FMC Issues its Annual Report for FY 2004

Almost $3 million in civil penalties collected in FY 2004. During FY 2004, the FMC's Bureau of Enforcement (BOE) investigated and prosecuted malpractices in many trade lanes, including the transpacific, North Atlantic, Central and South American and Caribbean trades. These included market-distorting activities such as various forms of secret rebates and absorptions, misdescription of commodities and misdeclaration of measurements, illegal equipment substitution, unlawful use of service contracts, as well as carriage of cargo by and for untariffed and unbonded non-vessel operating common carriers (NVOCCs). The FMC collected $2,959,000 in civil penalties in FY 2004 and that these collections represent a wide range of violations in all of the major trade lanes.

Most malpractices resolved informally, some with compromise settlements. Most of these malpractices were resolved informally some with compromise settlements of civil penalties. However, some investigations require the institution of formal adjudicatory proceedings in order to pursue remedies under the 1984 Act.

39 enforcement cases were pending resolution at end of FY 2004. At the beginning of FY 2004, 41 enforcement cases were pending final resolution by the BOE, the BOE was party to 9 formal proceedings, and there were 80 matters pending which the BOE was monitoring or for which it was providing legal advice. During FY 2004, 30 new enforcement actions were commenced; 32 were compromised and settled, administratively closed, or referred for formal proceedings; and 39 enforcement cases were pending resolution at fiscal year's end. Also, the BOE participated in 4 new formal proceedings, 6 proceedings were completed, and 7 formal proceedings were pending at the end of the fiscal year. Additionally, 44 matters involving monitoring or legal advice were received during FY 2004, 64 such matters were completed, and 60 were pending in the BOE on September 30, 2004.

BOE plans for FY 2005. The FMC states that in FY 2005, the BOE will continue to pursue market-distorting, fraudulent and anticompetitive practices and will continue to monitor U.S. trades and the implementation of the changes and regulations resulting from Ocean Shipping Reform Act (OSRA), to the extent that resources permit. It will pursue initiatives aimed at entities not in compliance with the FMC's regulations for ocean transporation intermediary (OTI) participation in transportation, its definition of vessel operating common carrier (VOCC), as well as instances of noncompliance with regulatory requirements for service contracts and NVOCC service arrangements.

OTI Licensing. During fiscal year 2004, the FMC received 313 new ocean transportation intermediary (OTI) applications and 209 amended applications, issued 245 OTI licenses, revoked 217 licenses, and reissued approximately 115 licenses.

At the end of FY 2004, 1,242 freight forwarders, 1,401 U.S. NVOCCs, 946 joint NVOCC/ocean freight forwarders, and 36 foreign NVOCCs held active OTI licenses. An additional 775 foreign NVOCCs maintained proof of financial responsibility on file with the FMC but chose not to be licensed.

During FY 2004, the FMC received 20 riders providing optional proof of financial responsibility for carriers serving in the U.S.-China trade. The FMC's final rule in Docket No. 04-02, Optional Rider for Proof of Additional NVOCC Financial Responsibility, implemented rules that permit U.S. NVOCCs to file riders to their existing NVOCC bonds to meet financial responsibility requirements imposed by the Chinese government. (See ITT's Online Archives or 04/05/04 and 04/06/04 news, 04040505 and 04040610, for BP's two-part summary of the FMC's final rule.)

The FMC maintains a list of licensed and bonded OTIs on its Web site, thus assisting carriers in complying with their statutory mandate to do business only with those licensed by the FMC. The FMC notes that this is especially helpful as carriers may incur liability for doing business with an unlicensed OTI. An up-to-date list is a safeguard to the shipping public, and also protects licensees from losing business because of an inaccurate determination by a carrier as to whether the OTI is licensed. During FY 2004, the FMC added a field to indicate whether an NVOCC had filed an Optional Rider to its NVOCC OTI bond evidencing additional coverage to meet the NVOCC financial responsibility requirements of the Chinese government.

FMC's OTI compliance audit program continued in FY 2004. In FY 2004, the FMC notes that the compliance audit program continued. This program reviews the operations of licensed OTIs to assist them in complying with statutory requirements and the FMC's rules and regulations. The audit program also includes a review of entities holding themselves out as VOCCs with no indication of vessel operations.

Restrictive trade practices (particularly China and Japan). The FMC states that in FY 2004 it continued its active approach in the area of restrictive trade practices and in particular, continued to address practices of China and Japan.

China.The FMC notes that in FY 2004, it continued to gather information to determine whether China was carrying out the commitments made in its bilateral Maritime Agreement with the U.S. (See ITT's Online Archives or 04/28/05 news, 05042812, for BP summary of the FMC's announcement that it was discontinuing its proceeding on China shipping restrictions, practices, etc.)

Japan.The FMC also continued to monitor regulations and port practices of the Government of Japan. In FY 2001, the FMC revised its semiannual reporting requirement for U.S. and Japanese carriers and continued to require these semiannual reports in FY 2004

Realignment. During FY 2004, the FMC reviewed its work processes and practices in light of changes in the industry to determine how it could best perform its duties. Based on this review, a realignment of the FMC became effective on August 23, 2004. The FMC states that its new organizational structure did not create any new programs, nor eliminate any existing agency projects or activities. Rather, the restructuring reallocated the FMC's resources to maximize the effectiveness of the staff and facilitate agency efforts to better serve the ocean transportation industry. (See ITT's Online Archives or 08/25/04 news, 04082520, for BP summary on the FMC's restructuring.)

FMC's FY 2004 Annual Report available at http://www.fmc.gov/Dockets/2004%20Annual%20Report.htm.