Bonding for transport co's

[uShipBD]

Hello, my company operates an online marketplace for large item shipping. While we are not a broker, we do provide the venue for shipping transactions and, as such, we would like to offer some bonding options for our users and transportation providers.
Because we are an eBay-styled marketplace, it would seem that both Bid and Performance bonds would be appropriate, as transport companies bid openly to win posted jobs. Into which category does an ICC Bond fall? What other options should I be looking at? Thanks in advance.

[Admin]

Hello, and welcome to our forums!

Hello, my company operates an online marketplace for large item shipping. While we are not a broker, we do provide the venue for shipping transactions and, as such, we would like to offer some bonding options for our users and transportation providers.
Because we are an eBay-styled marketplace, it would seem that both Bid and Performance bonds would be appropriate, as transport companies bid openly to win posted jobs.

A bid bond guarantees that the performance bond will be posted in the event the principal is the lowest bidder. The performance bond guarantees the principal will perform per the contract. So you certainly have done your homework on bond types and are correct in your choice. However, bonding companies usually will not bond a shipment due to the languange within the shipping contracts. There is no problem if it is simply a contract to guarantee transportation from point A to point B. Unfortunately, most contracts also want a guarantee of the proper working order of the package. For instance, the contract might guarantee that a machine will be delivered unharmed and work properly for X years. Obviously the shipper did not manufacture the product and can not guarantee it. Therefore, these contracts are often "unbondable".

Into which category does an ICC Bond fall?

An ICC bond is considered a commercial surety bond.

What other options should I be looking at? Thanks in advance.

As far as surety bonds go, there are no other standard market options. If the contract isn't acceptable, you will not find a surety to write the risk.

One option might be a letter of credit issued by a bank to guarantee the transport. They are often used when bonding companies are not interested due to high risk. Unfortunately, the letter of credit would be held until the contract is complete, which would be problematic for contracts with warranties.

Ebay has the buySAFE bond program, which is tailored specifically for them by Liberty Mutual. A program like this would be perfect for you, but I doubt you are going to be able to find a surety with interest in setting something similar up unless the premiums would be similar to those collected from the Ebay project.


Let me know if you have any further questions. We are always happy to help!

[uShipBD]

Just so I am clear, a commercial surety bond is a type of bond distinct from performance and bid?
Also, what kinds of things do transportation bonds typically guarantee? Judging from feedback, what seems to matter most to our users is that whatever's being transported arrive in a timely fashion and in the same condition in which it was shipped. What kind of damages does one typically expect if a shipment is late, and how late is "late"? I realize that may vary according to contracts, but, generally, is it days, weeks, months?
Last question, to your last point re: eBay and buySAFE. Would a surety be looking for eBay's level of volume or simply the kind of per-user revenue that eBay provides? I would think that, on a per-user basis, we would compare favorably, simply because our average transaction sizes are relatively large compared to eBay's.
Thanks again for all of your guidance.

[Admin]

Just so I am clear, a commercial surety bond is a type of bond distinct from performance and bid?

Correct. Commercial bonds are a category of bonds, not a specific type. Performance and bid bonds fall under the contract bond category.

Also, what kinds of things do transportation bonds typically guarantee? Judging from feedback, what seems to matter most to our users is that whatever's being transported arrive in a timely fashion and in the same condition in which it was shipped. What kind of damages does one typically expect if a shipment is late, and how late is "late"? I realize that may vary according to contracts, but, generally, is it days, weeks, months?

A performance bond guaranteeing transportation will guarantee just that, the transportation of the product only. The terms of the transportation are found in each individual contract (e.g. arrival time, and other specs). I really can't answer that question without being vague since it varies, as the bond is a guarantee of the contract, so we would need to see a specific contract to discuss further details.

Last question, to your last point re: eBay and buySAFE. Would a surety be looking for eBay's level of volume or simply the kind of per-user revenue that eBay provides? I would think that, on a per-user basis, we would compare favorably, simply because our average transaction sizes are relatively large compared to eBay's.
Thanks again for all of your guidance.

The surety is going to be interested in premium collected, which is a percentage of the bond amount (typically 1-3% for contact bonds). Keep in mind Ebay sells high priced goods like vehicles now as well. In other words, you would have to generate a lot of premium for a surety to take the time to consider a program just for you. To be honest, I am not sure there are many other sites online that have the ability to do so other than the big boys (MSN, Yahoo Shopping, etc.). Not to frown upon your site, as I have visited it and it is very well done. I just see it as a long shot.