Licensing, Financial Responsibility Requirements, and General Duties for Ocean Transportation Intermediaries

FEDERAL MARITIME COMMISSION

46 CFR Parts 510, 515, and 583

[Docket No. 98-28]

Licensing, Financial Responsibility Requirements, and General

Duties for Ocean Transportation Intermediaries

AGENCY: Federal Maritime Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Federal Maritime Commission proposes to add new

regulations establishing licensing and financial responsibility

requirements for ocean transportation intermediaries in accordance with

the Shipping Act of 1984, as modified by the Ocean Shipping Reform Act

of 1998 (the Coast Guard Authorization Act of 1998).

DATES: Submit comments on or before January 21, 1999.

ADDRESSES: Address all comments concerning this proposed rule to:

Joseph C. Polking, Federal Maritime Commission, 800 North Capitol St.,

NW. Room 1046, Washington, DC. 20573-0001.

FOR FURTHER INFORMATION CONTACT:

Bryant L. VanBrakle, Director, Bureau of Tariffs, Certification and

Licensing, Federal Maritime Commission, 800 North Capitol Street, NW.,

Washington, DC. 20573-0001, (202) 523-5796.

Thomas Panebianco, General Counsel, Federal Maritime Commission, 800

North Capitol St., NW., Washington, DC 20573-0001, (202) 523-5740.

SUPPLEMENTARY INFORMATION: The Ocean Shipping Reform Act of 1998

(``OSRA''), Public Law 105-258, 112 Stat. 1902, amends the Shipping Act

of 1984 (``1984 Act''), 46 U.S.C. app. 1701 et seq., in several

respects relating to ocean freight forwarders and non-vessel-operating

common carriers (``NVOCCs''). The Federal Maritime Commission (``FMC''

or ``Commission'') proposes new regulations, at 46 CFR part 515, to

implement changes effectuated 5740by OSRA. In addition, the proposal

seeks to remove existing parts 510 and 583. Finally, under the

Commission's restructuring of its rules, the new part 515 will be

included in subchapter B of chapter IV, 46 CFR.

Licensing Requirements

OSRA applies the requirements of section 19 of the 1984 Act to all

``ocean transportation intermediaries'' (``OTIs'') in the United

States. An OTI means an ocean freight forwarder or an NVOCC as those

terms are defined by the 1984 Act. OSRA requires that all OTIs in the

United States be licensed by the Commission.

Proposed Sec. 515.3 seeks to license those OTIs who are performing

in the United States the services, or holding out to perform the

services, associated with the transportation of cargo to or from the

United States. The Commission has ruled that a freight forwarder must

perform ``traditional value added services'' as defined in

Secs. 515.2(i) and (n)(1) to be considered a freight forwarder. See In

Re: The Impact of Modern Technology on the Customs and Practices of the

Freight Forwarding Industry--Petition for Rulemaking: Order Denying

Petition for Rulemaking or Declaratory Order, 28 S.R.R. 418, 425

(1998). In addition, in determining whether a person is acting as a

common carrier, and thus as an NVOCC, as defined by section 3(6) of the

1984 Act, the Commission has consistently held that no single factor

determines a common carrier's status, but an essential characteristic

to be evaluated is ``whether he holds himself out to carry goods from

whomever offered to the extent of his ability to carry.'' Activities,

Filing Practices and Carrier Status of Containerships, Inc., 9 F.M.C.

56, 62 (1965).

The legislative history of OSRA directs the Commission to determine

``when foreign-based entities conducting business in the United States

are to be considered persons in the United States'' for purposes of the

licensing requirements of section 19 of the 1984 Act. S. Rep. No. 105-

61, 105th Cong., 1st Sess., at 31 (1997) (``Report''). Moreover, the

Commission is directed to consider that certain foreign-based OTIs

would not be licensed when establishing financial responsibility

requirements for OTIs. Id. Thus, the language clearly contemplates that

certain foreign-based OTIs engaged in the transportation of cargo to or

from the United States would not be licensed but would instead be

required to establish a higher amount of financial responsibility than

those OTIs who are `in the United States' for purposes of the 1984 Act.

One approach which the Commission considered and rejected would

have provided: ``For purposes of this part, a person is considered to

be `in the United States' if such person is incorporated in the United

States or maintains a physical presence in the United States through

another person, including a subsidiary, affiliate, agent or office

whether such subsidiary, affiliate, agent or office is incorporated or

unincorporated. Indicia of physical presence in the United States

include, but are not limited to, whether the person holds a taxpayer

identification number, or a state or local business license, or

maintains a mailing address in the United States. For purposes of this

part, the term `agent' does not include an agent for service of process

designated in accordance with Sec. 515.24.''

This definition would have required any foreign-based OTI providing

OTI services to or from the United States through an agent who is

physically present in the United States, regardless of the amount of

service that agent is providing to the foreign-based OTI, to be

licensed. Under this option, the Commission believes it would have been

imposing licensing requirements to a greater degree than envisioned by

OSRA (although the foreign-based OTIs who would have been licensed by

the Commission under this definition would not have been required to

obtain financial responsibility in the higher amount required under

Sec. 515.21(a)(4)). Because this approach would have given minimal

significance to the ``in the United States'' limitation, it is not

being proposed as a feasible option.

Rather, the proposed rule offers for comment two alternative

definitions of ``in the United States'' for purposes of the licensing

requirements of this part. The Commission recognizes that the first

proposed definition is relatively broad, and the second relatively

narrow. The Commission specifically requests comment on these proposed

definitions, suggestions for modifications, or additional approaches

which commenters may wish to offer.

Proposed definition number one provides: ``For purposes of this

part, a person is considered to be `in the United States' if such

person is resident in or incorporated or established under the laws of

the United States. Only 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.''

This definition would require all unlicensed foreign-based OTIs who

use an agent in the United States to provide OTI services to or from

the United States to use only licensed OTIs as their agents. Therefore,

an agent used by the unlicensed foreign-based OTI would have to be

providing OTI services in its own right and obtain its own OTI license

and financial responsibility. This would not, however, be a substitute

for the unlicensed foreign-based OTI's financial responsibility. All

unlicensed foreign-based OTIs would need to obtain financial

responsibility as required under proposed Sec. 515.21(a)(4).

The Commission recognizes that currently, many unlicensed foreign-

[[Page 70711]]

based OTIs use agents in the United States who provide only minimal

service, such as processing bills of lading. Providing this level of

service alone may not rise to the level of operating as an OTI.

Therefore, under this option, these agents would need to obtain an OTI

license or would be precluded from providing such services on behalf of

foreign-based OTIs.

The second proposed definition of ``in the United States''

provides: ``For purposes of this part, a person is considered to be `in

the United States' if such person is incorporated in, resident in, or

established under the laws of the United States, or otherwise maintains

a physical presence in the United States. Such indicia of physical

presence may include, but are not limited to, whether the person holds

a taxpayer identification number, a state or local business license, or

maintains a mailing address in the United States.''

This second option would license only those entities who are

freight forwarders or NVOCCs under proposed Sec. 515.2(n). It does not

contemplate licensing those entities in the United States who are

acting solely as agents for unlicensed foreign-based OTIs who provide

OTI services to or from the United States. For example, entities that

simply process bills of lading for an unlicensed foreign-based OTI

would not be required to be licensed. In those instances where an

unlicensed foreign-based OTI uses the limited services of such an

agent, the unlicensed foreign-based OTI would be required to furnish

the financial responsibility under proposed Sec. 515.21(a)(4).

Similarly, when a licensed OTI performs fewer services than would

qualify it as an OTI under Sec. 515.2(n) for an unlicensed foreign-

based OTI, then the unlicensed foreign-based OTI would furnish the

financial responsibility required under proposed Sec. 515.21(a)(4).

In order to better assess the impact of the proposed definition,

the Commission is particularly interested in receiving comment

regarding entities who are operating as agents in the United States and

the range of services they provide, specifically whether they are

performing minimal services, such as processing bills of lading, or

whether they are engaged in a full spectrum of OTI services, such as

booking vessel space, preparing documentation, and soliciting cargo.

The Commission is required to issue a license to any person that it

determines is qualified by experience and character to act as an OTI,

including all entities in the United States formerly known as NVOCCs.

The licensing requirements in 46 CFR part 510 mandate that freight

forwarders possess a minimum three years of experience in freight

forwarder duties in the United States, plus the necessary character to

render freight forwarder services. NVOCCs are currently not required to

be licensed. The proposed rule applies those licensing requirements

from part 510 to proposed part 515. As a result, all OTIs must possess

three years of experience providing OTI duties to be eligible for a

license. To effectuate this change, the Commission offers the following

guidance: all freight forwarders who have a valid license and proof of

financial responsibility in effect on May 1, 1999, will continue to be

licensed while the Commission issues those freight forwarders new

licenses as OTIs, provided that they increase their financial

responsibility as required by proposed subpart C by May 1, 1999.

NVOCCs must submit an application for a license and provide proof

of their increased financial responsibility as required by proposed

subpart C by April 30, 1999. Provided that such applicants have a valid

tariff and proof of financial responsibility in effect on May 1, 1999,

these NVOCCs will be provisionally licensed while the Commission

reviews their applications to determine if they meet the character and

experience requirements.

Because the new rules require that all OTIs possess three years of

experience in order to qualify for a license, and because some existing

NVOCCs may have less than the requisite three years, the Commission has

determined that any NVOCC with a tariff and evidence of its financial

responsibility in effect as of the date of publication of the proposed

part 515 in the Federal Register will be permitted to continue

operating as an NVOCC without the necessary experience. However, a

person operating under this arrangement may not act as a qualifying

individual for another ocean transportation intermediary until he or

she has obtained the necessary three years of experience in ocean

transportation intermediary services in the United States.

Exemption From Licensing Requirement

The Commission is proposing to exempt from its licensing

requirements any person which exclusively transports used household

goods and personal effects for the account of the Department of Defense

(``DOD'') or under the International Household Goods Program

administered by the General Services Administration (``GSA''). These

persons are currently exempt from the Commission's NVOCC financial

responsibility requirements of 46 CFR part 583 and that exemption is

being carried over into the proposed subpart C of part 515. These

carriers are exempt from the Commission's tariff and financial

responsibility requirements because they are subject to GSA

requirements that they post a bond and file their rates with GSA. In

addition, DOD requires that participants in its Personal Property

Program be licensed by that agency. These same reasons would appear to

permit the Commission to exempt these entities from the licensing

requirements of proposed part 515.

Financial Responsibility Requirements

All OTIs will be required to establish their financial

responsibility before performing any intermediary services in the

United States. Proposed subpart C of part 515 addresses issues arising

under this section. First, the bond, surety or other insurance obtained

pursuant to this requirement shall be available to pay for damages

suffered by ocean common carriers, shippers, and others, arising from

the transportation-related activities of the covered OTI. Report at 31.

As instructed by the Report, the Commission has defined transportation-

related activities at proposed Sec. 515.2(v) to include all of the

freight forwarding activities enumerated in proposed Sec. 515.2(i), as

well as other specified activities. The Report specifically indicates

that the bonds, or other instruments of financial responsibility, are

intended to cover liabilities related to service contract obligations,

as well as damages resulting from loss or conversion of cargo, from the

negligence or complicity of the insured entity, or from nonperformance

of services. Report at 31. The Commission's definition of

transportation-related activities is not meant to be inclusive, but

rather to indicate the broad spectrum of activities which OTIs may

engage in, and which shall be covered by the OTIs' instruments of

financial responsibility. To the extent, however, that someone who

operates as an OTI also provides non-OTI services, those services would

not be covered by the bond, surety or other insurance. This position is

consistent with the Commission's determination in Docket No. 91-1,

Bonding of Non-vessel-operating Common Carriers, 25 S.R.R. 1679, 1685

(1991), modified on other grounds, 26 S.R.R. 137 (1992), wherein the

Commission stated:

As Congress has indicated, the bond is intended to ``* * * be

available to pay any judgment for damages arising out of an NVOCC's

activities as an ocean common carrier providing ocean transportation

services.'' (citation omitted). To the extent

[[Page 70712]]

that someone who operates as an NVOCC also provides non-NVOCC

services, those services would not be covered by the bond.

25 S.R.R. at 1685.

The Commission also establishes new procedures, at proposed

Sec. 515.23, for pursuing claims against OTIs. Any party may seek an

order for reparation at the Commission pursuant to sections 11 or 14 of

the 1984 Act. Alternatively, where a claimant seeks relief in an

appropriate court, the claimant shall attempt to resolve its claim with

the financial responsibility provider prior to seeking payment on any

judgment it has or will obtain. The Commission believes that it does

not have the authority to limit or prevent a claimant from seeking

judicial access prior to pursuing a settlement with the financial

responsibility provider, particularly where such restrictions could

prevent claimants from filing their actions within a statute of

limitations. However, in light of the Report language directing the

Commission to establish an alternative process for resolving claims

against the OTI's instrument of financial responsibility, the

Commission believes that it may require the claimant to seek a

settlement prior to enforcing any judgment it has or will obtain.

Therefore, the rules provide that upon notification of the complaint,

the financial responsibility provider and claimant can settle the claim

with the OTI's consent, or, if the OTI fails to respond to the notice

of the claim within 45 days, the financial responsibility provider and

claimant can settle the claim on their own. If, however, the parties

fail to reach agreement within 90 days, then the bond, surety or other

insurance shall be available to pay any judgment for damages to the

extent they arise from the transportation-related activities of the

OTI.

