An Ocean Transport Intermediary (OTI) Bond is not an insurance policy, although it does serve a similar purpose of a financial guaranty. It is a regulatory requirement of the Federal Maritime Commission (FMC). The company serving as an ocean freight forwarder or a Non-Vessel Operating Common Carrier (NVOCC) must be able to guarantee their legal obligations for the shipment of cargo will be met, payments for shipments will be made and they will comply with FMC regulations. Unlike a standard insurance policy, if a claim is filed against an OTI Bond, the bond company can hold its customer liable for the full amount of the bond.
Once the FMC qualifies a company to act as a freight forwarder or NVOCC, the company has 120 days to obtain an OTI bond or the FMC will cancel its license to operate in the US. In addition, the bonding company providing the bond must be on the US Treasury’s Listing of Approved Sureties (Dept. Circular 570).
The minimum amount of the bond is $50,000 for freight forwarder, $75,000 for a NVOCC plus an additional $10,000 for every separate branch office that a forwarder or NVOCC maintains. For foreign based companies, the minimum amount is $150,000.
A NVOCC active in the US-China trade may also file an optional $21,000 rider to its bond. This rider is intended to cover any fines or sanctions the Chinese government might levy against a US company operating in its country. The rider can be cancelled without affecting the status of the bond. Either the bonding company or the NVOCC may cancel the bond at any time. But if so, the NVOCC has only 30 days after the FMC has received official notice of the cancellation to obtain a new bond or the FMC will revoke its license.
OTI Bonds provide stability and the free flow of trade by ensuring that the companies are financially able to make restitution in the event a cargo does not reach its intended destination on time, intact and with all payments rendered.