FMC Rulemaking: More Regulation Without Merit

        On May 31, 2013, the Federal Maritime Commission (FMC) issued an Advance Notice of Proposed Rulemaking (ANPRM) [38 Fed.Reg.32946] that seeks to revise the rules regulating Ocean Transportation Intermediaries (OTIs). OTIs are private sector businesses that act as ocean freight forwarders and non- vessel operating common carriers (NVOCCs) and assist shippers in transporting their merchandise by the most efficient means and most reasonable cost. The rulemaking is a staff-driven proposal, generated without objective criteria or basis, yet which burdens a highly competitive industry with a hodge-podge of new regulation.
         The ANPRM appears to have been generated as a response to FMC Fact Finding Investigation No. 27, which reviewed practices in the "barrel trade" relating to the movement of household goods for non-commercial shippers. Activity in this area is only a small subset of business practices in the larger OTI community. Nonetheless, the rulemaking here is silent on what to do about the barrel trade, but generated a series of proposals out of the blue that would revise regulations for all OTIs. And, as it completely fails to address the problems that exist in the barrel trade and is so unnecessary and burdensome for the mainstream shipping industry, the Commissioner who led the Fact Finding Investigation voted against issuing the ANPRM.
         Following are some of the proposals, with NCBFAA’s comments provided in italics:
  • The ANPRM requires, for the first time, an OTI to renew its license every two years. FMC argues that it needs to do this to update its information. FMC ignores the fact that update of essential information is already required of license holders. FMC cannot keep up with processing first-time applications now, let alone the potential for thousands more annually. And, there will be a fee (amount yet to be determined) for the privilege of assisting the FMC with these updates.
  • THE ANPRM provides for revocation of an OTI’s license, providing under certain circumstances that right to discovery and a hearing will not be afforded. Revocation of a license effectively puts an OTI out of business. Due process has to be a fundamental principle when the consequences are so severe.
  • Higher bonding levels will be required of OTIs. This is out of sync with and higher than the requirements established by Congress in the recent Transportation Bill (MAP-21). But most importantly, it creates a barrier to entry for newly formed OTIs, who must now post an even higher cash amount in order to obtain a bond. This is a special hardship on small and medium size businesses.
  • The ANPRM requires OTIs to notify the agency of any claims against them. Claims will then be published by the FMC. This requirement applies to any claim, no matter how relevant to FMC’s regulatory interests regardless of whether the claim has merit or substance.
               NCBFAA objects to this rulemaking because the FMC has neglected to establish a foundation, based on fact, for a majority of the ANPRM’s proposals. This is more regulation coming at a time when the maritime sector is going in the opposite direction – towards de-regulation. It is inconsistent with Congress’ direction in its recent Shipping Act revisions. It will be harmful to the profitability of the industry and burdensome on our businesses. We respectfully ask you to contact the FMC and the Congressional committees of jurisdiction, calling for this rulemaking to be withdrawn.


