Decoding OSRA – Section 8. Assessment of Penalties or Refunds

Introduction

We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 8 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Section 8 of OSRA might look somewhat complex at a quick glance, but it is actually quite simple. There is one main purpose of this section, and that is to add refunds to the penalties the Federal Maritime Commission (FMC) can assess against violators of U.S. shipping code.

Section 8 Text

SEC. 8. ASSESSMENT OF PENALTIES OR REFUNDS.

    (a) In General.--Title 46, United States Code, is amended--
            (1) in section 41107--
                    (A) in the section heading, by inserting ``or 
                refunds'' after ``penalties'';
                    (B) in subsection (a), by inserting ``or, in 
                addition to or in lieu of a civil penalty, is liable for 
                the refund of a charge'' after ``civil penalty''; and
                    (C) in subsection (b), by inserting ``or, in 
                addition to or in lieu of a civil penalty, the refund of 
                a charge,'' after ``civil penalty''; and
            (2) section 41109 is amended--
                    (A) by striking subsections (a) and (b) and 
                inserting the following:

    ``(a) General Authority.--Until a matter is referred to the Attorney 
General, the Federal Maritime Commission may--
            ``(1) <<NOTE: Notice.>>  after notice and opportunity for a 
        hearing, in accordance with this part--
                    ``(A) assess a civil penalty; or
                    ``(B) in addition to, or in lieu of, assessing a 
                civil penalty under subparagraph (A), order a refund of 
                money (including additional amounts in accordance with 
                section 41305(c)), subject to subsection (b)(2); and
            ``(2) compromise, modify, or remit, with or without 
        conditions, a civil penalty or refund imposed under paragraph 
        (1).

    ``(b) Determination of Amount.--
            ``(1) Factors for consideration.--In determining the amount 
        of a civil penalty assessed or refund of money ordered pursuant 
        to subsection (a), the Federal Maritime Commission shall take 
        into consideration--
                    ``(A) the nature, circumstances, extent, and gravity 
                of the violation committed;
                    ``(B) with respect to the violator--
                          ``(i) the degree of culpability;
                          ``(ii) any history of prior offenses;
                          ``(iii) the ability to pay; and
                          ``(iv) such other matters as justice may 
                      require; and
                    ``(C) the amount of any refund of money ordered 
                pursuant to subsection (a)(1)(B).
            ``(2) Commensurate reduction in civil penalty.--
                    ``(A) In general.--In any case in which the Federal 
                Maritime Commission orders a refund of money pursuant to 
                subsection (a)(1)(B) in addition to assessing a civil 
                penalty pursuant to subsection (a)(1)(A), the amount of 
                the civil penalty assessed shall be decreased by any 
                additional amounts included in the refund of money in 
                excess of the actual injury (as defined in section 
                41305(a)).
                    ``(B) Treatment of refunds.--A refund of money 
                ordered pursuant to subsection (a)(1)(B) shall be--
                          ``(i) considered to be compensation paid to 
                      the applicable claimant; and
                          ``(ii) deducted from the total amount of 
                      damages awarded to that claimant in a civil action 
                      against the violator relating to the applicable 
                      violation.'';
                    (B) in subsection (c), by striking ``may not be 
                imposed'' and inserting ``or refund of money under 
                subparagraph (A) or (B), respectively, of subsection 
                (a)(1) may not be imposed'';
                    (C) in subsection (e), by inserting ``or order a 
                refund of money'' after ``penalty'';
                    (D) in subsection (f), by inserting ``, or that is 
                ordered to refund money,'' after ``assessed''; and
                    (E) in subsection (g), in the first sentence, by 
                inserting ``or a refund required under this section'' 
                after ``penalty''.

Original Title 46 Text

§41107. Monetary penalties

(a) In General.—A person that violates this part or a regulation or order of the Federal Maritime Commission issued under this part is liable to the United States Government for a civil penalty. Unless otherwise provided in this part, the amount of the penalty may not exceed $5,000 for each violation or, if the violation was willfully and knowingly committed, $25,000 for each violation. Each day of a continuing violation is a separate violation.

(b) Lien on Carrier's Vessels.—The amount of a civil penalty imposed on a common carrier under this section constitutes a lien on the vessels operated by the carrier. Any such vessel is subject to an action in rem to enforce the lien in the district court of the United States for the district in which it is found.

[Historical and Revision Notes chart omitted.]

§41109. Assessment of penalties

(a) General Authority.—Until a matter is referred to the Attorney General, the Federal Maritime Commission may, after notice and opportunity for a hearing, assess a civil penalty provided for in this part. The Commission may compromise, modify, or remit, with or without conditions, a civil penalty.

(b) Factors in Determining Amount.—In determining the amount of a civil penalty, the Commission shall take into account the nature, circumstances, extent, and gravity of the violation committed and, with respect to the violator, the degree of culpability, history of prior offenses, ability to pay, and other matters justice may require.

(c) Exception.—A civil penalty may not be imposed for conspiracy to violate section 41102(a) or 41104(1) or (2) 1 of this title or to defraud the Commission by concealing such a violation.

