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BondsThough generally handled through insurance agencies, a bond is not insurance. In effect, a bond is a guarantee backed by a third party. In the arena of international trade, there are two basic classes of bonds, required by two different agencies of the U.S. government: the Federal Maritime Commission and U.S. Customs. All ocean freight forwarders and Non-Vessel Operating Common Carriers (NVOCC's) handling cargo originating from or destined for the United States must now be licensed and bonded as Ocean Transportation Intermediaries (OTI's).
The OTI BondThose who have been in the international trade business for awhile will know that the predecessors to these bonds were known as FMC and NVOCC Bonds. The OTI bond is intended to guarantee that contracts with shippers and carriers will be carried out and to protect the shipping public by ensuring the forwarder or NVOCC complies with Federal Maritime Commission regulations.
There are set bond amounts required for both classes of Ocean Transportation Intermediary:
Freight Forwarders - required to obtain and carry a bond of
NVOCC's - required to obtain and carry a bond of
For those operating outside the U.S. the minimum bond amount is $150,000.
U.S. Customs BondsImporters in the United States are also required to post a bond (or its cash equivalent) with the U.S. Customs Service to guarantee that they (the importer) will obey and follow all laws and regulations pertaining to bringing goods into the country for commercial purposes.
This type of bond is not designed to protect the importer or their clients. It is intended to protect the interests of U.S. commerce. The surety, or bonding company, takes on the same responsibilities as the importer and provides the required money to assure that no financial harm is done to the U.S. or its economy by the failure of the importer to pay duties, taxes and other charges in a timely manner, to make or complete entry and to produce documents and evidence, to redeliver merchandise or otherwise comply with any pertinent law, regulation or instruction required by U.S. Customs. Unlike an insurance company, the surety has the right to come after the importer for full recovery of any loss the surety may sustain.
The most common type of customs bond is the Activity Code 1 Importer or Broker Entry Bond. Within this category there are two forms:
The second most common customs bond is the Activity Code 2 – Custodian of Bonded Merchandise. This type of bond secures obligations related to custodial activities (the holding) of all classes of merchandise under customs supervision or being transported within the same customs port, or until released by customs. It includes several types to cover the custodial operations of bonded warehouses, domestic common carriers, cartmen, lightermen, centralized examination stations and container freight stations. Only continuous bonds are permitted as an Activity Code 2 bond.
Activity Code 3: International Carrier Bonds are the third most commonly used bonds related to the import of merchandise into the United States. Activities related to the entry or clearance of vessels, vehicles or aircraft from outside the U.S. are secured by this type of instrument, which may be written as either a single transaction or continuous bond. There is a bond under sub-code 3a: Instruments of International Traffic, that secures compliance with laws and regulations on the introduction of international traffic and other shipping containers without entry.
There are actually 11 Activity Codes for U.S. Customs Bonds that cover a range of activities.
Miscellaneous BondsATF Bonds (Alcohol, Tobacco and Firearms)
FECR Bond (Florida East Coast Railway Bond)
ICC Bond: Form Number BMC-84 (Property Broker's Surety Bond Under 49 U.S.C. 13906)
Through the Federal Motor Carrier Safety Administration
Global Insurance Network can help you with any of your U.S. Customs Bond needs.
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Global Insurance Network has been Serving South Florida's International Trade Community Exclusively for Over Twenty Years.
Unlike the new agencies entering the market in this area, Global is proud that we’ve been a South Florida-based insurance agency for twenty years. Global knows that where your business is concerned, it is best to “Think Locally – Act Globally!”
Specializing with the Logistics Industry and International Trade businesses