Federal Maritime Commission’s Proposed Rules and Direct Final Rule Will Have Significant Impact on Carriers and Forwarders

At its meeting on September 26, 2019, the Federal Maritime Commission (“FMC”) issued two proposed rules and a Request for Comments on a Direct Final Rule that may significantly affect ocean transportation intermediaries (“OTIs”), such as vessel operating common carriers (“VOCCs”), non-vessel operating common carriers (“NVOCCs”), and ocean freight forwarders (“OFFs”). These actions will revise the procedures of the Bureau of Enforcement (“BoE”), and will be published shortly in the Federal Register. The proposed changes are somewhat vague, and the following provides a summary of notices that were issued by the FMC last week.

In the first Notice of Proposed Rulemaking (“NPRM”), the FMC voted to approve an Order exempting VOCCs from publishing essential terms of service contracts.  The vote was a decision to approve part of a petition that was filed by the World Shipping Council (“the Council”) in September 2018 after the FMC granted filing exemptions to NVOCCs.  In its petition, the Council contended that exemptions from publishing essential terms and filing service contracts with the FMC should be approved for carriers as similar relief had been granted to NVOCCs. The FMC did not grant relief from filing service contracts with the agency claiming that it was unable to determine that  doing so would not be harmful to commerce. FMC Commissioner Dye dissented by stating that she would have granted the petition in its entirety.

The second NPRM contains several provisions, the most important effecting OTIs as follows:

• The class of persons that must be licensed as OTIs would be expanded and would require compliance with certain financial responsibility requirements;
• The prohibition on VOCCs knowingly and willfully accepting or transporting cargo for NVOCCs that do not have a tariff or meet financial responsibility requirements would be expanded; and,
• Clarification that OTI licensing and financial responsibility requirements do not apply to disclosed agents of licensed OTIs.

In addition, the Request for Comments on Direct Rule would create a new enforcement process for BoE, thereby increasing Commission oversight.  The revised procedures would require:

• The provision of notice to intended subjects of investigations and allowing them to respond before the FMC submits its recommendations;
• FMC approval before enforcement action is taken; and,
• FMC approval of any proposed informal compromise agreements.

Unless there is significant resistance to the proposed changes, the Direct Rule will become effective seventy-five (75) days after its publication in the Federal Register.

The NPRMs and the Request for Comments on the Direct Rule will be published soon in the Federal Register.  Watch this space for updates as they are become known.

Keep in mind that the FMC’s stated mission is “to ensure a competitive and reliable international ocean transportation supply system that supports the U.S. economy and protects the public from unfair and deceptive practices.”  In a globally competitive shipping world, the FMC attempts to abide its mission by balancing its regulatory oversight while facilitating U.S. ocean transport and protecting the interests of the shipping public.  This small independent agency, since its inception nearly 50 years ago, has been doing just that.  These proposed regulations are another step away from constricting ocean shipping in the U.S. trade lanes.

Miller Proctor Law PLLC will continue to track the developments of the FMC’s proposed rules and the Direct Rule. If you have any questions relating to FMC requirements or other international trade-related issues, please contact Melissa Proctor (melissa@millerproctorlaw.com) at Miller Proctor Law PLLC (https://millerproctorlaw.com ).