Proposed Sec. 515.23 provides that ordinarily, the financial

responsibility provider shall pay the judgment within 10 days; within

that time, the financial responsibility provider may inquire into the

subject matter of the judgment to ensure that it is for damages covered

by the instrument of financial responsibility--i.e. that it arises from

transportation-related activities. Report at 31. However, the

Commission is aware that there may be instances where the financial

responsibility provider has a legitimate challenge to a judgment. For

example, in the event that a claimant obtains a default judgment as a

result of invalid service of process, or some other procedural defect,

the financial responsibility provider may seek to vacate the judgment.

To that limited extent, the Commission recognizes that the financial

responsibility provider may have a genuine basis for inquiring into the

validity of the judgment as well.

In proposed Sec. 515.21, the Commission proposes to establish a

range of financial responsibility requirements commensurate with the

scope of the activities conducted by the different OTIs and the past

fitness of OTIs in the performance of intermediary services. Report at

31-32. Thus, OTIs operating as freight forwarders in the United States

will be required to establish financial responsibility in the amount of

$50,000; OTIs operating as NVOCCs in the United States in the amount of

$75,000; and OTIs operating as both freight forwarders and NVOCCs in

the United States will be required to establish financial

responsibility in the amount of $100,000. Unlicensed foreign-based

entities that provide OTI services for transportation to or from the

United States but are not operating ``in the United States'' as defined

in proposed Sec. 515.3 will be required to establish financial

responsibility in the amount of $150,000. Groups or associations of

OTIs will be able to provide financial responsibility for their members

with the maximum aggregate amount of $3,000,000.

Proposed Sec. 515.21 seeks to increase the amount of financial

responsibility required to be provided by OTIs to more accurately

reflect the diversity of activities engaged in by OTIs. The current

NVOCC financial responsibility amount of $50,000 was established by the

Non-Vessel-Operating Common Carrier Amendments of 1990, Pub. L. 101-

595. At that time, House Merchant Marine and Fisheries Chairman Walter

B. Jones commented that the $50,000 was a minimum amount, which the

Commission would ``have the continuing flexibility to adjust * * * as

changing circumstances warrant.'' 136 Cong. Rec. E2210-2211 (June 28,

1990). Thus far, the Commission has not increased the amount of

financial responsibility required by an NVOCC, but current

circumstances warrant the increased amounts proposed here. The FMC has

faced an increasing number of NVOCCs who have gone bankrupt or changed

company names to avoid their responsibilities arising from

transportation-related activities, thereby augmenting the importance of

an adequate bond, surety or other insurance. Increasingly, injured

shippers have not been made whole when seeking reparation from the

instrument of financial responsibility. We note as well the diverse

activities engaged in by OTIs due to the innovations and technological

advances made by the shipping industry. The increased amounts proposed

here will better protect the shipping public.

In addition, the Report directs the FMC to consider, when

establishing the amount of financial responsibility necessary for

foreign-based OTIs, that such OTIs are not ``in the United States'' as

defined by proposed Sec. 515.3, and, therefore, are not subject to the

Commission's licensing requirements, but nonetheless provide ocean

transportation intermediary services for transportation to or from the

United States. Report at 31. Accordingly, the Commission has

established different levels of financial responsibility requirements,

increasing the amount of financial responsibility required by foreign

entities, based on the high volume of judgments obtained against

foreign-based NVOCCs and the extent of financial injuries to shippers

that have resulted.

Proposed Sec. 515.27 amends the means by which a common carrier can

obtain proof of an NVOCC's compliance with the tariff and financial

responsibility requirements of the 1984 Act. Currently, part 583

provides that a common carrier can consult a list provided by the

Commission of bonded and tariffed NVOCCs. Because tariffs will no

longer be filed with the Commission, the proposal provides that

carriers may review a copy of the NVOCC's tariff published in

accordance with part 520 of this chapter, either through the NVOCC's

website or by other means established by the NVOCC. Carriers also will

be able to contact the Commission to verify that an NVOCC has filed

evidence of its financial responsibility. Additionally, the Commission

proposes in Sec. 515.27(d) that it will publish at its website a list

of the locations of all carrier and conference tariffs, as well as a

list of all OTIs who have furnished the Commission with evidence of

their financial responsibility. The Commission seeks comments on this

proposal. Carriers may adopt other appropriate procedures for purposes

of this section, so long as such procedures are set forth in the

carrier's tariff.

Duties and Responsibilities of OTIs

OSRA requires all NVOCCs to be licensed as OTIs under section 19 of

the 1984 Act, and thus, as licensees, NVOCCs are subjected to the same

responsibilities as ocean freight forwarders. Proposed Sec. 515.31

incorporates many of the duties of freight forwarders from 46 CFR

510.21 and 46 CFR 510.22 and applies them to all licensees. Those

duties include a freight forwarder's responsibility to its principal,

as defined in proposed

[[Page 70713]]

Sec. 515.2(p); an NVOCC's responsibility to its shipper, as defined in

proposed Sec. 515.2(s); and a licensed OTI's responsibility to the

Commission generally. In addition, the recordkeeping requirements of

licensed freight forwarders under 46 CFR 510.24 would now be applicable

to all licensees. This is reflected in proposed Sec. 515.32.

Proposed subpart E incorporates most of the regulations of 46 CFR

510.22 and 510.23 relating to the fees and compensation paid in

exchange for freight forwarding services, and adds two sections

regarding in-plant arrangements and electronic data interchange.

Proposed Sec. 515.41(e) provides for the placement of a licensed

freight forwarder's employee(s) on the premises of its principal as

part of a package of freight forwarding services rendered to that

principal. However, in order to prevent such an arrangement from being

an artifice for an unlawful payment to the principal, it is required

that the forwarder and principal document their in-plant arrangement by

executing a special contract (not filed with the Commission) under

proposed Sec. 515.32(d). (Under current regulations at 46 CFR

510.24(d), a licensee is required to maintain a true and complete copy,

or if oral, a true and complete memorandum, of every special

arrangement or contract with a principal, or modification or

cancellation thereof, to which it may be a party). The special contract

shall identify all the details of the arrangement, including the

freight forwarding services to be performed by the employee(s). This

section is not intended to reach incidental visits to the principal's

premises by a forwarder employee or meetings between forwarders and

principals, but rather seeks to reach the forwarder employee placed on

the principal's premises to perform freight forwarding services on a

recurring or continuing basis or for a fixed period of time.

Further, proposed Sec. 515.42(e) provides that a licensed freight

forwarder may operate an electronic data interchange computer-based

system in its forwarding business. In order to collect carrier

compensation, however, the forwarder must also perform the traditional

value-added services of booking, securing, or confirming space for

cargo and preparing and processing shipping documents, and certify the

performance of those services to the carrier.

The reporting, recordkeeping and disclosure requirements contained

in this proposed rule have been submitted to the Office of Management

and Budget (OMB). Public burden for this collection of information is

estimated at 5,164 man-hours for 4,600 OTIs. This estimate includes, as

applicable, the time needed to review instructions, develop, acquire,

install, and utilize technology and systems for the purposes of

collecting, validating, and verifying information, processing and

maintaining information, and disclosing and providing information;

adjust the existing ways to comply with any previously applicable

instructions and requirements; train personnel to respond to a

collection of information, search existing data sources, gather and

maintain the data needed, and complete and review the collection of

information; and transmit or otherwise disclose the information.

Send comments regarding the burden estimates to the Office of

Information and Regulatory Affairs, Office of Management and Budget,

Attention Desk Officer for the Federal Maritime Commission, New

Executive Office Building, 725 17th Street, NW., Washington, DC 20503

within 30 days of publication in the Federal Register.

The FMC would also like to solicit comments to: (a) Evaluate

whether the proposed collection of information is necessary for the

proper performance of the functions of the agency, including whether

the information will have practical utility; (b) evaluate the accuracy

of the Commission's burden estimates for the proposed collection of

information; (c) enhance the quality, utility, and clarity of the

information to be collected; and (d) minimize the burden of the

collection of information on respondents, including through the use of

automated collection techniques or other forms of information

technology. Comments submitted in response to this proposed rulemaking

will be summarized and/or included in the final rule and will become a

matter of public record.

Initial Regulatory Flexibility Analysis

Why the Commission is Considering the New Rule

The Commission proposes to add new regulations establishing

licensing and financial responsibility requirements for OTIs in

accordance with the 1984 Act, as modified by OSRA and part 424 of Pub.

L. 105-383 (The Coast Guard Authorization Act of 1998).

Objectives and Legal Basis for the New Rule

OSRA amends the 1984 Act in several respects relating to ocean

freight forwarders and NVOCCs. The Commission proposes new regulations,

at 46 CFR part 515, to implement changes effectuated by OSRA.

OSRA requires that all OTIs in the United States be licensed by the

Commission. Further, all OTIs will be required to establish their

financial responsibility before performing any intermediary services in

the United States. The bond, surety or other insurance obtained

pursuant to this requirement shall be available to pay for damages

suffered by ocean common carriers, shippers, and others, arising from

the transportation-related activities of the covered OTIs. Report at

31.

The Report specifically indicates that the bonds, or other

instruments of financial responsibility, are intended to cover

liabilities related to service contract obligations, as well as damages

resulting from loss or conversion of cargo, from the negligence or

complicity of the insured entity, or from nonperformance of services.

The new rule proposes to establish a range of financial responsibility

requirements commensurate with the scope of the activities conducted by

the different OTIs and the past fitness of OTIs in the performance of

intermediary duties.

Description of and Estimate of the Number of Small Entities to Which

the New Rule Will Apply

To determine whether a business should be considered a small

entity, the Small Business Administration (``SBA'') has established

statutory definitions of small businesses (13 CFR part 121, FR January

31, 1996). Businesses classified in the Standard Industrial

Classification code 4731, including ocean freight forwarders and

NVOCCs, are evaluated by the their annual receipts (gross annual

revenues). Ocean freight forwarders and NVOCCs with less than $18.5

million in annual receipts are considered small businesses by SBA. The

Commission does not have OTI revenue data readily available, but in

general, is aware that a handful of OTIs handle the bulk of the

intermediary cargo in the U.S. trades, while most OTIs are small

operators. Without specific OTI revenue data, however, the Commission

assumes that most if not all OTIs have revenues of less than $18.5

million, and are considered to be small businesses.

Projected Reporting, Record Keeping and Other Compliance Requirements

of the New Rule

It is estimated that the new rule will impose, in varying degrees,

a reporting burden on the entire OTI universe. The burden is calculated

on the estimated amount of cost and time necessary to comply with

various requirements of 46

[[Page 70714]]

CFR part 510. Calculated below are the estimated costs resulting from

the new rule.

Cost to the Government

The additional burden to the government, i.e., the Commission, as a

result of the new rule is expected to be minimal. The Commission does

not anticipate hiring any additional staff to administer changes

occurring from the new rule, but is expected to handle the anticipated

additional workload with existing Commission staff.

Cost of Filing Time

The new rule proposes changing the Commission's rules by requiring

U.S.-based NVOCCs and ocean freight forwarders also operating as NVOCCs

to be licensed with the FMC. It also requires foreign-based NVOCCs to

establish financial responsibility. It could also involve the licensing

of agents of foreign-based NVOCCs. Ocean freight forwarders operating

solely as ocean freight forwarders in the U.S. export trade are already

required to be licensed with the Commission under the current rules,

and would therefore be unaffected by this change.

Based on a survey conducted by the Commission, it is estimated that

the average hourly labor cost to file evidence of financial

responsibility or complete a new license application is $41. Further,

it is estimated to currently take individual ocean freight forwarders

3.5 hours to file evidence of financial responsibility and complete a

new license application at an average labor cost to the respondent of

$144. This cost takes into account time to gather information and

complete the application form, as well as time to comply with the

requirements of the rules. Since the licensing application form and

financial responsibility procedures will remain substantively unchanged

under the new rule, it is estimated that the additional labor cost of

the new rule to each U.S.-based NVOCC will be $144 in the first year.

Based on the Commission's survey, it is estimated that it would

take each foreign-based NVOCC 1.5 hours of staff time to file evidence

of financial responsibility at an average labor cost to the respondent

of $62 in the first year. Each ocean freight forwarder also operating

as an NVOCC would require 0.5 hours per year to amend their

applications and their financial responsibility at an average labor

cost to the respondent of $21 in the first year.

The total additional labor cost of the new rule is expected to

reach almost $255,000 in the first year. In subsequent years, since all

operating NVOCCs and ocean freight forwarders also operating as NVOCCs

will have financial responsibility and/or be licensed, the total labor

cost for filing time is expected to decrease substantially.

Cost of Licensing Fee

The Commission's current user fees for processing a new application

is $778, and $362 for an amendment. The new rule changes the current

requirements by requiring U.S.-based NVOCCs to file a new application

to become licensed. Further, ocean freight forwarders also operating as

NVOCCs will be required to amend their licenses. However, since

licensing fees do not change under the new rule, ocean freight

forwarders in the U.S. export trade that are already required to be

licensed with the Commission will not be affected in this regard.

Further, foreign-based NVOCCs are not required to be licensed under the

new rule. U.S.-based agents of foreign-based NVOCCs might be required

to be licensed. Since it is presumed that most would already be

licensed, the impact is expected to be de minimis. The total additional

licensing cost to OTIs to comply with the new rule is estimated to be

$1.3 million.

