January 14, 2019

FMC Issues Proposed Rule Changes Covering OTI Licensure and Financial Requirements

Holland & Knight Alert
J. Michael Cavanaugh


  • The Federal Maritime Commission (FMC) has published a series of proposed rule changes covering licensing, financial responsibility requirements and general duties pertaining to ocean transportation intermediaries.
  • The proposed rule changes affect the administrative and procedural requirements for the licensure process for ocean transport intermediaries. They also clarify existing requirements for renewal of licensure status.
  • The public comment period for the proposed rule changes is open until Jan. 18, 2019. All public comments should be sent to Rachel Dickon, Secretary of the FMC, at secretary@fmc.gov.

The Federal Maritime Commission (FMC) on Dec. 17, 2018, published proposed rule changes to its regulations governing ocean transportation intermediary (OTI) licensure, financial responsibility requirements and other general duties. The proposed rules are primarily administrative and procedural in nature. The FMC indicated that the proposed rules are intended to clarify existing regulations and reduce the regulatory burden on regulated entities.


The FMC regulates the licensing of two types of OTIs that serve as transportation middlemen for cargo moving in the U.S.-foreign oceanborne trades: a) non-vessel-operating common carriers (NVOCCs) and b) ocean freight forwarders (OFFs). An NVOCC is a common carrier that holds itself out to the public to provide ocean transportation and issues its own house bill of lading or equivalent document, but it does not actually operate the vessel. An OFF arranges for the transportation of cargo with a common carrier on behalf of shippers and processes documents related to U.S. export shipments, but it is not the common carrier.

The Shipping Act of 1984 and FMC regulations provide certain requirements for all OTIs located in the U.S. and some OTIs located outside of the U.S. Specifically, U.S.-based NVOCCs and OFFs must be licensed by the FMC and must establish financial responsibility. NVOCCs doing business involving U.S. trades but located outside the U.S. (foreign NVOCCs) are not required to be licensed by the FMC, but they must either opt-in to licensing or register with the FMC and establish financial responsibility.

The FMC previously published a final rule that significantly amended its regulations governing both foreign and domestic OTIs. On Nov. 3, 2015, the FMC added the requirement that OTIs renew their licenses every three years. The FMC also created an online renewal system meant to simplify the licensing process and eliminated the financial responsibility requirement that previously applied to each of the OTI's unincorporated branch offices. In addition, the FMC amended its rules at that time to expedite hearing processes for license denials, revocations and suspensions. The FMC now proposes new rules aimed at clarifying this past rule and to further streamline the licensure process.

Summary of Proposed Rule Changes

The FMC has proposed a series of rule changes that target existing OTI regulations. These changes are primarily administrative and procedural in nature and pertain mainly to licensure issues impacting NVOCCs and OFFs. The following provides a summary of the most important proposed rule changes contained in the FMC's Notice of Dec. 17, 2018:

  • Part 515 Title: The FMC proposes adding the word "Registration" to the Title of Part 515 to reflect the concept that foreign NVOCCs have the option of becoming licensed by the FMC or registering with the FMC.
  • U.S. Agents for Registered NVOCCs: The FMC proposes to add language in Section 515.3 clarifying that licensed OTI agents can be either OFFs or NVOCCs.
  • Forms and Application Fees: The FMC proposes eliminating the paper application for OTI licenses, given that the FMC has not received a paper application since it implemented the electronic application in November 2015.
  • Qualifying Individuals in Partnerships Between Entities: The FMC proposes adjusting the language of Section 515.11(b) regarding qualified individual (QI) requirements to clarify that an officer of a general partner entity may qualify as the QI.
  • Submission of Form FMC-1 as Prerequisite for License: The FMC proposes adjusting the language of Section 515.14(a) to add the requirement that NVOCCs submit a Form FMC-1 within 120 days of the conditional approval of their license applications. Failure to submit the form within the applicable time period will restart the licensure process.
  • License Renewal Process: The FMC proposes a few changes related to the OTI license renewal process, including adjusting the time between licensing and renewal from three years to a period of not less than one year to not greater than four years. The FMC also proposes to change the deadline for renewal to the actual renewal date, rather than 60 days prior thereto.
  • Application After Revocation or Denial: The FMC proposes to expand the types of applications subject to direct FMC review to include applicants employing any of the same officers, managers or members as an OTI whose license was revoked or denied within the previous three years due to lack of qualification. The FMC proposes to clarify that the direct review will occur even if the officer, manager or member is not serving as the QI for the applicant. Moreover, the FMC proposes to amend the language of Section 515.18 to clarify that an application denied under this process is not subject to the hearing procedures in Section 515.17.
  • Reporting Changes in Trade Names: The FMC proposes to clarify that an OTI must seek FMC approval prior to implementing any additions or deletions to the OTI's trade name, as well as changes to the corporate name.
  • Proof of Financial Responsibility: The FMC proposes to clarify that OTIs may submit proof of financial responsibility via email. The proposed change would also clarify that the FMC may, likewise, submit notices of termination of financial instruments via email.
  • Claims Against an OTI: The FMC proposes to require that financial responsibility providers include a registered foreign NVOCC's organization number when notifying the FMC of claims against that foreign NVOCC.

All public comments regarding the FMC's proposed rule changes must be submitted to Rachel Dickon, Secretary of the FMC, no later than Jan. 18, 2019. Comments may be submitted to secretary@fmc.gov.

Considerations and Takeaways

The FMC's proposed rule changes to the OTI licensure process are indicative of the FMC's emphasis on streamlining the process and easing regulatory burdens. OTI licenses are an important element of the FMC's regulatory authority and mission. The proposed rules reflect the importance of clarifying ambiguities in the licensure process. The FMC will receive public comment for the next few days regarding its proposed rule changes.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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