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FMC Considering Significant Changes to Regulations on Ocean Transportation Intermediaries

Friday, May 31, 2013
Sandler, Travis & Rosenberg Trade Report

The Federal Maritime Commission has issued an advance notice of proposed rulemaking through which it is requesting comments no later than July 31 on a number of potential changes to its regulations on the licensing, financial responsibility requirements and duties of ocean transportation intermediaries. The FMC states that these revisions are intended to adapt to changing industry conditions, improve regulatory effectiveness, improve transparency, streamline processes and reduce regulatory burdens. Among the changes under consideration are the following.

- adding new definitions of “advertisement,” “registered non-vessel-operating common carrier” (which identifies NVOCCs that are located outside the U.S. and opt to register rather than obtain a license), and “qualifying individual” (an employee of a licensed OTI who is age 21 or older, is responsible for general supervision of the licensee’s OTI operations and meets the Shipping Act’s experience and character requirements)

- deleting the requirement that only licensed intermediaries in the U.S. may perform OTI services on behalf of an unlicensed OTI (i.e., foreign-based NVOCCs) and substituting the requirement that registered NVOCCs must use licensed OTI agents in the U.S. with respect to OTI services performed in the U.S.

- eliminating the regulatory burden associated with procuring and maintaining additional financial responsibility to cover an OTI’s unincorporated branch offices

- requiring all license applications and registration forms to be filed electronically unless the FMC grants a waiver to file on paper

- clarifying that the three years of OTI experience required for a license may not be met by working for an unlicensed, unbonded or unregistered OTI (instead, such experience could be obtained by working for licensed or registered OTIs, foreign-based OTIs bonded under the FMC’s current rules, VOCCs or cargo owners

- requiring foreign-based NVOCCs that opt to obtain a license rather than register to establish a presence in the U.S. by opening an unincorporated office that is operated by a bona fide employee and qualifies to do business where it becomes resident

- requiring OTI licenses to be issued for an initial two-year period and be renewed every two years, with the renewal application due 60 days prior to the expiration date of the license (comments are specifically sought on the process that should be used to renew the approximately 4,500 existing OTI licenses that have no expiration dates)

- adding reasons an OTI license may be revoked or suspended; e.g., failure to file a Form FMC-1 within 120 days of being notified that a license application has been approved, failure to maintain a Form FMC-1 and a published tariff, or knowingly and willfully accepting cargo from or processing, booking or transporting cargo for an OTI that does not have an OTI license, has not registered or fails to provide proof of financial responsibility

- streamlining appeal procedures for denial of OTI license applications and for revocation or suspension of OTI licenses

- establishing new registration requirements for NVOCCs located outside the U.S. that wish to provide NVOCC services in the U.S. foreign trade

- requiring OTIs operating as partnerships, corporations or LLCs to submit a report within 15 business days when their qualifying individual ceases to serve as a full-time employee or when the QI is no longer responsible for the general supervision of the licensee’s OTI activities

- increasing financial responsibility levels as follows: from $50,000 to $75,000 for ocean freight forwarders, from $75,000 to $100,000 for NVOCCs, from $150,000 to $200,000 for registered NVOCCs, and from $3 million to $4 million for groups

- requiring OTIs to restore their bond, insurance or surety to the required amounts within 60 days of a claim being paid and prohibiting OTIs from accepting new business until they furnish proof that this requirement has been met

- clarifying that OTI license applications will be invalid, and approval rescinded, if the required proof of financial responsibility is not filed within 120 days of notification of license approval

- clarifying that OTIs must include their names and license or registration numbers on all shipping documents and communications (including written, printed and electronic communications) and that their agents must include the OTI principal’s name and license or registration number on all shipping documents issued on behalf of the OTI (an entity that issues shipping documents in its own name would be presumed to be operating in its own name and not on behalf of a licensed or registered OTI)

- clarifying that all OTIs must maintain records pertaining to their OTI business and that the records must be maintained in useable form and readily available to the FMC, regardless of whether the records are kept in the U.S. or in foreign locations

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