The Federal Maritime Commission & Types of OTIs
To simplify the information throughout this page, we’ll start by defining a few terms. To learn about Federal Motor Carrier Safety Administration (FMCSA) requirements for U.S.-based transportation brokers, check out our guide on Freight Broker Surety Bonds.
Federal Maritime Commission (FMC)
The Federal Maritime Commission is an independent agency regulating the U.S. international ocean transportation supply system for consumers, exporters, and importers. That includes protecting the public from deceptive and unfair practices.
Ocean Transport Intermediary (OTI)
Ocean Transport Intermediaries encompass NVOCCs and OFFs, both of which the FMC regulates according to the Shipping Act of 1984. The FMC must license all U.S.-based OTIs (sole proprietors and companies) for them to operate legally. The licensing process includes obtaining a surety bond or another form of financial responsibility. Surety bonds are most common.
Ocean Freight Forwarder (OFF)
According to the FMC, an Ocean Freight Forwarder is a U.S.-based company or individual that:
- Arranges cargo movement to international destinations
- Prepares and processes documentation
- Dispatches shipments from the U.S. using common carriers and books or arranges space for shipments on shippers’ behalf
Non-Vessel Operating Common Carrier (NVOCC)
NVOCCs include the following:
- Common carriers that hold themselves out to the public to provide ocean transportation (but don’t operate the vessels)
- Shippers in relationship with vessel-operating common carriers involved in moving cargo
Get Your OTI Bond:
- The Federal Maritime Commission is an independent agency regulating the U.S. international ocean transportation supply system. It supports consumers, exporters, and importers.
- The FMC requires Ocean Transportation Intermediaries to post a surety bond as part of the licensing process.
- All Ocean Freight Forwarders must submit a $50,000 bond.
- U.S.-based Non-Vessel Operating Common Carriers must submit a $75,000 bond.
What is an OTI bond?
The FMC requires Ocean Transportation Intermediaries to post a surety bond as part of the licensing process – to operate legally in the United States. Surety bonds guarantee that OTIs follow industry laws and regulations. An OTI bond will cover settlements for valid claims and payments for judgments – up to the bond’s full value.
OTI Surety Bond Requirements
To submit “acceptable proof of financial responsibility,” obtain a surety bond in one of the following amounts:
- OFFs must submit proof of financial responsibility in the amount of $50,000.
- U.S.-based NVOCCs must submit an amount of $75,000.
- If you’re a non-U.S.-based NVOCC, you must submit an amount of $75,000.
- If you’re non-U.S.-based and don’t have a license, submit proof of financial responsibility in the amount of $150,000.
Individual OTIs must submit their bond using Form FMC-48. A group of OTIs should use Form FMC-69.
The OTI or the surety may cancel the bond, effective 30 days after the other party receives notice of the cancellation. If you cancel your bond, your license will be revoked, and you will be prohibited from performing OTI services in U.S. trades.
How to Apply for Your OTI License
You will need to acquire a license from the FMC if you wish to operate as an OFF or NVOCC in the U.S. Here’s an overview of the steps to obtain your license.
- Appoint a qualifying individual (someone with three years of OTI experience; they may be an officer in a corporation, a sole proprietor, a manager or member in an LLC, or a partner in a partnership).
- Submit Form FMC-18 to apply for your OTI license.
- Provide proof of financial responsibility (your surety bond).
- Pay the license application fee.
Frequently Asked Questions
Like other surety bonds, you will pay a small percentage of the total value of your bond. So if you need a $50,000 bond, you could pay as low as 1% of that amount (if you have an excellent credit score, good financials, and industry experience). If you have poor credit, you may pay more.
The purpose of this surety bond is to provide financial protection to the shipping public in case the OTI fails to meet its contractual obligations. Specifically, an OTI surety bond protects against the following:
- Non-payment of freight charges: If an OTI fails to pay the shipping company or carrier for the services provided, the surety bond can cover the outstanding freight charges.
- Failure to deliver goods: If an OTI fails to deliver the goods as agreed upon in the contract, the surety bond can compensate the shipping company or carrier for any losses or damages incurred.
- Violation of the Shipping Act: If an OTI violates the Shipping Act or any other applicable laws or regulations, the surety bond can be used to pay any resulting penalties or fines.
Get an OTI Bond in Your State
We can help you find the right OTI bond for your ocean transportation business. ZipBonds offers the fastest and most secure option for acquiring license and permit bonds. Our all-digital platform is intuitive and straightforward. Apply online or call us at 888-435-4191 to speak with an agent directly.
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.