Cost of Increasing the Financial Responsibility Requirement

The new rule proposes raising the financial responsibility

requirement for: Ocean freight forwarders operating solely as ocean

freight forwarders in the U.S. export trade from $30,000 to $50,000,

with $10,000 in additional coverage for each unincorporated branch

office; U.S.-based NVOCCs will be required to increase their financial

responsibility from $50,000 to $75,000 with $10,000 in additional

coverage for each unincorporated branch office that is not already

covered under an ocean freight forwarder's financial responsibility;

and foreign-based NVOCCs will be required to increase their financial

responsibility from $50,000 to $150,000. Entities that operate as both

ocean freight forwarders and NVOCCs are presently required to have

separate financial responsibility, financial responsibility in the

amount of $30,000 covering their freight forwarding activity and

financial responsibility in the amount of $50,000 covering their NVOCC

activity. The new rule will increase their financial responsibility

coverage from two totaling $80,000 to one totaling $100,000. The new

rule would further require ocean freight forwarders also operating as

NVOCCs to have $10,000 in additional coverage for each unincorporated

branch office that is not already covered under an ocean freight

forwarder's financial responsibility.

The new rule also proposes broadening the option for group

financial responsibility to include ocean freight forwarders as well as

NVOCCs, while raising the group financial responsibility requirement

from $1 million to $3 million. There are currently three group proofs

of financial responsibility on file with the Commission with a total of

166 NVOCC members. By posting group financial responsibility, it is

believed that participants save on premium payments by receiving a

group coverage rate. However, it is difficult to project how many ocean

freight forwarders would opt for group financial responsibility as a

result of the new rule. Therefore, it is not feasible to forecast the

potential cost savings to the industry of modifying the group financial

responsibility provision in the new rule. Instead, the Commission will

assume that all OTIs will post financial responsibility at the higher

individual premium rate.

For individual financial responsibility coverage, the Commission

estimates that the premium for establishing financial responsibility

ranges from $800 to $1,200 per year for $50,000 in financial

responsibility coverage. The Commission employed an average premium

cost of $1,000 per year for $50,000 in bond coverage to calculate the

cost to OTIs of the proposed increases in financial responsibility

coverages. In addition, the proportion of ocean freight forwarders to

branch offices was applied to estimate the number of NVOCC

unincorporated branch offices.

The Commission estimates that the average cost to OTIs of

additional financial responsibility requirements is as follows: Ocean

freight forwarders operating solely as ocean freight forwarders in the

U.S. export trade will pay $887,000 more ($578 per entity) per year for

financial responsibility; ocean freight forwarders also operating as

NVOCCs will pay $297,000 more per year ($578 per entity); U.S.-based

NVOCCs will pay $967,000 more per year ($678 per entity); and foreign-

based NVOCCs will pay $1,252,000 more per year ($2,000 per entity). The

total first year cost of increased financial responsibility

requirements for all entities under the new rule totals $3.4 million.

In some cases, financial responsibility underwriters may require

individual OTIs to provide collateral in order to secure a financial

responsibility. Collateral accounts typically accrue interest at a

risk-free rate until they are claimed or remitted in full to an OTI.

[[Page 70715]]

However, when considering the industry as a whole, funds that are set

aside as collateral could be otherwise invested in higher earning

assets, such as in an OTI's business operations, thereby effectively

assessing a cost to OTIs. Calculating the opportunity cost of increased

collateral requires specific data on individual OTI's financial and

operating riskiness. However, the Commission does not have that

information available. In lieu of such information, and in order to

ensure that no substantial economic impact is overlooked, the

Commission solicits comments concerning the effects of the cost of

increased collateral and premium requirements on OTIs.

Summary of Costs

In the first year of its implementation, the additional burden of

the new rule is expected to average $1,600 for each U.S.-based NVOCC,

$2,062 for each foreign-based NVOCC, $961 for each ocean freight

forwarder also operating as an NVOCC, and $578 for each ocean freight

forwarder operating solely as an ocean freight forwarder in the U.S.

export trade. The total additional first year cost as a result of the

new rule is estimated to be almost $5 million.

The new rule seeks to increase the amount of financial

responsibility required to be provided by OTIs to more accurately

reflect the diversity of activities engaged in by OTIs. The current

NVOCC financial responsibility amount of $50,000 was established by the

Non-Vessel-Operating Common Carrier Amendments of 1990, Pub. L. 101-

195. At that time, House Merchant Marine and Fisheries Chairman Walter

B. Jones commented that the $50,000 was a minimum amount, which the

Commission would ``have the continuing flexibility to adjust * * * as

changing circumstances warrant.'' 136 Cong. Rec. E2210-2211 (June 28,

1990). Thus far, the Commission has not increased the amount of

financial responsibility required by an NVOCC, but current

circumstances warrant the increased amounts proposed here. The

Commission has pursued several investigations against NVOCCs in which

the $50,000 liability amount has fallen short of the penalties

assessed. The Commission has faced an increasing number of NVOCCs who

have gone bankrupt or changed company names to avoid their

responsibilities arising from transportation-related activities,

thereby augmenting the importance of an adequate bond, surety or other

insurance. Increasingly, injured shippers have not been made whole when

seeking reparation from the instrument of financial responsibility. The

Commission notes as well the diverse activities engaged in by OTIs due

to the innovations and technological advances made by the shipping

industry. The increased amounts proposed in the new rule will better

protect the shipping public.

In addition, the Report directs the FMC to consider that some

foreign-based OTIs are not ``in the United States'' as defined by

proposed Sec. 515.3, and, therefore are not subject to the Commission's

licensing requirements, but do provide ocean transportation

intermediary services for transportation to or from the United States,

when establishing the amount of financial responsibility necessary for

such OTIs. Report at 31. Accordingly, the Commission has established

different levels of financial responsibility requirements, increasing

the amount of financial responsibility required by foreign entities,

based on the high volume of judgments obtained against foreign-based

NVOCCs and the extent of financial injuries to shippers that have

resulted.

The Commission cannot certify that the new rule will not have a

significant economic impact on a substantial number of small entities.

However, based on the above discussion, the Commission believes that

the burden imposed on small ocean freight forwarders and NVOCCs as a

result of the new rule is justified and necessary in light of the

legislative benefit to effect these changes, and because of the benefit

to the shipping public and to carriers gained by licensing and

requiring financial responsibility of all OTIs.

Relevant Federal Rules That may Duplicate, Overlap, or Conflict With

the New Rule

The Commission is not aware of any other federal rules that

duplicate, overlap, or conflict with the new rule.

List of Subjects in 46 CFR parts 510, 515 and 583

Exports, Freight forwarders, Non-vessel-operating common carriers,

Ocean transportation intermediaries, Licensing requirements, Financial

responsibility requirements, Reports and recordkeeping requirements,

surety bonds.

Under the authority of Pub. L. 105-258 and as discussed in the

preamble, the Federal Maritime Commission proposes to amend subchapter

B, chapter IV, of 46 CFR as follows:

PART 510--[REMOVED]

1. Remove Part 510

PART 583--[REMOVED]

2. Remove Part 583

3. Revise the heading of subchapter B to read as follows:

SUBCHAPTER B--REGULATIONS AFFECTING OCEAN SHIPPING IN FOREIGN COMMERCE

4. Add Part 515 as follows:

PART 515--LICENSING, FINANCIAL RESPONSIBILITY REQUIREMENTS, AND

GENERAL DUTIES FOR OCEAN TRANSPORTATION INTERMEDIARIES

Subpart A--General

Sec.

515.1 Scope.

515.2 Definitions.

515.3 License; when required.

515.4 License; when not required.

515.5 Forms and fees.

Subpart B--Eligibility and Procedure for Licensing

515.11 Basic requirements for licensing; eligibility.

515.12 Application for license.

515.13 Investigation of applicants.

515.14 Issuance and use of license.

515.15 Denial of license.

515.16 Revocation or suspension of license.

515.17 Application after revocation or denial.

515.18 Changes in organization.

Subpart C--Financial Responsibility Requirements; Claims Against Ocean

Transportation Intermediaries

515.21 Financial responsibility requirements.

515.22 Proof of financial responsibility.

515.23 Claims against an ocean transportation intermediary.

515.24 Agent for service of process.

515.25 Filing of proof of financial responsibility.

515.26 Termination of financial responsibility.

515.27 Proof of compliance.

Appendix A to Subpart C of Part 515--Ocean Transportation

Intermediary (OTI) Bond Form [Form 48]

Appendix B to Subpart C of Part 515--Ocean Transportation

Intermediary (OTI) Insurance Form [Form 67]

Appendix C to Subpart C of Part 515--Ocean Transportation

Intermediary (OTI) Guaranty Form [Form 68]

Appendix D to Subpart C Part 515--Ocean Transportation Intermediary

(OTI) Group Bond Form [FMC-69]

Subpart D--Duties and Responsibilities of Ocean Transportation

Intermediaries; Reports to Commission

515.31 General duties.

515.32 Records required to be kept.

515.33 Regulated Persons Index.

[[Page 70716]]

Subpart E--Freight Forwarding Fees and Compensation

515.41 Forwarder and principal; fees.

515.42 Forwarder and carrier; compensation.

Authority: 5 U.S.C. 553; 31 U.S.C. 9701; 46 U.S.C. app. 1702,

1707, 1709, 1710, 1712, 1714, 1716, and 1718, as amended by Pub. L.

105-258, 112 Stat. 1902, and Pub. L. 105-383, 112 Stat. 3411; 21

U.S.C. 862.

Subpart A--General

Sec. 515.1 Scope.

(a) This part sets forth regulations providing for the licensing as

ocean transportation intermediaries of persons who wish to carry on the

business of providing intermediary services, including the grounds and

procedures for revocation and suspension of licenses. This part also

prescribes the financial responsibility requirements and the duties and

responsibilities of ocean transportation intermediaries, and

regulations concerning practices of ocean transportation intermediaries

with respect to common carriers.

(b) Information obtained under this part is used to determine the

qualifications of ocean transportation intermediaries and their

compliance with shipping statutes and regulations. Failure to follow

the provisions of this part may result in denial, revocation or

suspension of an ocean transportation intermediary license. Persons

operating without the proper license may be subject to civil penalties

not to exceed $5,500 for each such violation unless the violation is

willfully and knowingly committed, in which case the amount of the

civil penalty may not exceed $27,500 for each violation; for other

violations of the provisions of this part, the civil penalties range

from $5,500 to $27,500 for each violation (46 U.S.C. app. 1712). Each

day of a continuing violation shall constitute a separate violation.

Sec. 515.2 Definitions.

The terms used in this part are defined as follows:

(a) Act means the Shipping Act of 1984, as amended by the Ocean

Shipping Reform Act of 1998 and the Coast Guard Authorization Act of

1998.

(b) Beneficial interest includes a lien or interest in or right to

use, enjoy, profit, benefit, or receive any advantage, either

proprietary or financial, from the whole or any part of a shipment of

cargo where such interest arises from the financing of the shipment or

by operation of law, or by agreement, express or implied. The term

``beneficial interest'' shall not include any obligation in favor of an

ocean transportation intermediary arising solely by reason of the

advance of out-of-pocket expenses incurred in dispatching a shipment.

(c) Branch office means any office in the United States established

by or maintained by or under the control of a licensee for the purpose

of rendering intermediary services, which office is located at an

address different from that of the licensee's designated home office.

This term does not include a separately incorporated entity.

(d) Brokerage refers to payment by a common carrier to an ocean

freight broker for the performance of services as specified in

paragraph (m) of this section.

(e) Commission means the Federal Maritime Commission.

(f) Common carrier means any person holding itself out to the

general public to provide transportation by water of passengers or

cargo between the United States and a foreign country for compensation

that:

(1) Assumes responsibility for the transportation from the port or

point of receipt to the port or point of destination, and

(2) Utilizes, for all or part of that transportation, a vessel

operating on the high seas or the Great Lakes between a port in the

United States and a port in a foreign country, except that the term

does not include a common carrier engaged in ocean transportation by

ferry boat, ocean tramp, chemical parcel tanker, or by a vessel when

primarily engaged in the carriage of perishable agricultural

commodities.

(i) If the common carrier and the owner of those commodities are

wholly-owned, directly or indirectly, by a person primarily engaged in

the marketing and distribution of those commodities, and

(ii) Only with respect to those commodities.

(g) Compensation means payment by a common carrier to a freight

forwarder for the performance of services as specified in

Sec. 515.42(c).

(h) Freight forwarding fee means charges billed by a freight

forwarder to a shipper, consignee, seller, purchaser, or any agent

thereof, for the performance of freight forwarding services.

(i) Freight forwarding services refers to the dispatching of

shipments on behalf of others, in order to facilitate shipment by a

common carrier, which may include, but are not limited to, the

following:

(1) Ordering cargo to port;

(2) Preparing and/or processing export declarations;

(3) Booking, arranging for or confirming cargo space;

(4) Preparing or processing delivery orders or dock receipts;

(5) Preparing and/or processing ocean bills of lading;

(6) Preparing or processing consular documents or arranging for

their certification;

(7) Arranging for warehouse storage;

(8) Arranging for cargo insurance;

(9) Clearing shipments in accordance with United States Government

export regulations;

(10) Preparing and/or sending advance notifications of shipments or

other documents to banks, shippers, or consignees, as required;

(11) Handling freight or other monies advanced by shippers, or

remitting or advancing freight or other monies or credit in connection

with the dispatching of shipments;

(12) Coordinating the movement of shipments from origin to vessel;

and

(13) Giving expert advice to exporters concerning letters of

credit, other documents, licenses or inspections, or on problems

germane to the cargoes' dispatch.

(j) From the United States means oceanborne export commerce from

the United States, its territories, or possessions, to foreign

countries.

(k) Licensee is any person licensed by the Federal Maritime

Commission as an ocean transportation intermediary.

(l) Ocean common carrier means a vessel-operating common carrier

(``VOCC'').

(m) Ocean freight broker is an entity which is engaged by a carrier

to secure cargo for such carrier and/or to sell or offer for sale ocean

transportation services and which holds itself out to the public as one

who negotiates between shipper or consignee and carrier for the

purchase, sale, conditions and terms of transportation.

