Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-08-01152/USCOURTS-caDC-08-01152-0/pdf.json

Parties Involved:
Federal Maritime Commission
Respondent
Landstar Express America, Inc.
Petitioner
Landstar Global Logistics, Inc.
Petitioner
United States of America
Respondent

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 21, 2009 Decided June 26, 2009 

No. 08-1152 

LANDSTAR EXPRESS AMERICA, INC. AND LANDSTAR GLOBAL 

LOGISTICS, INC., 

PETITIONERS

v. 

FEDERAL MARITIME COMMISSION AND UNITED STATES OF 

AMERICA, 

RESPONDENTS

On Petition for Review of an Order 

of the Federal Maritime Commission 

David K. Monroe argued the cause for petitioners. With 

him on the briefs was David P. Street. 

Benjamin K. Trogdon, Attorney, Federal Maritime 

Commission, argued the cause for respondent. With him on 

the brief were Deborah A. Garza, Acting Assistant Attorney 

General, U.S. Department of Justice, John J. Powers, III and 

Robert J. Wiggers, Attorneys, and Peter J. King, General 

Counsel, Federal Maritime Commission. 

USCA Case #08-1152 Document #1193418 Filed: 06/26/2009 Page 1 of 15
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Before: GINSBURG, HENDERSON, and KAVANAUGH, 

Circuit Judges. 

Opinion for the Court filed by Circuit Judge

KAVANAUGH. 

KAVANAUGH, Circuit Judge: This case illustrates the 

basic rule-of-law maxim that statutory text binds federal 

agencies. Ocean Transportation Intermediaries help arrange 

shipping for U.S. companies. Federal law requires Ocean 

Transportation Intermediaries to obtain licenses from the 

Federal Maritime Commission. On occasion, Ocean 

Transportation Intermediaries will use agents – who are not 

themselves Ocean Transportation Intermediaries – to assist 

them in some of their myriad activities, such as packing or 

trucking services. In the order at issue here, the Federal 

Maritime Commission required agents of Ocean 

Transportation Intermediaries to obtain licenses. The 

Commission’s decision requiring agent licensing may or may 

not be wise policy. But the fundamental problem, as Federal 

Maritime Commissioner Dye explained in her persuasive 

dissenting opinion, is that the Commission does not possess 

statutory authority to require agents of Ocean Transportation 

Intermediaries who are not themselves Ocean Transportation 

Intermediaries to obtain licenses. We therefore grant 

Landstar’s petition for review, vacate the Commission’s 

declaratory order, and remand to the Commission. 

I 

A 

Under the Shipping Act of 1984, 46 U.S.C. §§ 40101 et 

seq., the Federal Maritime Commission regulates ocean 

shipping between the United States and foreign countries. 

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Section 19 of the Act mandates that all Ocean Transportation 

Intermediaries be licensed by the Commission: 

A person in the United States may not act as an ocean 

transportation intermediary unless the person holds an 

ocean transportation intermediary’s license issued by the 

Federal Maritime Commission. The Commission shall 

issue a license to a person that the Commission 

determines to be qualified by experience and character to 

act as an ocean transportation intermediary. 

Id. § 40901(a) (emphasis added). 

Ocean Transportation Intermediaries are defined as either 

Ocean Freight Forwarders (OFFs) or Non-Vessel-Operating 

Common Carriers (NVOCCs). Id. § 40102(19). Both OFFs 

and NVOCCs are intermediaries between (i) shippers, who 

seek to export cargo, and (ii) ocean carriers, who physically 

carry the cargo on their vessels. See NLRB v. Int’l 

Longshoremen’s Ass’n, 447 U.S. 490, 496 n.8 (1980) 

(NVOCCs); Nat’l Customs Brokers & Forwarders Ass’n of 

Am., Inc. (NCBFAA) v. United States, 883 F.2d 93, 94-95 

(D.C. Cir. 1989) (OFFs). 

