04-1808. Optional Rider for Proof of Additional NVOCC Financial Responsibility

AGENCY:

Federal Maritime Commission.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Federal Maritime Commission proposes to amend its regulations governing proof of financial responsibility for ocean transportation intermediaries. The Commission proposes to allow an optional rider for additional coverage to be filed with a licensed non-vessel-operating common carrier's proof of financial responsibility for such carriers serving the U.S. oceanborne trade with the People's Republic of China.

DATES:

Comments must be received no later than February 20, 2004. Requests for meetings to make oral presentations to individual Commissioners must be received, and the meetings completed, by this date as well. Submit an original and 15 copies of comments (paper), or e-mail comments as an attachment in WordPerfect 8, Microsoft Word 2000, or earlier versions of these applications.

ADDRESSES:

Address all comments concerning this proposed rule to: Bryant L. VanBrakle, Secretary, Federal Maritime Commission, 800 North Capitol Street, NW., Room 1046, Washington, DC 20573-0001, [phone], E-mail: [e-mail].

FOR FURTHER INFORMATION CONTACT:

Amy W. Larson, General Counsel, Federal Maritime Commission, 800 North Capitol Street, NW., Room 1018, Washington, DC 20573-0001, [phone], E-mail: [e-mail].

Sandra A. Kusumoto, Director, Bureau of Consumer Complaints and Licensing, Federal Maritime Commission, 800 North Capitol Street, NW., Room 970, Washington, DC 20573-0001, [phone], E-mail: [e-mail].

SUPPLEMENTARY INFORMATION:

On January 22, 2004, the Federal Maritime Commission (“FMC” or “Commission”) granted in part and denied in part a petition for rulemaking (“Petition”) from the National Customs Brokers and Forwarders Association of America, Inc. (“NCBFAA”). Petition No. P10-03, Petition of the National Customs Brokers and Forwarders Association of America, Inc. for Rulemaking. NCBFAA, a trade association representing licensed ocean transportation intermediaries (“OTIs”) in the U.S., whose members it claims are linked to 90% of the U.S. oceanborne cargo, petitioned the Commission to change its rules to effectuate concessions made by the People's Republic of China (“PRC” or “China”) in a recently concluded U.S.-China Agreement on Maritime Transport (“Agreement”). The Agreement's associated Memorandum of Consultations provides that the Chinese government will not require U.S. NVOCCs to make a cash deposit in a Chinese bank, as long as the NVOCC: (1) Is a legal person registered by U.S. authorities; (2) obtains an FMC license as an NVOCC; and (3) provides evidence of financial responsibility in the total amount of RMB 800,000 or U.S. $96,000. Therefore, it appears that an FMC-licensed NVOCC that voluntarily provides an additional surety bond in the amount of $21,000, which by its conditions is responsive to potential claims of the Chinese Ministry of Communications (“MOC”) (as well as other Chinese agencies) for violations of the RIMT, would be able to register in the PRC without paying the cash deposit otherwise required by Chinese law and regulation. However, because current FMC regulations do not provide any mechanism for NVOCCs to file proof of such additional financial responsibility with the FMC, the Commission proposes to amend its regulations in order to permit licensed NVOCCs to file such additional proof in the form of optional riders to the required NVOCC bond.

The rule the Commission proposes differs from that requested by NCBFAA in its Petition as described in the Commission's order granting the Petition in part and denying it in part. The rule changes proposed herein reflect the grant of that Petition in most substantive respects. However, while NCBFAA's Petition requests a rule that would “provide that the bond would * * * be available for the payment of fines or reparation awards,” the language proposed by NCBFAA does not include “reparation awards” imposed by the Chinese Ministry of Communications (“MOC”). NCBFAA Petition at 2. Thus, NCBFAA's request is internally inconsistent. Therefore we are proposing a rule which would relate only to “fines and penalties” imposed by MOC, as provided in NCBFAA's proposed language for the optional rider form. Comments on the proposed coverage of the optional rider are invited.

As requested by NCBFAA, the Commission proposes to amend its rules to add a new subsection to provide for the optional rider at § 515.25. As suggested by NCBFAA, the Commission proposes to provide for group security bonds by the addition of § 515.25(c), changes to § 515.21(b), and the addition of Appendix F. Finally, the Commission declines to propose changes requested by NCBFAA which would have the effect of creating a procedure by which the Commission would administer the payment of claims against these optional riders. NCBFAA Petition at 5. The Commission declines to propose such changes because it would be inappropriate for the Commission to be involved in the collection of claims arising from decisions of the MOC, whether involving reparations, fines or penalties. The issuers of such bonds may wish to propose language to be included in the optional rider itself that would relate to procedures by which claims may be exercised against the optional rider, such as whether the English language must be used for all claims, whether the surety will not pay any claim earlier than 30 days after it has been notified of the claim, or what documentation the surety will require before paying a claim. The Commission invites comments on this issue.

Pursuant to Rule 53(a) of the Commission's Rules of Practice and Procedure, 46 CFR 502.53(a), in notice-and-comment rulemakings the Commission may permit interested persons to make oral presentations in addition to filing written comments. The Commission has determined to permit interested persons to make such presentations to individual Commissioners in this proceeding, at the discretion of each Commissioner.

