The Federal Maritime Commission (FMC) on November 3, 2015 issued its Final Rule to amend the provisions of 46 C.F.R. part 515 governing the licensing, financial responsibility requirements and general duties of Ocean Transportation Intermediaries (OTIs). OTIs include both freight forwarders and non-vessel operating common carriers (NVOCCs). The rule change is reportedly intended to adapt to changing industry conditions by improving regulatory effectiveness and transparence, while streamlining processes and reducing regulatory burdens currently imposed on OTIs. The new rulemaking constitutes the first significant amendment of regulations governing OTIs since promulgation of the Ocean Shipping Reform Act of 1998 (the "Shipping Act").
In addition to updating a number of definitions to comport with current practices of OTIs, the amended regulations impose revised licensing and financial responsibility requirements, the majority of which become effective December 9, 2015.
Although not a substantive change to the long-standing rule, part 515.3 is amended to provide that a "registered NVOCC" must use licensed OTIs as their agents in the United States with respect to any OTI services performed therein. Thus, only licensed OTIs are permitted to provide OTI services in the United States to registered NVOCCs. A "registered NVOCC" was formerly referred to under part 515.3 as an "unlicensed NVOCC."
As intimated, the regulation of unlicensed foreign-based NVOCCs is nothing new. Although the Shipping Act only imposes licensing requirements upon NVOCCs "in the United States," in 1999 the FMC addressed its authority to regulate the US operations of foreign NVOCCs in FMC Docket No. 98-28. Therein, the FMC—which is legislatively mandated to determine "when foreign-based entities conducting business in the United States are to be considered persons in the United States" for purposes of licensing requirements under Section 19 of the Shipping Act—explained its perceived need to "level the playing field between OTIs in the United States who are within the Commission's jurisdictional reach and those who are outside of that reach." Accordingly, part 515.3 has since 1999 provided that "[o]nly persons licensed under this part may furnish or contract to furnish ocean transportation intermediary services in the United States on behalf of an unlicensed ocean transportation intermediary." Thus, foreign-based NVOCCs have the option of voluntarily obtaining a license or operating through another licensed OTI. The FMC has stated the requirement that unlicensed foreign-based NVOCCs use licensed OTIs as their agents in the United States is necessary to ensure the distinction created by Congress would not be undermined.
In addition to the licensing requirements, the licensing process itself has also been revamped—to include among other things a new e-filing system. Changes to the current rules will add a requirement that licenses be renewed every three (3) years and establish a process for expedited resolution and appeal of license denials, revocations and suspensions.
The Final Rule additionally eliminates the regulatory burden of maintaining financial responsibility for branch offices, which previously imposed additional $10,000 bonding requirements for each unincorporated branch office. Part 515.4(b) has also been amended to clarify the liability imposed upon OTIs, substituting "shall be fully responsible" for the 1999 language "shall be held strictly responsibly." This change resolves the ambiguity created by the current rule's reference to the concept of strict liability for acts and omissions of employees and agents of OTIs in violation of the Shipping Act or FMC regulations contained in Chapter IV of Title 46 of the Code of Federal Regulations.
The rule revisions will also establish a simple, one-stop database for performing OTI status verifications. Pursuant to part 515.27(a), no common carrier shall "knowingly and willfully" transport cargo for any NVOCC unless that carrier has determined the NVOCC has a license or registration, a published tariff, and has provided proof of financial responsibility. In order to permit convenient verification, the FMC will publish on its website (www.fmc.gov) a periodically updated list of verified OTIs.
The amended regulations place an obligation on all OTIs to promptly respond to requests for records made by authorized FMC representatives and clarify that OTI principals will be held responsible for ensuring their agents promptly respond to any such requests. OTIs will also be responsible to make available all records relating to OTI services provided either by or for the OTI.
The Final Rule becomes effective December 9, 2015, with the exception of amendments to the license renewal rules located in 46 C.F.R. part 515.14(c) and (d).