[Federal Register Volume 63, Number 245 (Tuesday, December 22, 1998)]
[Proposed Rules]
[Pages 70710-70727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33554]



[[Page 70710]]

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FEDERAL MARITIME COMMISSION

46 CFR Parts 510, 515, and 583

[Docket No. 98-28]


Licensing, Financial Responsibility Requirements, and General 
Duties for Ocean Transportation Intermediaries

AGENCY: Federal Maritime Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Federal Maritime Commission proposes to add new 
regulations establishing licensing and financial responsibility 
requirements for ocean transportation intermediaries in accordance with 
the Shipping Act of 1984, as modified by the Ocean Shipping Reform Act 
of 1998 (the Coast Guard Authorization Act of 1998).

DATES: Submit comments on or before January 21, 1999.

ADDRESSES: Address all comments concerning this proposed rule to: 
Joseph C. Polking, Federal Maritime Commission, 800 North Capitol St., 
NW. Room 1046, Washington, DC. 20573-0001.

FOR FURTHER INFORMATION CONTACT:

Bryant L. VanBrakle, Director, Bureau of Tariffs, Certification and 
Licensing, Federal Maritime Commission, 800 North Capitol Street, NW., 
Washington, DC. 20573-0001, (202) 523-5796.
Thomas Panebianco, General Counsel, Federal Maritime Commission, 800 
North Capitol St., NW., Washington, DC 20573-0001, (202) 523-5740.

SUPPLEMENTARY INFORMATION: The Ocean Shipping Reform Act of 1998 
(``OSRA''), Public Law 105-258, 112 Stat. 1902, amends the Shipping Act 
of 1984 (``1984 Act''), 46 U.S.C. app. 1701 et seq., in several 
respects relating to ocean freight forwarders and non-vessel-operating 
common carriers (``NVOCCs''). The Federal Maritime Commission (``FMC'' 
or ``Commission'') proposes new regulations, at 46 CFR part 515, to 
implement changes effectuated 5740by OSRA. In addition, the proposal 
seeks to remove existing parts 510 and 583. Finally, under the 
Commission's restructuring of its rules, the new part 515 will be 
included in subchapter B of chapter IV, 46 CFR.

Licensing Requirements

    OSRA applies the requirements of section 19 of the 1984 Act to all 
``ocean transportation intermediaries'' (``OTIs'') in the United 
States. An OTI means an ocean freight forwarder or an NVOCC as those 
terms are defined by the 1984 Act. OSRA requires that all OTIs in the 
United States be licensed by the Commission.
    Proposed Sec. 515.3 seeks to license those OTIs who are performing 
in the United States the services, or holding out to perform the 
services, associated with the transportation of cargo to or from the 
United States. The Commission has ruled that a freight forwarder must 
perform ``traditional value added services'' as defined in 
Secs. 515.2(i) and (n)(1) to be considered a freight forwarder. See In 
Re: The Impact of Modern Technology on the Customs and Practices of the 
Freight Forwarding Industry--Petition for Rulemaking: Order Denying 
Petition for Rulemaking or Declaratory Order, 28 S.R.R. 418, 425 
(1998). In addition, in determining whether a person is acting as a 
common carrier, and thus as an NVOCC, as defined by section 3(6) of the 
1984 Act, the Commission has consistently held that no single factor 
determines a common carrier's status, but an essential characteristic 
to be evaluated is ``whether he holds himself out to carry goods from 
whomever offered to the extent of his ability to carry.'' Activities, 
Filing Practices and Carrier Status of Containerships, Inc., 9 F.M.C. 
56, 62 (1965).
    The legislative history of OSRA directs the Commission to determine 
``when foreign-based entities conducting business in the United States 
are to be considered persons in the United States'' for purposes of the 
licensing requirements of section 19 of the 1984 Act. S. Rep. No. 105-
61, 105th Cong., 1st Sess., at 31 (1997) (``Report''). Moreover, the 
Commission is directed to consider that certain foreign-based OTIs 
would not be licensed when establishing financial responsibility 
requirements for OTIs. Id. Thus, the language clearly contemplates that 
certain foreign-based OTIs engaged in the transportation of cargo to or 
from the United States would not be licensed but would instead be 
required to establish a higher amount of financial responsibility than 
those OTIs who are `in the United States' for purposes of the 1984 Act.
    One approach which the Commission considered and rejected would 
have provided: ``For purposes of this part, a person is considered to 
be `in the United States' if such person is incorporated in the United 
States or maintains a physical presence in the United States through 
another person, including a subsidiary, affiliate, agent or office 
whether such subsidiary, affiliate, agent or office is incorporated or 
unincorporated. Indicia of physical presence in the United States 
include, but are not limited to, whether the person holds a taxpayer 
identification number, or a state or local business license, or 
maintains a mailing address in the United States. For purposes of this 
part, the term `agent' does not include an agent for service of process 
designated in accordance with Sec. 515.24.''
    This definition would have required any foreign-based OTI providing 
OTI services to or from the United States through an agent who is 
physically present in the United States, regardless of the amount of 
service that agent is providing to the foreign-based OTI, to be 
licensed. Under this option, the Commission believes it would have been 
imposing licensing requirements to a greater degree than envisioned by 
OSRA (although the foreign-based OTIs who would have been licensed by 
the Commission under this definition would not have been required to 
obtain financial responsibility in the higher amount required under 
Sec. 515.21(a)(4)). Because this approach would have given minimal 
significance to the ``in the United States'' limitation, it is not 
being proposed as a feasible option.
    Rather, the proposed rule offers for comment two alternative 
definitions of ``in the United States'' for purposes of the licensing 
requirements of this part. The Commission recognizes that the first 
proposed definition is relatively broad, and the second relatively 
narrow. The Commission specifically requests comment on these proposed 
definitions, suggestions for modifications, or additional approaches 
which commenters may wish to offer.
    Proposed definition number one provides: ``For purposes of this 
part, a person is considered to be `in the United States' if such 
person is resident in or incorporated or established under the laws of 
the United States. Only persons licensed under this part may furnish or 
contract to furnish ocean transportation intermediary services in the 
United States on behalf of an unlicensed ocean transportation 
intermediary.''
    This definition would require all unlicensed foreign-based OTIs who 
use an agent in the United States to provide OTI services to or from 
the United States to use only licensed OTIs as their agents. Therefore, 
an agent used by the unlicensed foreign-based OTI would have to be 
providing OTI services in its own right and obtain its own OTI license 
and financial responsibility. This would not, however, be a substitute 
for the unlicensed foreign-based OTI's financial responsibility. All 
unlicensed foreign-based OTIs would need to obtain financial 
responsibility as required under proposed Sec. 515.21(a)(4).
    The Commission recognizes that currently, many unlicensed foreign-

[[Page 70711]]

based OTIs use agents in the United States who provide only minimal 
service, such as processing bills of lading. Providing this level of 
service alone may not rise to the level of operating as an OTI. 
Therefore, under this option, these agents would need to obtain an OTI 
license or would be precluded from providing such services on behalf of 
foreign-based OTIs.
    The second proposed definition of ``in the United States'' 
provides: ``For purposes of this part, a person is considered to be `in 
the United States' if such person is incorporated in, resident in, or 
established under the laws of the United States, or otherwise maintains 
a physical presence in the United States. Such indicia of physical 
presence may include, but are not limited to, whether the person holds 
a taxpayer identification number, a state or local business license, or 
maintains a mailing address in the United States.''
    This second option would license only those entities who are 
freight forwarders or NVOCCs under proposed Sec. 515.2(n). It does not 
contemplate licensing those entities in the United States who are 
acting solely as agents for unlicensed foreign-based OTIs who provide 
OTI services to or from the United States. For example, entities that 
simply process bills of lading for an unlicensed foreign-based OTI 
would not be required to be licensed. In those instances where an 
unlicensed foreign-based OTI uses the limited services of such an 
agent, the unlicensed foreign-based OTI would be required to furnish 
the financial responsibility under proposed Sec. 515.21(a)(4). 
Similarly, when a licensed OTI performs fewer services than would 
qualify it as an OTI under Sec. 515.2(n) for an unlicensed foreign-
based OTI, then the unlicensed foreign-based OTI would furnish the 
financial responsibility required under proposed Sec. 515.21(a)(4).
    In order to better assess the impact of the proposed definition, 
the Commission is particularly interested in receiving comment 
regarding entities who are operating as agents in the United States and 
the range of services they provide, specifically whether they are 
performing minimal services, such as processing bills of lading, or 
whether they are engaged in a full spectrum of OTI services, such as 
booking vessel space, preparing documentation, and soliciting cargo.
    The Commission is required to issue a license to any person that it 
determines is qualified by experience and character to act as an OTI, 
including all entities in the United States formerly known as NVOCCs. 
The licensing requirements in 46 CFR part 510 mandate that freight 
forwarders possess a minimum three years of experience in freight 
forwarder duties in the United States, plus the necessary character to 
render freight forwarder services. NVOCCs are currently not required to 
be licensed. The proposed rule applies those licensing requirements 
from part 510 to proposed part 515. As a result, all OTIs must possess 
three years of experience providing OTI duties to be eligible for a 
license. To effectuate this change, the Commission offers the following 
guidance: all freight forwarders who have a valid license and proof of 
financial responsibility in effect on May 1, 1999, will continue to be 
licensed while the Commission issues those freight forwarders new 
licenses as OTIs, provided that they increase their financial 
responsibility as required by proposed subpart C by May 1, 1999.
    NVOCCs must submit an application for a license and provide proof 
of their increased financial responsibility as required by proposed 
subpart C by April 30, 1999. Provided that such applicants have a valid 
tariff and proof of financial responsibility in effect on May 1, 1999, 
these NVOCCs will be provisionally licensed while the Commission 
reviews their applications to determine if they meet the character and 
experience requirements.
    Because the new rules require that all OTIs possess three years of 
experience in order to qualify for a license, and because some existing 
NVOCCs may have less than the requisite three years, the Commission has 
determined that any NVOCC with a tariff and evidence of its financial 
responsibility in effect as of the date of publication of the proposed 
part 515 in the Federal Register will be permitted to continue 
operating as an NVOCC without the necessary experience. However, a 
person operating under this arrangement may not act as a qualifying 
individual for another ocean transportation intermediary until he or 
she has obtained the necessary three years of experience in ocean 
transportation intermediary services in the United States.

Exemption From Licensing Requirement

    The Commission is proposing to exempt from its licensing 
requirements any person which exclusively transports used household 
goods and personal effects for the account of the Department of Defense 
(``DOD'') or under the International Household Goods Program 
administered by the General Services Administration (``GSA''). These 
persons are currently exempt from the Commission's NVOCC financial 
responsibility requirements of 46 CFR part 583 and that exemption is 
being carried over into the proposed subpart C of part 515. These 
carriers are exempt from the Commission's tariff and financial 
responsibility requirements because they are subject to GSA 
requirements that they post a bond and file their rates with GSA. In 
addition, DOD requires that participants in its Personal Property 
Program be licensed by that agency. These same reasons would appear to 
permit the Commission to exempt these entities from the licensing 
requirements of proposed part 515.

Financial Responsibility Requirements

    All OTIs will be required to establish their financial 
responsibility before performing any intermediary services in the 
United States. Proposed subpart C of part 515 addresses issues arising 
under this section. First, the bond, surety or other insurance obtained 
pursuant to this requirement shall be available to pay for damages 
suffered by ocean common carriers, shippers, and others, arising from 
the transportation-related activities of the covered OTI. Report at 31. 
As instructed by the Report, the Commission has defined transportation-
related activities at proposed Sec. 515.2(v) to include all of the 
freight forwarding activities enumerated in proposed Sec. 515.2(i), as 
well as other specified activities. The Report specifically indicates 
that the bonds, or other instruments of financial responsibility, are 
intended to cover liabilities related to service contract obligations, 
as well as damages resulting from loss or conversion of cargo, from the 
negligence or complicity of the insured entity, or from nonperformance 
of services. Report at 31. The Commission's definition of 
transportation-related activities is not meant to be inclusive, but 
rather to indicate the broad spectrum of activities which OTIs may 
engage in, and which shall be covered by the OTIs' instruments of 
financial responsibility. To the extent, however, that someone who 
operates as an OTI also provides non-OTI services, those services would 
not be covered by the bond, surety or other insurance. This position is 
consistent with the Commission's determination in Docket No. 91-1, 
Bonding of Non-vessel-operating Common Carriers, 25 S.R.R. 1679, 1685 
(1991), modified on other grounds, 26 S.R.R. 137 (1992), wherein the 
Commission stated:

    As Congress has indicated, the bond is intended to ``* * * be 
available to pay any judgment for damages arising out of an NVOCC's 
activities as an ocean common carrier providing ocean transportation 
services.'' (citation omitted). To the extent

[[Page 70712]]

that someone who operates as an NVOCC also provides non-NVOCC 
services, those services would not be covered by the bond.