An Ocean Freight Forwarder is “a person that . . . 

dispatches shipments from the United States via a common 

carrier and books or otherwise arranges space for those 

shipments on behalf of shippers,” and “processes the 

documentation or performs related activities incident to those 

shipments.” 46 U.S.C. § 40102(18). In practice, that 

typically means that the OFF “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 provides other “accessorial services . . . such as 

arranging insurance, trucking, and warehousing.” NCBFAA, 

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883 F.2d at 95. OFFs receive compensation from both the 

shipper and the carrier. Id. 

A Non-Vessel-Operating Common Carrier, meanwhile, is 

“a common carrier that . . . does not operate the vessels by 

which the ocean transportation is provided” and “is a shipper 

in its relationship with [a vessel-operating] common carrier.” 

46 U.S.C. § 40102(16); see also id. § 40102(17). Although 

NVOCCs usually do not own or operate vessels to actually 

carry the cargo, they lease facilities and services from other 

firms – making them the “common carrier[s]” responsible for 

transportation of the cargo from origin to destination. See 

NCBFAA, 883 F.2d at 101. Most NVOCCs consolidate small 

parcels from multiple shippers bound for the same destination 

and arrange for them to be shipped as a single, large, sealed 

container under one bill of lading. See id. Upon arrival, 

NVOCCs arrange for the container to be broken down and for 

each parcel to be distributed to each customer. Thus, unlike 

an OFF, the NVOCC issues its own bill of lading to each 

shipper, and the vessel-operating common carrier issues a bill 

of lading to each NVOCC. See Fireman’s Fund Am. Ins. Cos. 

v. Puerto Rican Forwarding Co., 492 F.2d 1294, 1295 (1st 

Cir. 1974). Unlike OFFs, NVOCCs receive compensation 

only from the shipper. See NCBFAA, 883 F.2d at 101. 

Under § 19 of the Act, all persons or entities acting as 

Ocean Transportation Intermediaries must obtain licenses 

from the Federal Maritime Commission. Thus, all persons or 

entities acting as OFFs must obtain OFF licenses, and all 

persons or entities acting as NVOCCs must obtain NVOCC 

licenses. 

In recent decades, the Ocean Transportation Intermediary 

industry has expanded and modernized. OFFs and NVOCCs 

have increasingly forged agency arrangements with certain 

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third parties to enhance their operational efficiencies. For 

example, NVOCCs rely on agents such as warehouses, 

truckers, container lessors, steamships, and receivers – 

especially in foreign countries where it may be difficult to 

hire employees or open branch offices. 

B 

Petitioner Landstar is a licensed NVOCC. In January 

2006, Landstar requested an opinion letter from the Federal 

Maritime Commission’s General Counsel on the lawfulness 

of using unlicensed agents to assist with certain aspects of its 

Ocean Transportation Intermediary services. The General 

Counsel responded that a licensed NVOCC could lawfully use 

unlicensed agents to perform NVOCC services. “As agents, 

acting on behalf of [Landstar], they would not be subject to 

the licensing requirements of section 19 of the Shipping Act” 

because they would not “be holding out in their own right to 

provide NVOCC services.” Letter from FMC General 

Counsel to Landstar (Jan. 26, 2006), Joint Appendix 1, 2-3. 

In August 2006, Team Ocean Services, Inc., an Ocean 

Transportation Intermediary licensed as both an OFF and 

NVOCC, petitioned the Commission for a declaratory order 

that would reaffirm the conclusions of the FMC’s General 

Counsel. Team Ocean requested that the Commission dispel 

any regulatory uncertainty so it could move forward with 

plans to incorporate unlicensed agents – providing OFF and 

NVOCC services on its behalf – into its business model. In 

the Team Ocean proceeding, Landstar (the petitioner in this 

case) filed comments advancing the position that agents 

providing NVOCC services are not subject to the licensing 

requirement of § 19. 

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In a 3-1 decision, the Commission ruled that the use of 

unlicensed agents was unlawful because an agent that 

provides Ocean Transportation Intermediary services “act[s] 

as an ocean transportation intermediary” within the meaning 

of § 19 and is therefore subject to the licensing requirement. 

