by M. Sigmund Shapiro
July 14, 1998
The battle being waged between large and small forwarders
regarding ocean freight brokerage, as reported in the press
recently, fails to discuss what is in fact the key problem – the
obsolescence of the controlling regulation and Section 19(d) of the
Shipping Act of 1984.
The Act, which tracks previous legislation, permits carriers to
compensate ocean freight forwarders only when the forwarder books
the cargo and prepares the bill of lading, dock receipt or other
similar documents.
The FMC, over the years has vigorously policed this regulation
and investigated forwarders who considered the amount of brokerage
to be received as a factor in quoting its forwarding fees to a
client. The FMC considered a reduction in service fees to be
tantamount to a freight rebate to the shipper, which is a no-no.
This vigor led to a complaint to the Commission that certain
forwarders were bidding on government business through the General
Services Administration and quoting as little as five cents per
shipment, since the brokerage was substantial. Needless to say, the
FMC took no action to stop the practice.
Now the Commission is being asked to rule on the nuance of
whether a PC can be licensed as an ocean freight forwarder!
The problem of course, is that the law and regulation are
archaic, in the definition of an ocean freight forwarder but the
Commission is compelled to go through the exercise of investigating
the issue. One wonders whether the convoluted arguments put forth by
both sides will receive a response based on what is happening today
in a highly automated industry.
Transportation is virtually unregulated today. Service Contracts
abound on sea traffic and rebates are not a serious problem, at
least in the rest of the trading world. The CAB is out of existence
as is the ICC and air and truck traffic rates are negotiated
privately.
It was recently reported that many ocean carriers are reducing
their sales and marketing staffs and relying on NVO’s to generate
business for them in the same way that airlines operate.
Today, the freight forwarder is a multi-modal operator. He can be
an NVO, is usually an airfreight forwarder and might engage in
trucking. He receives commissions from many different entities. The
airlines for example consider brokerage payments to be sales
commissions. Yet the Federal Maritime Commission, constrained by the
1984 Act and its own regulations, is forced to examine labor saving
technology to see if it violated the law. It sounds like a case for
Groucho Marx.
It is the fervent hope of the writer that, if it’s not too late,
the National Customs Brokers and Forwarders Association of America,
Inc. would lend its efforts to changing the process, rather than
decrying the enterprise of one of its own. Protectionism, to
paraphrase Barry Goldwater, is no virtue.