(n) Ocean transportation intermediary means an ocean freight

forwarder or a non-vessel-operating common carrier. For the purposes of

this part, the term

(1) Ocean freight forwarder means a person that--

(i) in the United States, dispatches shipments from the United

States via a common carrier and books or otherwise arranges space for

those shipments on behalf of shippers; and

(ii) processes the documentation or performs related activities

incident to those shipments; and

(2) Non-vessel-operating common carrier (``NVOCC'') means a common

carrier that does not operate the vessels by which the ocean

transportation is provided, and is a shipper in its relationship with

an ocean common carrier.

(o) Person includes individuals, corporations, partnerships and

[[Page 70717]]

associations existing under or authorized by the laws of the United

States or of a foreign country.

(p) Principal, except as used in Surety Bond Form FMC 48, Rev. and

Group Bond Form FMC 69, refers to the shipper, consignee, seller, or

purchaser of property, and to anyone acting on behalf of such shipper,

consignee, seller, or purchaser of property, who employs the services

of a licensed freight forwarder to facilitate the ocean transportation

of such property.

(q) Reduced forwarding fees means charges to a principal for

forwarding services that are below the licensed freight forwarder's

usual charges for such services.

(r) Shipment means all of the cargo carried under the terms of a

single bill of lading.

(s) Shipper means:

(1) A cargo owner;

(2) The person for whose account the ocean transportation is

provided;

(3) The person to whom delivery is to be made;

(4) A shippers' association; or

(5) A non-vessel-operating common carrier that accepts

responsibility for payment of all charges applicable under the tariff

or service contract.

(t) Small shipment refers to a single shipment sent by one

consignor to one consignee on one bill of lading which does not exceed

the underlying common carrier's minimum charge rule.

(u) Special contract is a contract for freight forwarding services

which provides for a periodic lump sum fee.

(v) Transportation-related activities which are covered by the

bond, surety or other insurance obtained pursuant to this part,

include, to the extent involved in the foreign commerce of the United

States, the freight forwarding services enumerated in paragraph (i) of

this section, and, in addition, may include, but are not limited to,

the following:

(1) Payment of ocean freight charges;

(2) Payment of inland charges for through movements;

(3) Loss or conversion of cargo;

(4) Service contract obligations of an NVOCC, as a shipper;

(5) Obligations as an NVOCC member of a shippers' association;

(6) Cargo damage;

(7) Delay in shipment; and

(8) Breach of fiduciary responsibility.

(w) United States includes the several States, the District of

Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the

Northern Marianas, and all other United States territories and

possessions.

Sec. 515.3 License; when required.

Except as otherwise provided in this part, no person in the United

States may act as an ocean transportation intermediary unless that

person holds a valid license issued by the Commission. A separate

license is required for each branch office that is separately

incorporated. (For purposes of this part, a person is considered to be

``in the United States'' if such person is resident in or incorporated

or established under the laws of the United States. Only 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.) or (For purposes of

this part, a person is considered to be ``in the United States'' if

such person is incorporated in, resident in, or established under the

laws of the United States, or otherwise maintains a physical presence

in the United States. Such indicia of physical presence may include,

but are not limited to, whether the person holds a taxpayer

identification number, a state or local business license, or maintains

a mailing address in the United States.)

Sec. 515.4 License; when not required.

A license is not required in the following circumstances:

(a) Shipper. Any person whose primary business is the sale of

merchandise may, without a license, dispatch and perform freight

forwarding services on behalf of its own shipments, or on behalf of

shipments or consolidated shipments of a parent, subsidiary, affiliate,

or associated company. Such person shall not receive compensation from

the common carrier for any services rendered in connection with such

shipments.

(b) Employee or branch office of licensed ocean transportation

intermediary. (1) An individual employee or unincorporated branch

office of a licensed ocean transportation intermediary is not required

to be licensed in order to act solely for such licensee, provided that

such branch offices:

(i) Have been reported to the Commission in writing; and

(ii) Are covered by an increased bond in accordance with

Sec. 515.21(a)(5).

(2) Each licensed ocean transportation intermediary will be held

strictly responsible for the acts or omissions of any of its employees

or agents rendered in connection with the conduct of its business.

(c) Common carrier. A common carrier, or agent thereof, may perform

ocean freight forwarding services without a license only with respect

to cargo carried under such carrier's own bill of lading. Charges for

such forwarding services shall be assessed in conformance with the

carrier's published tariffs.

(d) Ocean freight brokers. An ocean freight broker is not required

to be licensed to perform those services specified in Sec. 515.2(m).

(e) Federal military and civilian household goods. Any person which

exclusively transports used household goods and personal effects for

the account of the Department of Defense, or for the account of the

federal civilian executive agencies shipping under the International

Household Goods Program administered by the General Services

Administration, or both, is not subject to the requirements of subpart

B of this part, but may be subject to other requirements, such as

alternative surety bonding, imposed by the Department of Defense, or

the General Services Administration.

Sec. 515.5 Forms and fees.

(a) Forms. License form FMC-18 Rev., and financial responsibility

forms FMC-48, FMC-67, FMC-68, FMC-69 may be obtained from the

Commission's website at www.fmc.gov, the Director, Bureau of Tariffs,

Certification and Licensing, Federal Maritime Commission, Washington,

DC 20573, or from any of the Commission's area representatives.

(b) Fees. All fees shall be payable by money order, certified

check, cashier's check, or personal check to the ``Federal Maritime

Commission.'' Should a personal check not be honored when presented for

payment, the processing of an application under this section shall be

suspended until the processing fee is paid. In any instance where an

application has been processed in whole or in part, the fee will not be

refunded. Such fees are:

(1) Application for License as required by Sec. 515.12(a): $778;

(2) Application for status change of license transfer as required

by Secs. 515.18(a) and 515.18(b): $362; and

(3) Supplementary investigation as required by Sec. 515.25(a):

$224.

Subpart B--Eligibility and Procedure for Licensing

Sec. 515.11 Basic requirements for licensing; eligibility.

(a) Necessary qualifications. To be eligible for an ocean

transportation intermediary license, the applicant must demonstrate to

the Commission that:

(1) It possesses the necessary experience, that is, its qualifying

individual has a minimum of three (3) years experience in ocean

transportation intermediary activities in the United States, and the

necessary character to

[[Page 70718]]

render ocean transportation intermediary services; and

(2) It has obtained and filed with the Commission a valid bond,

proof of insurance, or other surety in conformance with Sec. 515.21.

(3) An NVOCC with a tariff and proof of financial responsibility in

effect as of December 22, 1998, may continue to operate as an NVOCC

without the requisite three years experience; and will be provisionally

licensed while the Commission reviews their application. Such person

designated as the qualifying individual for a provisionally licensed

NVOCC may not act as a qualifying individual for another ocean

transportation intermediary until it has obtained the necessary three

years experience in ocean transportation intermediary services in the

United States.

(b) Qualifying individual. The following individuals must qualify

the applicant for a license:

(1) Sole proprietorship. The applicant sole proprietor.

(2) Partnership. At least one of the active managing partners, but

all partners must execute the application.

(3) Corporation. At least one of the active corporate officers.

(c) Affiliates of intermediaries. (1) An independently qualified

applicant may be granted a separate license to carry on the business of

providing ocean transportation intermediary services even though it is

associated with, under common control with, or otherwise related to

another ocean transportation intermediary through stock ownership or

common directors or officers, if such applicant submits:

(i) A separate application and fee, and

(ii) a valid instrument of financial responsibility in the form and

amount prescribed under Sec. 515.21.

(2) The qualifying individual of one active licensee shall not also

be designated contemporaneously as the qualifying individual of an

applicant for another ocean transportation intermediary license.

(d) Common carrier. A common carrier or agent thereof which meets

the requirements of this part may be licensed to dispatch shipments

moving on other than such carrier's own bills of lading subject to the

provisions of Sec. 515.42(g).

Sec. 515.12 Application for license.

(a) Application and forms. Any person who wishes to obtain a

license to operate as an ocean transportation intermediary shall

submit, in duplicate, to the Director of the Commission's Bureau of

Tariffs, Certification and Licensing, a completed application Form FMC-

18 Rev. (``Application for a License as an Ocean Transportation

Intermediary'') accompanied by the fee required under Sec. 515.5(b).

All applications will be assigned an application number, and each

applicant will be notified of the number assigned to its application.

Notice of filing of such application shall be published in the Federal

Register and shall state the name and address of the applicant and the

name and address of the qualifying individual. If the applicant is a

corporation or partnership, the names of the officers or partners

thereof shall be published.

(b) Rejection. Any application which appears upon its face to be

incomplete or to indicate that the applicant fails to meet the

licensing requirements of the Act, or the Commission's regulations,

shall be returned by certified U.S. mail or other method reasonably

calculated to provide actual notice to the applicant without further

processing, together with an explanation of the reason(s) for

rejection, and the application fee shall be refunded in full. Persons

who have had their applications returned may reapply for a license at

any time thereafter by submitting a new application, together with the

full application fee.

(c) Investigation. Each applicant shall be investigated in

accordance with Sec. 515.13.

(d) Changes in fact. Each applicant and each licensee shall submit

to the Commission, in duplicate, an amended Form FMC-18 Rev. advising

of any changes in the facts submitted in the original application,

within thirty (30) days after such change(s) occur. In the case of an

application for a license, any unreported change may delay the

processing and investigation of the application and may result in

rejection or denial of the application. No fee is required when

reporting changes to an application for initial license under this

section.

Sec. 515.13 Investigation of applicants.

The Commission shall conduct an investigation of the applicant's

qualifications for a license. Such investigations may address:

(a) The accuracy of the information submitted in the application;

(b) The integrity and financial responsibility of the applicant;

(c) The character of the applicant and its qualifying individual;

and

(d) The length and nature of the qualifying individual's experience

in handling ocean transportation intermediary duties.

Sec. 515.14 Issuance and use of license.

(a) Qualification necessary for issuance. The Commission will issue

a license if it determines, as a result of its investigation, that the

applicant possesses the necessary experience and character to render

ocean transportation intermediary services and has filed the required

bond, insurance or other surety.

(b) To whom issued. The Commission will issue a license only in the

name of the applicant, whether the applicant is a sole proprietorship,

a partnership, or a corporation. A license issued to a sole proprietor

doing business under a trade name shall be in the name of the sole

proprietor, indicating the trade name under which the licensee will be

conducting business. Only one license shall be issued to any applicant

regardless of the number of names under which such applicant may be

doing business, and except as otherwise provided in this part, such

license is limited exclusively to use by the named licensee and shall

not be transferred without prior Commission approval to another person.

Sec. 515.15 Denial of license.

If the Commission determines, as a result of its investigation,

that the applicant:

(a) Does not possess the necessary experience or character to

render intermediary services;

(b) Has failed to respond to any lawful inquiry of the Commission;

or

(c) Has made any materially false or misleading statement to the

Commission in connection with its application; then, a letter of intent

to deny the application shall be sent to the applicant by certified

U.S. mail or other method reasonably calculated to provide actual

notice, stating the reason(s) why the Commission intends to deny the

application. If the applicant submits a written request for hearing on

the proposed denial within twenty (20) days after receipt of

notification, such hearing shall be granted by the Commission pursuant

to its rules of practice and procedure contained in part 502 of this

chapter. Otherwise, denial of the application will become effective and

the applicant shall be so notified by certified U.S. mail or other

method reasonably calculated to provide actual notice.

Sec. 515.16 Revocation or suspension of license.

(a) Grounds for revocation. Except for the automatic revocation for

termination of proof of financial responsibility under Sec. 515.26, or

as provided in Sec. 515.25(b), a license may be revoked or

[[Page 70719]]

suspended after notice and an opportunity for a hearing for any of the

following reasons:

(1) Violation of any provision of the Act, or any other statute or

Commission order or regulation related to carrying on the business of

an ocean transportation intermediary;

(2) Failure to respond to any lawful order or inquiry by the

Commission;

(3) Making a materially false or misleading statement to the

Commission in connection with an application for a license or an

amendment to an existing license;

(4) Where the Commission determines that the licensee is not

qualified to render intermediary services; or

(5) Failure to honor the licensee's financial obligations to the

Commission.

(b) Notice of revocation. The Commission shall publish in the

Federal Register a notice of each revocation.

Sec. 515.17 Application after revocation or denial.

Whenever a license has been revoked or an application has been

denied because the Commission has found the licensee or applicant to be

not qualified to render ocean transportation intermediary services, any

further application within 3 years of the Commission's notice of

revocation or denial, made by such former licensee or applicant or by

another applicant employing the same qualifying individual or

controlled by persons on whose conduct the Commission based its

determination for revocation or denial, shall be reviewed directly by

the Commission.

Sec. 515.18 Changes in organization.

(a) The following changes in an existing licensee's organization

require prior approval of the Commission, and application for such

status change or license transfer shall be made on Form FMC-18 Rev.,

filed in duplicate with the Commission's Bureau of Tariffs,

Certification and Licensing, and accompanied by the fee required under

Sec. 515.5(b)(2):

(1) Transfer of a corporate license to another person;

(2) Change in ownership of a sole proprietorship;

(3) Addition of one or more partners to a licensed partnership;

(4) Any change in the business structure of a licensee from or to a

sole proprietorship, partnership, or corporation, whether or not such

change involves a change in ownership;

(5) Any change in a licensee's name; or

(6) Change in the identity or status of the designated qualifying

individual, except as described in paragraphs (b) and (c) of this

section.

