B-134866, MARCH 14, 1958, 37 COMP. GEN. 601

B-134866: Mar 14, 1958

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IF AN AGENCY DETERMINES THAT FOREIGN FREIGHT SERVICES ARE NEEDED. 1958: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 9. YOUR DEPARTMENT NO LONGER IS REQUIRED TO USE FOREIGN FREIGHT FORWARDERS IN CONNECTION WITH SHIPMENTS OF AGRICULTURAL COMMODITIES FOR THE INTERNATIONAL COOPERATION ADMINISTRATION. YOU HAVE DETERMINED THAT CERTAIN OF THE SERVICES PERFORMED BY FOREIGN FREIGHT FORWARDERS ARE NEEDED IN CONNECTION WITH SUCH SHIPMENTS. SINCE THE DEPARTMENT DOES NOT HAVE PERSONNEL AT ALL PORTS AT ALL TIMES TO PERFORM SUCH SERVICES. YOU REQUEST OUR OPINION AS TO THE PROPERTY OF THE USE BY THE DEPARTMENT OF FOREIGN FREIGHT FORWARDERS AND THE MAKING OF PAYMENTS IN CONNECTION THEREWITH IN CASES WHERE IT IS DETERMINED THAT SUCH SERVICES ARE NEEDED BY THE DEPARTMENT.

B-134866, MARCH 14, 1958, 37 COMP. GEN. 601

TRANSPORTATION - FREIGHT FORWARDERS - FREE OR REDUCED RATES FOR SERVICES THE ACCEPTANCE BY A GOVERNMENT AGENCY AS A SHIPPER OF THE SERVICES OF FOREIGN FREIGHT FORWARDERS FREE OF CHARGE OR AT REDUCED RATES ON THE BASIS THAT REIMBURSEMENT FOR SUCH SERVICES WOULD BE INCLUDED IN THE OCEAN FREIGHT BROKERAGE FEE PAID BY THE WATER CARRIER TO THE FORWARDER FOR SECURING CARGO FOR THE SHIP CONSTITUTES A DISCRIMINATORY ACT UNDER SECTION 16 OF THE SHIPPING ACT, 1916, 46 U.S.C. 815, WHICH MAKES IT UNLAWFUL FOR FORWARDERS TO OBTAIN BY ANY UNFAIR DEVICE OR MEANS TRANSPORTATION BY WATER AT LESS THAN THE RATES OR CHARGES OTHERWISE APPLICABLE; THEREFORE, IF AN AGENCY DETERMINES THAT FOREIGN FREIGHT SERVICES ARE NEEDED, THEY MUST BE PAID FOR FROM AGENCY FUNDS.

TO THE SECRETARY OF AGRICULTURE, MARCH 14, 1958:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 9, 1958, CONCERNING THE MATTER OF PAYMENT FOR THE SERVICES OF FOREIGN FREIGHT FORWARDERS.

IN BRIEF, YOU CALL ATTENTION TO A LETTER DATED MARCH 5, 1957, FROM THE FEDERAL MARITIME BOARD WHICH, IN PERTINENT PART, STATED THAT THE BOARD AND THE ADMINISTRATOR CONSIDERED IT TO BE CONTRARY TO SECTION 16 OF THE SHIPPING ACT, 1916, 46 U.S.C. 815, FOR A FORWARDER TO RENDER FORWARDING SERVICES FREE OF CHARGE OR AT REDUCED RATES TO GOVERNMENT AGENCIES, AS WELL AS PRIVATE SHIPPERS, IN CONSIDERATION OF THE RECEIPT OF BROKERAGE FEES FROM THE CARRIERS. YOU ADVISE THAT WHILE, SINCE THE REVOCATION OF GENERAL ORDER NO. 70, ON MARCH 5, 1957, YOUR DEPARTMENT NO LONGER IS REQUIRED TO USE FOREIGN FREIGHT FORWARDERS IN CONNECTION WITH SHIPMENTS OF AGRICULTURAL COMMODITIES FOR THE INTERNATIONAL COOPERATION ADMINISTRATION, YOU HAVE DETERMINED THAT CERTAIN OF THE SERVICES PERFORMED BY FOREIGN FREIGHT FORWARDERS ARE NEEDED IN CONNECTION WITH SUCH SHIPMENTS, SINCE THE DEPARTMENT DOES NOT HAVE PERSONNEL AT ALL PORTS AT ALL TIMES TO PERFORM SUCH SERVICES. IN VIEW OF THIS REQUIREMENT, AND IN THE LIGHT OF THE AFOREMENTIONED RULING ISSUED BY THE FEDERAL MARITIME BOARD, YOU REQUEST OUR OPINION AS TO THE PROPERTY OF THE USE BY THE DEPARTMENT OF FOREIGN FREIGHT FORWARDERS AND THE MAKING OF PAYMENTS IN CONNECTION THEREWITH IN CASES WHERE IT IS DETERMINED THAT SUCH SERVICES ARE NEEDED BY THE DEPARTMENT.

SECTION 16 OF THE SHIPPING ACT, 1916, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

THAT IT SHALL BE UNLAWFUL FOR ANY SHIPPER, CONSIGNOR, CONSIGNEE, FORWARDER, BROKER, OR OTHER PERSON, OR ANY OFFICER, AGENT, OR EMPLOYEE THEREOF, KNOWINGLY AND WILLFULLY, DIRECTLY OR INDIRECTLY, BY MEANS OF FALSE BILLING, FALSE CLASSIFICATION, FALSE WEIGHING, FALSE REPORT OF WEIGHT, OR BY ANY OTHER UNJUST OR UNFAIR DEVICE OR MEANS TO OBTAIN OR ATTEMPT TO OBTAIN TRANSPORTATION BY WATER FOR PROPERTY AT LESS THAN THE RATES OR CHARGES WHICH WOULD OTHERWISE BE APPLICABLE. ( ITALICS SUPPLIED.)

