883 F.2d 93 (D.C. Cir. 1989), 87-1754, National Customs Brokers & Forwarders Ass'n of America, Inc. v. U.S.

Docket Nº:87-1754.
Citation:883 F.2d 93
Party Name:NATIONAL CUSTOMS BROKERS & FORWARDERS ASSOCIATION OF AMERICA, INC., Petitioner, v. UNITED STATES of America and the Federal Maritime Commission, Respondents, '8900' Lines, U.S. Atlantic-North Europe Conference, et al., Atlantic & Gulf/West Coast of South America Conference, et al., Pacific Coast/Australia-New Zealand Tariff Bureau, et al., Interven
Case Date:June 30, 1989
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

Page 93

883 F.2d 93 (D.C. Cir. 1989)


AMERICA, INC., Petitioner,


UNITED STATES of America and the Federal Maritime

Commission, Respondents,

'8900' Lines, U.S. Atlantic-North Europe Conference, et al.,

Atlantic & Gulf/West Coast of South America

Conference, et al., Pacific

Coast/Australia-New Zealand

Tariff Bureau, et

al., Intervenors.

No. 87-1754.

United States Court of Appeals, District of Columbia Circuit.

June 30, 1989

Page 94

Argued May 4, 1989.

Gerald H. Ullman, New York City, with whom Olga Boikess, Washington, D.C., was on the brief, for petitioner.

Gordon M. Shaw, Atty., Federal Maritime Com'n, with whom Robert D. Bourgoin, General Counsel, Federal Maritime Com'n, John J. Powers, III and Robert J. Wiggers, Attys., Dept. of Justice, Washington, D.C., were on the brief, for respondent.

Howard A. Levy, with whom Marc J. Fink, F. Conger Fawcett, David C. Nolan, Eliot J. Halperin, Washington, D.C., Nathan J. Bayer, and Kevin Keelan, New York City, were on the brief, for intervenors.

William Karas, Washington, D.C., also entered an appearance for intervenor.

Before WALD, Chief Judge, RUTH BADER GINSBURG and BUCKLEY, Circuit Judges.

Opinion for the Court filed by Circuit Judge RUTH B. GINSBURG.


The National Customs Brokers & Forwarders Association of America, Inc. (NCBFAA) seeks review of a Federal Maritime Commission (FMC or Commission) order dismissing the NCBFAA's petition to initiate a rulemaking proceeding. Petitioner NCBFAA sought Commission repeal of certain regulations governing ocean freight forwarding; the challenged regulations, the NCBFAA contends, are not authorized by the Shipping Act of 1984, 46 U.S.C. App. sections 1701-1720 (Supp. III 1985) (1984 Act), or are otherwise unreasonable. The NCBFAA also proposed rules to check particular practices of ocean common carriers. We hold that the FMC reasonably interpreted the Shipping Act of 1984 to authorize the challenged regulations and adequately explained its denial of the NCBFAA's rulemaking petition. Given the extraordinary deference due an agency when it declines to undertake a rulemaking, parties should hesitate to bring challenges unless they have far stronger grounds than those offered by petitioner in this case.


    Ocean freight forwarders arrange for exportation and transportation of merchandise via ocean carriers. As defined in the Shipping Act of 1984, "ocean freight forwarder" means:

    a person in the United States that

    (A) dispatches shipments from the United States via common carriers and books

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    or otherwise arranges space for those shipments on behalf of shippers; and

    (B) processes the documentation or performs related activities incident to those shipments.

    Id. section 1702(19). A forwarder secures cargo space with a shipping line (books the cargo), coordinates the movement of cargo to shipside, arranges for the payment of ocean freight charges, and prepares and processes the ocean bills of lading, export declarations, and other documentation. Forwarders often perform accessorial services for the exporter, such as arranging insurance, trucking, and warehousing.

    A forwarder receives compensation for its services both from its customer (the exporter or consignee) and from the ocean carrier. Customers pay a fee for accessorial services charged as a "markup" over the forwarder's actual disbursements. Carriers pay forwarders "brokerage," compensation in the form of a percentage of the ocean freight, but

    only when the ocean freight forwarder has certified in writing that it holds a valid license and has performed the following services:

    (A) Engaged, booked, secured, reserved, or contracted directly with the carrier or its agent for space aboard a vessel or confirmed the availability of that space.

    (B) Prepared and processed the ocean bill of lading, dock receipt, or other similar document with respect to the shipment.

    Id. Section 1718(d).

    Section 19 of the Shipping Act of 1984, id. section 1718, contains specific limitations not only on the compensation of forwarders by carriers, but also on entry into the business of ocean freight forwarding. The forwarder is the only entity regulated by the FMC that is required to obtain a license before it can operate lawfully. To obtain a forwarder's license, an applicant must demonstrate experience and character qualifications and furnish a bond to insure financial responsibility. Id. section 1718(a).

