What is an OTI Bond?
OTI bonds are required by the Federal Maritime Commission (FMC) from all ocean freight forwarders (OFFs) and non-vessel-operating common carriers (NVOCCs) who wish to become licensed as ocean transportation intermediaries (OTI) and operate in the United States.
OTI surety bonds are required by the FMC, to guarantee that licensed freight forwarders and NVOCCs will comply with FMC requirements and regulations, such as the Shipping Act of 1984. It is also meant to guarantee to shippers and carriers who work with these businesses that they will be treated honestly and in accordance with these regulations.
In other words, these bonds are a form of protection against licensed and bonded OFFs and NVOCCs who don’t comply with these rules, or commit fraud. These bond offer legal recourse to their business partners, in the form of compensation by the surety that issued the OTI bond.
Like all license bonds, an OTI bond functions as an agreement between three sides: the bond principal (in this case the OFF or NVOCC), the obligee (the FMC and shippers and carriers), and the surety that issues and backs the bond.
When an obligee files a claim against the principal for violating regulations, the claim is investigated by the surety. If the claim is found to be legitimate, the surety pays a compensation to the claimant. But it doesn’t end there– the principal must then repay the surety for its backing.
Read on for answers to the most frequently-asked questions about OTI Bonds.
Questions about Ocean Transportation Intermediary Oti Bond
Who needs to obtain an OTI bond?
OTI bonds are required by U.S. based and licensed ocean freight forwarders (OFFs) and non-vessel operating common carriers (NVOCCs) and licensed non-U.S.-based NVOCCs who wish to perform ocean freight forwarder services.
These bonds are also necessary for unlicensed non-U.S. based NVOCCs though the financial guarantee they need to submit is higher.
In addition to the regular OTI bond, NVOCCs who wish to work on the U.S.-China trade must submit a bond in a greater amount than the standard OTI bond. Check out the sections below for more on the cost of these bonds.
Are there different types of OTI bonds?
These bonds vary only in the bonding amount for the different types of licenses.
OFFs need to submit a $50,000 OTI surety bond, plus $10,000 each for every unincorporated branch office in the U.S. performing the same activity.
Licensed NVOCCs, whether U.S. based or non-U.S. based, must submit a $75,000 bond, and $10,000 on top of that for every unincorporated branch office.
Unlicensed and non-U.S. based NVOCCs are required to submit proof of financial responsibility in the amount of $150,000.
NVOCCs working in trade between the U.S. and China must file an Optional Rider (Form 48 or Form FMC-69), which adds another $21,000 to their bond (making it a $96,000 bond), in order to meet the requirements of the Chinese government.
How much does an OTI bond cost?
The cost of your OTI bond depends on its bonding amount– whether it’s a $50,000, $75,000, $96,000, or $150,000 bond. When determining the rate or surety premium of a bond, sureties base it on the total bonding amount and make it a percentage thereof.
To determine your rate, sureties look at your personal credit score first and foremost, and at other financial and business-related items, such as your financial statements or industry experience.
If you have a high credit score and a solid business history you can expect to receive a standard market rate: from 1%-5% of the total amount of your bond. If your credit score isn’t that high, the surety will typically offer a rate that’s between 5%-10% of the bonding amount.
So, to obtain a NVOCC bond at standard rates for a licensed U.S. entity you would have to pay between $750 and $3,750.
To get a free quote on your bond, with no obligations, simply submit a surety bond application with all the relevant details.
Can I get an OTI bond with bad credit?
Getting a bond with bad or non-existent credit may be hard, but it’s certainly not impossible. In fact, with Lance Surety Bonds getting a bond can still be fairly easy. Thanks to our Bad Credit Surety Bonds program, applicants who have a low credit score can still apply for and obtain an OTI surety bond.
Rates are slightly higher for these bonds, as sureties need to make up for the risk involved. Thanks to our excellent connections to A-rated and T-listed sureties, we are able to offer all of our clients the same excellent bonds, at rates that are tailored to them.
How to get your OTI bond
Apply online here in a matter of minutes. As soon as we receive your application, we will process it and get back to you with your quote.
Call our surety experts at (877)-514-5146 if you have any questions about your bond and bonding requirements. We can also help you with filling in your application if you’re experiencing any difficulties.
OTI license requirements
To get licensed as an OTI, you have to fulfill a few requirements. You must:
- Appoint a qualifying individual
- Submit the FMC-18 application form
- Submit a valid OTI bond
- Pay the required license application fee
To find out more about the licensing process and fill in the relevant forms, consult the FMC’s ‘How to Apply for an OTI License’ page.
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