FMC hopes to help NVOs meet financial responsibilities in U.S.-China trade.
By Chris Dupin
The U.S. Federal Maritime Commission has proposed to increase the size of the optional bond rider that non-vessel-operating common carriers may file to meet the Chinese government’s financial responsibility requirements for them to serve in the U.S.-China trade.
Both U.S.-based and licensed non-U.S.-based NVOs are required by U.S. regulation to submit proof of financial responsibility in the amount of $75,000, and $10,000 for every additional office they have. China also requires NVOs operating within its borders to also show financial responsibility.
Under a 2003 bilateral maritime agreement with the United States, China permits U.S. NVOs doing business in China to forgo making a cash deposit in a Chinese bank if they can show they have obtained an FMC license as an NVO and demonstrate financial responsibility in the total amount of 800,000 Chinese renminbi (RMB) or $96,000.
The agreement between the two countries allows NVOs to meet the Chinese government’s financial responsibility requirements by adding a $21,000 rider to their $75,000 FMC NVO bond. The rider amount is available to pay fines and penalties for activities in the U.S.-China trade imposed by the Chinese government.
China now wants to raise the financial responsibility amount from $96,000 to $122,000 in recognition of the country’s strengthening currency.
The FMC asked for industry comments on the proposal last June and the National Customs Brokers and Forwarders Association of America said the China bond rider has been “extremely successful,” and has allowed U.S. companies to provide services in China that might otherwise be difficult if the companies were required to post cash with the Chinese government. Though U.S.-licensed NVOs must register in China to conduct business, the NCBFAA indicates the process “has not been unduly onerous,” and “has not heretofore unduly increased operating costs.”
The NCBFAA and two NVOs that commented on the proposed increase — Econocaribe Consolidators and Mohawk Global Logistics — noted that NVOs with five branch offices would have $125,000 in bonds with the FMC, $3,000 in excess of the $122,000 that the Chinese asked for.
“If the FMC can get the (Chinese government) to ‘count’ the entire bond currently posted, including the amount of the bond posted for the branch offices, even with the (Chinese government) increasing the bond requirement, this would actually have a slight reduction in the cost of the bond,” wrote John Abisch, president of Econocaribe.
In a notice of proposed rulemaking, the FMC proposed the Chinese bond rider be raised from $21,000 to $50,000, so that NVOs posting a $125,000 bond satisfy the Chinese government’s requirement.
In response to comments received from the NVOs and NCBFAA, the FMC proposes to modify its requirements so that NVOs with branch offices may have rider amounts that vary to satisfy the level of coverage requested by China, so long as their total coverage equals $125,000.
Comments on the proposed revisions should be submitted to the FMC by March 12.