FMC Boosting Enforcement Against OTIs, Panelists Say
RANCH MIRAGE, Calif. -- The Federal Maritime Commission is increasing its enforcement action against ocean transportation intermediaries (OTIs) to promote adherence to licensing and tariff regulations, speakers said at the Pacific Coast Council’s Western Cargo Conference last week.
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The FMC collected $2.9 million in penalties in FY 2024 to address shipping violations, “and I think we're going to see an increase in that once the government gets ruling again,” said Roberts & Kehagiaras lawyer Cameron Roberts. The agency’s operations are currently suspended as part of the federal government shutdown (see 2510020034).
FMC enforcement enjoys broad bipartisan support in Congress, according to Gabriel Padilla, principal consultant at Padilla Maritime Consulting and a former FMC employee.
“In the polarized world that everybody's talking about in Congress, one thing that doesn't seem to be as polarized is maritime enforcement,” he said. “I think you're going to start seeing increased penalties with all these activities," especially on the "unlicensed side.”
Roberts said he expects that stepped-up enforcement will result in more letter audits, as the Trump administration’s government downsizing has left the FMC with fewer field personnel. "They have to do everything by remote control, but they're still entitled to send you a letter demanding the documentation.”
Padilla said the agency is becoming more “creative” in how it imposes penalties, such as by recently requiring an OTI for the first time to fund an independent monitor of its business practices as part of a settlement with the agency (see 2502100029). The settlement also included a $165,000 penalty. “This kind of trend will continue,” he predicted.
The agency also might turn to AI to compensate for its loss of personnel, Padilla said. “Probably in the not-too-distant future, you're going to have a lot of AI analysis of the documents coming in, and that exposes a lot more of where the issues are and where they need to concentrate their efforts, because they have less available staff to do what they need to do.”
Roberts recommended that OTIs help themselves avoid shipping violations by developing a “proactive compliance culture,” such as by having and following a compliance manual; implementing internal controls and conducting regular audits; continuously holding training for staff; and responding to inquiries in a timely manner.
While the panel mostly discussed the FMC, Roberts said the Bureau of Industry and Security is also ramping up its enforcement efforts, and he urged exporters to be certain they know where their products are going, especially if sensitive technology or luxury items are involved.
“Right now, I have a guy who swears that he was shipping these three items to a woman in [South] Korea, and that's what the paperwork says,” Roberts said. “But if you go on that woman's LinkedIn page, she flatly states that she's your gateway to Kamchatka, which is in Russia. So she was sourcing luxury automobiles for shipment from the United States to Busan. She was going to simply transship them -- I'm sure this is what the government would say -- to Kamchatka and on to some Russian oligarch somewhere.”