25 S.R.R. at 1685.

    The Commission also establishes new procedures, at proposed 
Sec. 515.23, for pursuing claims against OTIs. Any party may seek an 
order for reparation at the Commission pursuant to sections 11 or 14 of 
the 1984 Act. Alternatively, where a claimant seeks relief in an 
appropriate court, the claimant shall attempt to resolve its claim with 
the financial responsibility provider prior to seeking payment on any 
judgment it has or will obtain. The Commission believes that it does 
not have the authority to limit or prevent a claimant from seeking 
judicial access prior to pursuing a settlement with the financial 
responsibility provider, particularly where such restrictions could 
prevent claimants from filing their actions within a statute of 
limitations. However, in light of the Report language directing the 
Commission to establish an alternative process for resolving claims 
against the OTI's instrument of financial responsibility, the 
Commission believes that it may require the claimant to seek a 
settlement prior to enforcing any judgment it has or will obtain. 
Therefore, the rules provide that upon notification of the complaint, 
the financial responsibility provider and claimant can settle the claim 
with the OTI's consent, or, if the OTI fails to respond to the notice 
of the claim within 45 days, the financial responsibility provider and 
claimant can settle the claim on their own. If, however, the parties 
fail to reach agreement within 90 days, then the bond, surety or other 
insurance shall be available to pay any judgment for damages to the 
extent they arise from the transportation-related activities of the 
OTI.
    Proposed Sec. 515.23 provides that ordinarily, the financial 
responsibility provider shall pay the judgment within 10 days; within 
that time, the financial responsibility provider may inquire into the 
subject matter of the judgment to ensure that it is for damages covered 
by the instrument of financial responsibility--i.e. that it arises from 
transportation-related activities. Report at 31. However, the 
Commission is aware that there may be instances where the financial 
responsibility provider has a legitimate challenge to a judgment. For 
example, in the event that a claimant obtains a default judgment as a 
result of invalid service of process, or some other procedural defect, 
the financial responsibility provider may seek to vacate the judgment. 
To that limited extent, the Commission recognizes that the financial 
responsibility provider may have a genuine basis for inquiring into the 
validity of the judgment as well.
    In proposed Sec. 515.21, the Commission proposes to establish a 
range of financial responsibility requirements commensurate with the 
scope of the activities conducted by the different OTIs and the past 
fitness of OTIs in the performance of intermediary services. Report at 
31-32. Thus, OTIs operating as freight forwarders in the United States 
will be required to establish financial responsibility in the amount of 
$50,000; OTIs operating as NVOCCs in the United States in the amount of 
$75,000; and OTIs operating as both freight forwarders and NVOCCs in 
the United States will be required to establish financial 
responsibility in the amount of $100,000. Unlicensed foreign-based 
entities that provide OTI services for transportation to or from the 
United States but are not operating ``in the United States'' as defined 
in proposed Sec. 515.3 will be required to establish financial 
responsibility in the amount of $150,000. Groups or associations of 
OTIs will be able to provide financial responsibility for their members 
with the maximum aggregate amount of $3,000,000.
    Proposed Sec. 515.21 seeks to increase the amount of financial 
responsibility required to be provided by OTIs to more accurately 
reflect the diversity of activities engaged in by OTIs. The current 
NVOCC financial responsibility amount of $50,000 was established by the 
Non-Vessel-Operating Common Carrier Amendments of 1990, Pub. L. 101-
595. At that time, House Merchant Marine and Fisheries Chairman Walter 
B. Jones commented that the $50,000 was a minimum amount, which the 
Commission would ``have the continuing flexibility to adjust * * * as 
changing circumstances warrant.'' 136 Cong. Rec. E2210-2211 (June 28, 
1990). Thus far, the Commission has not increased the amount of 
financial responsibility required by an NVOCC, but current 
circumstances warrant the increased amounts proposed here. The FMC has 
faced an increasing number of NVOCCs who have gone bankrupt or changed 
company names to avoid their responsibilities arising from 
transportation-related activities, thereby augmenting the importance of 
an adequate bond, surety or other insurance. Increasingly, injured 
shippers have not been made whole when seeking reparation from the 
instrument of financial responsibility. We note as well the diverse 
activities engaged in by OTIs due to the innovations and technological 
advances made by the shipping industry. The increased amounts proposed 
here will better protect the shipping public.
    In addition, the Report directs the FMC to consider, when 
establishing the amount of financial responsibility necessary for 
foreign-based OTIs, that such OTIs are not ``in the United States'' as 
defined by proposed Sec. 515.3, and, therefore, are not subject to the 
Commission's licensing requirements, but nonetheless provide ocean 
transportation intermediary services for transportation to or from the 
United States. Report at 31. Accordingly, the Commission has 
established different levels of financial responsibility requirements, 
increasing the amount of financial responsibility required by foreign 
entities, based on the high volume of judgments obtained against 
foreign-based NVOCCs and the extent of financial injuries to shippers 
that have resulted.
    Proposed Sec. 515.27 amends the means by which a common carrier can 
obtain proof of an NVOCC's compliance with the tariff and financial 
responsibility requirements of the 1984 Act. Currently, part 583 
provides that a common carrier can consult a list provided by the 
Commission of bonded and tariffed NVOCCs. Because tariffs will no 
longer be filed with the Commission, the proposal provides that 
carriers may review a copy of the NVOCC's tariff published in 
accordance with part 520 of this chapter, either through the NVOCC's 
website or by other means established by the NVOCC. Carriers also will 
be able to contact the Commission to verify that an NVOCC has filed 
evidence of its financial responsibility. Additionally, the Commission 
proposes in Sec. 515.27(d) that it will publish at its website a list 
of the locations of all carrier and conference tariffs, as well as a 
list of all OTIs who have furnished the Commission with evidence of 
their financial responsibility. The Commission seeks comments on this 
proposal. Carriers may adopt other appropriate procedures for purposes 
of this section, so long as such procedures are set forth in the 
carrier's tariff.

Duties and Responsibilities of OTIs

    OSRA requires all NVOCCs to be licensed as OTIs under section 19 of 
the 1984 Act, and thus, as licensees, NVOCCs are subjected to the same 
responsibilities as ocean freight forwarders. Proposed Sec. 515.31 
incorporates many of the duties of freight forwarders from 46 CFR 
510.21 and 46 CFR 510.22 and applies them to all licensees. Those 
duties include a freight forwarder's responsibility to its principal, 
as defined in proposed

[[Page 70713]]

Sec. 515.2(p); an NVOCC's responsibility to its shipper, as defined in 
proposed Sec. 515.2(s); and a licensed OTI's responsibility to the 
Commission generally. In addition, the recordkeeping requirements of 
licensed freight forwarders under 46 CFR 510.24 would now be applicable 
to all licensees. This is reflected in proposed Sec. 515.32.
    Proposed subpart E incorporates most of the regulations of 46 CFR 
510.22 and 510.23 relating to the fees and compensation paid in 
exchange for freight forwarding services, and adds two sections 
regarding in-plant arrangements and electronic data interchange. 
Proposed Sec. 515.41(e) provides for the placement of a licensed 
freight forwarder's employee(s) on the premises of its principal as 
part of a package of freight forwarding services rendered to that 
principal. However, in order to prevent such an arrangement from being 
an artifice for an unlawful payment to the principal, it is required 
that the forwarder and principal document their in-plant arrangement by 
executing a special contract (not filed with the Commission) under 
proposed Sec. 515.32(d). (Under current regulations at 46 CFR 
510.24(d), a licensee is required to maintain a true and complete copy, 
or if oral, a true and complete memorandum, of every special 
arrangement or contract with a principal, or modification or 
cancellation thereof, to which it may be a party). The special contract 
shall identify all the details of the arrangement, including the 
freight forwarding services to be performed by the employee(s). This 
section is not intended to reach incidental visits to the principal's 
premises by a forwarder employee or meetings between forwarders and 
principals, but rather seeks to reach the forwarder employee placed on 
the principal's premises to perform freight forwarding services on a 
recurring or continuing basis or for a fixed period of time.
    Further, proposed Sec. 515.42(e) provides that a licensed freight 
forwarder may operate an electronic data interchange computer-based 
system in its forwarding business. In order to collect carrier 
compensation, however, the forwarder must also perform the traditional 
value-added services of booking, securing, or confirming space for 
cargo and preparing and processing shipping documents, and certify the 
performance of those services to the carrier.
    The reporting, recordkeeping and disclosure requirements contained 
in this proposed rule have been submitted to the Office of Management 
and Budget (OMB). Public burden for this collection of information is 
estimated at 5,164 man-hours for 4,600 OTIs. This estimate includes, as 
applicable, the time needed to review instructions, develop, acquire, 
install, and utilize technology and systems for the purposes of 
collecting, validating, and verifying information, processing and 
maintaining information, and disclosing and providing information; 
adjust the existing ways to comply with any previously applicable 
instructions and requirements; train personnel to respond to a 
collection of information, search existing data sources, gather and 
maintain the data needed, and complete and review the collection of 
information; and transmit or otherwise disclose the information.
    Send comments regarding the burden estimates to the Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
Attention Desk Officer for the Federal Maritime Commission, New 
Executive Office Building, 725 17th Street, NW., Washington, DC 20503 
within 30 days of publication in the Federal Register.
    The FMC would also like to solicit comments to: (a) Evaluate 
whether the proposed collection of information is necessary for the 
proper performance of the functions of the agency, including whether 
the information will have practical utility; (b) evaluate the accuracy 
of the Commission's burden estimates for the proposed collection of 
information; (c) enhance the quality, utility, and clarity of the 
information to be collected; and (d) minimize the burden of the 
collection of information on respondents, including through the use of 
automated collection techniques or other forms of information 
technology. Comments submitted in response to this proposed rulemaking 
will be summarized and/or included in the final rule and will become a 
matter of public record.

Initial Regulatory Flexibility Analysis

Why the Commission is Considering the New Rule

    The Commission proposes to add new regulations establishing 
licensing and financial responsibility requirements for OTIs in 
accordance with the 1984 Act, as modified by OSRA and part 424 of Pub. 
L. 105-383 (The Coast Guard Authorization Act of 1998).

Objectives and Legal Basis for the New Rule

    OSRA amends the 1984 Act in several respects relating to ocean 
freight forwarders and NVOCCs. The Commission proposes new regulations, 
at 46 CFR part 515, to implement changes effectuated by OSRA.
    OSRA requires that all OTIs in the United States be licensed by the 
Commission. Further, all OTIs will be required to establish their 
financial responsibility before performing any intermediary services in 
the United States. The bond, surety or other insurance obtained 
pursuant to this requirement shall be available to pay for damages 
suffered by ocean common carriers, shippers, and others, arising from 
the transportation-related activities of the covered OTIs. Report at 
31.
    The Report specifically indicates that the bonds, or other 
instruments of financial responsibility, are intended to cover 
liabilities related to service contract obligations, as well as damages 
resulting from loss or conversion of cargo, from the negligence or 
complicity of the insured entity, or from nonperformance of services. 
The new rule proposes to establish a range of financial responsibility 
requirements commensurate with the scope of the activities conducted by 
the different OTIs and the past fitness of OTIs in the performance of 
intermediary duties.

Description of and Estimate of the Number of Small Entities to Which 
the New Rule Will Apply

    To determine whether a business should be considered a small 
entity, the Small Business Administration (``SBA'') has established 
statutory definitions of small businesses (13 CFR part 121, FR January 
31, 1996). Businesses classified in the Standard Industrial 
Classification code 4731, including ocean freight forwarders and 
NVOCCs, are evaluated by the their annual receipts (gross annual 
revenues). Ocean freight forwarders and NVOCCs with less than $18.5 
million in annual receipts are considered small businesses by SBA. The 
Commission does not have OTI revenue data readily available, but in 
general, is aware that a handful of OTIs handle the bulk of the 
intermediary cargo in the U.S. trades, while most OTIs are small 
operators. Without specific OTI revenue data, however, the Commission 
assumes that most if not all OTIs have revenues of less than $18.5 
million, and are considered to be small businesses.

Projected Reporting, Record Keeping and Other Compliance Requirements 
of the New Rule

    It is estimated that the new rule will impose, in varying degrees, 
a reporting burden on the entire OTI universe. The burden is calculated 
on the estimated amount of cost and time necessary to comply with 
various requirements of 46

[[Page 70714]]

CFR part 510. Calculated below are the estimated costs resulting from 
the new rule.

Cost to the Government

    The additional burden to the government, i.e., the Commission, as a 
result of the new rule is expected to be minimal. The Commission does 
not anticipate hiring any additional staff to administer changes 
occurring from the new rule, but is expected to handle the anticipated 
additional workload with existing Commission staff.

Cost of Filing Time

    The new rule proposes changing the Commission's rules by requiring 
U.S.-based NVOCCs and ocean freight forwarders also operating as NVOCCs 
to be licensed with the FMC. It also requires foreign-based NVOCCs to 
establish financial responsibility. It could also involve the licensing 
of agents of foreign-based NVOCCs. Ocean freight forwarders operating 
solely as ocean freight forwarders in the U.S. export trade are already 
required to be licensed with the Commission under the current rules, 
and would therefore be unaffected by this change.
    Based on a survey conducted by the Commission, it is estimated that 
the average hourly labor cost to file evidence of financial 
responsibility or complete a new license application is $41. Further, 
it is estimated to currently take individual ocean freight forwarders 
3.5 hours to file evidence of financial responsibility and complete a 
new license application at an average labor cost to the respondent of 
$144. This cost takes into account time to gather information and 
complete the application form, as well as time to comply with the 
requirements of the rules. Since the licensing application form and 
financial responsibility procedures will remain substantively unchanged 
under the new rule, it is estimated that the additional labor cost of 
the new rule to each U.S.-based NVOCC will be $144 in the first year.
    Based on the Commission's survey, it is estimated that it would 
take each foreign-based NVOCC 1.5 hours of staff time to file evidence 
of financial responsibility at an average labor cost to the respondent 
of $62 in the first year. Each ocean freight forwarder also operating 
as an NVOCC would require 0.5 hours per year to amend their 
applications and their financial responsibility at an average labor 
cost to the respondent of $21 in the first year.
    The total additional labor cost of the new rule is expected to 
reach almost $255,000 in the first year. In subsequent years, since all 
operating NVOCCs and ocean freight forwarders also operating as NVOCCs 
will have financial responsibility and/or be licensed, the total labor 
cost for filing time is expected to decrease substantially.

Cost of Licensing Fee

    The Commission's current user fees for processing a new application 
is $778, and $362 for an amendment. The new rule changes the current 
requirements by requiring U.S.-based NVOCCs to file a new application 
to become licensed. Further, ocean freight forwarders also operating as 
NVOCCs will be required to amend their licenses. However, since 
licensing fees do not change under the new rule, ocean freight 
forwarders in the U.S. export trade that are already required to be 
licensed with the Commission will not be affected in this regard. 
Further, foreign-based NVOCCs are not required to be licensed under the 
new rule. U.S.-based agents of foreign-based NVOCCs might be required 
to be licensed. Since it is presumed that most would already be 
licensed, the impact is expected to be de minimis. The total additional 
licensing cost to OTIs to comply with the new rule is estimated to be 
$1.3 million.

