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: Confirmation of interim final rule and correction.

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SUMMARY: This rule confirms as final the interim rule published on

March 8, 1999, which added a provision to the Federal Maritime

Commission's licensing requirements to allow foreign non-vessel-

operating common carriers the opportunity to seek to obtain a license.

In addition, this document contains a correction to the final

regulations which were published in the same document on March 8, 1999.

DATES: Effective May 1, 1999.

FOR FURTHER INFORMATION CONTACT:

Austin L. Schmitt, 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 Street, NW, Washington, DC 20573-0001, (202) 523-5740

SUPPLEMENTARY INFORMATION:

On February 26, 1999, the Federal Maritime Commission (``FMC'' or

``Commission'') adopted new regulations at 46 CFR part 515 to implement

changes made by the Ocean Shipping Reform Act of 1998 (``OSRA''), Pub.

L. 105-258, 112 Stat. 1902, to the Shipping Act of 1984 (``1984 Act''),

46 U.S.C. app. section 1701 et seq., relating to ocean freight

forwarders and non-vessel-operating common carriers (``NVOCCs''), 64 FR

11155-11183, March 8, 1999.

As part of the final rule, the Commission published as an interim

final rule a provision to allow foreign NVOCCs the opportunity to seek

to obtain a license under the provisions of 46 CFR part 515. We

explained that pursuant to the definition of ``in the United States''

in 46 CFR 515.3 adopted by the Commission, a foreign NVOCC could choose

to establish a presence in the United States for licensing purposes in

accordance with 515.3 and secure financial responsibility applicable to

NVOCCs in the United States. To establish a presence in the United

States necessary to obtain a license under this part, a foreign NVOCC

must set up an unincorporated office that is resident in the United

States. We would not consider the foreign NVOCC's primary location in

the United States to be a separate branch office subject to additional

licensing and financial responsibility requirements of this part.

However, in the event that the licensee seeks to establish other branch

offices in addition to its primary United States office, those other

offices would be subject to the licensing and financial responsibility

requirements applicable to separately incorporated and unincorporated

branch offices.

We further limited the option of a foreign entity becoming licensed

under this part to NVOCCs, and not freight forwarders, because an

``ocean freight forwarder'' is defined in Sec. 515.2(o)(1) as a person

who dispatches shipments ``from the United States.'' Moreover, a

freight forwarder has a fiduciary relationship with its customer, and a

foreign freight forwarder, by its very nature, would be performing

services for its customers in a foreign country beyond the reach of the

Commission. Finally, in order to better assist foreign NVOCCs who seek

to become licensed under this part, we amended Sec. 515.11(a)(1) to

provide that a foreign NVOCC's experience in ocean transportation

intermediary (``OTI'') services need not be in the United States.

We sought comments on those aspects of the rule that were

implemented as an interim final rule. We received comments from North

American Van Lines, Inc., t/a North American International, who

supports the Commission's proposal to permit foreign NVOCCs to obtain a

license, believing it will result in enhanced compliance with the 1984

Act. No other comments were received, and, therefore, we implement as

final those provisions which allow foreign NVOCCs to seek to obtain a

license under 46 CFR part 515.

As the Commission is preparing to implement the licensing and

financial responsibility requirements of this part, several issues have

been raised which we will now address.

With respect to the licensing requirements of Sec. 515.11, in the

supplementary information to the final rule, we stated that an NVOCC

with a tariff and financial responsibility in effect as of April 30,

1999, would be permitted to continue operating without the requisite

three years' experience and character requirement. 64 FR 11158-59.

However, in Sec. 515.11(a)(3), the reference to the character

requirement was inadvertently omitted. Therefore, Sec. 515.11(a)(3) is

corrected to reflect that an NVOCC with a tariff and financial

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responsibility in effect as of April 30, 1999 will be permitted to

continue operating without satisfying the requisite qualifications of

three years' experience and necessary character to render OTI services.

