Deposit liability insurance launched for non-vessel operating carriers

The PRC International Maritime Transport Regulations, which came into effect in 2002, established a non-vessel operating carrier (NVOC) system. Under these Regulations, an NVOC is required to pay a non-vessel operating carriage deposit of RMB800,000 (US$122,000) to the Ministry of Transport as financial security, and for each branch it establishes, it is required to pay a further RMB200,000. The International Maritime Transport Regulations Implementing Rules, which came into effect in 2003, specify that the NVOC deposit is to be used to compensate for losses incurred as a result of an NVOC failing to perform or improperly performing its obligations as a carrier, or to pay fines imposed on it by a transport authority.

Financial burden eased

At the end of February this year, there were more than 3,600 NVOCs in the PRC. With the exception of qualified foreign NVOCs, which can be exempted, all other NVOCs are required, in accordance with the Regulations, to pay a deposit. The main objective of this deposit system is to protect the interests of creditors, but it has, to a certain extent, proved to be a financial burden on NVOCs.

For this reason, the Ministry of Transport introduced an NVOC deposit liability insurance system on a trial basis starting from 1 November 2010. It permits NVOCs to choose between paying the deposit and taking out deposit liability insurance. If a company that has already registered as an NVOC wishes to recover a deposit it has already paid, it may apply for a refund after executing a deposit liability insurance contract with a qualified insurer.