Cost of Increasing the Financial Responsibility Requirement

    The new rule proposes raising the financial responsibility 
requirement for: Ocean freight forwarders operating solely as ocean 
freight forwarders in the U.S. export trade from $30,000 to $50,000, 
with $10,000 in additional coverage for each unincorporated branch 
office; U.S.-based NVOCCs will be required to increase their financial 
responsibility from $50,000 to $75,000 with $10,000 in additional 
coverage for each unincorporated branch office that is not already 
covered under an ocean freight forwarder's financial responsibility; 
and foreign-based NVOCCs will be required to increase their financial 
responsibility from $50,000 to $150,000. Entities that operate as both 
ocean freight forwarders and NVOCCs are presently required to have 
separate financial responsibility, financial responsibility in the 
amount of $30,000 covering their freight forwarding activity and 
financial responsibility in the amount of $50,000 covering their NVOCC 
activity. The new rule will increase their financial responsibility 
coverage from two totaling $80,000 to one totaling $100,000. The new 
rule would further require ocean freight forwarders also operating as 
NVOCCs to have $10,000 in additional coverage for each unincorporated 
branch office that is not already covered under an ocean freight 
forwarder's financial responsibility.
    The new rule also proposes broadening the option for group 
financial responsibility to include ocean freight forwarders as well as 
NVOCCs, while raising the group financial responsibility requirement 
from $1 million to $3 million. There are currently three group proofs 
of financial responsibility on file with the Commission with a total of 
166 NVOCC members. By posting group financial responsibility, it is 
believed that participants save on premium payments by receiving a 
group coverage rate. However, it is difficult to project how many ocean 
freight forwarders would opt for group financial responsibility as a 
result of the new rule. Therefore, it is not feasible to forecast the 
potential cost savings to the industry of modifying the group financial 
responsibility provision in the new rule. Instead, the Commission will 
assume that all OTIs will post financial responsibility at the higher 
individual premium rate.
    For individual financial responsibility coverage, the Commission 
estimates that the premium for establishing financial responsibility 
ranges from $800 to $1,200 per year for $50,000 in financial 
responsibility coverage. The Commission employed an average premium 
cost of $1,000 per year for $50,000 in bond coverage to calculate the 
cost to OTIs of the proposed increases in financial responsibility 
coverages. In addition, the proportion of ocean freight forwarders to 
branch offices was applied to estimate the number of NVOCC 
unincorporated branch offices.
    The Commission estimates that the average cost to OTIs of 
additional financial responsibility requirements is as follows: Ocean 
freight forwarders operating solely as ocean freight forwarders in the 
U.S. export trade will pay $887,000 more ($578 per entity) per year for 
financial responsibility; ocean freight forwarders also operating as 
NVOCCs will pay $297,000 more per year ($578 per entity); U.S.-based 
NVOCCs will pay $967,000 more per year ($678 per entity); and foreign-
based NVOCCs will pay $1,252,000 more per year ($2,000 per entity). The 
total first year cost of increased financial responsibility 
requirements for all entities under the new rule totals $3.4 million.
    In some cases, financial responsibility underwriters may require 
individual OTIs to provide collateral in order to secure a financial 
responsibility. Collateral accounts typically accrue interest at a 
risk-free rate until they are claimed or remitted in full to an OTI.

[[Page 70715]]

However, when considering the industry as a whole, funds that are set 
aside as collateral could be otherwise invested in higher earning 
assets, such as in an OTI's business operations, thereby effectively 
assessing a cost to OTIs. Calculating the opportunity cost of increased 
collateral requires specific data on individual OTI's financial and 
operating riskiness. However, the Commission does not have that 
information available. In lieu of such information, and in order to 
ensure that no substantial economic impact is overlooked, the 
Commission solicits comments concerning the effects of the cost of 
increased collateral and premium requirements on OTIs.

Summary of Costs

    In the first year of its implementation, the additional burden of 
the new rule is expected to average $1,600 for each U.S.-based NVOCC, 
$2,062 for each foreign-based NVOCC, $961 for each ocean freight 
forwarder also operating as an NVOCC, and $578 for each ocean freight 
forwarder operating solely as an ocean freight forwarder in the U.S. 
export trade. The total additional first year cost as a result of the 
new rule is estimated to be almost $5 million.
    The new rule seeks to increase the amount of financial 
responsibility required to be provided by OTIs to more accurately 
reflect the diversity of activities engaged in by OTIs. The current 
NVOCC financial responsibility amount of $50,000 was established by the 
Non-Vessel-Operating Common Carrier Amendments of 1990, Pub. L. 101-
195. At that time, House Merchant Marine and Fisheries Chairman Walter 
B. Jones commented that the $50,000 was a minimum amount, which the 
Commission would ``have the continuing flexibility to adjust * * * as 
changing circumstances warrant.'' 136 Cong. Rec. E2210-2211 (June 28, 
1990). Thus far, the Commission has not increased the amount of 
financial responsibility required by an NVOCC, but current 
circumstances warrant the increased amounts proposed here. The 
Commission has pursued several investigations against NVOCCs in which 
the $50,000 liability amount has fallen short of the penalties 
assessed. The Commission has faced an increasing number of NVOCCs who 
have gone bankrupt or changed company names to avoid their 
responsibilities arising from transportation-related activities, 
thereby augmenting the importance of an adequate bond, surety or other 
insurance. Increasingly, injured shippers have not been made whole when 
seeking reparation from the instrument of financial responsibility. The 
Commission notes as well the diverse activities engaged in by OTIs due 
to the innovations and technological advances made by the shipping 
industry. The increased amounts proposed in the new rule will better 
protect the shipping public.
    In addition, the Report directs the FMC to consider that some 
foreign-based OTIs are not ``in the United States'' as defined by 
proposed Sec. 515.3, and, therefore are not subject to the Commission's 
licensing requirements, but do provide ocean transportation 
intermediary services for transportation to or from the United States, 
when establishing the amount of financial responsibility necessary for 
such OTIs. Report at 31. Accordingly, the Commission has established 
different levels of financial responsibility requirements, increasing 
the amount of financial responsibility required by foreign entities, 
based on the high volume of judgments obtained against foreign-based 
NVOCCs and the extent of financial injuries to shippers that have 
resulted.
    The Commission cannot certify that the new rule will not have a 
significant economic impact on a substantial number of small entities. 
However, based on the above discussion, the Commission believes that 
the burden imposed on small ocean freight forwarders and NVOCCs as a 
result of the new rule is justified and necessary in light of the 
legislative benefit to effect these changes, and because of the benefit 
to the shipping public and to carriers gained by licensing and 
requiring financial responsibility of all OTIs.

Relevant Federal Rules That may Duplicate, Overlap, or Conflict With 
the New Rule

    The Commission is not aware of any other federal rules that 
duplicate, overlap, or conflict with the new rule.

List of Subjects in 46 CFR parts 510, 515 and 583

    Exports, Freight forwarders, Non-vessel-operating common carriers, 
Ocean transportation intermediaries, Licensing requirements, Financial 
responsibility requirements, Reports and recordkeeping requirements, 
surety bonds.
    Under the authority of Pub. L. 105-258 and as discussed in the 
preamble, the Federal Maritime Commission proposes to amend subchapter 
B, chapter IV, of 46 CFR as follows:

PART 510--[REMOVED]

    1. Remove Part 510

PART 583--[REMOVED]

    2. Remove Part 583
    3. Revise the heading of subchapter B to read as follows:

SUBCHAPTER B--REGULATIONS AFFECTING OCEAN SHIPPING IN FOREIGN COMMERCE

    4. Add Part 515 as follows:

PART 515--LICENSING, FINANCIAL RESPONSIBILITY REQUIREMENTS, AND 
GENERAL DUTIES FOR OCEAN TRANSPORTATION INTERMEDIARIES

Subpart A--General

Sec.
515.1  Scope.
515.2  Definitions.
515.3  License; when required.
515.4  License; when not required.
515.5  Forms and fees.

Subpart B--Eligibility and Procedure for Licensing

515.11  Basic requirements for licensing; eligibility.
515.12  Application for license.
515.13  Investigation of applicants.
515.14  Issuance and use of license.
515.15  Denial of license.
515.16  Revocation or suspension of license.
515.17  Application after revocation or denial.
515.18  Changes in organization.

Subpart C--Financial Responsibility Requirements; Claims Against Ocean 
Transportation Intermediaries

515.21  Financial responsibility requirements.
515.22  Proof of financial responsibility.
515.23  Claims against an ocean transportation intermediary.
515.24  Agent for service of process.
515.25  Filing of proof of financial responsibility.
515.26  Termination of financial responsibility.
515.27  Proof of compliance.
Appendix A to Subpart C of Part 515--Ocean Transportation 
Intermediary (OTI) Bond Form [Form 48]
Appendix B to Subpart C of Part 515--Ocean Transportation 
Intermediary (OTI) Insurance Form [Form 67]
Appendix C to Subpart C of Part 515--Ocean Transportation 
Intermediary (OTI) Guaranty Form [Form 68]
Appendix D to Subpart C Part 515--Ocean Transportation Intermediary 
(OTI) Group Bond Form [FMC-69]

Subpart D--Duties and Responsibilities of Ocean Transportation 
Intermediaries; Reports to Commission

515.31  General duties.
515.32  Records required to be kept.
515.33  Regulated Persons Index.

[[Page 70716]]

Subpart E--Freight Forwarding Fees and Compensation

515.41  Forwarder and principal; fees.
515.42  Forwarder and carrier; compensation.

    Authority: 5 U.S.C. 553; 31 U.S.C. 9701; 46 U.S.C. app. 1702, 
1707, 1709, 1710, 1712, 1714, 1716, and 1718, as amended by Pub. L. 
105-258, 112 Stat. 1902, and Pub. L. 105-383, 112 Stat. 3411; 21 
U.S.C. 862.

Subpart A--General


Sec. 515.1  Scope.

    (a) This part sets forth regulations providing for the licensing as 
ocean transportation intermediaries of persons who wish to carry on the 
business of providing intermediary services, including the grounds and 
procedures for revocation and suspension of licenses. This part also 
prescribes the financial responsibility requirements and the duties and 
responsibilities of ocean transportation intermediaries, and 
regulations concerning practices of ocean transportation intermediaries 
with respect to common carriers.
    (b) Information obtained under this part is used to determine the 
qualifications of ocean transportation intermediaries and their 
compliance with shipping statutes and regulations. Failure to follow 
the provisions of this part may result in denial, revocation or 
suspension of an ocean transportation intermediary license. Persons 
operating without the proper license may be subject to civil penalties 
not to exceed $5,500 for each such violation unless the violation is 
willfully and knowingly committed, in which case the amount of the 
civil penalty may not exceed $27,500 for each violation; for other 
violations of the provisions of this part, the civil penalties range 
from $5,500 to $27,500 for each violation (46 U.S.C. app. 1712). Each 
day of a continuing violation shall constitute a separate violation.


Sec. 515.2  Definitions.

    The terms used in this part are defined as follows:
    (a) Act means the Shipping Act of 1984, as amended by the Ocean 
Shipping Reform Act of 1998 and the Coast Guard Authorization Act of 
1998.
    (b) Beneficial interest includes a lien or interest in or right to 
use, enjoy, profit, benefit, or receive any advantage, either 
proprietary or financial, from the whole or any part of a shipment of 
cargo where such interest arises from the financing of the shipment or 
by operation of law, or by agreement, express or implied. The term 
``beneficial interest'' shall not include any obligation in favor of an 
ocean transportation intermediary arising solely by reason of the 
advance of out-of-pocket expenses incurred in dispatching a shipment.
    (c) Branch office means any office in the United States established 
by or maintained by or under the control of a licensee for the purpose 
of rendering intermediary services, which office is located at an 
address different from that of the licensee's designated home office. 
This term does not include a separately incorporated entity.
    (d) Brokerage refers to payment by a common carrier to an ocean 
freight broker for the performance of services as specified in 
paragraph (m) of this section.
    (e) Commission means the Federal Maritime Commission.
    (f) Common carrier means any person holding itself out to the 
general public to provide transportation by water of passengers or 
cargo between the United States and a foreign country for compensation 
that:
    (1) Assumes responsibility for the transportation from the port or 
point of receipt to the port or point of destination, and
    (2) Utilizes, for all or part of that transportation, a vessel 
operating on the high seas or the Great Lakes between a port in the 
United States and a port in a foreign country, except that the term 
does not include a common carrier engaged in ocean transportation by 
ferry boat, ocean tramp, chemical parcel tanker, or by a vessel when 
primarily engaged in the carriage of perishable agricultural 
commodities.
    (i) If the common carrier and the owner of those commodities are 
wholly-owned, directly or indirectly, by a person primarily engaged in 
the marketing and distribution of those commodities, and
    (ii) Only with respect to those commodities.
    (g) Compensation means payment by a common carrier to a freight 
forwarder for the performance of services as specified in 
Sec. 515.42(c).
    (h) Freight forwarding fee means charges billed by a freight 
forwarder to a shipper, consignee, seller, purchaser, or any agent 
thereof, for the performance of freight forwarding services.
    (i) Freight forwarding services refers to the dispatching of 
shipments on behalf of others, in order to facilitate shipment by a 
common carrier, which may include, but are not limited to, the 
following:
    (1) Ordering cargo to port;
    (2) Preparing and/or processing export declarations;
    (3) Booking, arranging for or confirming cargo space;
    (4) Preparing or processing delivery orders or dock receipts;
    (5) Preparing and/or processing ocean bills of lading;
    (6) Preparing or processing consular documents or arranging for 
their certification;
    (7) Arranging for warehouse storage;
    (8) Arranging for cargo insurance;
    (9) Clearing shipments in accordance with United States Government 
export regulations;
    (10) Preparing and/or sending advance notifications of shipments or 
other documents to banks, shippers, or consignees, as required;
    (11) Handling freight or other monies advanced by shippers, or 
remitting or advancing freight or other monies or credit in connection 
with the dispatching of shipments;
    (12) Coordinating the movement of shipments from origin to vessel; 
and
    (13) Giving expert advice to exporters concerning letters of 
credit, other documents, licenses or inspections, or on problems 
germane to the cargoes' dispatch.
    (j) From the United States means oceanborne export commerce from 
the United States, its territories, or possessions, to foreign 
countries.
    (k) Licensee is any person licensed by the Federal Maritime 
Commission as an ocean transportation intermediary.
    (l) Ocean common carrier means a vessel-operating common carrier 
(``VOCC'').
    (m) Ocean freight broker is an entity which is engaged by a carrier 
to secure cargo for such carrier and/or to sell or offer for sale ocean 
transportation services and which holds itself out to the public as one 
who negotiates between shipper or consignee and carrier for the 
purchase, sale, conditions and terms of transportation.
    (n) Ocean transportation intermediary means an ocean freight 
forwarder or a non-vessel-operating common carrier. For the purposes of 
this part, the term
    (1) Ocean freight forwarder means a person that--
    (i) in the United States, dispatches shipments from the United 
States via a common carrier and books or otherwise arranges space for 
those shipments on behalf of shippers; and
    (ii) processes the documentation or performs related activities 
incident to those shipments; and
    (2) Non-vessel-operating common carrier (``NVOCC'') means a common 
carrier that does not operate the vessels by which the ocean 
transportation is provided, and is a shipper in its relationship with 
an ocean common carrier.
    (o) Person includes individuals, corporations, partnerships and

