Since the summer (2015) there have been penalty settlements announced by the Federal Maritime Commission (FMC) which total in excess of $2,000,000.00. Its Bureau of Enforcement (BOE) is the arm of the Commission specifically focused on prosecution. The BOE investigates violations of the Shipping Act as well as enforces FMC regulations, and Bureau attorneys are the ones who act as trial counsel in all formal Commission proceedings. Often a settlement is reached between violating parties and Bureau attorneys, and detailed below are some notably large cases from the past year. Settlements generally avoid any admission of wrongdoing, and avoid the extensive time and money expenditure required by administrative trials.
In August, the BOE announced FMC collections of $1,227,500.00. These collections were made in the form of penalty payments by a variety of different parties, including seven different non-vessel operating common carriers (NVOCCs) and one vessel-operating common carrier (VOCC). The violations alleged of the NVOCCs included unlawfully collecting forwarder compensation, misrepresenting the names of shipper accounts, allowing improper parties to access service contracts, knowingly obtaining transportation less than applicable rates, and more. The most heavily penalized party was the vessel operator United Arab Shipping Company; it was charged with violating 46 U.S.C. 41104(1) and 46 U.S.C. 41104(2) for allegedly paying unlawful rebates to a shipper and providing transportation at rates inconsistent with their published tariff. In total, United Arab Shipping Company paid $537,500.00 in penalties to the agency.
In September another announcement was made regarding penalty collections, but this time only one party was involved. A VOCC based in Norway named Siem Car Carriers was found to be in violation of 46 U.S.C. 41102(b). In this case the violations were voluntarily disclosed, and an agreement was reached in which Siem paid $135,000.00 in penalties. The Chairman of the FMC, Mario Cordero, states, “Voluntary disclosures can serve to diminish carrier exposure to very significant monetary penalties.” Based on this, it is reasonable to assume that Siem would have been responsible for greater penalties if they had not taken the initiative to disclose this information voluntarily. In January of this year we presented our first seminar on voluntary disclosure to Federal agencies. It is interesting to see how the disclosed entity paid roughly 25% of what the non-disclosing entity paid above, though of course the facts and extent of the alleged violations may have differed greatly.
In December 2015, still more violations were announced, and this time they involved freight forwarders, NVOCCs, and two unlicensed entities acting as ocean transportation intermediaries (OTIs). The British Association of Removers and Sparx Logistics are both NVOCCs that allegedly violated FMC regulations by obtaining ocean transportation at lower than applicable rates; while neither company admitted to actually doing so, they did agree to settle and pay penalties. Wilhelmsen Ships Services and N/J International are licensed NVOCCs and freight forwarders which were involved in cases charging them with operating without a valid Qualifying Individual for a period of over one year. As a result, both companies were ordered to pay penalties to the FMC. Lastly, Azap Motors and Knopf International are unlicensed entities that were both alleged to be offering OTI services without a proper FMC license. Both companies agreed to pay penalties, and Azap Motors even dissolved as a company. Collections from penalty violations totaled $334,000.00 for the month overall.
As 2016 has kicked off, so have the FMC collections. It was announced recently that the FMC collected a total of $520,000.00 through civil penalties in the month of February. These penalties came from four different OTIs (both NVOCCs and freight forwarders) and one VOCC. It is important to note that in that month all NVOCCs were penalized for the same action: they allegedly obtained transportation at less than applicable rates. The FMC takes this seriously, and it is important to ensure you are paying a fair price for transportation as set by tariffs. Misrepresentation of weight, volume or commodity is dealt with harshly by the agency.
You can learn a great deal from examining past FMC penalties. When dealing with trade and transportation it is your responsibility to understand the regulations set forth by the FMC as well as the Shipping Act, and to ensure that your actions are in accordance with these guidelines. Otherwise, as we have seen in these cases, severe penalties may be assessed letting the agency laugh all the way to the bank.
