NCBFAA SECURES RULING ON FORWARDER COMPENSATION
Washington-based National Customs Brokers & Forwarders Association of America said that it has secured a decision by a judge of the U.S. Federal Maritime Commission to recognize the current practice of “endorsing certifications for services rendered at the time of depositing checks.”
The ruling clarifies a technicality on the allowed conditions for the payment of forwarder compensation by ocean carriers.
NCBFAA had filed an “amicus curiae” (friend of the court) brief following a court case between the FMC and former U.S. carrier Sea-Land Service, arguing that Sea-Land’s payment of forwarder compensation was consistent with industry practice. The brokers and forwarders association also argued that the fact that forwarders do not always physically sign certifications that they have provided various forwarder services does not amount to a violation of rules on the payment of forwarder compensation.
The NCBFAA said that, even if no physical signature is being made on the certification, the act of endorsing a check for deposit still constitutes a form of signature.
Not allowing this practice “would have threatened the continued existence of forwarder compensation,” the NCBFAA warned. “In other words, if the commission concluded that carriers had the burden of ensuring that the certifications are physically signed before paying the compensation, it is likely that the many carriers would prefer not to pay compensation at all; otherwise they might be required to audit each and every shipment as a way of ensuring that the forwarders had actually performed forwarder services and were therefore entitled to the compensation,” it explained.
The ruling on forwarder compensation will get Sea-Land off-the-hook concerning certain violations of the law on the prohibition of the payment of rebates to intermediaries.
But although the NCBFAA said that the FMC reversed its prior decision that Sea-Land was subject to substantial penalties for the forwarding certification issue, the agency nevertheless found that Sea-Land was guilty of having provided rebates to a number of non-vessel-operating common carriers.
Earlier this month, a U.S. Federal Maritime Commission administrative law judge has assessed a maximum civil penalty of $4.1 million on Sea-Land for “knowingly and willfully” committing tariff and forwarder-related violations of the Shipping Act of 1984.
Judge Frederick M. Dolan Jr. ruled that Sea-Land had violated section 10(b)(1) of the act “on 149 shipments by charging shippers the inapplicable rates on cargo in 20-foot containers when Sea-Land moved the cargo in 40-foot containers. The cargo did not comply with the tariff rule as to equipment substitution since the cargo exceeded the tariff limits on weight and measure.”
“Sea-Land was also found … to have paid compensation to ocean forwarders who did not perform the statutorily mandated services … And paid compensation to a person (with) a revoked FMC license, both in violation of section 19(d)(1) in 435 instances. Also, Sea-Land, in 170 instances, knowingly paid forwarder compensation to a forwarder who had a beneficial interest in the shipments,” Dolan said.
In its rebuttal argument, included in Dolan’s initial penalty decision, Sea-Land said, “the scope of the Bureau of Enforcement’s proposal is so far-reaching that it impacts settled forwarder practices across the industry. If a penalty is assessed for practices that are allegedly common throughout the industry, not only will Sea-Land be unfairly victimized, it would throw industry forwarder practices into turmoil.”
The alleged violations occurred between 1996 and 1998. Maersk acquire Sea-Land Service in late 1999 from CSX Corp.