[[Page 70717]]

associations existing under or authorized by the laws of the United 
States or of a foreign country.
    (p) Principal, except as used in Surety Bond Form FMC 48, Rev. and 
Group Bond Form FMC 69, refers to the shipper, consignee, seller, or 
purchaser of property, and to anyone acting on behalf of such shipper, 
consignee, seller, or purchaser of property, who employs the services 
of a licensed freight forwarder to facilitate the ocean transportation 
of such property.
    (q) Reduced forwarding fees means charges to a principal for 
forwarding services that are below the licensed freight forwarder's 
usual charges for such services.
    (r) Shipment means all of the cargo carried under the terms of a 
single bill of lading.
    (s) Shipper means:
    (1) A cargo owner;
    (2) The person for whose account the ocean transportation is 
provided;
    (3) The person to whom delivery is to be made;
    (4) A shippers' association; or
    (5) A non-vessel-operating common carrier that accepts 
responsibility for payment of all charges applicable under the tariff 
or service contract.
    (t) Small shipment refers to a single shipment sent by one 
consignor to one consignee on one bill of lading which does not exceed 
the underlying common carrier's minimum charge rule.
    (u) Special contract is a contract for freight forwarding services 
which provides for a periodic lump sum fee.
    (v) Transportation-related activities which are covered by the 
bond, surety or other insurance obtained pursuant to this part, 
include, to the extent involved in the foreign commerce of the United 
States, the freight forwarding services enumerated in paragraph (i) of 
this section, and, in addition, may include, but are not limited to, 
the following:
    (1) Payment of ocean freight charges;
    (2) Payment of inland charges for through movements;
    (3) Loss or conversion of cargo;
    (4) Service contract obligations of an NVOCC, as a shipper;
    (5) Obligations as an NVOCC member of a shippers' association;
    (6) Cargo damage;
    (7) Delay in shipment; and
    (8) Breach of fiduciary responsibility.
    (w) United States includes the several States, the District of 
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the 
Northern Marianas, and all other United States territories and 
possessions.


Sec. 515.3  License; when required.

    Except as otherwise provided in this part, no person in the United 
States may act as an ocean transportation intermediary unless that 
person holds a valid license issued by the Commission. A separate 
license is required for each branch office that is separately 
incorporated. (For purposes of this part, a person is considered to be 
``in the United States'' if such person is resident in or incorporated 
or established under the laws of the United States. Only persons 
licensed under this part may furnish or contract to furnish ocean 
transportation intermediary services in the United States on behalf of 
an unlicensed ocean transportation intermediary.) or (For purposes of 
this part, a person is considered to be ``in the United States'' if 
such person is incorporated in, resident in, or established under the 
laws of the United States, or otherwise maintains a physical presence 
in the United States. Such indicia of physical presence may include, 
but are not limited to, whether the person holds a taxpayer 
identification number, a state or local business license, or maintains 
a mailing address in the United States.)


Sec. 515.4  License; when not required.

    A license is not required in the following circumstances:
    (a) Shipper. Any person whose primary business is the sale of 
merchandise may, without a license, dispatch and perform freight 
forwarding services on behalf of its own shipments, or on behalf of 
shipments or consolidated shipments of a parent, subsidiary, affiliate, 
or associated company. Such person shall not receive compensation from 
the common carrier for any services rendered in connection with such 
shipments.
    (b) Employee or branch office of licensed ocean transportation 
intermediary. (1) An individual employee or unincorporated branch 
office of a licensed ocean transportation intermediary is not required 
to be licensed in order to act solely for such licensee, provided that 
such branch offices:
    (i) Have been reported to the Commission in writing; and
    (ii) Are covered by an increased bond in accordance with 
Sec. 515.21(a)(5).
    (2) Each licensed ocean transportation intermediary will be held 
strictly responsible for the acts or omissions of any of its employees 
or agents rendered in connection with the conduct of its business.
    (c) Common carrier. A common carrier, or agent thereof, may perform 
ocean freight forwarding services without a license only with respect 
to cargo carried under such carrier's own bill of lading. Charges for 
such forwarding services shall be assessed in conformance with the 
carrier's published tariffs.
    (d) Ocean freight brokers. An ocean freight broker is not required 
to be licensed to perform those services specified in Sec. 515.2(m).
    (e) Federal military and civilian household goods. Any person which 
exclusively transports used household goods and personal effects for 
the account of the Department of Defense, or for the account of the 
federal civilian executive agencies shipping under the International 
Household Goods Program administered by the General Services 
Administration, or both, is not subject to the requirements of subpart 
B of this part, but may be subject to other requirements, such as 
alternative surety bonding, imposed by the Department of Defense, or 
the General Services Administration.


Sec. 515.5  Forms and fees.

    (a) Forms. License form FMC-18 Rev., and financial responsibility 
forms FMC-48, FMC-67, FMC-68, FMC-69 may be obtained from the 
Commission's website at www.fmc.gov, the Director, Bureau of Tariffs, 
Certification and Licensing, Federal Maritime Commission, Washington, 
DC 20573, or from any of the Commission's area representatives.
    (b) Fees. All fees shall be payable by money order, certified 
check, cashier's check, or personal check to the ``Federal Maritime 
Commission.'' Should a personal check not be honored when presented for 
payment, the processing of an application under this section shall be 
suspended until the processing fee is paid. In any instance where an 
application has been processed in whole or in part, the fee will not be 
refunded. Such fees are:
    (1) Application for License as required by Sec. 515.12(a): $778;
    (2) Application for status change of license transfer as required 
by Secs. 515.18(a) and 515.18(b): $362; and
    (3) Supplementary investigation as required by Sec. 515.25(a): 
$224.

Subpart B--Eligibility and Procedure for Licensing


Sec. 515.11  Basic requirements for licensing; eligibility.

    (a) Necessary qualifications. To be eligible for an ocean 
transportation intermediary license, the applicant must demonstrate to 
the Commission that:
    (1) It possesses the necessary experience, that is, its qualifying 
individual has a minimum of three (3) years experience in ocean 
transportation intermediary activities in the United States, and the 
necessary character to

[[Page 70718]]

render ocean transportation intermediary services; and
    (2) It has obtained and filed with the Commission a valid bond, 
proof of insurance, or other surety in conformance with Sec. 515.21.
    (3) An NVOCC with a tariff and proof of financial responsibility in 
effect as of December 22, 1998, may continue to operate as an NVOCC 
without the requisite three years experience; and will be provisionally 
licensed while the Commission reviews their application. Such person 
designated as the qualifying individual for a provisionally licensed 
NVOCC may not act as a qualifying individual for another ocean 
transportation intermediary until it has obtained the necessary three 
years experience in ocean transportation intermediary services in the 
United States.
    (b) Qualifying individual. The following individuals must qualify 
the applicant for a license:
    (1) Sole proprietorship. The applicant sole proprietor.
    (2) Partnership. At least one of the active managing partners, but 
all partners must execute the application.
    (3) Corporation. At least one of the active corporate officers.
    (c) Affiliates of intermediaries. (1) An independently qualified 
applicant may be granted a separate license to carry on the business of 
providing ocean transportation intermediary services even though it is 
associated with, under common control with, or otherwise related to 
another ocean transportation intermediary through stock ownership or 
common directors or officers, if such applicant submits:
    (i) A separate application and fee, and
    (ii) a valid instrument of financial responsibility in the form and 
amount prescribed under Sec. 515.21.
    (2) The qualifying individual of one active licensee shall not also 
be designated contemporaneously as the qualifying individual of an 
applicant for another ocean transportation intermediary license.
    (d) Common carrier. A common carrier or agent thereof which meets 
the requirements of this part may be licensed to dispatch shipments 
moving on other than such carrier's own bills of lading subject to the 
provisions of Sec. 515.42(g).


Sec. 515.12  Application for license.

    (a) Application and forms. Any person who wishes to obtain a 
license to operate as an ocean transportation intermediary shall 
submit, in duplicate, to the Director of the Commission's Bureau of 
Tariffs, Certification and Licensing, a completed application Form FMC-
18 Rev. (``Application for a License as an Ocean Transportation 
Intermediary'') accompanied by the fee required under Sec. 515.5(b). 
All applications will be assigned an application number, and each 
applicant will be notified of the number assigned to its application. 
Notice of filing of such application shall be published in the Federal 
Register and shall state the name and address of the applicant and the 
name and address of the qualifying individual. If the applicant is a 
corporation or partnership, the names of the officers or partners 
thereof shall be published.
    (b) Rejection. Any application which appears upon its face to be 
incomplete or to indicate that the applicant fails to meet the 
licensing requirements of the Act, or the Commission's regulations, 
shall be returned by certified U.S. mail or other method reasonably 
calculated to provide actual notice to the applicant without further 
processing, together with an explanation of the reason(s) for 
rejection, and the application fee shall be refunded in full. Persons 
who have had their applications returned may reapply for a license at 
any time thereafter by submitting a new application, together with the 
full application fee.
    (c) Investigation. Each applicant shall be investigated in 
accordance with Sec. 515.13.
    (d) Changes in fact. Each applicant and each licensee shall submit 
to the Commission, in duplicate, an amended Form FMC-18 Rev. advising 
of any changes in the facts submitted in the original application, 
within thirty (30) days after such change(s) occur. In the case of an 
application for a license, any unreported change may delay the 
processing and investigation of the application and may result in 
rejection or denial of the application. No fee is required when 
reporting changes to an application for initial license under this 
section.


Sec. 515.13  Investigation of applicants.

    The Commission shall conduct an investigation of the applicant's 
qualifications for a license. Such investigations may address:
    (a) The accuracy of the information submitted in the application;
    (b) The integrity and financial responsibility of the applicant;
    (c) The character of the applicant and its qualifying individual; 
and
    (d) The length and nature of the qualifying individual's experience 
in handling ocean transportation intermediary duties.


Sec. 515.14  Issuance and use of license.

    (a) Qualification necessary for issuance. The Commission will issue 
a license if it determines, as a result of its investigation, that the 
applicant possesses the necessary experience and character to render 
ocean transportation intermediary services and has filed the required 
bond, insurance or other surety.
    (b) To whom issued. The Commission will issue a license only in the 
name of the applicant, whether the applicant is a sole proprietorship, 
a partnership, or a corporation. A license issued to a sole proprietor 
doing business under a trade name shall be in the name of the sole 
proprietor, indicating the trade name under which the licensee will be 
conducting business. Only one license shall be issued to any applicant 
regardless of the number of names under which such applicant may be 
doing business, and except as otherwise provided in this part, such 
license is limited exclusively to use by the named licensee and shall 
not be transferred without prior Commission approval to another person.


Sec. 515.15  Denial of license.

    If the Commission determines, as a result of its investigation, 
that the applicant:
    (a) Does not possess the necessary experience or character to 
render intermediary services;
    (b) Has failed to respond to any lawful inquiry of the Commission; 
or
    (c) Has made any materially false or misleading statement to the 
Commission in connection with its application; then, a letter of intent 
to deny the application shall be sent to the applicant by certified 
U.S. mail or other method reasonably calculated to provide actual 
notice, stating the reason(s) why the Commission intends to deny the 
application. If the applicant submits a written request for hearing on 
the proposed denial within twenty (20) days after receipt of 
notification, such hearing shall be granted by the Commission pursuant 
to its rules of practice and procedure contained in part 502 of this 
chapter. Otherwise, denial of the application will become effective and 
the applicant shall be so notified by certified U.S. mail or other 
method reasonably calculated to provide actual notice.


Sec. 515.16  Revocation or suspension of license.

    (a) Grounds for revocation. Except for the automatic revocation for 
termination of proof of financial responsibility under Sec. 515.26, or 
as provided in Sec. 515.25(b), a license may be revoked or

[[Page 70719]]

suspended after notice and an opportunity for a hearing for any of the 
following reasons:
    (1) Violation of any provision of the Act, or any other statute or 
Commission order or regulation related to carrying on the business of 
an ocean transportation intermediary;
    (2) Failure to respond to any lawful order or inquiry by the 
Commission;
    (3) Making a materially false or misleading statement to the 
Commission in connection with an application for a license or an 
amendment to an existing license;
    (4) Where the Commission determines that the licensee is not 
qualified to render intermediary services; or
    (5) Failure to honor the licensee's financial obligations to the 
Commission.
    (b) Notice of revocation. The Commission shall publish in the 
Federal Register a notice of each revocation.


Sec. 515.17  Application after revocation or denial.

    Whenever a license has been revoked or an application has been 
denied because the Commission has found the licensee or applicant to be 
not qualified to render ocean transportation intermediary services, any 
further application within 3 years of the Commission's notice of 
revocation or denial, made by such former licensee or applicant or by 
another applicant employing the same qualifying individual or 
controlled by persons on whose conduct the Commission based its 
determination for revocation or denial, shall be reviewed directly by 
the Commission.


Sec. 515.18  Changes in organization.