In re Lawfulness of Unlicensed Persons Acting as Agents for 

Licensed Ocean Transportation Intermediaries – Petition for 

Declaratory Order, at 8, No. 06-08 (Fed. Mar. Comm’n Feb. 

15, 2008) (Order). The Commission did not rely on the text 

of the Shipping Act. The Commission instead relied on the 

“remedial purposes” of the Act, which the Commission said 

were to address “complaints concerning NVOCC practices” 

by protecting the shipping public from unqualified or 

unscrupulous service providers. Id. at 10-11 (internal 

quotation marks omitted). The Commission concluded that 

sanctioning the use of unlicensed agents would undermine the 

“spirit and basic policy” behind § 19 and render the statute 

“absurd.” Id. at 9-10 (internal quotation marks omitted). 

 In dissent, Commissioner Dye primarily argued that the 

text of § 19 of the Shipping Act does not permit licensing of 

agents who only provide NVOCC services on behalf of a 

licensed NVOCC principal. Commissioner Dye explained 

that an agent working on behalf of a disclosed, licensed 

NVOCC does not “act as an ocean transportation 

intermediary” because by definition it does not operate as an 

NVOCC or common carrier: “Since such NVOCC agents 

would be acting on behalf of a licensed principal without 

‘holding out’ and without ‘assuming responsibility,’ section 

19 of the Shipping Act would not require them to obtain 

separate OTI licenses.” Id. at 26, 30 (Dye, Commissioner, 

dissenting). Recognizing that “many licensed NVOCCs 

currently use unlicensed agents for different aspects of their 

businesses,” she warned that the “policy adopted by the 

majority would stifle this business innovation.” Id. at 31. 

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Commissioner Dye thus favored issuing a declaratory order 

stating that licensed NVOCCs may use unlicensed agents as 

long as the agent does not hold out to provide Ocean 

Transportation Intermediary services in its own right. 

 

Landstar petitions for review of the Commission’s 

declaratory order to the extent it applies to NVOCCs and their 

use of agents to provide NVOCC services. Landstar argues 

that the Commission’s order contravenes the text of the 

statute. Cf. Chevron USA, Inc. v. Natural Res. Def. Council, 

467 U.S. 837 (1984).

II 

The plain language of § 19 of the Shipping Act requires 

Ocean Transportation Intermediaries to obtain licenses: “A 

person in the United States may not act as an ocean 

transportation intermediary unless the person holds an ocean 

transportation intermediary’s license issued by the Federal 

Maritime Commission.” 46 U.S.C. § 40901(a). 

The statutory question here is whether agents of Ocean 

Transportation Intermediaries who are not themselves Ocean 

Transportation Intermediaries must also obtain licenses from 

the Commission. 

We have previously held that where the Shipping Act 

includes a precise definition, “the limits of the Commission’s 

jurisdiction to regulate carriers under [the Act] must 

necessarily depend upon the meaning and interpretation of the 

[statutory] definition.” Austasia Intermodal Lines, Ltd. v. 

FMC, 580 F.2d 642, 644 (D.C. Cir. 1978). In Austasia, the 

relevant Shipping Act provision required “every common 

carrier” to file certain tariffs with the Commission. Id. 

Because the Commission had imposed tariff filing 

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requirements on a carrier that did not meet that statutory 

definition, we explained that the Commission had exceeded 

its authority. Id. at 646. 

That basic principle of statutory interpretation also 

governs this case. Because the Shipping Act defines the term 

“ocean transportation intermediary” and because the 

Commission imposed a licensing requirement on agents that 

do not meet that statutory definition, the Commission 

exceeded its authority. 

A 

An Ocean Transportation Intermediary is either an Ocean 

Freight Forwarder or a Non-Vessel-Operating Common 

Carrier – that is, an OFF or an NVOCC. 46 U.S.C. 