(b) Operation after death of sole proprietor: In the event the

owner of a licensed sole proprietorship dies, the licensee's executor,

administrator, heir(s), or assign(s) may continue operation of such

proprietorship solely with respect to shipments for which the deceased

sole proprietor had undertaken to act as an ocean transportation

intermediary pursuant to the existing license, if the death is reported

within thirty (30) days to the Commission and to all principals and

shippers for whom services on such shipments are to be rendered. The

acceptance or solicitation of any other shipments is expressly

prohibited until a new license has been issued. Applications for a new

license by the executor, administrator, heir(s), or assign(s) shall be

made on Form FMC-18 Rev., and shall be accompanied by the transfer fee

required under Sec. 515.5(b)(2).

(c) Operation after retirement, resignation, or death of qualifying

individual: When a partnership or corporation has been licensed on the

basis of the qualifications of one or more of the partners or officers

thereof, and such qualifying individual(s) no longer serve in a full-

time, active capacity with the firm, the licensee shall report such

change to the Commission within thirty (30) days. Within the same 30-

day period, the licensee shall furnish to the Commission the name(s)

and detailed intermediary experience of any other active managing

partner(s) or officer(s) who may qualify the licensee. Such qualifying

individual(s) must meet the applicable requirements set forth in

Sec. 515.11(a). The licensee may continue to operate as an ocean

transportation intermediary while the Commission investigates the

qualifications of the newly designated partner or officer.

(d) Incorporation of branch office: In the event a licensee's

validly operating branch office becomes incorporated as a separate

entity, the licensee may continue to operate such office pending

receipt of a separate license, provided that:

(1) The separately incorporated entity applies to the Commission

for its own license within ten (10) days after incorporation, and

(2) While the application is pending, the continued operation of

the office is carried on as a bona fide branch office of the licensee,

under its full control and responsibility, and not as an operation of

the separately incorporated entity.

(e) Acquisition of one or more additional licensees: In the event a

licensee acquires one or more additional licensees, for the purpose of

merger, consolidation, or control, the acquiring licensee shall advise

the Commission of such change within thirty (30) days after such change

occurs by submitting in duplicate, an amended Form FMC-18, Rev. No

application fee is required when reporting this change.

Subpart C--Financial Responsibility Requirements; Claims Against

Ocean Transportation Intermediaries

Sec. 515.21 Financial responsibility requirements.

(a) Form and amount. Except as otherwise provided in this part, no

person may operate as an ocean transportation intermediary unless that

person furnishes a bond, proof of insurance, or other surety in a form

and amount determined by the Commission to insure financial

responsibility. The bond, insurance or other surety covers the

transportation-related activities of an ocean transportation

intermediary only when acting as an ocean transportation intermediary.

(1) Any person operating in the United States as an ocean freight

forwarder as defined by Sec. 515.2(n)(1) shall furnish evidence of

financial responsibility in the amount of $50,000.

(2) Any person operating in the United States as an NVOCC as

defined by Sec. 515.2(n)(2) shall furnish evidence of financial

responsibility in the amount of $75,000.

(3) Any person operating in the United States as both an ocean

freight forwarder and an NVOCC as defined by Secs. 515.2(n)(1) and (2)

shall furnish evidence of financial responsibility in the amount of

$100,000.

(4) Any unlicensed foreign-based entity, not operating in the

United States as defined in Sec. 515.3, providing ocean transportation

intermediary services for transportation to or from the United States,

shall furnish evidence of financial responsibility in the amount of

$150,000. Such foreign entity will be held strictly responsible

hereunder for the acts or omissions of its agent in the United States.

(5) The amount of the financial responsibility required to be

furnished by any entity pursuant to paragraphs (a)(1), (a)(2) or (a)(3)

of this section shall be increased by $10,000 for each of the

applicant's unincorporated branch offices.

(b) Group financial responsibility. Where a group or association of

ocean transportation intermediaries accepts liability for an ocean

transportation intermediary's financial responsibility for such ocean

transportation

[[Page 70720]]

intermediary's transportation-related activities under the Act, the

group or association of ocean transportation intermediaries must file

either a group supplemental coverage bond form, insurance form or

guaranty form, clearly identifying each ocean transportation

intermediary covered, before a covered ocean transportation

intermediary may provide ocean transportation intermediary services. In

such cases a group or association must establish financial

responsibility in the amount required by paragraph (a) of this section

for each member or $3,000,000 in aggregate.

(c) Common trade name. Where more than one person operates under a

common trade name, separate proof of financial responsibility is

required covering each corporation or person separately providing ocean

transportation intermediary services.

(d) Federal military and civilian household goods. Any person which

exclusively transports used household goods and personal effects for

the account of the Department of Defense, or for the account of the

federal civilian executive agencies shipping under the International

Household Goods Program administered by the General Services

Administration, or both, is not subject to the requirements of subpart

C of this part, but may be subject to other requirements, such as

alternative surety bonding, imposed by the Department of Defense, or

the General Services Administration.

Sec. 515.22 Proof of financial responsibility.

Prior to the date it commences furnishing ocean transportation

intermediary services, every ocean transportation intermediary shall

establish its financial responsibility for the purpose of this part by

one of the following methods:

(a) Surety bond, by filing with the Commission a valid bond on Form

FMC-48. Bonds must be issued by a surety company found acceptable by

the Secretary of the Treasury;

(b) Insurance, by filing with the Commission evidence of insurance

on Form FMC-67. The insurance must provide coverage for damages,

reparations or penalties arising from any transportation-related

activities under the Act of the insured ocean transportation

intermediary. This evidence of financial responsibility shall be

accompanied by: In the case of a financial rating, the Insurer's

financial rating on the rating organization's letterhead or designated

form; in the case of insurance provided by Underwriters at Lloyd's,

documentation verifying membership in Lloyd's; and in the case of

insurance provided by surplus lines insurers, documentation verifying

inclusion on a current ``white list'' issued by the Non-Admitted

Insurers' Information Office of the National Association of Insurance

Commissioners. The Insurer must certify that it has sufficient and

acceptable assets located in the United States to cover all

transportation-related liabilities of the insured ocean transportation

intermediary as specified under the Act. The insurance must be placed

with:

(1) An Insurer having a financial rating of Class V or higher under

the Financial Size Categories of A.M. Best & Company, or equivalent

from an acceptable international rating organization;

(2) Underwriters at Lloyd's; or

(3) Surplus lines insurers named on a current ``white list'' issued

by the Non-Admitted Insurers' Information Office of the National

Association of Insurance Commissioners; or

(c) Guaranty, by filing with the Commission evidence of guaranty on

Form FMC-68. The guaranty must provide coverage for damages,

reparations or penalties arising from any transportation-related

activities under the Act of the covered ocean transportation

intermediary. This evidence of financial responsibility shall be

accompanied by: In the case of a financial rating, the Guarantor's

financial rating on the rating organization's letterhead or designated

form; in the case of a guaranty provided by Underwriters at Lloyd's,

documentation verifying membership in Lloyd's; and in the case of a

guaranty provided by surplus lines insurers, documentation verifying

inclusion on a current ``white list'' issued by the Non-Admitted

Insurers' Information Office of the National Association of Insurance

Commissioners. The Guarantor must certify that it has sufficient and

acceptable assets located in the United States to cover all

transportation-related liabilities of the covered ocean transportation

intermediary as specified under the Act. The guaranty must be placed

with:

(1) A Guarantor having a financial rating of Class V or higher

under the Financial Size Categories of A.M. Best & Company, or

equivalent from an acceptable international rating organization;

(2) Underwriters at Lloyd's; or

(3) Surplus lines insurers named on a current ``white list'' issued

by the Non-Admitted Insurers' Information Office of the National

Association of Insurance Commissioners; or

(d) Evidence of financial responsibility of the type provided for

in paragraphs (a), (b) and (c) of this section established through and

filed with the Commission by a group or association of ocean

transportation intermediaries on behalf of its members, subject to the

following conditions and procedures:

(1) Each group or association of ocean transportation

intermediaries shall notify the Commission of its intention to

participate in such a program and furnish documentation as will

demonstrate its authenticity and authority to represent its members,

such as articles of incorporation, bylaws, etc.;

(2) Each group or association of ocean transportation

intermediaries shall provide the Commission with a list certified by

its Chief Executive Officer containing the names of those ocean

transportation intermediaries to which it will provide coverage; the

manner and amount of existing coverage each covered ocean

transportation intermediary has; an indication that the existing

coverage provided each ocean transportation intermediary is provided by

a surety bond issued by a surety company found acceptable to the

Secretary of the Treasury, or by insurance or guaranty issued by a firm

meeting the requirements of paragraphs (b) or (c) of this section with

coverage limits specified above in Sec. 515.21; and the name, address

and facsimile number of each surety, insurer or guarantor providing

coverage pursuant to this section. Each group or association of ocean

transportation intermediaries or its financial responsibility provider

shall notify the Commission within thirty (30) days of any changes to

its list;

(3) The group or association shall provide the Commission with a

sample copy of each type of existing financial responsibility coverage

used by member ocean transportation intermediaries;

(4) Each group or association of ocean transportation

intermediaries shall be responsible for ensuring that each member's

financial responsibility coverage allows for claims to be made in the

United States against the Surety, Insurer or Guarantor for any judgment

for damages against the ocean transportation intermediary arising from

its transportation-related activities under the Act, or order for

reparations issued pursuant to section 11 of the Act, or any penalty

assessed against the ocean transportation intermediary pursuant to

section 13 of the Act. Each group or association of ocean

transportation intermediaries shall be responsible for requiring each

member ocean transportation intermediary to

[[Page 70721]]

provide it with valid proof of financial responsibility annually;

(5) Where the group or association of ocean transportation

intermediaries determines to secure on behalf of its members other

forms of financial responsibility, as specified by this section, for

damages, reparations or penalties not covered by a member's individual

financial responsibility coverage, such additional coverage must:

(i) Allow claims to be made in the United States directly against

the group or association's Surety, Insurer or Guarantor for damages

against each covered member ocean transportation intermediary arising

from each covered member ocean transportation intermediary's

transportation-related activities under the Act, or order for

reparations issued pursuant to section 11 of the Act, or any penalty

assessed against each covered member ocean transportation intermediary

pursuant to section 13 of the Act; and

(ii) Be for an amount up to $75,000 or $150,000, whichever is

applicable, for each covered member ocean transportation intermediary

up to a maximum of $3,000,000 for each group or association of ocean

transportation intermediaries. In the event of a claim against a group

bond, the bond must be replenished up to the original amount of

coverage within 30 days payment of the claim; and

(6) The coverage provided by the group or association of ocean

transportation intermediaries on behalf of its members shall be

provided by:

(i) in the case of a surety bond, a surety company found acceptable

to the Secretary of the Treasury and issued by such a surety company on

Form FMC-69; and

(ii) in the case of insurance and guaranty, a firm having a

financial rating of Class V or higher under the Financial Size

Categories of A.M. Best & Company or equivalent from an acceptable

international rating organization, Underwriters at Lloyd's, or surplus

line insurers named on a current ``white list'' issued by the Non-

Admitted Insurers' Information Office of the National Association of

Insurance Commissioners and issued by such firms on Form FMC-67 and

Form FMC-68, respectively.

(e) All forms and documents for establishing financial

responsibility of ocean transportation intermediaries prescribed in

this section shall be submitted to the Director, Bureau of Tariffs,

Certification and Licensing, Federal Maritime Commission, Washington,

DC 20573. Such forms and documents must clearly identify the name;

trade name, if any; and the address of each ocean transportation

intermediary.

Sec. 515.23 Claims against an ocean transportation intermediary.

The Commission or another party may seek payment from the bond,

insurance, or other surety that is obtained by an ocean transportation

intermediary pursuant to this section.

(a) Payment pursuant to Commission order. If the Commission issues

an order for reparation pursuant to section 11 or 14 of the Act, or

assesses a penalty pursuant to section 13 of the Act, a bond,

insurance, or other surety shall be available to pay such order or

penalty.

(b) Payment pursuant to a claim. (1) If a party does not file a

complaint with the Commission pursuant to section 11 of the Act, but

otherwise seeks to pursue a claim against an ocean transportation

intermediary bond, insurance or other surety for damages arising from

its transportation-related activities, it shall attempt to resolve its

claim with the financial responsibility provider prior to seeking

payment on any judgment for damages obtained. When a claimant seeks

payment under this section, it simultaneously shall notify both the

financial responsibility provider and the ocean transportation

intermediary of the claim by certified mail, return receipt requested.

The bond, insurance, or other surety may be available to pay such claim

if:

(i) the ocean transportation intermediary consents to payment,

subject to review by the financial responsibility provider; or

(ii) the ocean transportation intermediary fails to respond within

45 days from the date of the notice of the claim to address the

validity of the claim, and the financial responsibility provider deems

the claim valid.

(2) If the parties fail to reach an agreement in accordance with

paragraph (b)(1) of this section within 90 days of the date of the

initial notification of the claim, the bond, insurance, or other surety

shall be available to pay any judgment for damages obtained from an

appropriate court. The financial responsibility provider shall pay such

judgment for damages only to the extent they arise from the

transportation-related activities of the ocean transportation

intermediary ordinarily within 10 days, without requiring further

evidence related to the validity of the claim; it may, however, inquire

into the extent to which the judgment for damages arises from the ocean

transportation intermediary's transportation-related activities.

(c) The Federal Maritime Commission shall not serve as depository

or distributor to third parties of bond, guaranty, or insurance funds

in the event of any claim, judgment, or order for reparation.

Sec. 515.24 Agent for service of process.

(a) Every ocean transportation intermediary not located in the

United States and every group or association of ocean transportation

intermediaries not located in the United States which provides

financial coverage for the financial responsibility of a member ocean

transportation intermediary shall designate and maintain a person in

the United States as legal agent for the receipt of judicial and

administrative process, including subpoenas.

