FMC Approves New Final Rules
Client Alert
New regulations that the FMC voted to approve January 15, 2020. The new rules pertain to the actions of agents of NVOs and ocean forwarders. If the requirements are not met, there is a possibility that both the agent and the licensed OTI may have liability for having violated the Shipping Act.
On January 15, 2020, the Federal Maritime Commission (“Commission”) held its first meeting of the year. At that time, the Commission voted to issue and publish two final rules, one of which is particularly relevant to NVOCCs and forwarders that use agents and implemented provisions of the recent Frank LoBiondo Coast Guard Authorization Act of 2018.
The final rule is intended to:
- Clarify that persons that advertise or hold themselves out as OTIs must be licensed as OTIs and meet associated financial responsibility requirements.
- Make clear that OTI licensing and financial responsibility requirements do not apply to a person performing OTI services on behalf of an OTI for which it is a disclosed agent.
- Expand the prohibition on common carriers knowingly and willfully accepting or transporting cargo for OTIs that do not have a tariff or do not meet financial responsibility requirements.
While these changes may seem somewhat innocuous, it is likely that many agency arrangements between OTIs and their agents are somewhat informal or are even not in writing. It is similarly likely many agents may not be making it clear that they are acting as the agent of the licensed OTI when they book cargo, enter into service contracts, cut HBLs or otherwise make logistical arrangements for the movement of ocean cargo. In those instances, the new final rule could lead to significantly liability on the part of both the agent and the OTI if the transportation documentation and booking process does not clearly spell out the relationships of the parties.
Although these final rules still need to be reviewed by the Office of Information and Regulatory Affairs (since they amount to additional regulation), it is likely that all will be approved because they are required by the LoBiondo legislation. We accordingly expect that the final rules will be published shortly in the Federal Register and become effective 30 days following publication. We suggest that consider reviewing your agency relationships to ensure that the agents are always making it clear that they are acting as your agent, not as a principal in their own right, for traffic moving under your HBLs.
If you have any questions, let us know.