The Trade Agenda: Unfinished Business

       When you talk about job creation and stimulating the economy, the first place to look is Congress’ unfinished trade agenda. Trade has long been the engine that propels the economy and it remains so today. The following items are overdue for action. Passage of these legislative initiatives will make a difference. This is just the beginning, of course. But these are the essential elements that will support U.S. companies seeking to sell to export markets, help U.S. workers looking for jobs and benefit consumers by keeping costs of merchandise down.
     Customs Reauthorization: Legislation in the House (H.R. 6642 in the 112th Congress) and the Senate (S. 662) contain important provisions to modernize trade processes and provide the tools to make customs facilitation and trade enforcement a priority. The House Ways and Means Committee and the Senate Finance Committee have worked hard over the past several years to develop these legislative proposals. NCBFAA strongly supports passage of a robust customs reauthorization bill that provides firm direction to revitalize CBP’s commercial trade facilitation and enforcement function, including:
  • Complete the "core functions" (end-to-end electronic processing of customs entries) of the Automated Commercial Environment (ACE) and support full participation by other agencies in the International Trade Development System (ITDS) to fulfill the promise of a single window interface to ACE for other government agencies with import or export data requirements.
  • Revise House language that requires customs brokers to be accountable for importers under a vague, ambiguous standard, with harsh penalties for violations. Instead, Congress should support the collaborative dialogue now taking place between CBP and customs brokers to address that issue.
  • Invigorate CBP’s focus on commercial functions through structural refinements.
  • Modernize the Duty Drawback program.
  • Leverage the process now taking shape to promote the role of the customs broker in reaching, educating and acting for importers, including thousands of small and medium-size importers.
        Water Resources Bill and Harbor Maintenance Fee: For years, needed dredging and maintenance of our nation’s ports has been neglected, despite the fact that importers pay a Harbor Maintenance Fee on each shipment. In fact, the Harbor Maintenance Trust Fund (HMTF), which collects around $1.6 to $1.8 billion per year yet spends only $800 million for its intended purpose, runs a large surplus, while the backlog of port maintenance projects grows. With the completed expansion of the Panama Canal in 2015, the situation will become even more urgent, as U.S. ports push to complete port modernization to accommodate the massive ships that will soon be traveling through the Canal.
         In May, the Senate passed the Water Resources Development Act (S. 601), which includes a provision to increase the amount of HMTF collections that are spent on port maintenance and dredging to $1 billion in 2014, with incremental increases each year until 2020 when harbor maintenance spending must match revenue. The House Transportation and Infrastructure Committee marked up their Water Resources bill on September 19. We urge the House to move expeditiously to approve a Water Resources bill that includes language to ensure that collections by the HMTF will be spent for its intended purpose. This is critical to ensure that the U. S. has the infrastructure necessary to compete in world trade.
        Generalized System of Preferences (GSP) Renewal: GSP expired July 31. The cost to U.S. companies – a significant proportion of which are small businesses – amounts to $2 million per day in increased tariffs. For the smallest companies operating on slim profit margins, the cash flow burden of these duties is particularly detrimental, as are the administrative costs to government and industry. And, yet, there is longstanding, bipartisan consensus that GSP is a valuable program that should be extended. Congress knows that GSP helps lower the costs of raw materials or component parts for U.S. manufacturers, an important factor in keeping U.S. companies competitive in foreign markets and lowering the cost of finished products to U.S. consumers. GSP only applies to products where there is no U.S. production. Further delay in renewing the program is bad for U.S. companies and U.S. workers. NCBFAA asks Congress for swift action on H.R. 2709 and S. 1331 to renew GSP through September 30, 2015.
         Miscellaneous Tariff Bill (MTB): By suspending or reducing duties on specific products where there is no U.S. production of a like or competing product, the MTB allows U.S. companies to reduce costs on inputs, contributing to the competitiveness of U.S. manufacturers globally. Duty suspensions also help to keep prices of finished products affordable for consumers. In July, House trade leaders reintroduced an MTB (H.R. 2708) that contains over 800 duty suspensions/reductions. H.R. 2708 provides broad benefits across the economy. The legislation was the culmination of a process with unprecedented transparency, including a public comment period and an in-depth analysis by the International Trade Commission. After this thorough and lengthy review, only noncontroversial bills with an annual revenue impact less than $500,000 were allowed into the MTB package. It is now time for Congress to approve this legislation.
         Trade Promotion Authority (TPA) Renewal: Trade Promotion Authority is the authority of the President to negotiate international trade agreements that Congress can approve or disapprove, but cannot amend or filibuster, under an expedited procedure. TPA is an essential tool for U.S. negotiators as they head into the final and most intense phase of the Trans-Pacific Partnership talks and as the Administration seeks to progress on a comprehensive U.S.-E.U. agreement. These bold new trade initiatives promise to tear down barriers to U.S. exports. Yet, they can only come to fruition if TPA is finalized. Every President since Franklin D. Roosevelt has had trade negotiating authority – every President should have it. NCBFAA urges Congress to move forward on bipartisan TPA in collaboration with the President.

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