(b) If the designated legal agent cannot be served because of

death, disability, or unavailability, the Secretary, Federal Maritime

Commission, will be deemed to be the legal agent for service of

process. Any person serving the Secretary must also send to the ocean

transportation intermediary, or group or association of ocean

transportation intermediaries which provide financial coverage for the

financial responsibilities of a member ocean transportation

intermediary, by registered mail, return receipt requested, at its

address published in its tariff, a copy of each document served upon

the Secretary, and shall attest to that mailing at the time service is

made upon the Secretary.

(c) Service of administrative process, other than subpoenas, may be

effected upon the legal agent by mailing a copy of the document to be

served by certified or registered mail, return receipt requested.

Administrative subpoenas shall be served in accordance with

Sec. 502.134 of this chapter.

(d) Designations of resident agent under paragraphs (a) and (b) of

this section and provisions relating to service of process under

paragraph (c) of this section shall be published in the ocean

transportation intermediary's tariff, when required, in accordance with

part 520 of this chapter.

(e) Every ocean transportation intermediary using a group or

association of ocean transportation intermediaries to cover its

financial responsibility requirement under Sec. 515.21(b) shall publish

the name and address of the group or association's resident agent for

receipt of judicial and administrative process, including subpoenas, in

its tariff, when required, in accordance with part 520 of this chapter.

[[Page 70722]]

Sec. 515.25 Filing of proof of financial responsibility.

(a) Filing of proof of financial responsibility. Upon notification

by the Commission by certified U.S. mail or other method reasonably

calculated to provide actual notice that the applicant has been

approved for licensing, the applicant shall file with the Director of

the Commission's Bureau of Tariffs, Certification and Licensing proof

of financial responsibility in the form and amount prescribed in

Sec. 515.21. No tariff shall be published until a license is issued, if

applicable, and proof of financial responsibility is provided. No

license will be issued until the Commission is in receipt of valid

proof of financial responsibility from the applicant. If more than six

(6) months elapse between issuance of the notification of qualification

and receipt of the proof of financial responsibility, the Commission

may, at its discretion, undertake a supplementary investigation to

determine the applicant's continued qualification, for which a fee is

required under Sec. 515.5(b)(3). Should the applicant not file the

requisite proof of financial responsibility within two years of

notification, the Commission will consider the application to be

invalid.

(b) Branch offices. New proof of financial responsibility, or a

rider to the existing proof of financial responsibility, increasing the

amount of the bond in accordance with Sec. 515.21(a)(5), shall be filed

with the Commission prior to the date the licensee commences operation

of any branch office. Failure to adhere to this requirement may result

in revocation of the license.

Sec. 515.26 Termination of financial responsibility.

No license shall remain in effect unless valid proof of financial

responsibility is maintained on file with the Commission. Upon receipt

of notice of termination of such financial responsibility, the

Commission shall notify the concerned licensee by certified U.S. mail

or other method reasonably calculated to provide actual notice, at its

last known address, that the Commission shall, without hearing or other

proceeding, revoke the license as of the termination date of the

financial responsibility, unless the licensee shall have submitted

valid replacement proof of financial responsibility before such

termination date. Replacement financial responsibility must bear an

effective date no later than the termination date of the expiring

financial responsibility.

Sec. 515.27 Proof of compliance.

(a) No common carrier may transport cargo for the account of a

shipper known by the carrier to be an NVOCC unless the carrier has

determined that the NVOCC has a tariff and financial responsibility as

required by sections 8 and 19 of the Act.

(b) A common carrier can obtain proof of an NVOCC's compliance with

the tariff and financial responsibility requirements by:

(1) Reviewing a copy of the tariff rule published by the NVOCC and

in effect under part 520 of this chapter;

(2) Consulting the Commission to verify that the NVOCC has filed

evidence of its financial responsibility; or

(3) Any other appropriate procedure, provided that such procedure

is set forth in the carrier's tariff.

(c) A common carrier that has employed the procedure prescribed in

either paragraph (b)(1) or (b)(2) of this section shall be deemed to

have met its obligations under section 10(b)(11) of the Act, unless the

common carrier knew that such NVOCC was not in compliance with the

tariff and financial responsibility requirements.

(d) The Commission will publish at its website, www.fmc.gov, a list

of the locations of all carrier and conference tariffs, and a list of

ocean transportation intermediaries who have furnished the Commission

with evidence of financial responsibility, current as of the last date

on which the list is updated. The Commission will update this list on a

periodic basis.

Appendix A to Subpart C of Part 515--Ocean Transportation

Intermediary (OTI) Bond Form [Form 48]

Form FMC-48--Federal Maritime Commission

Ocean Transportation Intermediary (OTI) Bond (Section 19, Shipping Act

of 1984, as amended by the Ocean Shipping Reform Act of 1998 and the

Coast Guard Authorization Act of 1998) ____, as Principal (hereinafter

called Principal), and ____, as Surety (hereinafter called Surety) are

held and firmly bound unto the United States of America in the sum of

$____ for the payment of which sum we bind ourselves, our heirs,

executors, administrators, successors and assigns, jointly and

severally.

Whereas, Principal operates as an OTI in the waterborne foreign

commerce of the United States in accordance with the Shipping Act of

1984, as amended by the Ocean Shipping Reform Act of 1998 and the

Coast Guard Authorization Act of 1998 (``1984 Act''), 46 U.S.C. app

1702, and, if necessary, has a valid tariff published pursuant to 46

CFR part 515 and 520, and pursuant to section 19 of the 1984 Act,

files this bond with the Commission;

Now, Therefore, The condition of this obligation is that the

penalty amount of this bond shall be available to pay any judgment

or any settlement made pursuant to a claim under 46 CFR 515.23(b)

for damages against the Principal arising from the Principal's

transportation related activities or order for reparations issued

pursuant to section 11 of the 1984 Act, 46 U.S.C. app. 1710, or any

penalty assessed against the Principal pursuant to section 13 of the

1984 Act, 46 U.S.C. app. 1712.

This bond shall inure to the benefit of any and all persons who

have obtained a judgment or a settlement made pursuant to a claim

under 46 CFR 515.23(b) for damages against the Principal arising

from its transportation related activities or order of reparation

issued pursuant to section 11 of the 1984 Act, and to the benefit of

the Federal Maritime Commission for any penalty assessed against the

Principal pursuant to section 13 of the 1984 Act. However, the bond

shall not apply to shipments of used household goods and personal

effects for the account of the Department of Defense or the account

of federal civilian executive agencies shipping under the

International Household Goods Program administered by the General

Services Administration.

The liability of the Surety shall not be discharged by any

payment or succession of payments hereunder, unless and until such

payment or payments shall aggregate the penalty of this bond, and in

no event shall the Surety's total obligation hereunder exceed said

penalty regardless of the number of claims or claimants.

This bond is effective the __ day of ____, 19 ____, and shall

continue in effect until discharged or terminated as herein

provided. The Principal or the Surety may at any time terminate this

bond by written notice to the Federal Maritime Commission at its

office in Washington, DC. Such termination shall become effective

thirty (30) days after receipt of said notice by the Commission. The

Surety shall not be liable for any transportation related activities

of the Principal after the expiration of the thirty (30) day period

but such termination shall not affect the liability of the Principal

and Surety for any event occurring prior to the date when said

termination becomes effective.

The Surety consents to be sued directly in respect of any bona

fide claim owed by Principal for damages, reparations or penalties

arising from the transportation-related activities under the 1984

Act of Principal in the event that such legal liability has not been

discharged by the Principal or Surety within 10 days after a

claimant has obtained a final judgment (after appeal, if any)

against the Principal from a United States Federal or State Court of

competent jurisdiction and has complied with the procedures for

collecting on such a judgment pursuant to 46 CFR 515.23(b), the

Federal Maritime Commission, or where all parties and claimants

mutually consent, from a foreign court, or where such claimant has

become entitled to payment of a specified sum by virtue of a

compromise settlement agreement made with the Principal and/or

Surety pursuant to 46 CFR 515.23(b),

[[Page 70723]]

whereby, upon payment of the agreed sum, the Surety is to be fully,

irrevocably and unconditionally discharged from all further

liability to such claimant; provided, however, that Surety's total

obligation hereunder shall not exceed the amount per OTI set forth

in 46 CFR 515.21 or the amount per group or association of OTIs set

forth in 46 CFR 515.21.

The underwriting Surety will promptly notify the Director,

Bureau of Tariffs, Certification and Licensing, Federal Maritime

Commission, Washington, DC 20573, of any claim(s) against this bond.

Signed and sealed this __ day of ____, 19 ____.

(Please type name of signer under each signature.)

----------------------------------------------------------------------

Individual Principal or Partner

----------------------------------------------------------------------

Business Address

----------------------------------------------------------------------

Individual Principal or Partner

----------------------------------------------------------------------

Business Address

----------------------------------------------------------------------

Individual Principal or Partner

----------------------------------------------------------------------

Business Address

----------------------------------------------------------------------

Trade Name, If Any

----------------------------------------------------------------------

Corporate Principal

----------------------------------------------------------------------

State of Incorporation

----------------------------------------------------------------------

Trade Name, If Any

----------------------------------------------------------------------

Business Address

----------------------------------------------------------------------

By

----------------------------------------------------------------------

Title

(Affix Corporate Seal)

----------------------------------------------------------------------

Corporate Surety

----------------------------------------------------------------------

Business Address

----------------------------------------------------------------------

By

----------------------------------------------------------------------

Title

(Affix Corporate Seal)

Appendix B to Subpart C of Part 515--Ocean Transportation

Intermediary (OTI) Insurance Form [Form 67]

Form FMC-67--Federal Maritime Commission

Ocean Transportation Intermediary (OTI) Insurance Form Furnished as

Evidence of Financial Responsibility Under 46 U.S.C. app. 1718

This is to certify, that the [Name of Insurance Company] ,

(hereinafter ``Insurer'') of [Home Office Address of Company] has

issued to [OTI or Group or Association of OTIs] (hereinafter called

``insured'' of [Address of OTI or Group or Association of OTIs] a

policy or policies of insurance for purposes of complying with the

provisions of 46 U.S.C. app. 1718 and the rules and regulations, as

amended, of the Federal Maritime Commission, which provide

compensation for damages, reparations or penalties arising from the

transportation-related activities of Insured, and made pursuant to

the Shipping Act of 1984, as amended by the Ocean Shipping Reform

Act of 1998 and the Coast Guard Authorization Act of 1998 (``1984

Act'').

Whereas, the Insured is or may become an OTI subject to the 1984

Act, 46 U.S.C. app. 1701 et seq., and the rules and regulations of

the Federal Maritime Commission, or is or may become a group or

association of OTIs, and desires to establish financial

responsibility in accordance with section 19 of the 1984 Act, files

with the Commission this Insurance Form as evidence of its financial

responsibility and evidence of a financial rating for the Insurer of

Class V or higher under the Financial Size Categories of A.M. Best &

Company or equivalent from an acceptable international rating

organization on such organization's letterhead or designated form,

or, in the case of insurance provided by Underwriters at Lloyd's,

documentation verifying membership in Lloyd's, or, in the case of

surplus lines insurers, documentation verifying inclusion on a

current ``white list'' issued by the Non-Admitted Insurers'

Information Office of the National Association of Insurance

Commissioners.

Whereas, the Insurance is written to assure compliance by the

Insured with section 19 of the 1984 Act, 46 U.S.C. app. 1718, and

the rules and regulations of the Federal Maritime Commission

relating to evidence of financial responsibility for OTIs, this

Insurance shall be available to pay any judgment obtained or any

settlement made pursuant to claim under 46 CFR Sec. 515.23(b) for

damages against the Insured arising from the Insured's

transportation-related activities under the 1984 Act, or order for

reparations issued pursuant to section 11 of the 1984 Act, 46 U.S.C.

app. 1710, or any penalty assessed against the Insured pursuant to

section 13 of the 1984 Act, 46 U.S.C. app. 1712; provided, however,

that Insurer's obligation for a group or association of OTIs shall

extend only to such damages, reparations or penalties described

herein as are not covered by another insurance policy, guaranty or

surety bond held by the OTI(s) against which a claim or final

judgment has been brought and that Insurer's total obligation

hereunder shall not exceed the amount per OTI set forth in 46 CFR

515.21 or the amount per group or association of OTIs set forth in

46 CFR 515.21 in aggregate.

Whereas, the Insurer certifies that it has sufficient and

acceptable assets located in the United States to cover all

liabilities of Insured herein described, this Insurance shall inure

to the benefit of any and all persons who have a bona fide claim

against the Insured pursuant to 46 CFR 515.23(b) arising from its

transportation-related activities under the 1984 Act, or order of

reparation issued pursuant to section 11 of the 1984 Act, and to the

benefit of the Federal Maritime Commission for any penalty assessed

against the Insured pursuant to section 13 of the 1984 Act.

The Insurer consents to be sued directly in respect of any bona

fide claim owed by Insured for damages, reparations or penalties

arising from the transportation-related activities under the 1984

Act, of Insured in the event that such legal liability has not been

discharged by the Insured or Insurer within 10 days after a claimant

has obtained a final judgment (after appeal, if any) against the

Insured from a United States Federal or State Court of competent

jurisdiction and has complied with the procedures for collecting on

such a judgment pursuant to 46 CFR 515.23(b), the Federal Maritime

Commission, or where all parties and claimants mutually consent,

from a foreign court, or where such claimant has become entitled to

payment of a specified sum by virtue of a compromise settlement

agreement made with the Insured and/or Insurer pursuant to 46 CFR

515.23(b), whereby, upon payment of the agreed sum, the Insurer is

to be fully, irrevocably and unconditionally discharged from all

further liability to such claimant; provided, however, that

Insurer's total obligation hereunder shall not exceed the amount per

OTI set forth in 46 CFR 515.21 or the amount per group or

association of OTIs set forth in 46 CFR 515.21.