§ 40102(19). This case involves agents of NVOCCs. In its 

order, the Commission suggested that agents of NVOCCs fall 

within the statutory definition of an NVOCC. See Order at 8-

9 & n.6. That is plainly wrong. An “NVOCC” is a nonvessel-operating common carrier. Id. § 40102(16). And a 

“common carrier” under the Act is a person or entity that: 

(i) holds itself out to the general public to provide 

transportation by water of passengers or cargo between 

the United States and a foreign country for compensation; 

[and] 

(ii) assumes responsibility for the transportation from the 

port or point of receipt to the port or point of destination. 

Id. § 40102(6)(A). 

Connecting the statutory dots, a person or entity that 

provides NVOCC services falls within the ambit of § 19 only 

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when it “holds itself out to the general public to provide 

transportation” and “assumes responsibility for the 

transportation.” Id.1

 

An agent providing NVOCC services on behalf of a 

disclosed NVOCC principal possesses neither of those two 

defining characteristics of an NVOCC. An agent acting on 

behalf of a disclosed NVOCC principal does not hold itself

out to the general public to provide transportation because it 

holds out only in the name of the NVOCC, subject to that 

NVOCC’s control. See RESTATEMENT (THIRD) OF AGENCY § 

1.01 (“the agent shall act on the principal’s behalf and subject 

to the principal’s control”); JSG Trading Corp. v. Dep’t of 

Agric., 235 F.3d 608, 616 (D.C. Cir. 2001). An agent of a 

disclosed principal also does not ordinarily assume 

responsibility for the transportation of the cargo as the 

principal bears the burdens of liability. See RESTATEMENT 

(THIRD) OF AGENCY § 6.01 (agent for disclosed principal); id.

§ 7.03 (principal liability); Judah v. Reiner, 744 A.2d 1037, 

1039-40 (D.C. 2000) (agency relationship prerequisite to 

respondeat superior). 

 1

 The Commission’s case law and rulemakings reinforce the 

importance of both factors to NVOCC status. See, e.g., Rose Int’l, 

Inc. v. Overseas Moving Network Int’l, Ltd., 29 S.R.R. 119, 162, 

2001 WL 865708 (Fed. Mar. Comm’n June 1, 2001) (“The most 

essential factor is whether the carrier holds itself out”); Licensing, 

Fin. Responsibility Requirements, and General Duties for Ocean 

Transportation Intermediaries, 63 Fed. Reg. 70,710, 70,710 (Dec. 

22, 1998) (notice of proposed rulemaking) (“whether he holds 

himself out to carry goods from whomever offered to the extent of 

his ability to carry” is essential) (internal quotation marks omitted); 

Common Carriers by Water – Status of Express Companies, Truck 

Lines and Other Non-Vessel Carriers, 6 F.M.B. 245, 256 (Fed. 

Mar. Bd. March 2, 1961) (“Actual liability as a common carrier 

over the entire journey . . . is essential”). 

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Just as the FMC’s General Counsel concluded in the 

initial Landstar opinion letter and as Commissioner Dye 

explained in her dissent to the Commission’s ruling in this 

case, an agent of an NVOCC by definition is not a “common 

carrier,” and thus not an “NVOCC” as described in the Act. 

The Commission justified its extension of § 19’s 

licensing requirement to agents by finding the text of the 

statute less important than what the Commission said was the 

statute’s broader “spirit and basic policy.” Order at 10. In 

effect, the Commission appealed to this “spirit” to interpret 

“act as an ocean transportation intermediary” to encompass 

persons who do not act as Ocean Transportation 

Intermediaries. But agencies cannot distort statutory language 

in this manner. 

In explaining its counterintuitive gloss on the text, the 

Commission noted that it was “not aware of any legislative 

history or case law that would indicate Congress intended to 

distinguish between persons who ‘act’ as [Ocean 

Transportation Intermediaries], on the one hand, and persons 

who provide [Ocean Transportation Intermediary] services on 

the other.” Id. at 8. It should go without saying, however, 

that the absence of disproof in the legislative history hardly 

constitutes proof. The statute means what it says. 

