Federal Maritime Commission The Ultimate FAQ Guide

Federal Maritime Commission: The Ultimate FAQ Guide

If you’re importing from China to USA or any other country to USA, then you need to understand the role of Federal Maritime Commission.

This guide explores everything you need to know about Federal Maritime Commission.

So, keep reading to learn more.

What Is Federal Maritime Commission?

It refers to a US agency whose responsibility includes regulating ocean shipment into and via the US. These regulations govern both NVOCCs and VOCCs to maintain fair competition.

Federal Maritime Commission

Federal Maritime Commission

What Is The History Of The FMC?

FMC started its operations in 1961 as a successor of the United States federal maritime board. Before 1961, United States Federal maritime board functions before 1961 regulated the ocean freight business and promoted itself.

However, with the birth of FMC, a reorganization plan came into effect to separate regulations and promotional functions.

In this new plan, it is the responsibility of FMC to administer the regulation of the shipping laws.

Changes in the shipping act of 1984 and that of the ocean shipping reform act of 1998 affected the operations of FMC. There are three main provisions that FMC use to administer their functions.

These provisions are the public law 89-777, 1988 foreign shipping practices act, 1984 shipping act and merchant marine act 1920.

The shipping act of 1984 introduced a regulation that impacted liner shipping and the responsibility of FMC.

Such regulations include liner services pricing using negotiated contracts instead of public tariffs. The Ocean shipping reform act of 1998 offers a basis for US liner shipping, including flexibility in business operations.

The mission of FMC since its inception is to promote fair ocean shipping practices in the US to all parties involved.

What Is The Role Of The Federal Maritime Commission In Shipping?

The ultimate role of FMC is to create fair competition for all the stakeholders involved in shipping. These parties include importers, exporters, and the American public.

FMC achieves this by formulating rules and regulations and performing several activities. For instance, they formulate policies and regulate the activities of ocean shipping intermediaries.

Ocean intermediaries include non-vessel operating common carriers and ocean freight forwarders. They also issue specific licenses to stakeholders like the ocean shipment intermediaries.

These licenses facilitate the shipping activities of these intermediaries into or from the US. It is also the duty of the FMC to asses’ applicable fees and penalties.

The purpose of the assessment is to violate the fees that customers pay and freight forwarders’ compensation.

Who Makes The Decisions Of Federal Maritime Commission?

Five commissioners are responsible for the day-to-day operations of the commission. The president is responsible for approving their appointment after submitting by the legislature arm of govt.

The commissioners are responsible for coming up with decisions about the operation of the commission.

FMC Decision Making Chart

FMC Decision Making Chart       

What Are FMC Regulations For Ocean Freight?

FMC regulations refer to regulations that govern ocean shipping intermediaries’ activities in the US. FMC controls two classes of ocean shipping intermediaries.

That is non-vessel operating common carriers and ocean freight forwarders. The regulations define these two classes to facilitates the identification and follow-up processes.

These regulations govern the license requirement and procedure and the applicable fees and compensation.

Who Are The Service Providers Outlined In The FMC Regulations?

There are three primary service providers that FMC regulations outline, that is:

Non-vessel Operating Common Carrier

It refers to an ocean carrier whose services include shipping goods using their bill of lading. These service providers do not necessarily have to operate their shipping vessels.

They can lease space from other ocean carriers for the shipping of their goods.

Unregistered Non-vessel Operating Common Carrier

Unregistered non-vessel operating common carriers are those that do not have an FMC license. It means they cannot ship to and from the US.

They, therefore, have to rely on non-vessel operating common carriers who are registered for them to ship their goods.

Unregistered NVOCC cannot use their ocean freight rates when shipping which denies them exclusive freight rates.

When searching for registered NVOCC, one ought to look for the experience and services before engaging them.

Freight Forwarding Services

These are services that freight forwarders offer on behalf of cargo owners.

They undertake to ship, package and deliver customs clearance of goods on behalf of importers.

Once they have goods to ship, engage the services of freight forwarders search for NVOCC, who have US registration.

What Is FMC License?

It refers to a license that allows you to ship to and from the US via the ocean.

FMC License

FMC License

Who Needs An FMC License?

Anyone who wants to ship to and from the US should have an FMC license. Such persons include VOCC, OTI, freight forwarders, and NVOCC.

VOCC are usually big shipping companies like MSC and Maersk that offer ocean freight to and from the US.