    (a) The following changes in an existing licensee's organization 
require prior approval of the Commission, and application for such 
status change or license transfer shall be made on Form FMC-18 Rev., 
filed in duplicate with the Commission's Bureau of Tariffs, 
Certification and Licensing, and accompanied by the fee required under 
Sec. 515.5(b)(2):
    (1) Transfer of a corporate license to another person;
    (2) Change in ownership of a sole proprietorship;
    (3) Addition of one or more partners to a licensed partnership;
    (4) Any change in the business structure of a licensee from or to a 
sole proprietorship, partnership, or corporation, whether or not such 
change involves a change in ownership;
    (5) Any change in a licensee's name; or
    (6) Change in the identity or status of the designated qualifying 
individual, except as described in paragraphs (b) and (c) of this 
section.
    (b) Operation after death of sole proprietor: In the event the 
owner of a licensed sole proprietorship dies, the licensee's executor, 
administrator, heir(s), or assign(s) may continue operation of such 
proprietorship solely with respect to shipments for which the deceased 
sole proprietor had undertaken to act as an ocean transportation 
intermediary pursuant to the existing license, if the death is reported 
within thirty (30) days to the Commission and to all principals and 
shippers for whom services on such shipments are to be rendered. The 
acceptance or solicitation of any other shipments is expressly 
prohibited until a new license has been issued. Applications for a new 
license by the executor, administrator, heir(s), or assign(s) shall be 
made on Form FMC-18 Rev., and shall be accompanied by the transfer fee 
required under Sec. 515.5(b)(2).
    (c) Operation after retirement, resignation, or death of qualifying 
individual: When a partnership or corporation has been licensed on the 
basis of the qualifications of one or more of the partners or officers 
thereof, and such qualifying individual(s) no longer serve in a full-
time, active capacity with the firm, the licensee shall report such 
change to the Commission within thirty (30) days. Within the same 30-
day period, the licensee shall furnish to the Commission the name(s) 
and detailed intermediary experience of any other active managing 
partner(s) or officer(s) who may qualify the licensee. Such qualifying 
individual(s) must meet the applicable requirements set forth in 
Sec. 515.11(a). The licensee may continue to operate as an ocean 
transportation intermediary while the Commission investigates the 
qualifications of the newly designated partner or officer.
    (d) Incorporation of branch office: In the event a licensee's 
validly operating branch office becomes incorporated as a separate 
entity, the licensee may continue to operate such office pending 
receipt of a separate license, provided that:
    (1) The separately incorporated entity applies to the Commission 
for its own license within ten (10) days after incorporation, and
    (2) While the application is pending, the continued operation of 
the office is carried on as a bona fide branch office of the licensee, 
under its full control and responsibility, and not as an operation of 
the separately incorporated entity.
    (e) Acquisition of one or more additional licensees: In the event a 
licensee acquires one or more additional licensees, for the purpose of 
merger, consolidation, or control, the acquiring licensee shall advise 
the Commission of such change within thirty (30) days after such change 
occurs by submitting in duplicate, an amended Form FMC-18, Rev. No 
application fee is required when reporting this change.

Subpart C--Financial Responsibility Requirements; Claims Against 
Ocean Transportation Intermediaries


Sec. 515.21  Financial responsibility requirements.

    (a) Form and amount. Except as otherwise provided in this part, no 
person may operate as an ocean transportation intermediary unless that 
person furnishes a bond, proof of insurance, or other surety in a form 
and amount determined by the Commission to insure financial 
responsibility. The bond, insurance or other surety covers the 
transportation-related activities of an ocean transportation 
intermediary only when acting as an ocean transportation intermediary.
    (1) Any person operating in the United States as an ocean freight 
forwarder as defined by Sec. 515.2(n)(1) shall furnish evidence of 
financial responsibility in the amount of $50,000.
    (2) Any person operating in the United States as an NVOCC as 
defined by Sec. 515.2(n)(2) shall furnish evidence of financial 
responsibility in the amount of $75,000.
    (3) Any person operating in the United States as both an ocean 
freight forwarder and an NVOCC as defined by Secs. 515.2(n)(1) and (2) 
shall furnish evidence of financial responsibility in the amount of 
$100,000.
    (4) Any unlicensed foreign-based entity, not operating in the 
United States as defined in Sec. 515.3, providing ocean transportation 
intermediary services for transportation to or from the United States, 
shall furnish evidence of financial responsibility in the amount of 
$150,000. Such foreign entity will be held strictly responsible 
hereunder for the acts or omissions of its agent in the United States.
    (5) The amount of the financial responsibility required to be 
furnished by any entity pursuant to paragraphs (a)(1), (a)(2) or (a)(3) 
of this section shall be increased by $10,000 for each of the 
applicant's unincorporated branch offices.
    (b) Group financial responsibility. Where a group or association of 
ocean transportation intermediaries accepts liability for an ocean 
transportation intermediary's financial responsibility for such ocean 
transportation

[[Page 70720]]

intermediary's transportation-related activities under the Act, the 
group or association of ocean transportation intermediaries must file 
either a group supplemental coverage bond form, insurance form or 
guaranty form, clearly identifying each ocean transportation 
intermediary covered, before a covered ocean transportation 
intermediary may provide ocean transportation intermediary services. In 
such cases a group or association must establish financial 
responsibility in the amount required by paragraph (a) of this section 
for each member or $3,000,000 in aggregate.
    (c) Common trade name. Where more than one person operates under a 
common trade name, separate proof of financial responsibility is 
required covering each corporation or person separately providing ocean 
transportation intermediary services.
    (d) Federal military and civilian household goods. Any person which 
exclusively transports used household goods and personal effects for 
the account of the Department of Defense, or for the account of the 
federal civilian executive agencies shipping under the International 
Household Goods Program administered by the General Services 
Administration, or both, is not subject to the requirements of subpart 
C of this part, but may be subject to other requirements, such as 
alternative surety bonding, imposed by the Department of Defense, or 
the General Services Administration.


Sec. 515.22  Proof of financial responsibility.

    Prior to the date it commences furnishing ocean transportation 
intermediary services, every ocean transportation intermediary shall 
establish its financial responsibility for the purpose of this part by 
one of the following methods:
    (a) Surety bond, by filing with the Commission a valid bond on Form 
FMC-48. Bonds must be issued by a surety company found acceptable by 
the Secretary of the Treasury;
    (b) Insurance, by filing with the Commission evidence of insurance 
on Form FMC-67. The insurance must provide coverage for damages, 
reparations or penalties arising from any transportation-related 
activities under the Act of the insured ocean transportation 
intermediary. This evidence of financial responsibility shall be 
accompanied by: In the case of a financial rating, the Insurer's 
financial rating on the rating organization's letterhead or designated 
form; in the case of insurance provided by Underwriters at Lloyd's, 
documentation verifying membership in Lloyd's; and in the case of 
insurance provided by surplus lines insurers, documentation verifying 
inclusion on a current ``white list'' issued by the Non-Admitted 
Insurers' Information Office of the National Association of Insurance 
Commissioners. The Insurer must certify that it has sufficient and 
acceptable assets located in the United States to cover all 
transportation-related liabilities of the insured ocean transportation 
intermediary as specified under the Act. The insurance must be placed 
with:
    (1) An Insurer having a financial rating of Class V or higher under 
the Financial Size Categories of A.M. Best & Company, or equivalent 
from an acceptable international rating organization;
    (2) Underwriters at Lloyd's; or
    (3) Surplus lines insurers named on a current ``white list'' issued 
by the Non-Admitted Insurers' Information Office of the National 
Association of Insurance Commissioners; or
    (c) Guaranty, by filing with the Commission evidence of guaranty on 
Form FMC-68. The guaranty must provide coverage for damages, 
reparations or penalties arising from any transportation-related 
activities under the Act of the covered ocean transportation 
intermediary. This evidence of financial responsibility shall be 
accompanied by: In the case of a financial rating, the Guarantor's 
financial rating on the rating organization's letterhead or designated 
form; in the case of a guaranty provided by Underwriters at Lloyd's, 
documentation verifying membership in Lloyd's; and in the case of a 
guaranty provided by surplus lines insurers, documentation verifying 
inclusion on a current ``white list'' issued by the Non-Admitted 
Insurers' Information Office of the National Association of Insurance 
Commissioners. The Guarantor must certify that it has sufficient and 
acceptable assets located in the United States to cover all 
transportation-related liabilities of the covered ocean transportation 
intermediary as specified under the Act. The guaranty must be placed 
with:
    (1) A Guarantor having a financial rating of Class V or higher 
under the Financial Size Categories of A.M. Best & Company, or 
equivalent from an acceptable international rating organization;
    (2) Underwriters at Lloyd's; or
    (3) Surplus lines insurers named on a current ``white list'' issued 
by the Non-Admitted Insurers' Information Office of the National 
Association of Insurance Commissioners; or
    (d) Evidence of financial responsibility of the type provided for 
in paragraphs (a), (b) and (c) of this section established through and 
filed with the Commission by a group or association of ocean 
transportation intermediaries on behalf of its members, subject to the 
following conditions and procedures:
    (1) Each group or association of ocean transportation 
intermediaries shall notify the Commission of its intention to 
participate in such a program and furnish documentation as will 
demonstrate its authenticity and authority to represent its members, 
such as articles of incorporation, bylaws, etc.;
    (2) Each group or association of ocean transportation 
intermediaries shall provide the Commission with a list certified by 
its Chief Executive Officer containing the names of those ocean 
transportation intermediaries to which it will provide coverage; the 
manner and amount of existing coverage each covered ocean 
transportation intermediary has; an indication that the existing 
coverage provided each ocean transportation intermediary is provided by 
a surety bond issued by a surety company found acceptable to the 
Secretary of the Treasury, or by insurance or guaranty issued by a firm 
meeting the requirements of paragraphs (b) or (c) of this section with 
coverage limits specified above in Sec. 515.21; and the name, address 
and facsimile number of each surety, insurer or guarantor providing 
coverage pursuant to this section. Each group or association of ocean 
transportation intermediaries or its financial responsibility provider 
shall notify the Commission within thirty (30) days of any changes to 
its list;
    (3) The group or association shall provide the Commission with a 
sample copy of each type of existing financial responsibility coverage 
used by member ocean transportation intermediaries;
    (4) Each group or association of ocean transportation 
intermediaries shall be responsible for ensuring that each member's 
financial responsibility coverage allows for claims to be made in the 
United States against the Surety, Insurer or Guarantor for any judgment 
for damages against the ocean transportation intermediary arising from 
its transportation-related activities under the Act, or order for 
reparations issued pursuant to section 11 of the Act, or any penalty 
assessed against the ocean transportation intermediary pursuant to 
section 13 of the Act. Each group or association of ocean 
transportation intermediaries shall be responsible for requiring each 
member ocean transportation intermediary to

[[Page 70721]]

provide it with valid proof of financial responsibility annually;
    (5) Where the group or association of ocean transportation 
intermediaries determines to secure on behalf of its members other 
forms of financial responsibility, as specified by this section, for 
damages, reparations or penalties not covered by a member's individual 
financial responsibility coverage, such additional coverage must:
    (i) Allow claims to be made in the United States directly against 
the group or association's Surety, Insurer or Guarantor for damages 
against each covered member ocean transportation intermediary arising 
from each covered member ocean transportation intermediary's 
transportation-related activities under the Act, or order for 
reparations issued pursuant to section 11 of the Act, or any penalty 
assessed against each covered member ocean transportation intermediary 
pursuant to section 13 of the Act; and
    (ii) Be for an amount up to $75,000 or $150,000, whichever is 
applicable, for each covered member ocean transportation intermediary 
up to a maximum of $3,000,000 for each group or association of ocean 
transportation intermediaries. In the event of a claim against a group 
bond, the bond must be replenished up to the original amount of 
coverage within 30 days payment of the claim; and
    (6) The coverage provided by the group or association of ocean 
transportation intermediaries on behalf of its members shall be 
provided by:
    (i) in the case of a surety bond, a surety company found acceptable 
to the Secretary of the Treasury and issued by such a surety company on 
Form FMC-69; and
    (ii) in the case of insurance and guaranty, a firm having a 
financial rating of Class V or higher under the Financial Size 
Categories of A.M. Best & Company or equivalent from an acceptable 
international rating organization, Underwriters at Lloyd's, or surplus 
line insurers named on a current ``white list'' issued by the Non-
Admitted Insurers' Information Office of the National Association of 
Insurance Commissioners and issued by such firms on Form FMC-67 and 
Form FMC-68, respectively.
    (e) All forms and documents for establishing financial 
responsibility of ocean transportation intermediaries prescribed in 
this section shall be submitted to the Director, Bureau of Tariffs, 
Certification and Licensing, Federal Maritime Commission, Washington, 
DC 20573. Such forms and documents must clearly identify the name; 
trade name, if any; and the address of each ocean transportation 
intermediary.


Sec. 515.23  Claims against an ocean transportation intermediary.

    The Commission or another party may seek payment from the bond, 
insurance, or other surety that is obtained by an ocean transportation 
intermediary pursuant to this section.
    (a) Payment pursuant to Commission order. If the Commission issues 
an order for reparation pursuant to section 11 or 14 of the Act, or 
assesses a penalty pursuant to section 13 of the Act, a bond, 
insurance, or other surety shall be available to pay such order or 
penalty.
    (b) Payment pursuant to a claim. (1) If a party does not file a 
complaint with the Commission pursuant to section 11 of the Act, but 
otherwise seeks to pursue a claim against an ocean transportation 
intermediary bond, insurance or other surety for damages arising from 
its transportation-related activities, it shall attempt to resolve its 
claim with the financial responsibility provider prior to seeking 
payment on any judgment for damages obtained. When a claimant seeks 
payment under this section, it simultaneously shall notify both the 
financial responsibility provider and the ocean transportation 
intermediary of the claim by certified mail, return receipt requested. 
The bond, insurance, or other surety may be available to pay such claim 
if:
    (i) the ocean transportation intermediary consents to payment, 
subject to review by the financial responsibility provider; or
    (ii) the ocean transportation intermediary fails to respond within 
45 days from the date of the notice of the claim to address the 
validity of the claim, and the financial responsibility provider deems 
the claim valid.
    (2) If the parties fail to reach an agreement in accordance with 
paragraph (b)(1) of this section within 90 days of the date of the 
initial notification of the claim, the bond, insurance, or other surety 
shall be available to pay any judgment for damages obtained from an 
appropriate court. The financial responsibility provider shall pay such 
judgment for damages only to the extent they arise from the 
transportation-related activities of the ocean transportation 
intermediary ordinarily within 10 days, without requiring further 
evidence related to the validity of the claim; it may, however, inquire 
into the extent to which the judgment for damages arises from the ocean 
transportation intermediary's transportation-related activities.
    (c) The Federal Maritime Commission shall not serve as depository 
or distributor to third parties of bond, guaranty, or insurance funds 
in the event of any claim, judgment, or order for reparation.


Sec. 515.24  Agent for service of process.

