IN_Bond
FMC Amends China Bond Rider Regulations
September 4, 2012

Effective November 23, 2012, the optional MOC bond rider for proof of NVOCC financial responsibility with regards to trade with the People's Republic of China (PRC) will increase from $21,000. The notice was published in the Federal Register on August 28th.

Background
 The optional MOC rider is in addition to the OTI NVOCC bond. Through a bilateral agreement in 2003 between the United States and the PRC, China allowed for the US NVOCC to supplement its bond by $21,000 (regardless of the underlying bond amount) by way of a bond rider. The MOC rider gave extra leverage for US-China ocean transportation liabilities, and allowed the MOC the ability to collect penalties

The purpose of the adjustment is to increase the financial responsibility of the NVO to RMB 800,000 or US$96,000, a level set by China's MOC regulating authority. This change eliminates the need of the US NVOCC from having to deposit RMB 800,000 in China's banking systems. Since the 2003 bilateral agreement, the RMB has become more valuable. The effect of the strengthening Yuan is that RMB 800,000 is the equivalent of approximately US$126,000

The FMC has determined the optional bond rider is still good for many NVOCCs in the industry to fulfill China's requirements, and the FMC will continue to allow for the use of an optional bond rider. The FMC found it necessary to modify the language to the rider to allow for meaningful currency fluctuations and to recognize bonds larger than the minimum bond amount. Furthermore, the FMC will periodically review the total coverage provided by the MOC rider in the event more fluctuations in the currencies become material.

What This Means to You
 There are still details that need to be determined by the FMC, such as when to begin filing riders with the new language, and how the FMC requires existing riders to be amended. Additionally, underwriting requirements may need to be reviewed to protect the surety. We will notify you as information becomes available

Please contact your Roanoke Trade bond service representative if you have any questions.

Sincerely,


Roanoke Trade, a division of Roanoke Insurance Group Inc.
phone: 1-800-ROANOKE