Interested persons may request one-on-one meetings at which they may make presentations describing their views on the proposed rule. Any meeting or meetings shall be completed before the close of the comment period. The summary or transcript of oral presentations will be included in the record and must be submitted to the Secretary of the Commission within 5 days of the meeting. Interested persons wishing to make an oral presentation should contact the Office of the Secretary to secure contact names and numbers for individual Commissioners.

In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., the Chairman of the Federal Maritime Commission certifies that this rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. The Commission recognizes that the majority of businesses that would be affected by this rule qualify as small entities under the guidelines of the Small Business Administration. The rule, however, would establish an optional provision for U.S. licensed NVOCCs, which may be used at their discretion. The rule would pose no economic detriment to small business entities. Rather, it would provide a cost effective alternative, than would otherwise be available, to assist licensed NVOCCs with their business endeavors in the PRC. As such, the rule would help to promote U.S. business interests in the PRC and facilitate U.S. foreign commerce.

This regulatory action is not a “major rule” under 5 U.S.C. 804(2).

The collection of information requirements contained in this rule have been submitted to the Office of Management and Budget for review under section 3504(h) of the Paperwork Reduction Act of 1980, as amended. Public reporting burden for this collection of information is estimated to be 1 hour per response, including time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding the burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Austin L. Schmitt, Deputy Executive Director, Federal Maritime Commission, 800 North Capitol Street, NW., Washington, DC 20573; and to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for the Federal Maritime Commission, Washington, DC 20503.

List of Subjects for 46 CFR Part 515

• Common carriers
• Exports
• Non-vessel-operating common carriers
• Ocean transportation intermediaries
• Financial responsibility requirements
• Reports and recordkeeping requirements
• Surety bonds

Accordingly, the Federal Maritime Commission proposes to amend 46 CFR part 515 subpart C as follows:

Subpart C—Financial Responsibility Requirements; Claims Against Ocean Transportation Intermediaries

1. The authority citation for part 515 continues to read as follows:

Authority: 5 U.S.C. 553; 31 U.S.C. 9701; 46 U.S.C. app. 1702, 1707, 1709, 1710, 1712, 1714, 1716, and 1718; Pub. L. 105-383, 112 Stat. 3411; 21 U.S.C. 862.

2. Revise 46 CFR 515.21(b) to add a new sentence at the end as follows:

§ 515.21

Financial responsibility requirements.

* * * * *

(b) * * * A group or association of ocean transportation intermediaries may also file an optional additional bond as provided for by § 515.25(c).

* * * * *

3. Amend 46 CFR 515.23 to add paragraph (d) to read as follows:

§ 515.23

Claims against an ocean transportation intermediary.

* * * * *

(d) The Federal Maritime Commission shall not serve as depository or distributor to third parties of optional bond riders as described in § 515.25(c), Appendix E to Subpart C of this Part [Optional Rider to Form FMC-48] or Appendix F to Subpart C of this Part [Optional Rider to Form FMC-69]. Administration of claims against such optional bond riders will be pursuant to the terms of the optional bond rider itself.

4. Revise 46 CFR 515.25 to add paragraph (c) to read as follows:

§ 515.25

Filing of proof of financial responsibility.

* * * * *

(c) Optional bond rider. Any person operating as an NVOCC in the United States as defined by § 515.2(o)(2), in addition to the bond required by § 515.21(a)(2), may file with the Commission proof of additional financial responsibility in the form of a rider as provided for in Appendix E or Appendix F of this Part.

5. Add Appendix E to read as follows:

Appendix E to Subpart C of Part 515—Optional Rider for Additional NVOCC Financial Responsibility (Optional Rider to Form FMC-48) [Form 48A]

Form FMC-48A

RIDER

The undersigned [_______], as Principal and [_____], as Surety do hereby agree that the existing Bond No. [___] to the United States of America and filed with the Federal Maritime Commission pursuant to Section 19 of the Shipping Act of 1984 is modified as follows:

1. The following condition is added to this Bond:

An additional condition of this Bond is that $[____] shall be available to pay any fines and penalties imposed by the Ministry of Communications of the People's Republic of China or its authorized competent communications department of the people's government of the province, autonomous region or municipality directly under the Central Government or the State Administration of Industry and Commerce pursuant to the Regulations of the People's Republic of China on International Maritime Transportation and the Implementing Rules of the Regulations of the PRC on International Maritime Transportation promulgated by MOC Decree No. 1, January 20, 2003. Such amount is separate and distinct from the bond amount set forth in the first paragraph of this Bond. Payment under this Rider shall not reduce the bond amount in the first paragraph of this Bond.

2. The liability of the Surety shall not be discharged by any payment or succession of payments pursuant to section 1 of this Rider, unless and until the payment or payments shall aggregate the amount set forth in section 1 of this Rider. In no event shall the Surety's obligation under this Rider exceed the amount set forth in section 1 regardless of the number of claims.

