FMC Judge Reverses Position on Forwarder Compensation

Tom Mathers
Phone: (202) 466-0222
For Immediate Release

Washington, DCTaking the National Customs Brokers & Forwarders Association of America, Inc. (NCBFAA) position and reversing his own, an FMC Judge has concluded that the current practice of endorsing certifications for services rendered at the time of depositing checks constituted forwarder compliance with the certification rule. In coming to his conclusion, the Judge relied on the amicus curiae brief of the NCBFAA, excerpts from a Study Guide taken from the NCBFAA Certified Ocean Forwarder course, and the expert testimony of Mr. Bill Maron, a recognized leader in the forwarding field.
        Although the Judge reversed his prior decision that SeaLand was subject to substantial penalties for the forwarding certification issue, he nevertheless found that SeaLand was guilty of having provided rebates to a number of NVOCCs. Essentially, he concluded that SeaLand had provided these NVOCCs with preferential rates by providing them with 40-foot and 45-foot containers while only assessing charges applicable to 20-foot containers. Consequently, he assessed the maximum civil penalty of $4.1 million against SeaLand for knowingly and violating §§10(b)(1) and 10(b)(4) of the Act on 149 separate instances.
        The case that gave rise to this decision had been ongoing for more than four years. The FMC’s Bureau of Enforcement (BOE) had charged SeaLand with various types of violations of the Shipping Act. One of those violations pertained to the regulations that govern the payment of forwarder compensation. In particular, BOE contended that SeaLand violated the regulation, in 46 C.F.R. §510.23(c) that requires forwarders to certify they have provided various forwarder services in consideration for receiving forwarder compensation. More specifically, a number of forwarders had not physically signed these certifications that appeared on the reverse side of SeaLand’s compensation checks.
        Had BOE’s position been sustained, it would have threatened the continued existence of forwarder compensation. In other words, if the Commission concluded that carriers had the burden of ensuring that the certifications are physically signed before paying the compensation, it is likely that the many carriers would prefer not to pay compensation at all; otherwise they might be required to audit each and every shipment as a way of ensuring that the forwarders had actually performed forwarder services and were therefore entitled to the compensation.
        Accordingly, the NCBFAA intervened in the proceeding and filed an amicus curiae brief, arguing that SeaLand’s payment of forwarder compensation was consistent with industry practice. In addition, the NCBFAA argued that this industry practice was consistent with the provisions of the Act, even if no physical signature was being made on the certification, since the act of endorsing a check "for deposit only" still constitutes a form of signature. 
The Judge’s decision was issued in FMC Docket #98-06, Sea-Land Service, Inc. - - Possible Violations of §§10(b)(1), 10(b)(4) and 19(d) of the Shipping Act of 1984.
        With headquarters in Washington, DC, the NCBFAA ( represents nearly 700 member companies - the nation's leading freight forwarders, customs brokers, ocean transportation intermediaries (OTIs) and air cargo agents. Established in 1897 in New York, NCBFAA is the strong, effective national voice of the industry. Through its various committees, counsel and representatives, the Association maintains a close watch over legislative and regulatory issues that affect its members. It keeps them informed of these and other related issues through its weekly Monday Morning eBriefingQuarterly NCBFAA Bulletin, and various meetings and conferences throughout the year.


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