The Commission also stated that agents must be subject 

to licensing so as to further the “remedial purposes” of § 19. 

Id. at 10. The purpose of § 19, the Commission explained, 

was to protect the public from unknown or unscrupulous 

Ocean Transportation Intermediary service providers. If § 19 

were not “broadly construed” to encompass agents, this would 

“eviscerate” and “defeat the statute’s clear and evident 

purpose.” Id. at 10, 12. As the Supreme Court has repeatedly 

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explained, however, neither courts nor federal agencies can 

rewrite a statute’s plain text to correspond to its supposed 

purposes. See Norfolk S. Ry. Co. v. Sorrell, 549 U.S. 158, 171 

(2007) (“statute’s remedial purpose cannot compensate for the 

lack of a statutory basis [in text]”); Barnhart v. Sigmon Coal 

Co., Inc., 534 U.S. 438, 462 (2002) (“We will not alter the 

text in order to satisfy the policy preferences of the 

Commissioner.”). Moreover, even accepting the Commission 

on its own terms, declining to require the licensing of agents 

does not “eviscerate” or “defeat” the statute’s remedial 

purposes. As the FMC’s General Counsel concluded and as 

Commissioner Dye explained, common law agency principles 

provide members of the public with adequate safeguards in 

their dealings with agents: If an agent breaches a contract or 

commits a tort, the disclosed NVOCC principal in whose 

name the agent acts is subject to liability. See RESTATEMENT 

(THIRD) OF AGENCY §§ 6.01, 7.03; 46 C.F.R. § 515.4(b)(2) 

(Ocean Transportation Intermediaries “strictly responsible for 

the acts or omissions of any of its . . . agents rendered in 

connection with the conduct of its business”). Therefore, the 

Commission’s suggestion that the plain reading of the 

statute’s text undermines its purpose rings hollow. 

In a similar vein, the Commission said it would be 

“absurd” to require NVOCCs to be licensed, but to excuse the 

agents from that licensing requirement. Order at 9. A 

statutory outcome is absurd if it defies rationality. See Corley 

v. United States, 129 S. Ct. 1558, 1566-68 (2009) 

(“absurdities of literalism” would render statute “nonsensical 

and superfluous”); Barnhart v. Thomas, 540 U.S. 20, 28 

(2003) (agency’s statutory interpretation did not create 

“absurd results” because there was a “plausible reason why 

Congress” might have intended those results) (internal 

quotation marks omitted); see also John F. Manning, The 

Absurdity Doctrine, 116 HARV. L. REV. 2387, 2390 (2003) 

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(“standard interpretive doctrine . . . defines an ‘absurd result’ 

as an outcome so contrary to perceived social values that 

Congress could not have ‘intended’ it”). The absurdity 

doctrine is inapposite here: Exempting agents from § 19 may 

be debatable policy, but it is hardly irrational. Declining to 

subject agents to the licensing requirement encourages Ocean 

Transportation Intermediaries to incorporate agency 

arrangements into their business models and arguably 

promotes efficiency and innovation in the Ocean 

Transportation Intermediary industry. Indeed, the 

Commission admits there are no “legal or policy reasons to 

prohibit” licensed Ocean Transportation Intermediaries from 

contracting with unlicensed vendors to perform trucking and 

similar services. Order at 19-20. 

In sum, the plain language of § 19’s licensing 

requirement does not extend to agents of Ocean 

Transportation Intermediaries. 

B 

 In this Court, no doubt recognizing the problem of 

squaring the Commission’s order (which primarily addressed 

whether agents of NVOCCs must be licensed) with the 

statutory text, the attorneys for the Commission have radically 

shifted away from the rationale employed by the Commission. 

The Commission’s attorneys now argue that agents of NonVessel-Operating Common Carriers need only obtain Ocean 

Freight Forwarder licenses, not Non-Vessel-Operating 

Common Carrier licenses. We appreciate the legal creativity. 

