Newly minted entities that had hoped to begin offering forwarding and NVO services at the start of 2019 are stuck until the FMC can resume issuance of licenses.
The U.S. ocean transportation intermediary industry, which includes freight forwarders, non-vessel-operating common carriers or a combination of the two, remains fertile ground for entrepreneurial-minded individuals seeking to gain a foothold in a dynamic business that’s focused on managing the international transportation of containerized goods.
Unfortunately, many of those U.S.-based entities that had hoped to begin offering forwarding and NVO services at the start of 2019 are now stuck in a holding pattern, while they wait for the issuance of their licenses from the now shuttered Federal Maritime Commission.
Since Dec. 26, the FMC has been closed due to the federal government shutdown. With the exceptions of Acting Chairman Michael A. Khouri and Commissioner Rebecca Dye, who are presidentially appointed, Senate-confirmed officials, all commission employees have been placed on furlough and are prohibited by law from performing any duties during the shutdown.
“Everything is at an absolute standstill at the FMC,” said Albert Saphir, principal of ABS Consulting, who has helped many newly minted forwarders and NVOs get their start.
Generally, it takes two to three months from the time an OTI application is submitted to receiving a license from the agency. During this process, the OTI applicant also must provide the FMC with proof of financial responsibility, usually in the form of a bond, and in the case of NVOs, prepare the publication of tariffs. All of this takes time and patience during the best of circumstances.
Even if the shutdown should be lifted on Wednesday, it is expected to take weeks for the FMC to dig out from the existing backlog and resume normal operations.
The FMC’s Bureau of Certification and Licensing oversees and audits about 6,460 licensed and/or registered OTI companies.
In recent years, the FMC has instituted a number of changes that aim to simplify and ease regulatory and compliance burdens for OTIs.
In 2015, the FMC published a final rule making significant amendments to its regulations governing OTIs. These changes included adding requirements to renew OTI licenses every three years, providing for simple online renewals, eliminating the $10,000 financial responsibility coverage requirement for each unincorporated branch office and establishing an expedited hearing process for license denials, revocations and suspensions, while continuing to provide applicants and licensees due process and the ability to appeal adverse decisions to the commission. Most of the changes were implemented in December 2015, and OTI license renewals were initiated in 2017.
Before the end of 2018, the FMC issued a proposed rule to further clarify these OTI regulations, including:
• Updating the title and scope of Part 515 of the Shipping Act to include foreign-based NVO registrations;
• Clarifying the requirements for U.S. agents of foreign-based registered NVOs;
• Removing the optional paper application process and related reference to fee amounts;
• Adding language to clarify who can be the qualifying individual in partnerships between entities other than individuals;
• Updating and improving processes (renewal, bond and termination);
• Adding clarifying language regarding the commission’s direct review of applications in certain cases;
• Clarifying the information that sureties are to provide regarding claims against OTIs;
• Adding a requirement that NVOs submit their Form FMC-1 prior to being issued a license;
• And deleting reference to availability of the Regulated Person’s Index.
The FMC said that “none of the proposed changes increase the burden” to applicants, licensees or registered foreign-based NVOs.
The most significant OTI regulatory changes made by the FMC last year involved the publication of final rules for NVO negotiated rate arrangements (NRAs) and NVO service arrangements (NSAs).
NRAs may be amended at any time, permit the inclusion of non-rate economic terms and allow an NVO to provide for the shipper’s acceptance of the NRA by booking a shipment, while NSAs remove the requirement of NVOs filing essential terms with the FMC.
The National Customs Brokers and Forwarders Association of America, at the time, said the changes would provide “groundbreaking relief” to NVOs.
“These changes will benefit American consumers and the industry by expanding choices for shippers, reducing regulatory requirements and increasing efficiencies in contracting for ocean shipping services,” the FMC’s Khouri told the Association of Transportation Law Professionals Transportation Forum XV on Nov. 5.
Both Khouri and Dye have remained committed to President Trump’s Feb. 24, 2017 Executive Order 13777 to identify and address outdated, unnecessary or unduly burdensome regulations within the Shipping Act’s provisions.
These changes, in addition to the burgeoning and dynamic third-party logistics market, will continue to entice more people to enter the OTI space.
Commentary: OTI licenses frozen by shutdown
