Forward, Summer 2016 Issue

At the Bar

Forward Magazine

Summer 2016

Airforwarders Association

burden on the applicant or registrant.

The regulations do still allow for payment

of application fees by personal check and

other non-electronic means, along with

an added requirement that payment must

be received by the FMC within ten busi-

ness days after submission of the applica-

tion or registration.

A significant change impacts foreign-based

unlicensed NVOCCs

. Previously a foreign

NVO could issue bills of lading and engage

in providing NVOCC services to and from

ports of the United States merely by reg-

istering with the FMC, posting a required

bond, and appointing an agent for service

of process in the U.S.

Under the amended regulations, a regis-

tered NVOCC can continue to operate

as before, except that in the U.S. it may

only utilize the services of a U.S. based

NVO holding a valid licensed issued by the

FMC. In the U.S. only licensed OTIs may

act as agents for registered NVOCCs.

Alternatively, registered OTI’s may establish

a presence in the United States, qualified

to do business where it is located and apply

for its own OTI license. The required OTI

experience for a QI of such an entity may be

acquired in the United States, or a foreign

country in connection with ocean shipping

to or from ports of the United States.

Another material change affects the life of a

license. Formally a license, once issued, was

valid forever, baring revocation for some

gross violation of the law or regulations,

discontinuance of the licensee’s business or

some other circumstance terminating the

use of the license.

Under the new regulations licenses will only

be issued for an initial period of three (3)

years, and will be renewable for subsequent

three year (3) periods

. The OTI must

submit an electronic renewal application no

later than sixty (60) days prior to the renewal

date on the OTI’s license. The Supplemental

Information portion of the Final Rule notes

that the renewal requirement for existing

licenses will be phased in over a three-year

period in an effort to make the transition

smooth. The FMC will issue a notice on its

website of the schedule by which currently

licensed OTIs will have to renew.

In the section dealing with license renewals,

the Final Rule adds a provision noting that

although the renewal process is not meant to

be a re-evaluation of the licensee’s character,

the FMC “may review a licensee’s character

at any time, including at the time of the

renewal, based upon information received

from the licensee or other sources.”

Such character review of an applicant’s

eligibility may consider, in addition to

information provided by the applicant and

its references, all information relevant in

determining whether an applicant has the

necessary character to render OTI services.

This includes, but is not limited to, viola-

tions of shipping laws, operating as an OTI

without a license or registration, state and

federal felonies and misdemeanors, bank-

ruptcies, tax liens, etc.

These considerations were not expressly

included in the regulations prior to the

issuance of the Final Rule. However,

the FMC notes that these factors were

already generally considered in making

license determinations.

Penalties for operating without a proper

license or registration have increased signif-

icantly under the final rules. The penalties

now have a ceiling of $9,000 per violation,

or $45,000 for each willful and knowing

violation, up from the previous maximums

of $5,500 and $27,500, respectively.

Limited Liability Companies (“LLC”) may

now apply for OTI licenses. The Final Rule

has expanded the definition of a “person”

in the regulation to include, among other

business organizations, LLCs. LLCs are

now included in the portion of the regula-

tions dealing with Qualifying Individu-

als

(“QI”). This is more of a technical

amendment than a substantive one, as

LLCs could apply for a license prior to the

amendment but the regulations and the

application form had not express provision

to identify the LLC as such.

The Final Rule provides a new expedit-

ing mechanism for contesting the denial,

revocation and suspension of licenses. The

same mechanism applies to terminations or

suspensions of the registrations of foreign-

based NVOCCs.

Within twenty (20) days of the adverse

notice, the OTI must submit a statement

to the FMC’s Secretary as to why the

FMC should not take such action. The

Secretary will appoint a hearing officer,

who will provide notice to the OTI of

their right to file within thirty days of

the notice additional information and

documents, including affidavits of fact

and written argument, in support of their

license or application. The FMC will

then have twenty (20) days to submit

responsive materials. This constitutes the

The section requiring renewal of the license every 3 years is the only portion of the Final Rule set to go into effect on December 9, 2016.

This is one example of a host of unwritten policy considerations the FMC follows which one cannot know of or anticipate until encountered in the

course of applying for a license or filing an update or amendment of an existing license. The net effect of being confronted by such unwritten “rules”

can range from delay in obtaining approval of an application to outright rejection. The latter consequence is frequently the result of the very short

time limit within which responses to issues raised by the FMC must be submitted. The time constraint is twenty (20) from the date the FMC raises

the issue, not when the applicant or OTI receives such notice. The FMC’s current zeal in examining the character of an applicant or existing OTI at

times seems excessive and of little significance. As an example, a company name change application of an existing OTI was held up several months