To all non-vessel operating common carriers:
The system of administration for non-vessel operating common carriers was established by the Regulations on International Maritime Transport of the People’s Republic of China (hereinafter “Regulations on International Maritime Transport”) implemented on January 1, 2002. Currently, over 3,000 non-vessel operating common carriers (hereinafter “NVOCCs”) have obtained the qualifications to become non-vessel operating common carriers via payment of security deposits. The implementation of the administration system for non-vessel operating common carriers has standardized the international maritime transport market effectively.
Based on the principle of “freedom of choice” between non-vessel operating common carrier security deposit liability insurance and NVOCC business security deposits, this ministry has consulted the China Insurance Regulatory Commission and has decided upon a trial implementation of a security deposit liability insurance system for NVOCCs as an option for them in addition to currently available security deposit methods for NVOCC businesses; this is done to further perfect the system of administration for NVOCCs, alleviate the capital pressures on NVOCCs, and safeguard the lawful rights of parties involved. As of November 1, 2010, NVOCCs may choose to apply for non-vessel operating common carrier qualifications by way of purchasing NVOCC security deposit liability insurance. Notice regarding the relevant items is hereby provided below:
I. Basic Principle
Non-vessel operating common carrier security deposit liability insurance for NVOCC security deposits are both proof of financial liability that may be used by applicants for non-vessel operating common carrier qualifications (hereinafter “Applicants”); both exist in parallel to be independently chosen by Applicants. NVOCCs that choose to remit security deposits are to do so in accordance with the system of security deposits currently in force.
II. Insurance Institutions
Insurance institutions administering NVOCC security deposit liability insurance must meet the following criteria:
(I) Registered within the People’s Republic of China;
(II) Licensed by the China Insurance Regulatory Commission;
(III) Insurance products licensed by the Ministry of Transport and submitted to the China Insurance Regulatory Commission for approval or recording on file;
(IV) Sign the Letter of Commitment to Insure Non-Vessel Operating Common Carrier Security Deposit Liability Insurance (see Appendix), and fulfill the obligations associated with NVOCC security deposit liability insurance.
III. Forms of Coverage, Duration and Scope of Insurance
For ease of administration, in principle, Applicants applying for non-vessel operating common carrier qualifications and their subsidiary organizations are to use the same proof of financial liability, meaning that all are to utilize security deposits or security deposit liability insurance.
Duration of insurance is to be independently contracted by Applicants and insurance institutions, but must be a minimum of 1 year.
Non-vessel operating common carrier security deposit liability insurance is used only to settle debts of NVOCCs arising from non-fulfillment or improper fulfillment of carrier obligations, and cannot be used for payment of fines. NVOCCs are to pay fines separately if they are incurred.