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Reminder: New OTI Rules Now in Effect

Friday, December 27, 2019
Sandler, Travis & Rosenberg Trade Report

Effective Dec. 16, the Federal Maritime Commission amended its rules governing licensing, financial responsibility requirements, and general duties for ocean transportation intermediaries. According to the agency, these changes are mainly administrative and procedural.

There are two types of OTIs that serve as transportation middlemen for cargo moving in the U.S.-foreign oceanborne trades: non-vessel-operating common carriers and ocean freight forwarders. All NVOCCs and OFFs located in the U.S. must be licensed by the FMC and establish financial responsibility. Foreign NVOCCs may choose to become FMC-licensed but are not required to do so; however, they must register with the FMC and establish financial responsibility if they are not licensed.

In November 2015 the FMC made significant amendments to its regulations governing OTIs, including adding requirements to renew OTI licenses every three years, providing for simple online renewals, eliminating the $10,000 financial responsibility coverage requirement for each unincorporated branch office, and establishing an expedited hearing process for license denials, revocations, and suspensions.

Based on its experience implementing that rule, the FMC has made the following changes to clarify provisions and further reduce the burden on regulated entities.

- removed the optional paper application process for OTI licenses

- added language to clarify that an officer of a general partner entity can be the qualifying individual in partnerships between entities other than individuals

- added a requirement that NVOCCs submit their Form FMC-1 prior to being issued a license

- improved and clarified the license renewal process; e.g., spreading renewals out across the entire year and allowing OTIs additional time to complete the renewal process

- expanded the types of applications subject to direct FMC review to include applicants employing any of the same officers, managers, or members as an OTI whose license was revoked or denied within the previous three years because the FMC determined that the OTI was not qualified to provide OTI services

- clarified that denial of an OTI license application is final and not subject to hearing procedures

- clarified that a change in a licensee’s name includes adding or deleting a trade name relating to its OTI services and that OTIs must seek prior FMC approval before making such changes

- clarified that in addition to the principal’s name, trade name, and address, the financial responsibility instrument must clearly identify the principal’s state of incorporation or formation and the printed name and title of the signatory

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