But this new argument is not only contrary to the 

Commission’s actual rationale – meaning we cannot sustain 

the order on that basis, see SEC v. Chenery Corp., 332 U.S. 

194, 196 (1947) – but also is rather nonsensical. 

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A short explanation suffices to reveal the flaws of this 

theory. Section 19 requires that the person or entity acting as 

an Ocean Transportation Intermediary obtain “an ocean 

transportation intermediary’s license.” 46 U.S.C. § 40901(a). 

An Ocean Transportation Intermediary is defined as an OFF 

or NVOCC. Id. § 40102(19). Accordingly, an “ocean 

transportation intermediary’s license” is an OFF license or an 

NVOCC license. Because OFF status does not require 

common carrier status, the Commission’s attorneys now argue 

that agents of NVOCCs actually perform OFF services and 

therefore must obtain OFF licenses instead of NVOCC 

licenses. But the Commission has no authority to require 

agents of OFFs who are not themselves OFFs to obtain OFF 

licenses, just as it has no authority to require agents of 

NVOCCs who are not themselves NVOCCs to obtain 

NVOCC licenses. And it would be doubly illogical to require 

agents of NVOCCs to obtain OFF licenses. 

What is more, the effort by the Commission’s attorneys 

to blend OFFs and NVOCCs into equivalents flies in the face 

of both the Shipping Act and the Commission’s own 

regulations. OFF licenses and NVOCC licenses are not 

interchangeable. The Act defines the terms in separate 

provisions of the Act, with different descriptions of their 

respective services. See id. § 40102(18) (defining OFF); id. § 

40102(16) (defining NVOCC). The Commission’s 

regulations similarly differentiate between OFFs and 

NVOCCs, setting forth distinct lists of their representative 

functions – specifying 13 OFF duties and 8 NVOCC duties 

with no overlap in wording. See 46 C.F.R. § 515.2(o)(1) 

(defining OFF); id. § 515.2(o)(2) (defining NVOCC); see also 

id. § 515.2(i) (listing OFF duties); id. § 515.2(l) (listing 

NVOCC duties); id. § 515.32 (setting forth “Freight forwarder 

duties”). We therefore reject the agency counsel’s invitation 

at oral argument to find “a distinction without a real 

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difference” in a statutory and regulatory scheme that plainly 

envisions a distinction with a difference. Tr. of Oral Arg. at 

30; cf. Nat’l Customs Brokers & Forwarders Ass’n of Am., 

Inc. v. United States, 883 F.2d 93, 102 (D.C. Cir. 1989) 

(affirming FMC’s position that an NVOCC that provides 

some OFF services “does not become a freight forwarder as 

well” as “it remains a common carrier”). 

* * * 

The Shipping Act imposes licensing on OFFs and 

NVOCCs, and on OFFs and NVOCCs alone. Agents 

providing NVOCC services for licensed NVOCC principals 

are not NVOCCs (or OFFs) solely by virtue of being agents 

of NVOCCs. They therefore fall outside the coverage of the 

statute’s licensing requirement. The Commission lacks 

authority to compel those agents to obtain licenses. 

The Commission’s interpretation of § 19 of the Shipping 

Act runs contrary to the plain language of that provision. But 

even if the plain language of § 19 were ambiguous on the 

question whether agents are subject to the Commission’s 

licensing authority, the Commission’s extension of the 

requirement to agents is arbitrary and capricious and 

constitutes an unreasonable interpretation and application of 

the statute. See generally Chevron USA, Inc. v. Natural Res. 

Def. Council, 467 U.S. 837, 842-43 (1984). 

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If the Commission is correct that sound policy requires 

licensing agents of Ocean Transportation Intermediaries, the 

Commission no doubt will convince Congress to update the 

statutory scheme to that effect. But the agency cannot rewrite 

a statute just to serve a perceived statutory “spirit.” We 

therefore grant Landstar’s petition for review, vacate the 

declaratory order, and remand to the Commission. 

So ordered. 

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