3. This Rider is effective the [___] day of [_____], 200[_], and shall continue in effect until discharged, terminated as herein provided, or upon termination of the Bond in accordance with the sixth paragraph of the Bond. The Principal or the Surety may at any time terminate this Rider by written notice to the Federal Maritime Commission at its office in Washington, DC. The Surety also shall send notice to the Ministry of Communications of the People's Republic of China via telecopier or e-mail. Evidence of transmission of the notice to the Ministry of Communications shall constitute proof of notice. Such termination shall become effective thirty (30) days after receipt of said notice by the Commission, or transmission of the notice to the Ministry of Communications, whichever occurs later. The Surety shall not be liable for fines or penalties imposed on the Principal after the expiration of the 30-day period but such termination shall not affect the liability of the Principal and Surety for any fine or penalty imposed prior to the date when said termination becomes effective.

4. Bond No. [____] remains in full force and effect according to its terms except as modified above.

In witness whereof we have hereunto set our hands and seals on this [__] day of [____], 200[_],

[Principal]

By:

[Surety]

By:

Privacy Act and Paperwork Reduction Act Notice.

The collection of this information is authorized generally by Section 19 of the Shipping Act of 1984, 46 U.S.C. app. § 1718.

This is an optional form. Submission is completely voluntary. Failure to submit this form will in no way impact the Federal Maritime Commission's assessment of your firm's financial responsibility.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Copies of this form will be maintained until the corresponding license has been revoked.

The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is: Recordkeeping, 20 minutes; Learning about the form, 20 minutes; Preparing and sending the form to the FMC, 20 minutes.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Secretary, Federal Maritime Commission, 800 North Capitol Street, NW, Washington, DC 20573-0001 or e-mail: [e-mail].

6. Add Appendix F to read as follows:

Appendix F to Subpart C of Part 515—Optional Rider for Additional NVOCC Financial Responsibility for Group Bonds [Optional Rider to Form FMC-69] [Form 69A]

Form FMC-69A

RIDER

The undersigned [_______], as Principal and [_____], as Surety do hereby agree that the existing Bond No. [___] to the United States of America and filed with the Federal Maritime Commission pursuant to Section 19 of the Shipping Act of 1984 is modified as follows:

1. The following condition is added to this Bond:

An additional condition of this Bond is that $[____] shall be available to any NVOCC enumerated in Appendix A to pay any fines and penalties imposed by the Ministry of Communications of the People's Republic of China or its authorized competent communications department of the people's government of the province, autonomous region or municipality directly under the Central Government or the State Administration of Industry and Commerce pursuant to the Regulations of the People's Republic of China on International Maritime Transportation and the Implementing Rules of the Regulations of the PRC on International Maritime Transportation promulgated by MOC Decree No. 1, January 20, 2003. Such amount is separate and distinct from the bond amount set forth in the first paragraph of this Bond. Payment under this Rider shall not reduce the bond amount in the first paragraph of this Bond. The Surety shall indicate the amount available to pay such fines and penalties on the Appendix A listing for each NVOCC wishing to exercise this option.

2. The liability of the Surety shall not be discharged by any payment or succession of payments pursuant to section 1 of this Rider, unless and until the payment or payments shall aggregate the amount set forth in section 1 of this Rider. In no event shall the Surety's obligation under this Rider exceed the amount set forth in section 1 regardless of the number of claims.

3. This Rider is effective the [___] day of [_____], 200[_], and shall continue in effect until discharged, terminated as herein provided, or upon termination of the Bond in accordance with the sixth paragraph of the Bond. The Principal or the Surety may at any time terminate this Rider by written notice to the Federal Maritime Commission at its office in Washington, DC. The Surety also shall send notice to the Ministry of Communications of the People's Republic of China via telecopier or email. Evidence of transmission of the notice to the Ministry of Communications shall constitute proof of notice. Such termination shall become effective thirty (30) days after receipt of said notice by the Commission, or transmission of the notice to the Ministry of Communications, whichever occurs later. The Surety shall not be liable for fines or penalties imposed on the Principal after the expiration of the 30-day period but such termination shall not affect the liability of the Principal and Surety for any fine or penalty imposed prior to the date when said termination becomes effective.

4. Bond No. [____] remains in full force and effect according to its terms except as modified above.

In witness whereof we have hereunto set our hands and seals on this [__] day of [____], 200[_],

[Principal]

By:

[Surety]

By:

Privacy Act and Paperwork Reduction Act Notice.

The collection of this information is authorized generally by Section 19 of the Shipping Act of 1984, 46 U.S.C. app. § 1718.

This is an optional form. Submission is completely voluntary. Failure to submit this form will in no way impact the Federal Maritime Commission's assessment of your firm's financial responsibility.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Copies of this form will be maintained until the corresponding license has been revoked.

The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is: Recordkeeping, 20 minutes; Learning about the form, 20 minutes; Preparing and sending the form to the FMC, 20 minutes.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Secretary, Federal Maritime Commission, 800 North Capitol Street, NW., Washington, DC 20573-0001 or e-mail: [e-mail].

By the Commission.

Bryant L. VanBrakle,

Secretary.