    (a) Every ocean transportation intermediary not located in the 
United States and every group or association of ocean transportation 
intermediaries not located in the United States which provides 
financial coverage for the financial responsibility of a member ocean 
transportation intermediary shall designate and maintain a person in 
the United States as legal agent for the receipt of judicial and 
administrative process, including subpoenas.
    (b) If the designated legal agent cannot be served because of 
death, disability, or unavailability, the Secretary, Federal Maritime 
Commission, will be deemed to be the legal agent for service of 
process. Any person serving the Secretary must also send to the ocean 
transportation intermediary, or group or association of ocean 
transportation intermediaries which provide financial coverage for the 
financial responsibilities of a member ocean transportation 
intermediary, by registered mail, return receipt requested, at its 
address published in its tariff, a copy of each document served upon 
the Secretary, and shall attest to that mailing at the time service is 
made upon the Secretary.
    (c) Service of administrative process, other than subpoenas, may be 
effected upon the legal agent by mailing a copy of the document to be 
served by certified or registered mail, return receipt requested. 
Administrative subpoenas shall be served in accordance with 
Sec. 502.134 of this chapter.
    (d) Designations of resident agent under paragraphs (a) and (b) of 
this section and provisions relating to service of process under 
paragraph (c) of this section shall be published in the ocean 
transportation intermediary's tariff, when required, in accordance with 
part 520 of this chapter.
    (e) Every ocean transportation intermediary using a group or 
association of ocean transportation intermediaries to cover its 
financial responsibility requirement under Sec. 515.21(b) shall publish 
the name and address of the group or association's resident agent for 
receipt of judicial and administrative process, including subpoenas, in 
its tariff, when required, in accordance with part 520 of this chapter.

[[Page 70722]]

Sec. 515.25  Filing of proof of financial responsibility.

    (a) Filing of proof of financial responsibility. Upon notification 
by the Commission by certified U.S. mail or other method reasonably 
calculated to provide actual notice that the applicant has been 
approved for licensing, the applicant shall file with the Director of 
the Commission's Bureau of Tariffs, Certification and Licensing proof 
of financial responsibility in the form and amount prescribed in 
Sec. 515.21. No tariff shall be published until a license is issued, if 
applicable, and proof of financial responsibility is provided. No 
license will be issued until the Commission is in receipt of valid 
proof of financial responsibility from the applicant. If more than six 
(6) months elapse between issuance of the notification of qualification 
and receipt of the proof of financial responsibility, the Commission 
may, at its discretion, undertake a supplementary investigation to 
determine the applicant's continued qualification, for which a fee is 
required under Sec. 515.5(b)(3). Should the applicant not file the 
requisite proof of financial responsibility within two years of 
notification, the Commission will consider the application to be 
invalid.
    (b) Branch offices. New proof of financial responsibility, or a 
rider to the existing proof of financial responsibility, increasing the 
amount of the bond in accordance with Sec. 515.21(a)(5), shall be filed 
with the Commission prior to the date the licensee commences operation 
of any branch office. Failure to adhere to this requirement may result 
in revocation of the license.


Sec. 515.26  Termination of financial responsibility.

    No license shall remain in effect unless valid proof of financial 
responsibility is maintained on file with the Commission. Upon receipt 
of notice of termination of such financial responsibility, the 
Commission shall notify the concerned licensee by certified U.S. mail 
or other method reasonably calculated to provide actual notice, at its 
last known address, that the Commission shall, without hearing or other 
proceeding, revoke the license as of the termination date of the 
financial responsibility, unless the licensee shall have submitted 
valid replacement proof of financial responsibility before such 
termination date. Replacement financial responsibility must bear an 
effective date no later than the termination date of the expiring 
financial responsibility.


Sec. 515.27  Proof of compliance.

    (a) No common carrier may transport cargo for the account of a 
shipper known by the carrier to be an NVOCC unless the carrier has 
determined that the NVOCC has a tariff and financial responsibility as 
required by sections 8 and 19 of the Act.
    (b) A common carrier can obtain proof of an NVOCC's compliance with 
the tariff and financial responsibility requirements by:
    (1) Reviewing a copy of the tariff rule published by the NVOCC and 
in effect under part 520 of this chapter;
    (2) Consulting the Commission to verify that the NVOCC has filed 
evidence of its financial responsibility; or
    (3) Any other appropriate procedure, provided that such procedure 
is set forth in the carrier's tariff.
    (c) A common carrier that has employed the procedure prescribed in 
either paragraph (b)(1) or (b)(2) of this section shall be deemed to 
have met its obligations under section 10(b)(11) of the Act, unless the 
common carrier knew that such NVOCC was not in compliance with the 
tariff and financial responsibility requirements.
    (d) The Commission will publish at its website, www.fmc.gov, a list 
of the locations of all carrier and conference tariffs, and a list of 
ocean transportation intermediaries who have furnished the Commission 
with evidence of financial responsibility, current as of the last date 
on which the list is updated. The Commission will update this list on a 
periodic basis.

Appendix A to Subpart C of Part 515--Ocean Transportation 
Intermediary (OTI) Bond Form [Form 48]

Form FMC-48--Federal Maritime Commission

Ocean Transportation Intermediary (OTI) Bond (Section 19, Shipping Act 
of 1984, as amended by the Ocean Shipping Reform Act of 1998 and the 
Coast Guard Authorization Act of 1998) ____, as Principal (hereinafter 
called Principal), and ____, as Surety (hereinafter called Surety) are 
held and firmly bound unto the United States of America in the sum of 
$____ for the payment of which sum we bind ourselves, our heirs, 
executors, administrators, successors and assigns, jointly and 
severally.

    Whereas, Principal operates as an OTI in the waterborne foreign 
commerce of the United States in accordance with the Shipping Act of 
1984, as amended by the Ocean Shipping Reform Act of 1998 and the 
Coast Guard Authorization Act of 1998 (``1984 Act''), 46 U.S.C. app 
1702, and, if necessary, has a valid tariff published pursuant to 46 
CFR part 515 and 520, and pursuant to section 19 of the 1984 Act, 
files this bond with the Commission;
    Now, Therefore, The condition of this obligation is that the 
penalty amount of this bond shall be available to pay any judgment 
or any settlement made pursuant to a claim under 46 CFR 515.23(b) 
for damages against the Principal arising from the Principal's 
transportation related activities or order for reparations issued 
pursuant to section 11 of the 1984 Act, 46 U.S.C. app. 1710, or any 
penalty assessed against the Principal pursuant to section 13 of the 
1984 Act, 46 U.S.C. app. 1712.
    This bond shall inure to the benefit of any and all persons who 
have obtained a judgment or a settlement made pursuant to a claim 
under 46 CFR 515.23(b) for damages against the Principal arising 
from its transportation related activities or order of reparation 
issued pursuant to section 11 of the 1984 Act, and to the benefit of 
the Federal Maritime Commission for any penalty assessed against the 
Principal pursuant to section 13 of the 1984 Act. However, the bond 
shall not apply to shipments of used household goods and personal 
effects for the account of the Department of Defense or the account 
of federal civilian executive agencies shipping under the 
International Household Goods Program administered by the General 
Services Administration.
    The liability of the Surety shall not be discharged by any 
payment or succession of payments hereunder, unless and until such 
payment or payments shall aggregate the penalty of this bond, and in 
no event shall the Surety's total obligation hereunder exceed said 
penalty regardless of the number of claims or claimants.
    This bond is effective the __ day of ____, 19 ____, and shall 
continue in effect until discharged or terminated as herein 
provided. The Principal or the Surety may at any time terminate this 
bond by written notice to the Federal Maritime Commission at its 
office in Washington, DC. Such termination shall become effective 
thirty (30) days after receipt of said notice by the Commission. The 
Surety shall not be liable for any transportation related activities 
of the Principal after the expiration of the thirty (30) day period 
but such termination shall not affect the liability of the Principal 
and Surety for any event occurring prior to the date when said 
termination becomes effective.
    The Surety consents to be sued directly in respect of any bona 
fide claim owed by Principal for damages, reparations or penalties 
arising from the transportation-related activities under the 1984 
Act of Principal in the event that such legal liability has not been 
discharged by the Principal or Surety within 10 days after a 
claimant has obtained a final judgment (after appeal, if any) 
against the Principal from a United States Federal or State Court of 
competent jurisdiction and has complied with the procedures for 
collecting on such a judgment pursuant to 46 CFR 515.23(b), the 
Federal Maritime Commission, or where all parties and claimants 
mutually consent, from a foreign court, or where such claimant has 
become entitled to payment of a specified sum by virtue of a 
compromise settlement agreement made with the Principal and/or 
Surety pursuant to 46 CFR 515.23(b),

[[Page 70723]]

whereby, upon payment of the agreed sum, the Surety is to be fully, 
irrevocably and unconditionally discharged from all further 
liability to such claimant; provided, however, that Surety's total 
obligation hereunder shall not exceed the amount per OTI set forth 
in 46 CFR 515.21 or the amount per group or association of OTIs set 
forth in 46 CFR 515.21.
    The underwriting Surety will promptly notify the Director, 
Bureau of Tariffs, Certification and Licensing, Federal Maritime 
Commission, Washington, DC 20573, of any claim(s) against this bond.
    Signed and sealed this __ day of ____, 19 ____.
(Please type name of signer under each signature.)
----------------------------------------------------------------------
Individual Principal or Partner

----------------------------------------------------------------------
Business Address

----------------------------------------------------------------------
Individual Principal or Partner

----------------------------------------------------------------------
Business Address

----------------------------------------------------------------------
Individual Principal or Partner

----------------------------------------------------------------------
Business Address

----------------------------------------------------------------------
Trade Name, If Any

----------------------------------------------------------------------
Corporate Principal

----------------------------------------------------------------------
State of Incorporation

----------------------------------------------------------------------
Trade Name, If Any

----------------------------------------------------------------------
Business Address

----------------------------------------------------------------------
By

----------------------------------------------------------------------
Title

(Affix Corporate Seal)

----------------------------------------------------------------------
Corporate Surety

----------------------------------------------------------------------
Business Address

----------------------------------------------------------------------
By

----------------------------------------------------------------------
Title

(Affix Corporate Seal)

Appendix B to Subpart C of Part 515--Ocean Transportation 
Intermediary (OTI) Insurance Form [Form 67]

Form FMC-67--Federal Maritime Commission

Ocean Transportation Intermediary (OTI) Insurance Form Furnished as 
Evidence of Financial Responsibility Under 46 U.S.C. app. 1718

    This is to certify, that the [Name of Insurance Company] , 
(hereinafter ``Insurer'') of [Home Office Address of Company] has 
issued to [OTI or Group or Association of OTIs] (hereinafter called 
``insured'' of [Address of OTI or Group or Association of OTIs] a 
policy or policies of insurance for purposes of complying with the 
provisions of 46 U.S.C. app. 1718 and the rules and regulations, as 
amended, of the Federal Maritime Commission, which provide 
compensation for damages, reparations or penalties arising from the 
transportation-related activities of Insured, and made pursuant to 
the Shipping Act of 1984, as amended by the Ocean Shipping Reform 
Act of 1998 and the Coast Guard Authorization Act of 1998 (``1984 
Act'').
    Whereas, the Insured is or may become an OTI subject to the 1984 
Act, 46 U.S.C. app. 1701 et seq., and the rules and regulations of 
the Federal Maritime Commission, or is or may become a group or 
association of OTIs, and desires to establish financial 
responsibility in accordance with section 19 of the 1984 Act, files 
with the Commission this Insurance Form as evidence of its financial 
responsibility and evidence of a financial rating for the Insurer of 
Class V or higher under the Financial Size Categories of A.M. Best & 
Company or equivalent from an acceptable international rating 
organization on such organization's letterhead or designated form, 
or, in the case of insurance provided by Underwriters at Lloyd's, 
documentation verifying membership in Lloyd's, or, in the case of 
surplus lines insurers, documentation verifying inclusion on a 
current ``white list'' issued by the Non-Admitted Insurers' 
Information Office of the National Association of Insurance 
Commissioners.
    Whereas, the Insurance is written to assure compliance by the 
Insured with section 19 of the 1984 Act, 46 U.S.C. app. 1718, and 
the rules and regulations of the Federal Maritime Commission 
relating to evidence of financial responsibility for OTIs, this 
Insurance shall be available to pay any judgment obtained or any 
settlement made pursuant to claim under 46 CFR Sec. 515.23(b) for 
damages against the Insured arising from the Insured's 
transportation-related activities under the 1984 Act, or order for 
reparations issued pursuant to section 11 of the 1984 Act, 46 U.S.C. 
app. 1710, or any penalty assessed against the Insured pursuant to 
section 13 of the 1984 Act, 46 U.S.C. app. 1712; provided, however, 
that Insurer's obligation for a group or association of OTIs shall 
extend only to such damages, reparations or penalties described 
herein as are not covered by another insurance policy, guaranty or 
surety bond held by the OTI(s) against which a claim or final 
judgment has been brought and that Insurer's total obligation 
hereunder shall not exceed the amount per OTI set forth in 46 CFR 
515.21 or the amount per group or association of OTIs set forth in 
46 CFR 515.21 in aggregate.
    Whereas, the Insurer certifies that it has sufficient and 
acceptable assets located in the United States to cover all 
liabilities of Insured herein described, this Insurance shall inure 
to the benefit of any and all persons who have a bona fide claim 
against the Insured pursuant to 46 CFR 515.23(b) arising from its 
transportation-related activities under the 1984 Act, or order of 
reparation issued pursuant to section 11 of the 1984 Act, and to the 
benefit of the Federal Maritime Commission for any penalty assessed 
against the Insured pursuant to section 13 of the 1984 Act.
    The Insurer consents to be sued directly in respect of any bona 
fide claim owed by Insured for damages, reparations or penalties 
arising from the transportation-related activities under the 1984 
Act, of Insured in the event that such legal liability has not been 
discharged by the Insured or Insurer within 10 days after a claimant 
has obtained a final judgment (after appeal, if any) against the 
Insured from a United States Federal or State Court of competent 
jurisdiction and has complied with the procedures for collecting on 
such a judgment pursuant to 46 CFR 515.23(b), the Federal Maritime 
Commission, or where all parties and claimants mutually consent, 
from a foreign court, or where such claimant has become entitled to 
payment of a specified sum by virtue of a compromise settlement 
agreement made with the Insured and/or Insurer pursuant to 46 CFR 
515.23(b), whereby, upon payment of the agreed sum, the Insurer is 
to be fully, irrevocably and unconditionally discharged from all 
further liability to such claimant; provided, however, that 
Insurer's total obligation hereunder shall not exceed the amount per 
OTI set forth in 46 CFR 515.21 or the amount per group or 
association of OTIs set forth in 46 CFR 515.21.
    The liability of the Insurer shall not be discharged by any 
payment or succession of payments hereunder, unless and until such 
payment or payments shall aggregate the penalty of the Insurance of 
the amount per member OTI set forth in 46 CFR 515.21 or the amount 
per group or association of OTIs set forth in 46 CFR 515.21, 
whichever comes first, regardless of the financial responsibility or 
lack thereof, or the solvency or bankruptcy, of Insured.
    The insurance evidenced by this undertaking shall be applicable 
only in relation to incidents occurring on or after the effective 
date and before the date termination of this undertaking becomes 
effective. The effective date of this undertaking shall be ____ day 
of ____, 19____, and shall continue in effect until discharged or 
terminated as herein provided. The Insured or the Insurer may at any 
time terminate the Insurance by filing a notice in writing with the 
Federal Maritime Commission at its office in Washington, DC. Such 
termination shall become effective thirty (30) days after receipt of 
said notice by the Commission. The Insurer shall not be liable for 
any transportation-related activities under the 1984 Act of the 
Insured after the expiration of the thirty (30) day period but such 
termination shall not affect the liability of the Insured and 
Insurer for such activities occurring prior to the date when said 
termination becomes effective.
    Insurer or Insured shall immediately give notice to the Federal 
Maritime Commission of all lawsuits filed, judgments rendered, and 
payments made under the insurance policy.
    (Name of Agent) ____ domiciled in the United States, with 
offices located in the United States, at ____________ is hereby 
designated as the Insurer's agent for service of process for the 
purposes of enforcing the Insurance certified to herein.
    If more than one insurer joins in executing this document, that 
action constitutes joint and several liability on the part of the 
insurers.

