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FMC May Meeting Focused on Agency Outreach and Licensing Efforts

Demand for cargo and passenger ocean transportation services remains strong post-pandemic and the Federal Maritime Commission (FMC) used the open session of its May 2024 meeting to highlight how agency licensing and outreach programs improve supply chain resiliency, protect the public, and ensure proper compliance by shipping companies and marine terminal operators (MTO).

While containerized cargo volumes have receded from record levels and rates experienced during the pandemic, recent events in the Middle East, Central America, and even the U.S. East Coast all serve as reminders of the susceptibility of the supply chain to shocks.

The FMC Audit Program (Audit Program) provides a channel for direct communication on timely matters between Commission staff and key executives at the largest container shipping lines calling the United States. The Audit Program was originally established in July 2021 at the height of pandemic-related supply congestion to address concerns with ocean carrier detention and demurrage charges and was expanded in 2023 to include MTOs. Participation in the Audit Program is voluntary, allowing for the Commission and regulated entities to raise and address operational, business, or compliance issues informally and before becoming problematic or triggering an enforcement action. Additionally, the Audit Program has been successful in promoting best practices in some key areas helping to create consistency of experience for shippers across ocean carriers.

A key feature of the Audit Program is participating ocean carriers and marine terminal operators sharing information that provides insight into market and operational trends of particular interest to the FMC. Specifically, information is regularly provided related to demurrage and detention billing trends; lockouts, or denials of access to pick-up containers based on non-payment of detention and demurrage fees; and bookings cancelled by either shipper or carrier.

The meeting also highlighted the FMC’s licensing role for ocean freight forwarders and non-vessel-operating common carriers (NVOCCs), grouped together as ocean transportation intermediaries (OTIs) under Title 46 of the U.S. Code. OTIs offer services that provide many shippers access to international markets and choice in the marketplace they might not otherwise have. The agency’s Bureau of Certification and Licensing (BCL) has day-to-day responsibility for the licensing, registration, and bond programs that protect shippers who use OTIs. There are more than 9,000 domestic or foreign OTIs licensed or registered at the FMC.

U.S. based OTIs must be licensed and bonded. There are now 5,119 active domestically licensed OTIs. This number has remained fairly consistent over recent years and the overwhelming percentage of U.S. OTIs are in California, Florida, New York, New Jersey, and Texas.

Foreign based NVOCCs can choose to be licensed or registered, but both categories must maintain a bond. Foreign licensed NVOCCs must meet a requirement to establish a presence in the U.S. via an unincorporated branch office, while also meeting all the same basic requirements of U.S.-based NVOCCs. Foreign Registered NVOCCs must meet fewer regulatory requirements, but must meet higher financial responsibility standards, than Foreign Licensed NVOCCs. The Commission has seen tremendous growth over the past three fiscal years in the numbers of foreign NVOCCs registering at the agency. Commission staff reported that very few foreign NVOCCs choose to be licensed and the overwhelming number of foreign registered NVOCCs are in the People’s Republic of China.

Another key function BCL carries out is providing safeguards to consumers for non-performance of, or death or injury aboard, a cruise voyage beginning in the United States. The Passenger Vessel Operators (PVO) Program requires cruise operators maintain proof of financial responsibility to address issues related to failure to perform or casualties aboard a vessel. PVOs can demonstrate their financial responsibility via bonds, guaranties, insurance, and escrow. The Commission does not hold or administer the instrument of financial responsibility, rather the Commission through BCL requires that covered companies prove they are meeting their statutorily mandated obligations. There are 51 companies participating in the PVO Program with a total of 276 vessels.

The Commission also discussed the Audit Program in a session closed to the public to allow the presentation of business confidential, company specific information. The Audit Program was the only item discussed in closed session.

A recording of the meeting is available on the FMC YouTube channel.

The meeting was held May 29, 2024, in Washington, DC.

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