Today, I would like to discuss a particular type of surety bond, referred to as a surety bond guarantee, and furnished as evidence of financial right and responsibility under the Oil Pollution Act of 1999 and the Comprehensive Environmental Response Compensation and Liability Act as amended. The OMB approval number is 1625-0046 and is a guarantee for vessels docked in select ports. The bond is a requirement of the US Department of Homeland Security through the US Coast Guard and filed with the US Coast Guard. The bond secures the environmental liability of vessels docked at specific ports. There are different ways to satisfy the financial responsibility, but I am limiting it to the surety bond.
The surety bond is an extension of credit or a financial guarantee of payment. Generally, we need to know the vessel’s name, type, age and life, the owner, and whether or not it is carrying any cargo that could cause an environmental hazard. The bond is payment if a spillage or event occurs. The bond can be canceled through written notice to the US Coast Guard within 30 days. Otherwise, the bond stays in effect and has liability. There is an annual bond premium, which is risk-based, depending on whether or not there is collateral and what type of financial resources the client has. A Surety Bond Guarantee is an obscure type of bond. The bond amount is set based on the tonnage or the weight of the vessel, yacht, or boat.
The bond is applicable under Coast Guard Regulations at 33 CFR Part 138. The bonds are filed with the US Coast Guard, so the surety companies have to be treasury-approved, listed on the Fiscal Treasury.gov website. The list of certified companies and the single largest bond amount that they can issue are listed on the website. The bond amount must be less than their applicable underwriting limitation. The companies I work with are all approved for federal surety bonds up to various amounts, and generally, those amounts are over the amounts that my clients need. The bond is a financial guarantee of payment. Clients can provide financials or deposit liquid collateral — cash, a letter of credit, a pledge of publicly traded securities — with the surety.
If you or your client runs into a scenario where you need the bond, give me a call, and let’s start working on it.
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