper and arrange for its transportation.

NVOCCs do not own or operate their own ships; they book space on ships owned by other companies and use it to consolidate shipments from their customers who aren’t shipping a large enough quantity to fill up a container on their own. They fill a container with goods from multiple shippers and contract with a carrier to accept the container for shipment under a single bill of lading. The NVOCC can be held financially responsible for any damage to or loss of the cargo that occurs as a result of the NVOCC’s negligence or unlawful or unethical actions.

NVOCCs are licensed by the Federal Maritime Commission (FMC), which requires proof of their financial responsibility in the form of a surety bond. So NVOCC bonds are classified as a form of license and permit bond. An NVOCC bond is, in effect, the NVOCC’s pledge to operate in accordance with the Ocean Shipping Reform Act and all applicable FMC regulations. It ensures that funds will be available to compensate shippers and carriers for damages and to pay any fines levied against the NVOCC by the FMC for violations, such as negligence in the handling of cargo or misrepresentation of cargo weight or classification.

Who Needs Them?

All U.S. based NVOCCs must be licensed by the FMC. Both NVOCCs licensed in the U.S. and those licensed in another country are required to provide an NVOCC surety bond (also referred to as an FMC bond)  in the amount of $75,000. Unlicensed NVOCCs based outside of the U.S. must provide a bond in the amount of $150,000. An additional $50,000 riser is required from NVOCCs involved in U.S.-China trade because of the additional financial responsibility requirements imposed by the Chinese government.

Failure to maintain an active NVOCC bond can result in revocation of a U.S.-licensed NVOCC’s license. Unlicensed NVOCCs based outside of the U.S. will be designated as inactive and will incur large penalties for operating while in that inactive status.

How Do They Work?

There are three parties to an NVOCC bond, which is a legally binding contract:

  • The “obligee” requiring the bond is the FMC,
  • The “principal” is the NVOCC required to purchase the bond, and
  • The “surety” is the company guaranteeing the payment of claims by the principal.

When a covered loss occurs and the obligee or other injured party files a claim against the NVOCC’s bond, the surety will investigate to ensure the claim’s validity and may attempt to negotiate a settlement.  Absent a settlement, the principal is legally obligated to pay the claim. However, the surety has guaranteed payment of claims and typically will pay the claim initially on behalf of the principal. The principal must then repay the surety for the resulting debt.

What Do They Cost?

The annual premium for an NVOCC bond is a small percentage of the required bond amount (also referred to as the bond’s “penal sum”).  The surety determines what the premium rate will be based on the principal’s credit history and financial strength. With good personal credit, the principal’s premium rate usually is in the rate of one to three percent. Poor credit does not automatically preclude bonding, but the premium rate will be significantly higher.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about NVOCC bonds.  If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

CONTACT US FOR A

FREE NVOCC BOND QUOTE

What Are NVOCC Bonds?

NVOCC stands for Non-Vessel Operating Common Carrier, which is a type of Ocean Transportation Intermediary, or OTI. An OTI operates much like the freight forwarders who serve as middlemen between shippers and trucking companies, who accept cargo on behalf of a shipper and arrange for its transportation.

NVOCCs do not own or operate their own ships; they book space on ships owned by other companies and use it to consolidate shipments from their customers who aren’t shipping a large enough quantity to fill up a container on their own. They fill a container with goods from multiple shippers and contract with a carrier to accept the container for shipment under a single bill of lading. The NVOCC can be held financially responsible for any damage to or loss of the cargo that occurs as a result of the NVOCC’s negligence or unlawful or unethical actions.

NVOCCs are licensed by the Federal Maritime Commission (FMC), which requires proof of their financial responsibility in the form of a surety bond. So NVOCC bonds are classified as a form of license and permit bond. An NVOCC bond is, in effect, the NVOCC’s pledge to operate in accordance with the Ocean Shipping Reform Act and all applicable FMC regulations. It ensures that funds will be available to compensate shippers and carriers for damages and to pay any fines levied against the NVOCC by the FMC for violations, such as negligence in the handling of cargo or misrepresentation of cargo weight or classification.

All U.S. based NVOCCs must be licensed by the FMC. Both NVOCCs licensed in the U.S. and those licensed in another country are required to provide an NVOCC surety bond (also rferred to as an FMC bond)  in the amount of $75,000. Unlicensed NVOCCs based outside of the U.S. must provide a bond in the amount of $150,000. An additional $50,000 riser is required from NVOCCs involved in U.S.-China trade because of the additional financial responsibiity requirements imposed by the Chinese government.

Failure to maintain an active NVOCC bond can result in revocation of a U.S.-licensed NVOCC’s license. Unlicensed NVOCCs based outside of the U.S. will be designated as inactive and will incur large penalties for operating while in that inactive status.

There are three parties to an NVOCC bond, which is a legally binding contract:

  • The “obligee” requiring the bond is the FMC,
  • The “principal” is the NVOCC required to purchase the bond, and
  • The “surety” is the company guaranteeing the payment of claims by the principal.

When a covered loss occurs and the obligee or other injured party files a claim against the NVOCC’s bond, the surety will investigate to ensure the claim’s validity and may attempt to negotiate a settlement.  Absent a settlement, the principal is legally obligated to pay the claim. However, the surety has guaranteed payment of claims and typically will pay the claim initially on behalf of the principal. The principal must then repay the surety for the resulting debt.

The annual premium for an NVOCC bond is a small percentage of the required bond amount (also referred to as the bond’s “penal sum”).  The surety determines what the premium rate will be based on the principal’s credit history and financial strength. With good personal credit, the principal’s premium rate usually is in the rate of one to three percent. Poor credit does not automatically preclude bonding, but the premium rate will be significantly higher.

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