[Federal Register Volume 64, Number 82 (Thursday, April 29, 1999)]
[Rules and Regulations]
[Pages 23019-23020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10755]


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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: Confirmation of interim final rule and correction.

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SUMMARY: This rule confirms as final the interim rule published on 
March 8, 1999, which added a provision to the Federal Maritime 
Commission's licensing requirements to allow foreign non-vessel-
operating common carriers the opportunity to seek to obtain a license. 
In addition, this document contains a correction to the final 
regulations which were published in the same document on March 8, 1999.

DATES: Effective May 1, 1999.

FOR FURTHER INFORMATION CONTACT:

Austin L. Schmitt, 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 Street, NW, Washington, DC 20573-0001, (202) 523-5740

SUPPLEMENTARY INFORMATION:
    On February 26, 1999, the Federal Maritime Commission (``FMC'' or 
``Commission'') adopted new regulations at 46 CFR part 515 to implement 
changes made by the Ocean Shipping Reform Act of 1998 (``OSRA''), Pub. 
L. 105-258, 112 Stat. 1902, to the Shipping Act of 1984 (``1984 Act''), 
46 U.S.C. app. section 1701 et seq., relating to ocean freight 
forwarders and non-vessel-operating common carriers (``NVOCCs''), 64 FR 
11155-11183, March 8, 1999.
    As part of the final rule, the Commission published as an interim 
final rule a provision to allow foreign NVOCCs the opportunity to seek 
to obtain a license under the provisions of 46 CFR part 515. We 
explained that pursuant to the definition of ``in the United States'' 
in 46 CFR 515.3 adopted by the Commission, a foreign NVOCC could choose 
to establish a presence in the United States for licensing purposes in 
accordance with 515.3 and secure financial responsibility applicable to 
NVOCCs in the United States. To establish a presence in the United 
States necessary to obtain a license under this part, a foreign NVOCC 
must set up an unincorporated office that is resident in the United 
States. We would not consider the foreign NVOCC's primary location in 
the United States to be a separate branch office subject to additional 
licensing and financial responsibility requirements of this part. 
However, in the event that the licensee seeks to establish other branch 
offices in addition to its primary United States office, those other 
offices would be subject to the licensing and financial responsibility 
requirements applicable to separately incorporated and unincorporated 
branch offices.
    We further limited the option of a foreign entity becoming licensed 
under this part to NVOCCs, and not freight forwarders, because an 
``ocean freight forwarder'' is defined in Sec. 515.2(o)(1) as a person 
who dispatches shipments ``from the United States.'' Moreover, a 
freight forwarder has a fiduciary relationship with its customer, and a 
foreign freight forwarder, by its very nature, would be performing 
services for its customers in a foreign country beyond the reach of the 
Commission. Finally, in order to better assist foreign NVOCCs who seek 
to become licensed under this part, we amended Sec. 515.11(a)(1) to 
provide that a foreign NVOCC's experience in ocean transportation 
intermediary (``OTI'') services need not be in the United States.
    We sought comments on those aspects of the rule that were 
implemented as an interim final rule. We received comments from North 
American Van Lines, Inc., t/a North American International, who 
supports the Commission's proposal to permit foreign NVOCCs to obtain a 
license, believing it will result in enhanced compliance with the 1984 
Act. No other comments were received, and, therefore, we implement as 
final those provisions which allow foreign NVOCCs to seek to obtain a 
license under 46 CFR part 515.
    As the Commission is preparing to implement the licensing and 
financial responsibility requirements of this part, several issues have 
been raised which we will now address.
    With respect to the licensing requirements of Sec. 515.11, in the 
supplementary information to the final rule, we stated that an NVOCC 
with a tariff and financial responsibility in effect as of April 30, 
1999, would be permitted to continue operating without the requisite 
three years' experience and character requirement. 64 FR 11158-59. 
However, in Sec. 515.11(a)(3), the reference to the character 
requirement was inadvertently omitted. Therefore, Sec. 515.11(a)(3) is 
corrected to reflect that an NVOCC with a tariff and financial