IN A RECENT REPORT OBTAINED FROM THE MARITIME ADMINISTRATION WITH RESPECT TO THE MATTER, THE ADMINISTRATION WAS PRIMARILY INTENDED FOR THE PURPOSE OF REMOVING ANY DOUBT CONCERNING THE POSITION OF THE MARITIME ADMINISTRATION THAT THE DETERMINATION OF THE USE OF THE SERVICES OF FREIGHT FORWARDERS BY GOVERNMENT AGENCIES RESTS WITH THOSE AGENCIES IN THE EXERCISE OF THEIR OWN DISCRETION. HOWEVER, ANY MATTER DEALING WITH THE PAYMENT FOR SERVICES TO A FREIGHT FORWARDER BY THE SHIPPER IS A SUBJECT WHICH INVOLVES REGULATORY ISSUES WITHIN THE JURISDICTION OF THE FEDERAL MARITIME BOARD. IN THIS CONNECTION, ATTENTION IS INVITED TO FAR EAST CONFERENCE V. UNITED STATES, 342 U.S. 570, AND UNITED STATES NAVIGATION CO. V. CUNARD STEAMSHIP CO., 284 U.S. 474.

THE BOARD CONSISTENTLY HAS DEFINED BROKERAGE AS "COMPENSATION FOR SECURING CARGO FOR THE SHIP," AND HAS POINTED OUT THAT IT IS COMPENSATION PAID BY COMMON CARRIERS BY WATER TO BROKERS, INCLUDING FORWARDERS, AND IS GENERALLY MEASURED IN AMOUNTS EQUAL TO FIXED PERCENTAGES OF GROSS REVENUES COLLECTED BY THE CARRIERS FROM SHIPPERS WHO HAVE EMPLOYED THE BROKERS OR SHIPPERS. ON THE OTHER HAND,"FORWARDER" HAS BEEN DEFINED AS ANY PERSON EMPLOYED BY SHIPPERS OR CONSIGNEES TO DISPATCH SHIPMENTS BY OCEAN STEAMSHIP COMPANIES AND TO TAKE CARE OF FORMALITIES INCIDENT THERETO. HENCE, IT WOULD APPEAR THAT WHILE A SHIPPER MAY BE REQUIRED TO PAY A FREIGHT FORWARDER FOR SERVICES RENDERED BY THE FORWARDER ON BEHALF OF THE SHIPPER, THE SAME FREIGHT FORWARDER IS NOT PRECLUDED FROM OBTAINING BROKERAGE FEES FROM THE CARRIER IN CONNECTION WITH THE SAME SHIPMENT. BUT THE MARITIME ADMINISTRATION HAS CONSISTENTLY HELD THAT OCEAN FREIGHT BROKERAGE CANNOT BE CONSIDERED PROPERLY AS COMPENSATION FOR FORWARDING SERVICES RENDERED A SHIPPER. IN THIS CONNECTION, ATTENTION IS INVITED TO DECISIONS OF THE MARITIME COMMISSION REPORTED IN 2 U.S.M.C. 775, 780, 3 U.S.M.C. 170, 172, AND A DECISION BY THE FEDERAL MARITIME BOARD REPORTED IN 4 F.M.B. 166, 172.

THE ADMINISTRATOR FURTHER POINTS OUT THAT BROKERAGE AS PAID BY A COMMON CARRIER BY WATER IS IN PAYMENT OF SERVICES RENDERED THE CARRIER, USUALLY THE SERVICE OF SECURING CARGO FOR THE SHIP; BUT IT DOES NOT AND SHOULD NOT EMBRACE PAYMENT FOR FORWARDING SERVICES WHICH ARE PERFORMED FOR THE SHIPPER. HE FURTHER STATES THAT IT ALWAYS HAS BEEN THE VIEW OF THE ADMINISTRATION THAT THE CHARGE FOR A SERVICE SHOULD BE MADE AGAINST THE PERSON FOR WHOM THE SERVICE IS PERFORMED, AND THAT A COMMON CARRIER BY WATER SHOULD NOT, UNDER THE GUISE OF BROKERAGE, PAY FOR FORWARDING SERVICES WHICH A FORWARDER HAS PERFORMED FOR A SHIPPER, GOVERNMENT OR OTHERWISE.

IN THE LIGHT OF THE FOREGOING INTERPRETATION OF SECTION 16 OF THE SHIPPING ACT, 1916, IT MUST BE CONCLUDED THAT IF AND WHEN YOUR DEPARTMENT IN ITS DISCRETION DETERMINES THAT CERTAIN OF THE SERVICES PERFORMED BY FOREIGN FREIGHT FORWARDERS ARE NEEDED IN CONNECTION WITH SHIPMENTS OF AGRICULTURAL COMMODITIES FOR THE INTERNATIONAL COOPERATION ADMINISTRATION, OR OTHERWISE, SUCH SERVICES SHOULD BE PAID FROM THE DEPARTMENT'S FUNDS, RATHER THAN TO ACCEPT FREE SERVICES IN CONSIDERATION OF THE FORWARDER'S RECEIPT OF BROKERAGE FEES FROM THE CARRIERS.