FMC ruling allows OTIs to use agents
Ocean freight forwarders and non-vessel-operating common carriers will have more latitude in how they organize their businesses as a result of a court decision and U.S. Federal Maritime Commission order last week.
The FMC order said “it is lawful for licensed ocean transportation intermediaries to engage unlicensed persons to act as their agents to perform OTI services on behalf of the disclosed licensed OTI.”
Last week’s decision grows out of a petition made in August 2006 by Team Ocean Services Inc., a Winnsboro, Texas-based forwarder and NVO, which asked the FMC to issue a declaratory order to clarify what was the permissible use of agents by so-called ocean transport intermediaries.
The commission issued a declaratory order on Feb. 15, 2008 that said “only licensed persons are permitted to provide OTI services to the public.”
Randy Honeycutt, president of Team Ocean Services, said he could live with that original decision, but he had wanted more flexibility in how he organized his business, to be able to use a franchise-like model.
“What we didn’t want was the cost of maintaining a local setup of buildings, phone systems, utilities, employee relationships — all of which bring unnecessary burdens, costs and risk,” he explained. He wanted to put agents and pay them on a commission basis, based in accordance to the amount of business they do.
After the 2008 order, Jacksonville, Fla.-based Landstar System petitioned the U.S. Court of Appeals for the District of Columbia Circuit to review the FMC declaratory order in the Team Ocean matter.
The appeals court reversed the FMC ruling on June 26, saying that agents providing OTI services need not be licensed, saying the FMC “lacks authority to compel those agents to obtain licenses.”
In line with the decision, the FMC last week granted the declaratory order.
Honeycutt believes the FMC ruling will help businesses grow, and provide shippers with more choice.
He noted that many articles about his company’s original petition “gave the opinion that we were trying to do away with the bonds at each location. We have no intention of doing that, as we will require each location to be bonded.
“Each station will be required to follow all FMC rules and regulations as Team Ocean Services Inc. is totally responsible for their actions. They will be required to perform all functions as Team Ocean Services as our agent and will not be utilizing their companies name in any manner. Each station will be under an agent’s agreement, specifically detailing our requirement that they adhere to FMC standards of actions. Each station will be required to have an employee with at least three years minimum experience as required by the FMC and they will be required to prove their worthiness prior to signing any agent agreements an they will be required to maintain an employee that meets our satisfaction.
“This is the way business is done today,” Honeycutt said. “A smaller company attaches itself to a larger company and utilizes their branding, their computer systems, their contract rates, their accounting systems and their procedural systems.
“While several articles said this places the larger companies at a disadvantage, I disagree as they can create a hybrid company. They can utilize company stations where the resources justify it, and they can assign agents in smaller locations where the revenue and resources do not justify the risk of a company owned station.” ' Chris Dupin