[[Page 70724]]

    The Insurer will promptly notify the Director, Bureau of 
Tariffs, Certification and Licensing, Federal Maritime Commission, 
Washington, DC 20573, of any claim(s) against the Insurance.
    Signed and sealed this __ day of ____, 19 __.
----------------------------------------------------------------------
Signature of Official signing on behalf of Insurer

----------------------------------------------------------------------
Type Name and Title of signer

This Insurance Form has been filed with the Federal Maritime 
Commission.

Appendix C to Subpart C of Part 515--Ocean Transportation 
Intermediary (OTI) Guaranty Form [Form 68]

Form FMC-68--Federal Maritime Commission

Guaranty in Respect of Ocean Transportation Intermediary (OTI) 
Liability for Damages, Reparations or Penalties Arising from 
Transportation-Related Activities Under the Shipping Act of 1984, as 
amended by the Ocean Shipping Reform Act of 1998 and the Coast Guard 
Authorization Act of 1998

    1. Whereas ____ (Name of Applicant) (Hereinafter referred to as 
the ``Applicant'') is or may become an Ocean Transportation 
Intermediary (``OTI'') subject to the Shipping Act of 1984, as 
amended by the Ocean Shipping Reform Act of 1998 and the Coast Guard 
Authorization Act of 1998 (``1984 Act''), 46 U.S.C. app. 1701 et 
seq., and the rules and regulations of the Federal Maritime 
Commission (``FMC''), or is or may become a group or association of 
OTIs, and desires to establish its financial responsibility in 
accordance with section 19 of the 1984 Act, then, provided that the 
FMC shall have accepted, as sufficient for that purpose, the 
Applicant's application, supported by evidence of a financial rating 
for the Guarantor of Class V or higher under the Financial Size 
Categories of A.M. Best & Company or equivalent from an acceptable 
international rating organization on such rating organization's 
letterhead or designated form, or, in the case of Guaranty provided 
by Underwriters at Lloyd's, documentation verifying membership in 
Lloyd's, or, in the case of surplus lines insurers, documentation 
verifying inclusion on a current ``white list'' issued by the Non-
Admitted Insurers'' Information Office of the National Association 
of Insurance Commissioners, the undersigned Guarantor certifies that 
it has sufficient and acceptable assets located in the United States 
to cover all transportation-related liabilities of the covered OTI 
as specified under the 1984 Act.
    2. Now, Therefore, The condition of this obligation is that the 
penalty amount of this Guaranty shall be available to pay any 
judgment obtained or any settlement made pursuant to a claim under 
46 CFR 515.23(b) for damages against the Applicant arising from the 
Applicant's transportation related activities or order for 
reparations issued pursuant to section 11 of the 1984 Act, 46 U.S.C. 
app. 1710, or any penalty assessed against the Principal pursuant to 
section 13 of the 1984 Act, 46 U.S.C. app. 1712.
    3. The undersigned Guarantor hereby guarantees to be sued 
directly in respect of any bona fide claim owed by Applicant for 
damages, reparations or penalties arising from Applicant's 
transportation-related activities under the 1984 Act, in the event 
that such legal liability has not been discharged by the Applicant 
within 10 days after any such claimant has obtained a final judgment 
(after appeal, if any) against the Applicant from a United States 
Federal or State Court of competent jurisdiction and has complied 
with the procedures for collecting on such a judgment pursuant to 46 
CFR 515.23(b), the FMC, or where all parties and claimants mutually 
consent, from a foreign court, or where such claimant has become 
entitled to payment of a specified sum by virtue of a compromise 
settlement agreement made with the Applicant and/or Guarantor 
pursuant to 46 CFR 515.23(b), whereby, upon payment of the agreed 
sum, the Guarantor is to be fully, irrevocably and unconditionally 
discharged from all further liability to such claimant. In the case 
of a guaranty covering the liability of a group or association of 
OTIs, Guarantor's obligation extends only to such damages, 
reparations or penalties described herein as are not covered by 
another insurance policy, guaranty or surety bond held by the OTI(s) 
against which a claim or final judgment has been brought.
    4. The Guarantor's liability under this Guaranty in respect to 
any claimant shall not exceed the amount of the guaranty; and the 
aggregate amount of the Guarantor's liability under this Guaranty 
shall not exceed the amount per OTI set forth in 46 CFR 515.21 or 
the amount per group or association of OTIs set forth in 46 CFR 
515.21 in aggregate.
    5. The Guarantor's liability under this Guaranty shall attach 
only in respect of such activities giving rise to a cause of action 
against the Applicant, in respect of any of its transportation-
related activities under the 1984 Act, occurring after the Guaranty 
has become effective, and before the expiration date of this 
Guaranty, which shall be the date 30 days after the date of receipt 
by FMC of notice in writing that either Applicant or the Guarantor 
has elected to terminate this Guaranty. The Guarantor and/or 
Applicant specifically agree to file such written notice of 
cancellation.
    6. Guarantor shall not be liable for payments of any of the 
damages, reparations or penalties hereinbefore described which arise 
as the result of any transportation-related activities of Applicant 
after the cancellation of the Guaranty, as herein provided, but such 
cancellation shall not affect the liability of the Guarantor for the 
payment of any such damages, reparations or penalties prior to the 
date such cancellation becomes effective.
    7. Guarantor shall pay, subject up to a limit of the amount per 
OTI set forth in 46 CFR 515.21, directly to a claimant any sum or 
sums which Guarantor, in good faith, determines that the Applicant 
has failed to pay and would be held legally liable by reason of 
Applicant's transportation-related activities, or its legal 
responsibilities under the 1984 Act and the rules and regulations of 
the FMC, made by Applicant while this agreement is in effect, 
regardless of the financial responsibility or lack thereof, or the 
solvency or bankruptcy, of Applicant.
    8. Applicant or Guarantor shall immediately give written notice 
to the FMC of all lawsuits filed, judgments rendered, and payments 
made under the Guaranty.
    9. Applicant and Guarantor agree to handle the processing and 
adjudication of claims by claimants under the Guaranty established 
herein in the United States, unless by mutual consent of all parties 
and claimants another country is agreed upon. Guarantor agrees to 
appoint an agent for service of process in the United States.
    10. This Guaranty shall be governed by the laws in the State of 
____ to the extent not inconsistent with the rules and regulations 
of the FMC.
    11. This Guaranty is effective the __ day of ____, 19 __, 12:01 
a.m., standard time at the address of the Guarantor as stated herein 
and shall continue in force until terminated as herein provided.
    12. The Guarantor hereby designates as the Guarantor's legal 
agent for service of process domiciled in the United States ______, 
with offices located in the United States at ______, for the 
purposes of enforcing the Guaranty described herein.
----------------------------------------------------------------------
(Place and Date of Execution)

----------------------------------------------------------------------
(Type Name of Guarantor)

----------------------------------------------------------------------
(Type Address of Guarantor)

By ______
(Signature and Title)

Appendix D to Subpart C of Part 515--Ocean Transportation 
Intermediary (OTI) Group Bond Form [FMC-69]

Form FMC-69--Federal Maritime Commission

Ocean Transportation Intermediary (OTI) Group Supplemental Coverage 
Bond Form (Section 19, Shipping Act of 1984, as amended by the Ocean 
Shipping Reform Act of 1998 and the Coast Guard Authorization Act of 
1998)

    ______, as Principal (hereinafter called Principal), and ______, 
as Surety (hereinafter called Surety) are held and firmly bound unto 
the United States of America in the sum of $____ for the payment of 
which sum we bind ourselves, our heirs, executors, administrators, 
successors and assigns, jointly and severally.
    Whereas, (Principal) ____ operates as a group or association of 
OTIs in the waterborne foreign commerce of the United States and 
pursuant to section 19 of the Shipping Act of 1984, as amended by 
the Ocean Shipping Reform Act of 1998 and the Coast Guard 
Authorization Act of 1998 (``1984 Act''), files this bond with the 
Federal Maritime Commission;
    Now, Therefore, the conditions of this obligation are that the 
penalty amount of this bond shall be available to pay any judgment 
obtained or any settlement made pursuant to a claim under 46 CFR 
515.23(b) against the OTIs enumerated in Appendix A of this bond for 
damages arising from any or all of the identified OTIs' 
transportation-related activities under the 1984 Act, 46 U.S.C. app. 
1701 et seq., or order for reparations issued pursuant to section 11 
of the 1984 Act, 46

[[Page 70725]]

U.S.C. app. 1710 or any penalty assessed pursuant to section 13 of 
the 1984 Act, 46 U.S.C. app. 1712 that are not covered by the 
identified OTIs' individual insurance policy(ies), guaranty(ies) or 
surety bond(s).
    This bond shall inure to the benefit of any and all persons who 
have obtained a judgment or made a settlement pursuant to a claim 
under 46 CFR 515.23(b) for damages against any or all of the OTIs 
identified in appendix A not covered by said OTIs' insurance 
policy(ies), guaranty(ies) or surety bond(s) arising from said OTIs' 
transportation-related activities under the 1984 Act, or order for 
reparation issued pursuant to section 11 of the 1984 Act, and to the 
benefit of the Federal Maritime Commission for any penalty assessed 
against said OTIs pursuant to section 13 of the 1984 Act. However, 
the bond shall not apply to shipments of used household goods and 
personal effects for the account of the Department of Defense or the 
account of federal civilian executive agencies shipping under the 
International Household Goods Program administered by the General 
Services Administration.
    The Surety consents to be sued directly in respect of any bona 
fide claim owed by any or all of the OTIs identified in Appendix A 
for damages, reparations or penalties arising from the 
transportation-related activities under the 1984 Act of the OTIs in 
the event that such legal liability has not been discharged by the 
OTIs or Surety within 10 days after a claimant has obtained a final 
judgment (after appeal, if any) against the OTIs from a United 
States Federal or State Court of competent jurisdiction and has 
complied with the procedures for collecting on such a judgment 
pursuant to 46 CFR 515.23(b), the Federal Maritime Commission, or 
where all parties and claimants mutually consent, from a foreign 
court, or where such claimant has become entitled to payment of a 
specified sum by virtue of a compromise settlement agreement made 
with the OTIs and/or Surety pursuant to 46 CFR 515.23(b), whereby, 
upon payment of the agreed sum, the Surety is to be fully, 
irrevocably and unconditionally discharged from all further 
liability to such claimant.
    The liability of the Surety shall not be discharged by any 
payment or succession of payments hereunder, unless and until such 
payment or payments shall aggregate the penalty of this bond, and in 
no event shall the Surety's total obligation hereunder exceed the 
amount per member OTI set forth in 46 CFR 515.21 identified in 
Appendix A, or the amount per group or association of OTIs set forth 
in 46 CFR 515.21, regardless of the number of OTIs, claims or 
claimants.
    This bond is effective the __ day of ____, 19 __, and shall 
continue in effect until discharged or terminated as herein 
provided. The Principal or the Surety may at any time terminate this 
bond by written notice to the Federal Maritime Commission at its 
office in Washington, DC. Such termination shall become effective 
thirty (30) days after receipt of said notice by the Commission. The 
Surety shall not be liable for any transportation-related activities 
of the OTIs identified in Appendix A as covered by the Principal 
after the expiration of the thirty (30) day period, but such 
termination shall not affect the liability of the Principal and 
Surety for any transportation-related activity occurring prior to 
the date when said termination becomes effective.
    The Principal or financial responsibility provider will promptly 
notify the underwriting Surety and the Director, Bureau of Tariffs, 
Certification and Licensing, Federal Maritime Commission, 
Washington, DC 20573, of any additions, deletions or changes to the 
OTIs enumerated in Appendix A. In the event of additions to appendix 
A, coverage will be effective upon receipt of such notice, in 
writing, by the Commission at its office in Washington, DC. In the 
event of deletions to Appendix A, termination of coverage for such 
OTI(s) shall become effective thirty (30) days after receipt of 
written notice by the Commission. Neither the Principal nor the 
Surety shall be liable for any transportation-related activities of 
the OTI(s) deleted from Appendix A after the expiration of the 
thirty (30) day period, but such termination shall not affect the 
liability of the Principal and Surety for any transportation-related 
activity of said OTI(s) occurring prior to the date when said 
termination becomes effective.
    The underwriting Surety will promptly notify the Director, 
Bureau of Tariffs, Certification and Licensing, Federal Maritime 
Commission, Washington, DC 20573, of any claim(s) against this bond.
    Signed and sealed this __day of ____, 19 __, (Please type name 
of signer under each signature).
----------------------------------------------------------------------
Individual Principal or Partner

----------------------------------------------------------------------
Business Address

----------------------------------------------------------------------
Individual Principal or Partner

----------------------------------------------------------------------
Business Address

----------------------------------------------------------------------
Individual Principal or Partner

----------------------------------------------------------------------
Business Address

----------------------------------------------------------------------
Trade Name, if Any

----------------------------------------------------------------------
Corporate Principal

----------------------------------------------------------------------
Place of Incorporation

----------------------------------------------------------------------
Trade Name, if Any

----------------------------------------------------------------------
Business Address (Affix Corporate Seal)

----------------------------------------------------------------------
By

----------------------------------------------------------------------
Title

----------------------------------------------------------------------
Principal's Agent for Service of Process (Required if Principal is 
not a U.S. Corporation)

----------------------------------------------------------------------
Agent's Address

----------------------------------------------------------------------
Corporate Surety

----------------------------------------------------------------------
Business Address (Affix Corporate Seal)

----------------------------------------------------------------------
By

----------------------------------------------------------------------
Title

Subpart D--Duties and Responsibilities of Ocean Transportation 
Intermediaries; Reports to Commission


Sec. 515.31  General duties.

