An industry check
FMC monitors unlicensed forwarder, NVO activity to protect shippers.
By Chris Gillis
For most ocean freight forwarders and non-vessel-operating common carriers, it's not worth attempting to operate in the U.S. market without a license and bond on file with the Federal Maritime Commission.
Yet there are a few ocean transportation intermediaries (OTIs) that will inevitably try, and the FMC continues to maintain a watchful eye for these types of violators.
'Shippers are vulnerable to risk of losing property and/or money to unscrupulous providers who either are unqualified to perform the work or do not have the financial responsibility coverage to protect the shipper when losses occur,' said Sandra Kusumoto, director of the FMC's Bureau of Certification and Licensing. 'The commission is also concerned licensed OTIs are at a disadvantage when unlicensed OTIs can operate without complying with regulatory requirements.'
Despite the recession, the FMC hasn't witnessed a discernable uptick in unlicensed OTIs.
'The commission continues to prosecute unlicensed OTI activity in violation of the Shipping Act,' Kusumoto said. 'Effective enforcement has been, and continues to be, a major tool in protecting the public from harmful unlicensed OTI activity.'
The FMC's Office of Consumer Affairs and Dispute Resolution Services addresses complaints from shippers that have used unlicensed firms performing OTI services.
'Shippers of household goods particularly have experienced loss of money or goods at the hands of such unlicensed entities,' Kusumoto said. 'Fewer complaints against licensed and unlicensed OTIs have been received recently, likely as a result of fewer cargo shipments because of economic conditions.'
The FMC's area representatives are active in local port communities and promote the licensing requirement through formal presentations to local chambers of commerce and industry groups. To inform shippers, the commission has occasionally run nationwide public service announcements. The target audience for these announcements is the occasional or one-time shipper sending holiday gifts or other household goods by ocean transport.
Today's OTI (FMC-18) application process with the FMC is straightforward and striving to be more automated. Once an application is received the agency reviews the documentation and contact information, and conducts an investigation of the applicant. The FMC also solicits comments from the industry by publishing a list of new applicants near weekly in the Federal Register.
If approved, the agency notifies the applicant and requires proof of financial responsibility, most likely in the form of a $50,000 surety bond for an ocean freight forwarder license or a $75,000 surety bond for an NVO license. In addition, each unincorporated U.S. branch office of the applicant performing OTI services is required to increase its bond by $10,000 and to report the addresses of those offices to the FMC. Once a license is issued to an NVO, it must file a Form FMC-1, which notifies the FMC of the location of the NVO's electronically available tariff. The NVO must then ensure the tariff is published.
Non-U.S.-based NVOs that do not wish to be licensed must provide the FMC with proof of financial responsibility in the amount of $150,000 (Form FMC-1), and ensure a tariff is published at the site listed on the form. The FMC said a non-U.S.-based NVO must list in its tariff an agent for service of process in the United States, and it must use a licensed OTI for any OTI services performed on its behalf in the United States.
Non-U.S.-based NVOs that choose to be licensed must submit Form FMC-18 together with the required documentation and fee. In addition, the entity must establish a U.S. presence, such as an unincorporated branch office. The amount of financial responsibility is $75,000 plus $10,000 for each unincorporated U.S. branch office. A Form FMC-1 must be filed and a tariff published.
The FMC publishes the names of ocean freight forwarders that are licensed and bonded, as well as NVOs that are licensed, bonded and have filed an FMC-1, or are foreign-domiciled NVOs that are bonded and filed an FMC-1. This information can be found on the FMC's Web site (www.fmc.gov) under 'OTI List.'
In the fiscal year ending Sept. 30, 2009, the FMC received 759 license applications (new and amended), compared to 738 during fiscal year 2008, for a total of 5,400 licensed OTIs. (Amended OTI applications include license transfers, business structure changes, replacement of qualifying individuals, additions to NVO or ocean freight forwarder authority, and additions or removals of trade names.)
Ocean freight forwarder and NVO specific license applications dropped slightly between fiscal years 2008 and 2009. However, the FMC realized an increase in the number of foreign registered OTIs from 1,032 to 1,068, or 3.49 percent, from fiscal year 2008 to 2009.
The largest increase in licenses during fiscal year 2009 occurred among OTIs possessing both NVO and ocean freight forwarder licenses. The FMC registered an increase of 82 licenses for a total of 1,449 in fiscal year 2009.
'This explains the overall increase of total OTIs and the OTI application increase in the amended rather than the new OTI applicant category,' Kusumoto said.