[[Page 23020]]

responsibility in effect as of April 30, 1999 will be permitted to 
continue operating without satisfying the requisite qualifications of 
three years' experience and necessary character to render OTI services.
    In addition, we stated that an applicant will be provisionally 
licensed while the Commission reviews its application. Concerns have 
been raised as to what the Commission intends by the term 
``provisionally.'' The Commission will issue licenses to those NVOCCs 
who have tariffs and financial responsibility in effect on April 30, 
1999 and who file license applications and increase their financial 
responsibility by May 1, 1999. These entities are permitted to continue 
operating while the Commission processes their applications. Should the 
review and investigation of applications reveal that an applicant is 
otherwise unqualified or unsuitable to retain a license, the regular 
procedures set forth at Sec. 515.16 for revocation or suspension of a 
license would apply.
    OSRA and 46 CFR part 515 require, for the first time, that NVOCCs 
obtain a license. Consistent with the licensing provisions applicable 
to freight forwarders under current regulations at 46 CFR part 510, and 
applicable to all licensed OTIs effective May 1, 1999 under 46 CFR part 
515, separately incorporated branch offices are treated as separate 
entities. Section 515.3 requires a separate license for separately 
incorporated branch offices. Branch office is defined at Sec. 515.2(c) 
as ``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 is located at an address different from 
that of the licensee's designated home office. This term does not 
include a separately incorporated entity.'' Similarly, subpart C of 46 
CFR part 515 requires that separately incorporated branch offices 
obtain their own financial responsibility. Unincorporated branch 
offices are not required to obtain their own licenses, but the licensee 
is required to increase its financial responsibility by $10,000 for 
each unincorporated branch office.
    Section 515.25(a), in conjunction with the licensing requirements 
of this part, could be read to require that a separately incorporated 
branch office of an NVOCC publish its own tariff, because an applicant 
who seeks to obtain a license to operate as an NVOCC must establish its 
financial responsibility and publish a tariff. We wish to clarify that 
a separately incorporated branch office of an NVOCC is not required to 
publish its own tariff. An NVOCC branch office which provides 
intermediary services is required to satisfy the licensing and 
financial responsibility requirements applicable to unincorporated and 
separately incorporated branch offices, as freight forwarders 
previously have been, and continue to be, so required. To the extent 
that a separately incorporated branch office of an NVOCC is issuing, 
processing, or otherwise handling, the designated home office's bills 
of lading, based on the rates published in the designated home office's 
tariff, it is not required to publish its own tariff.
    An office under the corporate umbrella that does not provide 
intermediary services under this part, but for example provides air 
freight forwarding, does not fall under the branch office requirements 
of this part, as it is not established or maintained by or under the 
control of the licensee for the purpose of rendering intermediary 
services within the meaning of the 1984 Act or this part. Similarly, a 
licensed OTI is allowed to use an agent, say for sales work on behalf 
of the licensed principal, and the agent is not required to obtain its 
own license and financial responsibility, so long as the agent is not, 
in actuality, operating as a branch office of the licensee, whether 
unincorporated or separately incorporated.
    The Commission has received OMB approval for this collection of 
information pursuant to the Paperwork Reduction Act of 1995, as 
amended. In accordance with that Act, agencies are required to display 
a currently valid control number. The valid control number for this 
collection of information is 3072-0012.
    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 Part 515

    Exports, Freight forwarders, Non-vessel-operating common carriers, 
Ocean transportation intermediaries, Licensing requirements, Financial 
responsibility requirements, Reports and recordkeeping requirements.

    Accordingly, the second sentence of Sec. 515.11(a)(1), which was 
published as an interim final rule within the final rule adding part 
515 at 64 FR 11173 on March 8, 1999, is adopted as a final rule without 
change.
    In addition, the following corrections are made:
    1. At the end of the preamble on page 11171 in the first column, in 
the fourth line above the heading for part 510, the words ``proposes to 
remove'' are corrected to read ``removes'', and in the following line, 
the word ``add'' is corrected to read ``adds'.
    2. In Sec. 515.11(a)(3), which was published at 64 FR 11173 in the 
third column on March 8, 1999, make the following correction: in the 
first sentence after the word ``experience'' and before the word 
``and'' add the phrase ``and necessary character to render ocean 
transportation intermediary services'.
Bryant L. VanBrakle,
Secretary.
[FR Doc. 99-10755 Filed 4-28-99; 8:45 am]
BILLING CODE 6730-01-P