On May 31, 2013, the United States Federal Maritime Commission (FMC) issued a wide-ranging proposed rulemaking significantly affecting the licensing, financial responsibility and duties of Ocean Transportation Intermediaries (OTIs).
There are approximately 5,700 OTIs, including domestic and foreign Non-Vessel Operating Common Carriers (NVOCCs) and ocean freight forwarders, operating in United States trades. All will be affected by the proposed changes. Although the proposed new rules are "intended to adapt to changing industry conditions, improve regulatory effectiveness, improve transparency, streamline processes and reduce regulatory burdens," they impose significant new conditions and alter the regulatory environment and risks for OTIs .
Under current regulations, an OTI's license is for an unlimited term. Under the proposed rules, OTI licenses would be subject to renewal every two years. Renewal applications would have to be submitted at least 60 days prior to the expiration date, and would include Qualifying Individual (QI) identification and contact information along with changes to the OTI's business or organization, trade names, tariff publication, physical address and electronic contact data. Experience requirements for QIs are expanded and are stated in more detail than before. Given the vast number of licensed OTIs and the FMC's limited resources, there are significant concerns as to how the FMC will process the initial round of renewals, as well as the large volume of renewals over the long term.
Under current regulations, an OTI's license may be revoked for failing to respond to a lawful order, making false or misleading statements or failing to have a current tariff or bond. The proposed new rules add: "knowingly and willfully processing, booking, or accepting, or transporting cargo for the account of an NVOCC that is not licensed or registered." This is a sensitive area, as NVOCCs are frequently approached by shippers that appear to be cargo owners but which the FMC may claim are required to be licensed as NVOCCs.
The Commission also proposes to “streamline” the appeals process for any license revocation by eliminating an OTI’s right for a full evidentiary hearing. Indicating that such proceedings are "often lengthy and expensive," the FMC proposes to establish a procedure by which appeals could be handled by a hearing officer on a written record without any apparent right of discovery concerning matters that may be in the FMC’s files.
Financial responsibility levels for OTIs are also slated to increase:
- Ocean Freight Forwarder: from $50,000 to $75,000
- NVOCC: from $75,000 to $100,000
- Registered (foreign) NVOCC : from $150,000 to $200,000
However, the FMC would eliminate the $10,000 additional bonding required for each unincorporated branch office. The proposed new rules also establish three payment priority tiers for claims against an OTI bond. The first tier would include shippers and consignees. The second would include common carriers, marine terminal operators and other third-party creditors. The final tier would consist of any claims by the FMC.
Under current regulations, foreign NVOCCs without a physical presence in the United States may operate in U.S. trades without a license if they: (1) file a Form FMC-1; (2) establish a bond of $150,000; and (3) publish an ocean tariff. Under the proposed new rules, foreign NVOCCs would also be required to "register" and supply additional information — including their legal name, principal business address, a contact person with an email address, and their U.S. resident legal agent — and would need to renew their registration every two years.
Given the far-reaching effects of many of the new rules, along with the potential strain on the FMC's resources in implementing them, industry participants are strongly encouraged to provide comments. Non-confidential comments must be submitted to the FMC in Washington, D.C., no later than July 31, 2013. Such comments may be submitted confidentially if they are clearly marked as such on each page.