An OTI is an intermediary that has its base in the US. It has an FMC license and is free to engage either as a freight forwarder or an NVOCC.

Freight forwarder accepts responsibility for shipment of goods to and from the US on behalf of the owner.

An NVOCC issues their bill of lading which does not follow a standard procedure and has an FMC approval.

NVOCC may have their containers for shipping or not.

All these parties are involved in shipping to and from the US hence require an FMC license.

How Can I Get An FMC License?

You can get an FMC license in two ways, depending on where you are based. That is:

US-Based NVOCC And OFFS

If you have a presence in the US, the first step involves appointing qualified personnel. A three-year experience is critical when searching for a qualified individual.

The person should have gained the experience while working in the US.

The individual should also have a stake in the business, depending on the business structure.

The next step involves submitting a soft copy of form FMC-18. It facilitates the issuance of certificates allowing you like an ocean shipping intermediary.

After submitting the papers, you have to pay the necessary fees associated with the authority. You have to make the payments electronically through their online portal.

Non-US Based NVOCC

You have to register your unlicensed non-US-based NVOCC before seeking a license. It involves submitting form FMC-65 through their email.

The next step is to submit form FMC-1 which is for carrier tariff registration. A tariff publisher can help you in submitting this form.

You can email them for clarification concerning this form. Once you have registered, the next step is to seek a license.

It is opening and operating an unincorporated branch presence in the country. You also have to appoint a qualified person to operate the branch.

Such a person should have a minimum of three years handling OTI in the US.

The next step is to submit the form FMC-18 electronically. You have to prepare your paper worksheet in advance before the electronic application.

The lasts step is to submit your license application fee via a credit card. You can do this using their online payment platform.

What Are The Requirements For FMC Licensing?

The following requirements are essential before seeking an FMC license:

Experience

You need to have a minimum of three years working as an OTI in the US. You should also demonstrate that you have all the requirements to operate OTI activities.

What Is An OTI Or NVOCC Surety Bond In FMC Licensing?

An OTO or NVOCC surety bond refers to a given amount that OTI or NVOCC must deposit before carrying on with activities.

The purpose of this bond is to ensure these parties comply with the ocean shipping reform act and the FMC regulations.

The amount ranges between $50,000 and $150,000. There are different types of surety bonds that are applicable for FMC licensing.

What Are The Types Of Federal Maritime Commission Bonds?

The primary bonds are the OTI bond, NVOCC bond (the US-domiciled), and NVOCC bond (non-US domiciled).

Some of Federal Maritime Commission bonds available are:

OTI Bond (Ocean Freight Forwarders)

It is a type of surety bond that you get if you are operating an Ocean Freight Forwarder.

Its alternative name is the FMC-48 surety bond.  The amount that you are to pay for this type of bind is $75,000.

It is possible to cancel an OTI bond either by you as an OTI or the surety. In practice, this is effective after thirty days upon receiving a cancellation notice.

However, once cancellation takes effect, it means you don’t have the financial capability to operate OTI. The consequence of this is to cancel your FMC license.

NVOCC Bond (U.S Domiciled)

It is a type of bond that one gets if they are operating from the US.

This type of bond undertakes to pay for damages to your goods during the shipping process by an NVOCC operator.

The shipping process includes packaging, loading, and unloading to a shipping container and transporting.

The bond also covers fines that FMC levies on your cargo for violation of the regulations.

You have to pay an NVOCC bond which is equal to $75,000 for this bond.

NVOCC Bond (Non-U.S. Domiciled)

If your NVOCC is not present in the US, you have to pay for this type of bond.  It covers damage to the goods during the shipping process.

The essence of this is to protect both the shipper and customer from exploitation and ensure a fair charge.

What Are The FMC Surety Bond Requirements?

The FMC surety bond requirements depend on the type of bond you are applying.  You can summarize these requirements as follows:

Licensed US-based OFFs And NVOCCs

If you are a licensed US-based OFFs or NVOCCs should prove their financial responsibility. Such proof should be in the form of taking a surety bond.

It is worth $50000 if you are an ocean freight forwarder or $75000 if your license is for NVOCC. You should also submit for all your unincorporated branches operating OTI services in the US.

Licensed Non-us Based NVOCCs

If you are a licensed non-us-based NVOCCs, you have to submit a surety bond equaling $75000. It assures FMC of your financial responsibility and ability to handle your shipping.

Non-us-based NVOCCs Licensed

If you are not based in the US but have the license, you should submit proof of financial responsibility to FMC. Such evidence is in the form of a surety bond of around $150000.