The liability of the Insurer shall not be discharged by any

payment or succession of payments hereunder, unless and until such

payment or payments shall aggregate the penalty of the Insurance of

the amount per member OTI set forth in 46 CFR 515.21 or the amount

per group or association of OTIs set forth in 46 CFR 515.21,

whichever comes first, regardless of the financial responsibility or

lack thereof, or the solvency or bankruptcy, of Insured.

The insurance evidenced by this undertaking shall be applicable

only in relation to incidents occurring on or after the effective

date and before the date termination of this undertaking becomes

effective. The effective date of this undertaking shall be ____ day

of ____, 19____, and shall continue in effect until discharged or

terminated as herein provided. The Insured or the Insurer may at any

time terminate the Insurance by filing a notice in writing with the

Federal Maritime Commission at its office in Washington, DC. Such

termination shall become effective thirty (30) days after receipt of

said notice by the Commission. The Insurer shall not be liable for

any transportation-related activities under the 1984 Act of the

Insured after the expiration of the thirty (30) day period but such

termination shall not affect the liability of the Insured and

Insurer for such activities occurring prior to the date when said

termination becomes effective.

Insurer or Insured shall immediately give notice to the Federal

Maritime Commission of all lawsuits filed, judgments rendered, and

payments made under the insurance policy.

(Name of Agent) ____ domiciled in the United States, with

offices located in the United States, at ____________ is hereby

designated as the Insurer's agent for service of process for the

purposes of enforcing the Insurance certified to herein.

If more than one insurer joins in executing this document, that

action constitutes joint and several liability on the part of the

insurers.

[[Page 70724]]

The Insurer will promptly notify the Director, Bureau of

Tariffs, Certification and Licensing, Federal Maritime Commission,

Washington, DC 20573, of any claim(s) against the Insurance.

Signed and sealed this __ day of ____, 19 __.

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Signature of Official signing on behalf of Insurer

----------------------------------------------------------------------

Type Name and Title of signer

This Insurance Form has been filed with the Federal Maritime

Commission.

Appendix C to Subpart C of Part 515--Ocean Transportation

Intermediary (OTI) Guaranty Form [Form 68]

Form FMC-68--Federal Maritime Commission

Guaranty in Respect of Ocean Transportation Intermediary (OTI)

Liability for Damages, Reparations or Penalties Arising from

Transportation-Related Activities Under the Shipping Act of 1984, as

amended by the Ocean Shipping Reform Act of 1998 and the Coast Guard

Authorization Act of 1998

1. Whereas ____ (Name of Applicant) (Hereinafter referred to as

the ``Applicant'') is or may become an Ocean Transportation

Intermediary (``OTI'') subject to the Shipping Act of 1984, as

amended by the Ocean Shipping Reform Act of 1998 and the Coast Guard

Authorization Act of 1998 (``1984 Act''), 46 U.S.C. app. 1701 et

seq., and the rules and regulations of the Federal Maritime

Commission (``FMC''), or is or may become a group or association of

OTIs, and desires to establish its financial responsibility in

accordance with section 19 of the 1984 Act, then, provided that the

FMC shall have accepted, as sufficient for that purpose, the

Applicant's application, supported by evidence of a financial rating

for the Guarantor of Class V or higher under the Financial Size

Categories of A.M. Best & Company or equivalent from an acceptable

international rating organization on such rating organization's

letterhead or designated form, or, in the case of Guaranty provided

by Underwriters at Lloyd's, documentation verifying membership in

Lloyd's, or, in the case of surplus lines insurers, documentation

verifying inclusion on a current ``white list'' issued by the Non-

Admitted Insurers'' Information Office of the National Association

of Insurance Commissioners, the undersigned Guarantor certifies that

it has sufficient and acceptable assets located in the United States

to cover all transportation-related liabilities of the covered OTI

as specified under the 1984 Act.

2. Now, Therefore, The condition of this obligation is that the

penalty amount of this Guaranty shall be available to pay any

judgment obtained or any settlement made pursuant to a claim under

46 CFR 515.23(b) for damages against the Applicant arising from the

Applicant's transportation related activities or order for

reparations issued pursuant to section 11 of the 1984 Act, 46 U.S.C.

app. 1710, or any penalty assessed against the Principal pursuant to

section 13 of the 1984 Act, 46 U.S.C. app. 1712.

3. The undersigned Guarantor hereby guarantees to be sued

directly in respect of any bona fide claim owed by Applicant for

damages, reparations or penalties arising from Applicant's

transportation-related activities under the 1984 Act, in the event

that such legal liability has not been discharged by the Applicant

within 10 days after any such claimant has obtained a final judgment

(after appeal, if any) against the Applicant from a United States

Federal or State Court of competent jurisdiction and has complied

with the procedures for collecting on such a judgment pursuant to 46

CFR 515.23(b), the FMC, or where all parties and claimants mutually

consent, from a foreign court, or where such claimant has become

entitled to payment of a specified sum by virtue of a compromise

settlement agreement made with the Applicant and/or Guarantor

pursuant to 46 CFR 515.23(b), whereby, upon payment of the agreed

sum, the Guarantor is to be fully, irrevocably and unconditionally

discharged from all further liability to such claimant. In the case

of a guaranty covering the liability of a group or association of

OTIs, Guarantor's obligation extends only to such damages,

reparations or penalties described herein as are not covered by

another insurance policy, guaranty or surety bond held by the OTI(s)

against which a claim or final judgment has been brought.

4. The Guarantor's liability under this Guaranty in respect to

any claimant shall not exceed the amount of the guaranty; and the

aggregate amount of the Guarantor's liability under this Guaranty

shall not exceed the amount per OTI set forth in 46 CFR 515.21 or

the amount per group or association of OTIs set forth in 46 CFR

515.21 in aggregate.

5. The Guarantor's liability under this Guaranty shall attach

only in respect of such activities giving rise to a cause of action

against the Applicant, in respect of any of its transportation-

related activities under the 1984 Act, occurring after the Guaranty

has become effective, and before the expiration date of this

Guaranty, which shall be the date 30 days after the date of receipt

by FMC of notice in writing that either Applicant or the Guarantor

has elected to terminate this Guaranty. The Guarantor and/or

Applicant specifically agree to file such written notice of

cancellation.

6. Guarantor shall not be liable for payments of any of the

damages, reparations or penalties hereinbefore described which arise

as the result of any transportation-related activities of Applicant

after the cancellation of the Guaranty, as herein provided, but such

cancellation shall not affect the liability of the Guarantor for the

payment of any such damages, reparations or penalties prior to the

date such cancellation becomes effective.

7. Guarantor shall pay, subject up to a limit of the amount per

OTI set forth in 46 CFR 515.21, directly to a claimant any sum or

sums which Guarantor, in good faith, determines that the Applicant

has failed to pay and would be held legally liable by reason of

Applicant's transportation-related activities, or its legal

responsibilities under the 1984 Act and the rules and regulations of

the FMC, made by Applicant while this agreement is in effect,

regardless of the financial responsibility or lack thereof, or the

solvency or bankruptcy, of Applicant.

8. Applicant or Guarantor shall immediately give written notice

to the FMC of all lawsuits filed, judgments rendered, and payments

made under the Guaranty.

9. Applicant and Guarantor agree to handle the processing and

adjudication of claims by claimants under the Guaranty established

herein in the United States, unless by mutual consent of all parties

and claimants another country is agreed upon. Guarantor agrees to

appoint an agent for service of process in the United States.

10. This Guaranty shall be governed by the laws in the State of

____ to the extent not inconsistent with the rules and regulations

of the FMC.

11. This Guaranty is effective the __ day of ____, 19 __, 12:01

a.m., standard time at the address of the Guarantor as stated herein

and shall continue in force until terminated as herein provided.

12. The Guarantor hereby designates as the Guarantor's legal

agent for service of process domiciled in the United States ______,

with offices located in the United States at ______, for the

purposes of enforcing the Guaranty described herein.

----------------------------------------------------------------------

(Place and Date of Execution)

----------------------------------------------------------------------

(Type Name of Guarantor)

----------------------------------------------------------------------

(Type Address of Guarantor)

By ______

(Signature and Title)

Appendix D to Subpart C of Part 515--Ocean Transportation

Intermediary (OTI) Group Bond Form [FMC-69]

Form FMC-69--Federal Maritime Commission

Ocean Transportation Intermediary (OTI) Group Supplemental Coverage

Bond Form (Section 19, Shipping Act of 1984, as amended by the Ocean

Shipping Reform Act of 1998 and the Coast Guard Authorization Act of

1998)

______, as Principal (hereinafter called Principal), and ______,

as Surety (hereinafter called Surety) are held and firmly bound unto

the United States of America in the sum of $____ for the payment of

which sum we bind ourselves, our heirs, executors, administrators,

successors and assigns, jointly and severally.

Whereas, (Principal) ____ operates as a group or association of

OTIs in the waterborne foreign commerce of the United States and

pursuant to section 19 of the Shipping Act of 1984, as amended by

the Ocean Shipping Reform Act of 1998 and the Coast Guard

Authorization Act of 1998 (``1984 Act''), files this bond with the

Federal Maritime Commission;

Now, Therefore, the conditions of this obligation are that the

penalty amount of this bond shall be available to pay any judgment

obtained or any settlement made pursuant to a claim under 46 CFR

515.23(b) against the OTIs enumerated in Appendix A of this bond for

damages arising from any or all of the identified OTIs'

transportation-related activities under the 1984 Act, 46 U.S.C. app.

1701 et seq., or order for reparations issued pursuant to section 11

of the 1984 Act, 46

[[Page 70725]]

U.S.C. app. 1710 or any penalty assessed pursuant to section 13 of

the 1984 Act, 46 U.S.C. app. 1712 that are not covered by the

identified OTIs' individual insurance policy(ies), guaranty(ies) or

surety bond(s).

This bond shall inure to the benefit of any and all persons who

have obtained a judgment or made a settlement pursuant to a claim

under 46 CFR 515.23(b) for damages against any or all of the OTIs

identified in appendix A not covered by said OTIs' insurance

policy(ies), guaranty(ies) or surety bond(s) arising from said OTIs'

transportation-related activities under the 1984 Act, or order for

reparation issued pursuant to section 11 of the 1984 Act, and to the

benefit of the Federal Maritime Commission for any penalty assessed

against said OTIs pursuant to section 13 of the 1984 Act. However,

the bond shall not apply to shipments of used household goods and

personal effects for the account of the Department of Defense or the

account of federal civilian executive agencies shipping under the

International Household Goods Program administered by the General

Services Administration.

The Surety consents to be sued directly in respect of any bona

fide claim owed by any or all of the OTIs identified in Appendix A

for damages, reparations or penalties arising from the

transportation-related activities under the 1984 Act of the OTIs in

the event that such legal liability has not been discharged by the

OTIs or Surety within 10 days after a claimant has obtained a final

judgment (after appeal, if any) against the OTIs from a United

States Federal or State Court of competent jurisdiction and has

complied with the procedures for collecting on such a judgment

pursuant to 46 CFR 515.23(b), the Federal Maritime Commission, or

where all parties and claimants mutually consent, from a foreign

court, or where such claimant has become entitled to payment of a

specified sum by virtue of a compromise settlement agreement made

with the OTIs and/or Surety pursuant to 46 CFR 515.23(b), whereby,

upon payment of the agreed sum, the Surety is to be fully,

irrevocably and unconditionally discharged from all further

liability to such claimant.

The liability of the Surety shall not be discharged by any

payment or succession of payments hereunder, unless and until such

payment or payments shall aggregate the penalty of this bond, and in

no event shall the Surety's total obligation hereunder exceed the

amount per member OTI set forth in 46 CFR 515.21 identified in

Appendix A, or the amount per group or association of OTIs set forth

in 46 CFR 515.21, regardless of the number of OTIs, claims or

claimants.

This bond is effective the __ day of ____, 19 __, and shall

continue in effect until discharged or terminated as herein

provided. The Principal or the Surety may at any time terminate this

bond by written notice to the Federal Maritime Commission at its

office in Washington, DC. Such termination shall become effective

thirty (30) days after receipt of said notice by the Commission. The

Surety shall not be liable for any transportation-related activities

of the OTIs identified in Appendix A as covered by the Principal

after the expiration of the thirty (30) day period, but such

termination shall not affect the liability of the Principal and

Surety for any transportation-related activity occurring prior to

the date when said termination becomes effective.

The Principal or financial responsibility provider will promptly

notify the underwriting Surety and the Director, Bureau of Tariffs,

Certification and Licensing, Federal Maritime Commission,

Washington, DC 20573, of any additions, deletions or changes to the

OTIs enumerated in Appendix A. In the event of additions to appendix

A, coverage will be effective upon receipt of such notice, in

writing, by the Commission at its office in Washington, DC. In the

event of deletions to Appendix A, termination of coverage for such

OTI(s) shall become effective thirty (30) days after receipt of

written notice by the Commission. Neither the Principal nor the

Surety shall be liable for any transportation-related activities of

the OTI(s) deleted from Appendix A after the expiration of the

thirty (30) day period, but such termination shall not affect the

liability of the Principal and Surety for any transportation-related

activity of said OTI(s) occurring prior to the date when said

termination becomes effective.

The underwriting Surety will promptly notify the Director,

Bureau of Tariffs, Certification and Licensing, Federal Maritime

Commission, Washington, DC 20573, of any claim(s) against this bond.

Signed and sealed this __day of ____, 19 __, (Please type name

of signer under each signature).

