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Signals™ Headlines - March 6, 2000

FMC Reorganizes Bureaus and Offices: more resources dedicated to OTI licensing

The FMC has implemented a major reorganization of its bureaus and offices responsible for agreements, service contracts, tariffs, OTI licensing, consumer complaints, passenger vessel certificates, and administration. FMC Chairman Hal Creel announced these changes on February 28, 2000. At least eight senior members of the Commission’s staff were reassigned in the reorganization, which Chairman Creel said would enable the Commission to “more efficiently and effectively accomplish our statutory responsibilities as charged by OSRA (the Ocean Shipping Reform Act of 1998).”

Only two months after his appointment as Managing Director, Bruce Dombrowski has been promoted to the newly created post of Executive Director. The Office of the Executive Director has assumed responsibility for the Bureau of Administration, thereby eliminating this Bureau. Florence A. Carr, who had formerly served as Director of the Bureau of Economics and Agreement Analysis, has been named to the new position of Deputy Executive Director.

A new Bureau of Consumer Complaints & Licensing (BCCL) has been created, and Sandra L. Kusumoto, who formerly headed the FMC Bureau of Administration, has been named Director. This new bureau includes the Office of Consumer Complaints, headed by Joseph Farrell, and the Office of Ocean Transportation Intermediaries (OTIs), headed by Betty Bennett, the former Chief of the Office of Freight Forwarders. OTI-NVOCC and OTI-Freight Forwarder licenses will be handled by Ms. Bennett’s new office. Improved processing of OTI license applications is one of the key goals of the reorganization. BCCL is also responsible for passenger vessel certificates.

Agreements, service contracts, tariffs and economic analysis are now the responsibility for the new Bureau of Trade Analysis. This Bureau, directed by Austin Schmidt, assumes all the functions of the former Bureau of Economic Analysis and Agreements, including the Office of Economics and Competition Analysis, headed by Frank Schwarz, and the Office of Agreements, headed by Jeremiah D. Hospital. The Bureau also takes on added responsibility for tariffs and service contracts. The position of Director of the Office of Service Contracts and Tariffs has not yet been filled. Improved techniques for the analysis and audit of service contracts and tariffs are also goals of the reorganization.

The Bureau of Enforcement remains under the reorganization plan, and the Commission intends this Bureau to remain active and aggressive in responding to evidence of wrongdoing. Even as amended by OSRA, the Commission’s statutory responsibilities include prosecuting certain proscribed acts, including unreasonably refusing to deal or negotiate, or willfully misdescribing cargo for the purposes of paying a lower rate, or operating without the necessary financial responsibility, license or published tariff. Chairman Creel noted, however, that the Commission will work with the industry to attain compliance and to bring entities into conformity with the law, and will not aim to penalize the unwary.

In addition to the above, Theodore A. Zook has been named Assistant Secretary, and Matthew J. Thomas has been named Assistant General Counsel for International Affairs.

Docket 99-10: Proposed New Definition of Vessel Operating Common Carrier (VOCC)

A more restrictive definition of “vessel operating common carrier” (VOCC) will be considered by the FMC Commissioners at their meeting on March 8, 2000. This definition was initially proposed during the OSRA rulemaking process in early 1999, but was withdrawn by the Commission. It was proposed again in July 1999, and it has been on hold since. Several carriers have objected to this proposal.

Under the new definition of VOCC proposed in Docket 99-10 only ocean common carriers that operate vessels in at least one United States trade would be allowed to register as VOCCs. Ocean carriers issuing bills of lading to or from the USA who do not satisfy this definition would be subject to FMC regulations that apply to Non-Vessel Operating Common Carriers (NVOCCs), including licensing and bonding requirements. As NVOCCs, these carriers would no longer enjoy the opportunity to enter into service contracts with their shippers, and would not be able to participate in agreements with other VOCCs.

Docket 99-23: OTI Licensing for Ocean Freight Forwarders and NVOCCs in the USA

The FMC has proposed changes to its regulations to create a more flexible definition of “branch office” for Ocean Transportation Intermediaries (OTIs), and to ease restrictions on OTI qualifying individuals who own or control more than one company. In Docket 99-23 the FMC acknowledges the definition of branch office had a “restrictive impact” on as many as 600 OTIs. The FMC’s Commissioners are expected to approve these two modifications to 46 CFR Part 515 at a meeting on March 8, 2000.

Under regulations adopted by the FMC on May 1, 1999 each separately incorporated branch office of an NVOCC in the USA must obtain its own OTI license and bond of USD 75,000. The words “separately incorporated” in the definition of branch office dramatically increased the regulatory burden on many NVOCCs. Prior to May 1999, an NVOCC could operate a network of separately incorporated offices throughout the USA under a single tariff and bond of USD 50,000. The FMC’s proposed new definition of branch office deletes the words “separately incorporated.” The new definition would allow wholly owned and/or controlled subsidiaries to operate as branch offices of a single OTI licensee, even when these offices are separately incorporated. OTI licensees with branch offices in the USA are required to increase their NVOCC and Freight Forwarder bonds by an additional USD 10,000 for each branch. Branch office bonding is not required for offices or subsidiaries outside the USA.

The proposed change to the Qualifying Individual requirement (46-CFR Part 515.11) would allow one person to act as QI for two separately incorporated but commonly owned companies; an NVOCC and an Ocean Freight Forwarder, for example. This change was requested by the National Customs Brokers & Forwarders Association of America (NCBFAA) in a formal petition. It will modify the current restriction, which does not allow one person to act as qualifying individual for more than one licensee. Each Qualifying Individual to must be an active officer of the licensee(s), and must demonstrate to the FMC that he or she has at least three years experience handling the duties of an ocean transportation intermediary.

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