10 Steps for FMC Licensing as an OTI

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James Devine

To operate as a non-vessel-operating common carrier or ocean forwarder in the U.S. handling international ocean shipments, a company or individual must first obtain an ocean transportation intermediary (OTI) license from the Federal Maritime Commission. This regulation applies to U.S. exports and imports, and applies even when a company is only acting as the agent of another NVOCC. All applicants for this license are subject to rigorous investigation by the FMC’s Bureau of Certification and Licensing to determine if they have the necessary experience and character to render OTI services in compliance with the Shipping Act and FMC regulations.

The following are 10 steps in the process to obtain and OTI.

1. Determine what type of FMC-OTI license is right for your business. There are three types of licenses: OTI-Forwarder, OTI-NVOCC and the combination license — OTI-NVOCC and Forwarder. The OTI-NVOCC license is the most popular: it authorizes the licensee to issue its own house bills of lading (HB/L), to set its own selling rates for ocean and intermodal shipments, and to enter into service contracts with ocean carriers to purchase transportation services. OTI-Forwarders are not permitted to do any of these things, but they may collect forwarding commissions (brokerage) from ocean carriers when they assist shippers with cargo booking and prepare shipping documents. The FMC does not permit an entity holding both licenses to collect a forwarding commission and act as an NVOCC on the same shipment. 2. Establish and/or confirm your corporate identity and status. The FMC issues OTI licenses to sole proprietorships, partnerships, and corporations. Trade names also may be licensed, provided they are documented properly. Once a license is issued, a change to the licensee’s corporate status, legal name or trade name requires an application to amend the license, or a new license application. Copies of the Articles of Incorporation or Articles of Formation (for an LLC) and all amendments to these must be attached to the application. Certificates of Good Standing also are required for corporations that have existed for more than a year. 3. Select Your Qualifying Individual. To qualify for any of the three types of OTI licenses, the sole proprietor must demonstrate to the FMC that he or she has three years of verifiable OTI experience. For corporate applicants, the company must demonstrate to the FMC that at least one of its corporate officers has three years of OTI experience. Generally speaking, this experience must be obtained while working as an employee of an FMC-licensed NVOCC, ocean forwarder or an ocean carrier in the United States. The FMC will require a copy of a corporate document that proves the qualifying individual is a company officer. He or she need not be a shareholder of the company, but must be an officer and a full-time employee. 4. Obtain Three Good References for the Qualifying Individual. The purpose of the references is to provide the FMC with people who will verify the OTI experience and good character of the proposed qualifying individual. References are not required to write letters of recommendation, but must respond to phone calls or e-mails from the FMC, and confirm their firsthand experience with the proposed qualifying individual. Each reference must work for a different company. 5. Prepare a Draft of the License Application Form (FMC-18). In addition to the corporate documents and qualifying-individual information, the license application form (FMC-18) requires details of all the company’s officers, shareholders, directors and related entities. If the company or any of its officers has ever had a bankruptcy, tax lien, criminal or civil court record, these must be explained in the application. The application also must disclose all related entities — other companies that are owned or controlled by any of the company officers or shareholders, for example. These aspects of the application can take more time and effort to answer than the details of the qualifying individual’s experience and references. 6. Obtain Pre-Approval for the OTI Surety Bond(s). Surety bonds are not required until the FMC has reviewed an application and found it qualified for the licensing. However, once the application is found qualified, a bond must be submitted within 120 days. There are several sureties that specialize in these types of bonds, and will provide pre-approval on bonds. If a license application is found qualified by the FMC, but the applicant is unable to secure the bond, all the effort and expense put into the license application will be wasted. The FMC will not issue a license without a valid bond. For OTI-Forwarders the bonding requirement is $50,000 plus $10,000 per branch office. For OTI-NVOCCs the bonding requirement is $75,000 plus $10,000 per branch. 7. Pay the License Fee and Submit the Application to the FMC. When the first six steps are complete, the license application can be submitted to the FMC License Office for official processing. The one-time FMC filing fee for filing a paper application for a new license is $825; for new applications filed through the FMC’s automated online FMC-18 system, the fee is $250. While an application can be withdrawn after the official FMC processing has begun, the filing fee is not refundable. 8. Follow-up with the FMC License Office. The FMC will contact the applicant, or its attorney or agent, during its review of the application for clarification on key points and documents. The FMC does not have a formal procedure or fees for expedited processing of these applications, but timely follow-up with the FMC will help avoid delays. For example, if a reference does not confirm the qualifying individual’s experience to the FMC’s satisfaction, a replacement reference can be used. If the FMC’s background investigation reveals a related entity that was overlooked in the application, this can usually be clarified with an amendment to the application. Willful and knowing omissions or misstatements are a different matter. The FMC has taken aggressive action against applicants who were found to have knowingly failed to provide accurate information in their applications. 9. Upon Approval of the Application, Submit the Bond. Normally, it takes the FMC about 60 days to process a well-prepared OTI license application. When an application is officially found qualified for licensing, the applicant receives a confirmation letter from the FMC that requests the bond(s). Once the signed original bond documents are submitted to the FMC in good order, the original license certificate will be signed and issued. Applicants must not begin operating or advertising as OTIs before they have their license certificates in hand. 10. Register and Publish Your NVOCC Tariff. Once an applicant obtains the OTI-NVOCC license, its NVOCC services will be subject to the terms and conditions of its tariff, which must be published and maintained according to FMC regulations. The tariff rules, including the house bill of lading terms and conditions, must be published immediately after the license certificate is issued, even if the licensee does not begin NVOCC operations right away. The initial tariff need not include the NVOCC’s freight rates, but once it begins operating, it is then required to update its tariff to include complete and accurate details of its selling rates and charges for all shipments moving under its house bill of lading. The tariff must be registered with the FMC Office of Tariffs. The FMC Web site (www.fmc.gov) provides a listing of each registered tariff and links to their locations on the Web. There are several professional tariff publishers who provide FMC registration, tariff publication and Web-hosting services.