----------------------------------------------------------------------

Individual Principal or Partner

----------------------------------------------------------------------

Business Address

----------------------------------------------------------------------

Individual Principal or Partner

----------------------------------------------------------------------

Business Address

----------------------------------------------------------------------

Individual Principal or Partner

----------------------------------------------------------------------

Business Address

----------------------------------------------------------------------

Trade Name, if Any

----------------------------------------------------------------------

Corporate Principal

----------------------------------------------------------------------

Place of Incorporation

----------------------------------------------------------------------

Trade Name, if Any

----------------------------------------------------------------------

Business Address (Affix Corporate Seal)

----------------------------------------------------------------------

By

----------------------------------------------------------------------

Title

----------------------------------------------------------------------

Principal's Agent for Service of Process (Required if Principal is

not a U.S. Corporation)

----------------------------------------------------------------------

Agent's Address

----------------------------------------------------------------------

Corporate Surety

----------------------------------------------------------------------

Business Address (Affix Corporate Seal)

----------------------------------------------------------------------

By

----------------------------------------------------------------------

Title

Subpart D--Duties and Responsibilities of Ocean Transportation

Intermediaries; Reports to Commission

Sec. 515.31 General duties.

(a) License; name and number. Each licensee shall carry on its

business only under the name in which its license is issued and only

under its license number as assigned by the Commission. Wherever the

licensee's name appears on shipping documents, its Commission license

number shall also be included.

(b) Stationery and billing forms; notice of shipper affiliation.

(1) The name and license number of each licensee shall be permanently

imprinted on the licensee's office stationery and billing forms. The

Commission may temporarily waive this requirement for good cause shown

if the licensee rubber stamps or types its name and Commission license

number on all papers and invoices concerned with any ocean

transportation intermediary forwarding transaction.

(2) When a licensee is a shipper or seller of goods in

international commerce or affiliated with such an entity, the licensee

shall have the option of:

(i) Identifying itself as such and/or, where applicable, listing

its affiliates on its office stationery and billing forms, or

(ii) Including the following notice on such items:

This company is a shipper or seller of goods in international

commerce or is affiliated with such an entity. Upon request, a

general statement of its business activities and those of its

affiliates, along with a written list of the names of such

affiliates, will be provided.

(c) Use of license by others; prohibition. No licensee shall permit

its license or name to be used by any person who is not a bona fide

individual employee of the licensee. Unincorporated branch offices of

the licensee may use the license number and name of the licensee if

such branch offices:

(1) Have been reported to the Commission in writing; and

(2) Are covered by increased financial responsibility in accordance

with Sec. 515.21(a)(5).

(d) Arrangements with ocean transportation intermediaries whose

licenses have been revoked. Unless prior written approval from the

Commission has been obtained, no licensee shall, directly or

indirectly:

[[Page 70726]]

(1) Agree to perform ocean transportation intermediary services on

shipments as an associate, correspondent, officer, employee, agent, or

sub-agent of any person whose license has been revoked or suspended

pursuant to Sec. 515.16;

(2) Assist in the furtherance of any ocean transportation

intermediary business of such person;

(3) Share forwarding fees or freight compensation with any such

person; or

(4) Permit any such person, directly or indirectly, to participate,

through ownership or otherwise, in the control or direction of the

ocean transportation intermediary business of the licensee.

(e) Arrangements with unauthorized persons. No licensee shall enter

into an agreement or other arrangement (excluding sales agency

arrangements not prohibited by law or this part) with an unlicensed

person that bestows any fee, compensation, or other benefit upon the

unlicensed person. When a licensee is employed to perform ocean

transportation intermediary services by the agent of the person

responsible for paying for such services, the licensee shall also

transmit a copy of its invoice for services rendered to the person

paying those charges.

(f) False or fraudulent claims, false information. No licensee

shall prepare or file or assist in the preparation or filing of any

claim, affidavit, letter of indemnity, or other paper or document

concerning an ocean transportation intermediary transaction which it

has reason to believe is false or fraudulent, nor shall any such

licensee knowingly impart to a principal, shipper, common carrier or

other person, false information relative to any ocean transportation

intermediary transaction.

(g) Information provided to the principal or shipper. No licensee

shall withhold any information concerning an ocean transportation

intermediary transaction from its principal or shipper, and each

licensee shall comply with the laws of the United States and shall

exercise due diligence to assure that all information provided to its

principal or shipper or provided in any export declaration, bill of

lading, affidavit, or other document which the licensee executes in

connection with a shipment is accurate.

(h) Errors and omissions of the principal or shipper. A licensee

who has reason to believe that its principal or shipper has not, with

respect to a shipment to be handled by such licensee, complied with the

laws of the United States, or has made any error or misrepresentation

in, or omission from, any export declaration, bill of lading,

affidavit, or other paper which the principal or shipper executes in

connection with such shipment, shall advise its principal or shipper

promptly of the suspected noncompliance, error, misrepresentation or

omission, and shall decline to participate in any transaction involving

such document until the matter is properly and lawfully resolved.

(i) Response to requests of Commission. Upon the request of any

authorized representative of the Commission, a licensee shall make

available promptly for inspection or reproduction all records and books

of account in connection with its ocean transportation intermediary

business, and shall respond promptly to any lawful inquiries by such

representative.

(j) Express written authority. No licensee shall endorse or

negotiate any draft, check, or warrant drawn to the order of its

principal or shipper without the express written authority of such

principal or shipper.

(k) Invoices; documents available upon request. Upon the request of

its principal(s) or shipper(s), each licensee shall provide a complete

breakout of its charges and a true copy of any underlying document or

bill of charges pertaining to the licensee's invoice. The following

notice shall appear on each invoice to a principal or shipper:

Upon request, we shall provide a detailed breakout of the

components of all charges assessed and a true copy of each pertinent

document relating to these charges.

(l) Accounting to principal or shipper. Each licensee shall account

to its principal(s) or shipper(s) for overpayments, adjustments of

charges, reductions in rates, insurance refunds, insurance monies

received for claims, proceeds of C.O.D. shipments, drafts, letters of

credit, and any other sums due such principal(s) or shipper(s).

Sec. 515.32 Records required to be kept.

Each licensee shall maintain in an orderly and systematic manner,

and keep current and correct, all records and books of account in

connection with its ocean transportation intermediary business. These

records must be kept in the United States in such manner as to enable

authorized Commission personnel to readily determine the licensee's

cash position, accounts receivable and accounts payable. The licensee

must maintain the following records for a period of five years:

(a) General financial data. A current running account of all

receipts and disbursements, accounts receivable and payable, and daily

cash balances, supported by appropriate books of account, bank deposit

slips, canceled checks, and monthly reconciliation of bank statements.

(b) Types of services by shipment. A separate file shall be

maintained for each shipment. Each file shall include a copy of each

document prepared, processed, or obtained by the licensee, including

each invoice for any service arranged by the licensee and performed by

others, with respect to such shipment.

(c) Receipts and disbursements by shipment. A record of all sums

received and/or disbursed by the licensee for services rendered and

out-of-pocket expenses advanced in connection with each shipment,

including specific dates and amounts.

(d) Special contracts. A true copy, or if oral, a true and complete

memorandum, of every special arrangement or contract between a licensed

freight forwarder and a principal, or modification or cancellation

thereof. Bona fide shippers shall also have access to such records upon

reasonable request.

Sec. 515.33 Regulated Persons Index.

The Regulated Persons Index is a database containing the names,

addresses, phone/fax numbers and bonding information, where applicable,

of Commission-regulated entities. The database may be purchased for $84

by contacting Bureau of Tariffs, Certification and Licensing, Federal

Maritime Commission, Washington, DC 20573. Contact information is

listed on the Commission's website at www.fmc.gov.

Subpart E--Freight Forwarding Fees and Compensation

Sec. 515.41 Forwarder and principal; fees.

(a) Compensation or fee sharing. No licensed freight forwarder

shall share, directly or indirectly, any compensation or freight

forwarding fee with a shipper, consignee, seller, or purchaser, or an

agent, affiliate, or employee thereof; nor with any person advancing

the purchase price of the property or guaranteeing payment therefor;

nor with any person having a beneficial interest in the shipment.

(b) Receipt for cargo. Each receipt for cargo issued by a licensed

freight forwarder shall be clearly identified as ``Receipt for Cargo''

and be readily distinguishable from a bill of lading.

(c) Special contracts. To the extent that special arrangements or

contracts are entered into by a licensed freight forwarder, the

forwarder shall not deny equal terms to other shippers similarly

situated.

(d) Reduced forwarding fees. No licensed freight forwarder shall

render,

[[Page 70727]]

or offer to render, any freight forwarding service free of charge or at

a reduced fee in consideration of receiving compensation from a common

carrier or for any other reason. Exception: A licensed freight

forwarder may perform freight forwarding services for recognized relief

agencies or charitable organizations, which are designated as such in

the tariff of the common carrier, free of charge or at reduced fees.

(e) In-plant arrangements. A licensed freight forwarder may place

an employee or employees on the premises of its principal as part of

the services rendered to such principal, provided:

(1) The in-plant forwarder arrangement is reduced to writing in the

manner of a special contract under Sec. 515.32(d), which shall identify

all services provided by either party (whether or not constituting a

freight forwarding service); state the amount of compensation to be

received by either party for such services; set forth all details

concerning the procurement, maintenance or sharing of office

facilities, personnel, furnishings, equipment and supplies; describe

all powers of supervision or oversight of the licensee's employee(s) to

be exercised by the principal; and detail all procedures for the

administration or management of in-plant arrangements between the

parties; and

(2) The arrangement is not an artifice for a payment or other

unlawful benefit to the principal.

Sec. 515.42 Forwarder and carrier; compensation.

(a) Disclosure of principal. The identity of the shipper must

always be disclosed in the shipper identification box on the bill of

lading. The licensed freight forwarder's name may appear with the name

of the shipper, but the forwarder must be identified as the shipper's

agent.

(b) Certification required for compensation. A common carrier may

pay compensation to a licensed freight forwarder only pursuant to such

common carrier's tariff provisions. Where a common carrier's tariff

provides for the payment of compensation, such compensation shall be

paid on any shipment forwarded on behalf of others where the forwarder

has provided a written certification as prescribed in paragraph (c) of

this section and the shipper has been disclosed on the bill of lading

as provided for in paragraph (a) of this section. The common carrier

shall be entitled to rely on such certification unless it knows that

the certification is incorrect. The common carrier shall retain such

certification for a period of five (5) years.

(c) Form of certification. Where a licensed freight forwarder is

entitled to compensation, the forwarder shall provide the common

carrier with a signed certification which indicates that the forwarder

has performed the required services that entitle it to compensation.

The required certification may be placed on one copy of the relevant

bill of lading, a summary statement from the forwarder, the forwarder's

compensation invoice, or as an endorsement on the carrier's

compensation check. Each forwarder shall retain evidence in its

shipment files that the forwarder, in fact, has performed the required

services enumerated on the certification. The certification shall read

as follows:

The undersigned hereby certifies that neither it nor any holding

company, subsidiary, affiliate, officer, director, agent or

executive of the undersigned has a beneficial interest in this

shipment; that it is the holder of valid FMC License No. ____,

issued by the Federal Maritime Commission and has performed the

following services:

(1) Engaged, booked, secured, reserved, or contracted directly

with the carrier or its agent for space aboard a vessel or confirmed

the availability of that space; and

(2) Prepared and processed the ocean bill of lading, dock

receipt, or other similar document with respect to the shipment.

(d) Compensation pursuant to tariff provisions. No licensed freight

forwarder, or employee thereof, shall accept compensation from a common

carrier which is different from that specifically provided for in the

carrier's effective tariff(s). No conference or group of common

carriers shall deny in the export commerce of the United States

compensation to an ocean freight forwarder or limit that compensation

to less than a reasonable amount.

(e) Electronic data interchange. A licensed freight forwarder may

own, operate, or otherwise maintain or supervise an electronic data

interchange based computer system in its forwarding business; however,

the forwarder must directly perform value-added services as described

in paragraph (c) of this section in order to be entitled to carrier

compensation.

(f) Compensation; services performed by underlying carrier;

exemptions. No licensed freight forwarder shall charge or collect

compensation in the event the underlying common carrier, or its agent,

has, at the request of such forwarder, performed any of the forwarding

services set forth in Sec. 515.2(i) unless such carrier or agent is

also a licensed freight forwarder, or unless no other licensed freight

forwarder is willing and able to perform such services.

(g) Duplicative compensation. A common carrier shall not pay

compensation for the services described in paragraph (c) of this

section more than once on the same shipment.

(h) Non-vessel-operating common carriers; compensation. (1) A

licensee operating as an NVOCC and a freight forwarder, or a person

related thereto, may collect compensation when, and only when, the

following certification is made together with the certification

required under paragraph (c) of this section:

The undersigned certifies that neither it nor any related person

has issued a bill of lading or otherwise undertaken common carrier

responsibility as a non-vessel-operating common carrier for the

ocean transportation of the shipment covered by this bill of lading.

(2) Whenever a person acts in the capacity of an NVOCC as to any

shipment, such person shall not collect compensation, nor shall any

underlying ocean common carrier pay compensation to such person, for

such shipment.

(i) Compensation; beneficial interest. A licensed freight forwarder

may not receive compensation from a common carrier with respect to any

shipment in which the forwarder has a beneficial interest or with

respect to any shipment in which any holding company, subsidiary,

affiliate, officer, director, agent, or executive of such forwarder has

a beneficial interest.

By the Commission.

Joseph C. Polking,

Secretary.

[FR Doc. 98-33554 Filed 12-21-98; 8:45 am]

BILLING CODE 6730-01-P