    (a) License; name and number. Each licensee shall carry on its 
business only under the name in which its license is issued and only 
under its license number as assigned by the Commission. Wherever the 
licensee's name appears on shipping documents, its Commission license 
number shall also be included.
    (b) Stationery and billing forms; notice of shipper affiliation. 
(1) The name and license number of each licensee shall be permanently 
imprinted on the licensee's office stationery and billing forms. The 
Commission may temporarily waive this requirement for good cause shown 
if the licensee rubber stamps or types its name and Commission license 
number on all papers and invoices concerned with any ocean 
transportation intermediary forwarding transaction.
    (2) When a licensee is a shipper or seller of goods in 
international commerce or affiliated with such an entity, the licensee 
shall have the option of:
    (i) Identifying itself as such and/or, where applicable, listing 
its affiliates on its office stationery and billing forms, or
    (ii) Including the following notice on such items:

    This company is a shipper or seller of goods in international 
commerce or is affiliated with such an entity. Upon request, a 
general statement of its business activities and those of its 
affiliates, along with a written list of the names of such 
affiliates, will be provided.

    (c) Use of license by others; prohibition. No licensee shall permit 
its license or name to be used by any person who is not a bona fide 
individual employee of the licensee. Unincorporated branch offices of 
the licensee may use the license number and name of the licensee if 
such branch offices:
    (1) Have been reported to the Commission in writing; and
    (2) Are covered by increased financial responsibility in accordance 
with Sec. 515.21(a)(5).
    (d) Arrangements with ocean transportation intermediaries whose 
licenses have been revoked. Unless prior written approval from the 
Commission has been obtained, no licensee shall, directly or 
indirectly:

[[Page 70726]]

    (1) Agree to perform ocean transportation intermediary services on 
shipments as an associate, correspondent, officer, employee, agent, or 
sub-agent of any person whose license has been revoked or suspended 
pursuant to Sec. 515.16;
    (2) Assist in the furtherance of any ocean transportation 
intermediary business of such person;
    (3) Share forwarding fees or freight compensation with any such 
person; or
    (4) Permit any such person, directly or indirectly, to participate, 
through ownership or otherwise, in the control or direction of the 
ocean transportation intermediary business of the licensee.
    (e) Arrangements with unauthorized persons. No licensee shall enter 
into an agreement or other arrangement (excluding sales agency 
arrangements not prohibited by law or this part) with an unlicensed 
person that bestows any fee, compensation, or other benefit upon the 
unlicensed person. When a licensee is employed to perform ocean 
transportation intermediary services by the agent of the person 
responsible for paying for such services, the licensee shall also 
transmit a copy of its invoice for services rendered to the person 
paying those charges.
    (f) False or fraudulent claims, false information. No licensee 
shall prepare or file or assist in the preparation or filing of any 
claim, affidavit, letter of indemnity, or other paper or document 
concerning an ocean transportation intermediary transaction which it 
has reason to believe is false or fraudulent, nor shall any such 
licensee knowingly impart to a principal, shipper, common carrier or 
other person, false information relative to any ocean transportation 
intermediary transaction.
    (g) Information provided to the principal or shipper. No licensee 
shall withhold any information concerning an ocean transportation 
intermediary transaction from its principal or shipper, and each 
licensee shall comply with the laws of the United States and shall 
exercise due diligence to assure that all information provided to its 
principal or shipper or provided in any export declaration, bill of 
lading, affidavit, or other document which the licensee executes in 
connection with a shipment is accurate.
    (h) Errors and omissions of the principal or shipper. A licensee 
who has reason to believe that its principal or shipper has not, with 
respect to a shipment to be handled by such licensee, complied with the 
laws of the United States, or has made any error or misrepresentation 
in, or omission from, any export declaration, bill of lading, 
affidavit, or other paper which the principal or shipper executes in 
connection with such shipment, shall advise its principal or shipper 
promptly of the suspected noncompliance, error, misrepresentation or 
omission, and shall decline to participate in any transaction involving 
such document until the matter is properly and lawfully resolved.
    (i) Response to requests of Commission. Upon the request of any 
authorized representative of the Commission, a licensee shall make 
available promptly for inspection or reproduction all records and books 
of account in connection with its ocean transportation intermediary 
business, and shall respond promptly to any lawful inquiries by such 
representative.
    (j) Express written authority. No licensee shall endorse or 
negotiate any draft, check, or warrant drawn to the order of its 
principal or shipper without the express written authority of such 
principal or shipper.
    (k) Invoices; documents available upon request. Upon the request of 
its principal(s) or shipper(s), each licensee shall provide a complete 
breakout of its charges and a true copy of any underlying document or 
bill of charges pertaining to the licensee's invoice. The following 
notice shall appear on each invoice to a principal or shipper:

    Upon request, we shall provide a detailed breakout of the 
components of all charges assessed and a true copy of each pertinent 
document relating to these charges.

    (l) Accounting to principal or shipper. Each licensee shall account 
to its principal(s) or shipper(s) for overpayments, adjustments of 
charges, reductions in rates, insurance refunds, insurance monies 
received for claims, proceeds of C.O.D. shipments, drafts, letters of 
credit, and any other sums due such principal(s) or shipper(s).


Sec. 515.32  Records required to be kept.

    Each licensee shall maintain in an orderly and systematic manner, 
and keep current and correct, all records and books of account in 
connection with its ocean transportation intermediary business. These 
records must be kept in the United States in such manner as to enable 
authorized Commission personnel to readily determine the licensee's 
cash position, accounts receivable and accounts payable. The licensee 
must maintain the following records for a period of five years:
    (a) General financial data. A current running account of all 
receipts and disbursements, accounts receivable and payable, and daily 
cash balances, supported by appropriate books of account, bank deposit 
slips, canceled checks, and monthly reconciliation of bank statements.
    (b) Types of services by shipment. A separate file shall be 
maintained for each shipment. Each file shall include a copy of each 
document prepared, processed, or obtained by the licensee, including 
each invoice for any service arranged by the licensee and performed by 
others, with respect to such shipment.
    (c) Receipts and disbursements by shipment. A record of all sums 
received and/or disbursed by the licensee for services rendered and 
out-of-pocket expenses advanced in connection with each shipment, 
including specific dates and amounts.
    (d) Special contracts. A true copy, or if oral, a true and complete 
memorandum, of every special arrangement or contract between a licensed 
freight forwarder and a principal, or modification or cancellation 
thereof. Bona fide shippers shall also have access to such records upon 
reasonable request.


Sec. 515.33  Regulated Persons Index.

    The Regulated Persons Index is a database containing the names, 
addresses, phone/fax numbers and bonding information, where applicable, 
of Commission-regulated entities. The database may be purchased for $84 
by contacting Bureau of Tariffs, Certification and Licensing, Federal 
Maritime Commission, Washington, DC 20573. Contact information is 
listed on the Commission's website at www.fmc.gov.

Subpart E--Freight Forwarding Fees and Compensation


Sec. 515.41  Forwarder and principal; fees.

    (a) Compensation or fee sharing. No licensed freight forwarder 
shall share, directly or indirectly, any compensation or freight 
forwarding fee with a shipper, consignee, seller, or purchaser, or an 
agent, affiliate, or employee thereof; nor with any person advancing 
the purchase price of the property or guaranteeing payment therefor; 
nor with any person having a beneficial interest in the shipment.
    (b) Receipt for cargo. Each receipt for cargo issued by a licensed 
freight forwarder shall be clearly identified as ``Receipt for Cargo'' 
and be readily distinguishable from a bill of lading.
    (c) Special contracts. To the extent that special arrangements or 
contracts are entered into by a licensed freight forwarder, the 
forwarder shall not deny equal terms to other shippers similarly 
situated.
    (d) Reduced forwarding fees. No licensed freight forwarder shall 
render,

[[Page 70727]]

or offer to render, any freight forwarding service free of charge or at 
a reduced fee in consideration of receiving compensation from a common 
carrier or for any other reason. Exception: A licensed freight 
forwarder may perform freight forwarding services for recognized relief 
agencies or charitable organizations, which are designated as such in 
the tariff of the common carrier, free of charge or at reduced fees.
    (e) In-plant arrangements. A licensed freight forwarder may place 
an employee or employees on the premises of its principal as part of 
the services rendered to such principal, provided:
    (1) The in-plant forwarder arrangement is reduced to writing in the 
manner of a special contract under Sec. 515.32(d), which shall identify 
all services provided by either party (whether or not constituting a 
freight forwarding service); state the amount of compensation to be 
received by either party for such services; set forth all details 
concerning the procurement, maintenance or sharing of office 
facilities, personnel, furnishings, equipment and supplies; describe 
all powers of supervision or oversight of the licensee's employee(s) to 
be exercised by the principal; and detail all procedures for the 
administration or management of in-plant arrangements between the 
parties; and
    (2) The arrangement is not an artifice for a payment or other 
unlawful benefit to the principal.


Sec. 515.42  Forwarder and carrier; compensation.

    (a) Disclosure of principal. The identity of the shipper must 
always be disclosed in the shipper identification box on the bill of 
lading. The licensed freight forwarder's name may appear with the name 
of the shipper, but the forwarder must be identified as the shipper's 
agent.
    (b) Certification required for compensation. A common carrier may 
pay compensation to a licensed freight forwarder only pursuant to such 
common carrier's tariff provisions. Where a common carrier's tariff 
provides for the payment of compensation, such compensation shall be 
paid on any shipment forwarded on behalf of others where the forwarder 
has provided a written certification as prescribed in paragraph (c) of 
this section and the shipper has been disclosed on the bill of lading 
as provided for in paragraph (a) of this section. The common carrier 
shall be entitled to rely on such certification unless it knows that 
the certification is incorrect. The common carrier shall retain such 
certification for a period of five (5) years.
    (c) Form of certification. Where a licensed freight forwarder is 
entitled to compensation, the forwarder shall provide the common 
carrier with a signed certification which indicates that the forwarder 
has performed the required services that entitle it to compensation. 
The required certification may be placed on one copy of the relevant 
bill of lading, a summary statement from the forwarder, the forwarder's 
compensation invoice, or as an endorsement on the carrier's 
compensation check. Each forwarder shall retain evidence in its 
shipment files that the forwarder, in fact, has performed the required 
services enumerated on the certification. The certification shall read 
as follows:

    The undersigned hereby certifies that neither it nor any holding 
company, subsidiary, affiliate, officer, director, agent or 
executive of the undersigned has a beneficial interest in this 
shipment; that it is the holder of valid FMC License No. ____, 
issued by the Federal Maritime Commission and has performed the 
following services:
    (1) Engaged, booked, secured, reserved, or contracted directly 
with the carrier or its agent for space aboard a vessel or confirmed 
the availability of that space; and
    (2) Prepared and processed the ocean bill of lading, dock 
receipt, or other similar document with respect to the shipment.

    (d) Compensation pursuant to tariff provisions. No licensed freight 
forwarder, or employee thereof, shall accept compensation from a common 
carrier which is different from that specifically provided for in the 
carrier's effective tariff(s). No conference or group of common 
carriers shall deny in the export commerce of the United States 
compensation to an ocean freight forwarder or limit that compensation 
to less than a reasonable amount.
    (e) Electronic data interchange. A licensed freight forwarder may 
own, operate, or otherwise maintain or supervise an electronic data 
interchange based computer system in its forwarding business; however, 
the forwarder must directly perform value-added services as described 
in paragraph (c) of this section in order to be entitled to carrier 
compensation.
    (f) Compensation; services performed by underlying carrier; 
exemptions. No licensed freight forwarder shall charge or collect 
compensation in the event the underlying common carrier, or its agent, 
has, at the request of such forwarder, performed any of the forwarding 
services set forth in Sec. 515.2(i) unless such carrier or agent is 
also a licensed freight forwarder, or unless no other licensed freight 
forwarder is willing and able to perform such services.
    (g) Duplicative compensation. A common carrier shall not pay 
compensation for the services described in paragraph (c) of this 
section more than once on the same shipment.
    (h) Non-vessel-operating common carriers; compensation. (1) A 
licensee operating as an NVOCC and a freight forwarder, or a person 
related thereto, may collect compensation when, and only when, the 
following certification is made together with the certification 
required under paragraph (c) of this section:

    The undersigned certifies that neither it nor any related person 
has issued a bill of lading or otherwise undertaken common carrier 
responsibility as a non-vessel-operating common carrier for the 
ocean transportation of the shipment covered by this bill of lading.

    (2) Whenever a person acts in the capacity of an NVOCC as to any 
shipment, such person shall not collect compensation, nor shall any 
underlying ocean common carrier pay compensation to such person, for 
such shipment.
    (i) Compensation; beneficial interest. A licensed freight forwarder 
may not receive compensation from a common carrier with respect to any 
shipment in which the forwarder has a beneficial interest or with 
respect to any shipment in which any holding company, subsidiary, 
affiliate, officer, director, agent, or executive of such forwarder has 
a beneficial interest.
    By the Commission.
Joseph C. Polking,
Secretary.
[FR Doc. 98-33554 Filed 12-21-98; 8:45 am]
BILLING CODE 6730-01-P