Final Rule for Ocean Transportation Intermediary Review

paperwork

By MarEx 2015-11-06 21:09:24

By Eric Lee

The U.S. Federal Maritime Commission has issued a Final Rule on ocean transportation intermediary (OTI) requirements. The Final Rule brings many changes to the existing rules, including new requirements. The changes include requiring OTIs to renew licenses every three years through an online portal beginning in late 2016 and adding a new hearing process for license denials, revocations or suspensions.  Except for license renewals, all aspects of the Final Rule are effective December 9, 2015.

This Final Rule reflects a multi-year rulemaking that focused on the freight forwarder and non-vessel operating common carrier (NVOCC) shipping sub-sector. Given the scope and sheer number of Commission regulated freight forwarders and NVOCCs – estimated by the Commission at 4,700 – the rulemaking received numerous comments from the industry. As expected, the resulting Final Rule is fairly comprehensive.

While there are many changes and all of the changes are relevant to the freight forwarder and NVOCC community, there are at least six that were subject to substantial comment. 

For one, the Commission altered its definitions for both freight forwarder services and NVOCC services. With the definition changes, the Commission seeks to align its own definitions with current industry practices. 

Additionally, the Commission added the notion of a “registered NVOCC” for NVOCCs based outside of the U.S. A registered NVOCC is one who opts not to be licensed as an NVOCC with the Commission, but, instead, the NVOCC registers with the Commission in accordance with its regulations, posts a bond or other surety, and publishes a tariff. 

Perhaps having the most immediate effect, the Commission reduced the financial burden previously imposed on some OTIs by way of deleting the bonding or surety requirement for each branch office. 

The Commission also expanded and clarified its scope of review when an applicant seeks a license from the Commission to include a diverse list of personal and professional information. 

As noted in the introduction, the additions require that Commission issued licenses be renewed every three years. While all other changes are scheduled to be effective as of December 9, 2015, the amendments regarding license renewals will not go into effect until December 9, 2016, as the Commission works to phase in existing license holders and develop a renewal process. 

For the compliance-minded operator subject to the Commission’s regulations, the Commission revised Section 515.27(b)(1) to include consulting the list of licensed and registered NVOCCs posted on the Commission's website as an acceptable method for common carriers to verify an NVOCC's compliance status.   

Many of the changes are consistent with the Commission’s current practices, so the effect is likely minimal or already realized. Removing the additional financial burden imposed on each branch should have a real and immediate effect for those who have been required to maintain a bond or other surety for each branch. As with any rulemaking, the long term effect of any particular rule change or any given new rule might not be realized for some time. 

While it is not directly related to this particular rulemaking, in the Closed Session following the Commission’s October 21 vote to issue this Final Rule, the Commission voted to proceed with a review of the Commission’s Service Contract and NVOCC Service Arrangement regulations. Accordingly, it is probably prudent for the broader regulated industry participants to begin considering how their particular business might be affected by the pending rulemaking, as well as contemplate what potential changes might warrant suggesting to the Commission. As with this Final Rule, comments from the industry will be key in assisting the Commission with its pending review of Service Contract and NVOCC Service Arrangement regulations.

The rule is available here.

Eric Lee is an Associate at Holland & Knight LLP.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.

This entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts.

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