You should also use a licensed OTI if you are carrying out OTI services in the US. The licensed OTI is responsible for your shipping process while in the US.

What Does The FMC Surety Bond Protect Against?

The primary purpose of the FMC surety bind is to offer protection to goods that you are shipping as an OTI.

Such protection covers damage to the goods on transit which reduces risk to the owners.

FMC surety bind is one of the requirements that you should prove before shipping. You, therefore, should present it to the relevant authorities.

This surety bond covers settlement or obligation arising from a valid claim relating to damage to the shipment.  There is also a pay for the penalty that goes to FMC.

What Are The Duties And Responsibilities Of Ocean Transportation Intermediaries According To The FMC?

The primary duties and responsibilities of Ocean Transport Intermediaries are to ensure smooth shipping to and from the US. Such shipping should comply with the regulations of FMC.

For instance, they can act as freight forwarders and consolidate goods for shipping from individuals who lack a valid FMC license. They can also act as NVOCC in reducing interests before loading them to a carrier for shipping.

It ensures shippers to and from the US do not violate the FMC regulations, which attract hefty penalties.

What Is FMC Rate?

FMC rate is the amount that FMC charges for shipping to and from the US. It also refers to the penalty that FMC imposes on those who violate the FMC regulations.

What Is The Difference Between An NVOCC And A Freight Forwarder?

You have to understand three vital points to understand the difference between a freight forwarder and an NVOCC.

These points are shipping documentation, specific roles, and the containers they handle.

Freight forwarders have their bill of lading whose standardization depends on the FIATA documentation.

The bill of lading for NVOCC does not rely on any standardization process.

The role of a freight forwarder is mainly acting as agents to shippers. NVOCC act as carriers to the shipper or as shippers to carriers.

NVOCC are middlemen between shippers and carriers, which helps in smooth shipping.

Freight forwarders do not own shipping containers or equipment that facilitates the shipping process.

NVOCC owns their shipping containers and equipment, thus making it easier to ship via them. The ownership of these containers and equipment reduces the overall price of shipping.

NVOCC Vs Freight Forwarder

NVOCC Vs Freight Forwarder

What Is The Advantage Of Working With An FMC Licensed Ocean Transport Intermediary (OTI)?

Working with an FMC licensed Ocean transport Intermediary offers numerous benefits for all parties involved in shipping. Such benefits include:

Acts As An NVOCC

An FMC licensed OTI handles the same functions as an NVOCC. For instance, they can engage carriers for shipping your goods to and from the US.

They also have the right to trade your sea from the US to NVOCCs or potential clients. It reduces the overall cost of shipping.

Flexibility Rates

An FMC licensed OTI is capable of engaging overseas agents and using their ocean rates. These rates are usually competitive, which can result in a faster filling process in the US.

Improves Standards

FMC licensed OTI indicates approval by FMC; hence you have the quality assurance aspect of your business. It increases your clientele base since most companies trust your process.

They also have a formal point to lodge complaints if they feel you are not treating them accordingly.

What Are The Restrictions Of Non-Licensed Agents?

The main restriction for non-licensed agents is how they perform their activities. They cannot sell ocean freight to and from the US using their ocean freight charges.

Non-licensed agents do not have authority to using ocean shipments across the US. In case it occurs, they only act as freight forwarders or booking agents.

As a non-licensed agent, you cannot book an ocean freight to and from us using your carrier contract rates.

What Are FMC Violations?

FMC violations refer to activities that contravene the rules and regulations of FMC. Any party involved in shipping to and from the US can violate these rules and regulations.

It includes OTI, NVOCC, and freight forwarders. The consequences of violating these regulations vary depending on the degree of violation and the party breaking them.

What Is The Punishment For Violating The Federal Maritime Commission Rules And Regulations?

There are different procedures for punishing violators of FMC regulations. It depends on the party that violates these regulations and the extent of the violation.

Common punishment that you can get for violating these regulations include:

  • Charging a fee that does not exceed USD 1,000,000 for every voyage of a particular carrier.
  • Suspension of part or entire contract of a carrier includes any preferential treatment agreement that such a carrier has with FMC.
  • FMC has the right to suspend cancel the rights of an OTI to operate any agreement it has with the commission. It includes the use of a carrier’s tariffs and service contracts.
  • FMC may also take other considerable actions which limit the activities of the violators for a specified time. It is to punish such violators with the intention of them rectifying their mistake.

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