United States: FMC Issues Final Rule Regarding Freight Forwarder And NVOCC Requirements

J. Michael Cavanaugh is a Partner and Eric Lee is an Associate in Holland & Knight's Washington D.C. office

The U.S. Federal Maritime Commission (FMC) issued its Final Rule in FMC Docket 13-05 on Nov. 3, 2015. The Commission's October vote in favor of issuing the Final Rule concluded a multiyear review and rulemaking that largely focused on 46 CFR Part 515.

Part 515 primarily provides the regulations governing freight forwarders, non-vessel operating common carriers (NVOCC) – U.S. or non-U.S. based – and other aspects of the ocean transportation intermediary (OTI) business. The full text of the FMC Docket 13-05 Final Rule is quite comprehensive. With the exception of the license renewal amendments, the OTI rule changes are effective Dec. 9, 2015.

Key Changes for Freight Forwarders and NVOCCs

  • Revised Section 515.2(h): "[F]reight forwarding services" are redefined in broader terms, so they now include "[p]reparing and/or processing export documents, including the required 'electronic export information'" and "[p]reparing and/or processing common carrier bills of lading or other shipping documents," which is an expansion by way of "common carrier" and "or other shipping documents."
  • Revised Section 515.2(k): "[N]on-vessel operating common carrier services" now include issuing "other shipping documents" and it no longer matters whether the issuance is "equivalent" to a bill of lading.
  • Revised Section 515.2(o): "[P]rincipal" is redefined to delete the introductory clause that referenced financial responsibility forms.
  • New Section 515.2(r): "[R]egistered non-vessel-operating common carrier" is a new term with a new definition ("Registered NVOCC"). A Registered NVOCC is an NVOCC located outside the United States that elects not to become licensed as an NVOCC but registers with the Commission as provided in §515.19, posts a bond or other surety, and publishes a tariff.
  • Revised Section 515.4: The FMC removed the additional financial requirements imposed on OTIs for each branch office by specifically deleting the requirements of Section 515.4(b)(1)(ii) and making corresponding changes in Section 515.21(a).
  • Revised Section 515.11(a)(2): The FMC also changed the current OTI licensing requirements. Now, the Commission may clearly consider violations of any shipping or international trade laws, operating as an OTI without a license or registration, state and federal felonies and misdemeanors, bankruptcies, tax liens, judgments and proceedings, immigration status, negative Transportation Worker Identification Credential (TWIC) history, and negative customs broker's license history.
  • New Sections 515.14(c) and (d): This new section requires license renewals to occur every three years, and the licensee must initiate the renewal and continued registration process 60 days prior to expiration. The FMC will phase in existing licenses over a three-year period, and the renewal requirements will not be effective until December 9, 2016. Suspension is not automatic and still requires positive Commission action, including notice and a hearing, and without such Commission action, the license remains effective.
  • New Section 515.17: With this addition, the FMC seeks to streamline an appeals process for OTIs facing the denial, revocation, or suspension of their license, but preserve the subject OTI's due process rights.
  • Revised Section 515.20: The FMC expanded OTI reporting requirements to include business address changes, conviction or indictment of the licensee (or other key individuals), bankruptcy filed by or naming a licensee (or other key individuals), changes of 5 percent or more in ownership or control, or changes of partners, members, or managers of a limited liability company or branch offices.
  • Revised Section 515.27(a): The FMC seeks to clarify and affirm that no common carrier may knowingly and willfully transport cargo for an NVOCC unless the carrier has determined that the NVOCC is licensed or registered and in compliance with tariff and bond requirements. The Commission revised Section 515.27(b)(1) to state that consulting the list of licensed and registered NVOCCs posted on the Commission's website is an acceptable method for carriers to verify an NVOCC's status.
  • Revised Section 515.31(g): All OTIs are required to respond to requests from the Commission, or its authorized representatives, and OTI principals must ensure that their agents respond to Commission inquiries.
  • Revised Section 515.33: OTIs' business records must be maintained in useable form and readily available to the Commission.

This rulemaking was conducted over a few years, and with it, there are many changes. While we have highlighted some of the key changes, how your particular business is affected by the changes is a unique question.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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