    Comprehensive forwarder regulation had its inception in 1946 when the Supreme Court held in United States v. American Union Transport, Inc., 327 U.S. 437, 66 S.Ct. 644, 90 L.Ed. 772 (1946), that independent ocean freight forwarders were subject to the regulatory provisions of the Shipping Act of 1916, 46 U.S.C.App. sections 801-842 (1982) (1916 Act). Following extensive investigation in the late 1940s, regulations issued in 1950 governing forwarder billing practices and carrier payments to forwarders. In 1954, the Federal Maritime Board (FMB) launched a second industry-wide investigation, culminating in 1961 in the publication of additional regulations. Investigation of Practices, Operations, Actions & Agreements of Ocean Freight Forwarders, 6 F.M.B. 327 (1961) (Ocean Freight Forwarders). The 1961 regulations declared "disguised markups" and free or reduced-rate forwarder services to be "unreasonable practices" in violation of the 1916 Act. Id. at 359, 366-67.

    That same year, 1961, Congress provided for the licensing of ocean freight forwarders and confined payment of forwarder compensation by carriers to licensed forwarders that had performed specified services on behalf of the carrier and had so certified. Pub.L. No. 87-254, 75 Stat. 522 (codified as amended at 46 U.S.C.App. section 801; 46 U.S.C. section 841b). Pursuant to statutory direction to prescribe 'reasonable rules and regulations' governing forwarders, 46 U.S.C. section 841b(c), the FMC promulgated comprehensive rules, including one that required a forwarder to itemize on its bill its actual expenditures on the shipper's behalf, as well as the charges or fees assessed for its own services. These rules were affirmed in New York Foreign Freight Forwarders & Brokers Association v. FMC, 337 F.2d 289 (2d Cir.1964), cert. denied, 380 U.S. 910, 85 S.Ct. 893, 13 L.Ed.2d 797 (1965).

    The FMC subsequently promulgated or considered further rules on which this case centers. In 1963, the Commission permitted carriers by water to perform forwarding services with respect to cargo they transport under their own bills of lading. 28 Fed.Reg. 4300, 4301 (1963). The legality of this rule remained unchallenged until

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    now. In 1980, the FMC considered regulatory revisions designed to: (1) prohibit carriers from compelling forwarders to guarantee payment of freight before shippers had advanced funds for this purpose; (2) require carriers to compensate forwarders within thirty days of payment of ocean freight; and (3) permit forwarders to deduct their compensation when making freight payments for shipments under a prepaid bill of lading. 45 Fed.Reg. 17,029, 17,031-32, 17,040-41 (1980) (proposed rules). In 1981, after evaluating all comments received, the Commission determined not to promulgate these rules. 46 Fed.Reg. 24,565, 24,567-68, 24,574 (1981) (final rule).

    Upon enactment of the Shipping Act of 1984, the FMC revised its rules to implement that legislation. These revisions included a prescription allowing a forwarder to provide a lump-sum invoice, but requiring the forwarder, upon request of its principal, to break out the items in the invoice. 49 Fed.Reg. 36,296, 36,297, 36,302 (1984) (final rules). The Commission rejected an alternative that would have deleted invoicing regulation entirely. 49 Fed.Reg. 18,839, 18,841 (1984) (interim rules).

    On April 3, 1986, the NCBFAA requested a rulemaking to delete the regulations, currently codified in 46 C.F.R. Part 510 (1988), that: (1) require prior FMC approval of one licensee's acquisition of another licensee, id. section 510.19(a)(5); (2) prohibit a forwarder's provision of forwarding services free of charge or at a reduced fee, id. section 510.22(i); (3) require the forwarder to provide a detailed breakout of the components of its charges at the request of its shipper-customer, id. section 510.22(g); and (4) permit carriers to perform forwarding services, without a forwarder's license, with respect to cargo carried under the carrier's own bill of lading, id. section 510.4(c). The NCBFAA also sought two new regulations similar in content to rules proposed in 1980 and rejected by the Commission in 1981. First, to protect forwarders from payment defaults by carriers, the NCBFAA proposed that (1) when a forwarder pays the carrier freight charge due on behalf of the shipper, the forwarder may deduct its brokerage, and (2) when the shipper pays the carrier directly, or the freight is collected at destination, the carrier must pay brokerage within sixty days of the date of vessel sailing. Petition for Rulemaking at 5. Second, the NCBFAA proposed a rule that would stop a carrier from requiring a forwarder to assume liability for freight charges owed by the forwarder's principal. Id. at 6-7.

    The FMC refused to institute rulemaking proceedings, In re Petition for Rulemaking of the Nat'l Customs Brokers & Forwarders Ass'n of Am., 24 Shipping Reg. (P & F) 116 (F.M.C. Apr. 27, 1987) (Order Denying Petition), and thereafter rejected the NCBFAA's petition for reconsideration, 24 Shipping Reg. (P & F) 581 (F.M.C. Oct. 16, 1987) (Order Rejecting Petition for Reconsideration). 1 The NCBFAA seeks review of the Commission's orders denying its petitions...

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