In addition, we stated that an applicant will be provisionally

licensed while the Commission reviews its application. Concerns have

been raised as to what the Commission intends by the term

``provisionally.'' The Commission will issue licenses to those NVOCCs

who have tariffs and financial responsibility in effect on April 30,

1999 and who file license applications and increase their financial

responsibility by May 1, 1999. These entities are permitted to continue

operating while the Commission processes their applications. Should the

review and investigation of applications reveal that an applicant is

otherwise unqualified or unsuitable to retain a license, the regular

procedures set forth at Sec. 515.16 for revocation or suspension of a

license would apply.

OSRA and 46 CFR part 515 require, for the first time, that NVOCCs

obtain a license. Consistent with the licensing provisions applicable

to freight forwarders under current regulations at 46 CFR part 510, and

applicable to all licensed OTIs effective May 1, 1999 under 46 CFR part

515, separately incorporated branch offices are treated as separate

entities. Section 515.3 requires a separate license for separately

incorporated branch offices. Branch office is defined at Sec. 515.2(c)

as ``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 is located at an address different from

that of the licensee's designated home office. This term does not

include a separately incorporated entity.'' Similarly, subpart C of 46

CFR part 515 requires that separately incorporated branch offices

obtain their own financial responsibility. Unincorporated branch

offices are not required to obtain their own licenses, but the licensee

is required to increase its financial responsibility by $10,000 for

each unincorporated branch office.

Section 515.25(a), in conjunction with the licensing requirements

of this part, could be read to require that a separately incorporated

branch office of an NVOCC publish its own tariff, because an applicant

who seeks to obtain a license to operate as an NVOCC must establish its

financial responsibility and publish a tariff. We wish to clarify that

a separately incorporated branch office of an NVOCC is not required to

publish its own tariff. An NVOCC branch office which provides

intermediary services is required to satisfy the licensing and

financial responsibility requirements applicable to unincorporated and

separately incorporated branch offices, as freight forwarders

previously have been, and continue to be, so required. To the extent

that a separately incorporated branch office of an NVOCC is issuing,

processing, or otherwise handling, the designated home office's bills

of lading, based on the rates published in the designated home office's

tariff, it is not required to publish its own tariff.

An office under the corporate umbrella that does not provide

intermediary services under this part, but for example provides air

freight forwarding, does not fall under the branch office requirements

of this part, as it is not established or maintained by or under the

control of the licensee for the purpose of rendering intermediary

services within the meaning of the 1984 Act or this part. Similarly, a

licensed OTI is allowed to use an agent, say for sales work on behalf

of the licensed principal, and the agent is not required to obtain its

own license and financial responsibility, so long as the agent is not,

in actuality, operating as a branch office of the licensee, whether

unincorporated or separately incorporated.

The Commission has received OMB approval for this collection of

information pursuant to the Paperwork Reduction Act of 1995, as

amended. In accordance with that Act, agencies are required to display

a currently valid control number. The valid control number for this

collection of information is 3072-0012.

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 Part 515

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

Ocean transportation intermediaries, Licensing requirements, Financial

responsibility requirements, Reports and recordkeeping requirements.

Accordingly, the second sentence of Sec. 515.11(a)(1), which was

published as an interim final rule within the final rule adding part

515 at 64 FR 11173 on March 8, 1999, is adopted as a final rule without

change.

In addition, the following corrections are made:

1. At the end of the preamble on page 11171 in the first column, in

the fourth line above the heading for part 510, the words ``proposes to

remove'' are corrected to read ``removes'', and in the following line,

the word ``add'' is corrected to read ``adds'.

2. In Sec. 515.11(a)(3), which was published at 64 FR 11173 in the

third column on March 8, 1999, make the following correction: in the

first sentence after the word ``experience'' and before the word

``and'' add the phrase ``and necessary character to render ocean

transportation intermediary services'.

Bryant L. VanBrakle,

Secretary.

[FR Doc. 99-10755 Filed 4-28-99; 8:45 am]

BILLING CODE 6730-01-P