(d) Prohibited Basis of Penalty.—The Commission or a court may not order a person to pay the difference between the amount billed and agreed upon in writing with a common carrier or its agent and the amount set forth in a tariff or service contract by that common carrier for the transportation service provided.

(e) Time Limit.—A proceeding to assess a civil penalty under this section must be commenced within 5 years after the date of the violation.

(f) Review of Civil Penalty.—A person against whom a civil penalty is assessed under this section may obtain review under chapter 158 of title 28.

(g) Civil Actions To Collect.—If a person does not pay an assessment of a civil penalty after it has become final or after the appropriate court has entered final judgment in favor of the Commission, the Attorney General at the request of the Commission may seek to collect the amount assessed in an appropriate district court of the United States. The court shall enforce the order of the Commission unless it finds that the order was not regularly made and duly issued.

Amended Text

Now let’s see how the Monetary Penalties section of Title 46 reads after the changes are made. To add attention to the changes, I’ve bolded them in text below.

§41107. Monetary penalties or refunds

(a) In General.—A person that violates this part or a regulation or order of the Federal Maritime Commission issued under this part is liable to the United States Government for a civil penalty or, in addition to or in lieu of a civil penalty, is liable for the refund of a charge. Unless otherwise provided in this part, the amount of the penalty may not exceed $5,000 for each violation or, if the violation was willfully and knowingly committed, $25,000 for each violation. Each day of a continuing violation is a separate violation.

(b) Lien on Carrier's Vessels.—The amount of a civil penalty or, in  addition to or in lieu of a civil penalty, the refund of a charge imposed on a common carrier under this section constitutes a lien on the vessels operated by the carrier. Any such vessel is subject to an action in rem to enforce the lien in the district court of the United States for the district in which it is found.

§41109. Assessment of penalties

(a) General Authority.—Until a matter is referred to the Attorney General, the Federal Maritime Commission may, after notice and opportunity for a hearing, assess a civil penalty provided for in this part. The Commission may compromise, modify, or remit, with or without conditions, a civil penalty.

(b) Factors in Determining Amount.—In determining the amount of a civil penalty, the Commission shall take into account the nature, circumstances, extent, and gravity of the violation committed and, with respect to the violator, the degree of culpability, history of prior offenses, ability to pay, and other matters justice may require.

(a) General Authority.--Until a matter is referred to the Attorney General, the Federal Maritime Commission may--

(1) <<NOTE: Notice.>>  after notice and opportunity for a hearing, in accordance with this part--

(A) assess a civil penalty; or

(B) in addition to, or in lieu of, assessing a civil penalty under subparagraph (A), order a refund of money (including additional amounts in accordance with section 41305(c)), subject to subsection (b)(2); and

(2) compromise, modify, or remit, with or without conditions, a civil penalty or refund imposed under paragraph (1).

(b) Determination of Amount.--

(1) Factors for consideration.--In determining the amount of a civil penalty assessed or refund of money ordered pursuant to subsection (a), the Federal Maritime Commission shall take into consideration--

(A) the nature, circumstances, extent, and gravity of the violation committed;

(B) with respect to the violator--

(i) the degree of culpability;
(ii) any history of prior offenses;
(iii) the ability to pay; and
(iv) such other matters as justice may require; and

(C) the amount of any refund of money ordered pursuant to subsection (a)(1)(B).

(2) Commensurate reduction in civil penalty.--

(A) In general.--In any case in which the Federal Maritime Commission orders a refund of money pursuant to subsection (a)(1)(B) in addition to assessing a civil penalty pursuant to subsection (a)(1)(A), the amount of the civil penalty assessed shall be decreased by any additional amounts included in the refund of money in excess of the actual injury (as defined in section 41305(a)).

(B) Treatment of refunds.--A refund of money ordered pursuant to subsection (a)(1)(B) shall be--

(i) considered to be compensation paid to the applicable claimant; and
(ii) deducted from the total amount of damages awarded to that claimant in a civil action against the violator relating to the applicable violation.

(c) Exception.—A civil penalty or refund of money under subparagraph (A) or (B), respectively, of subsection (a)(1) may not be imposed for conspiracy to violate section 41102(a) or 41104(1) or (2) 1 of this title or to defraud the Commission by concealing such a violation.

(d) Prohibited Basis of Penalty.—The Commission or a court may not order a person to pay the difference between the amount billed and agreed upon in writing with a common carrier or its agent and the amount set forth in a tariff or service contract by that common carrier for the transportation service provided.

(e) Time Limit.—A proceeding to assess a civil penalty or order a refund of money under this section must be commenced within 5 years after the date of the violation.

(f) Review of Civil Penalty.—A person against whom a civil penalty is assessed, or that is ordered to refund money, under this section may obtain review under chapter 158 of title 28.

(g) Civil Actions To Collect.—If a person does not pay an assessment of a civil penalty or a refund required under this section after it has become final or after the appropriate court has entered final judgment in favor of the Commission, the Attorney General at the request of the Commission may seek to collect the amount assessed in an appropriate district court of the United States. The court shall enforce the order of the Commission unless it finds that the order was not regularly made and duly issued.

Summary of Subparagraph (1)(A)

The first line of OSRA Section 8, paragraph (a), simply states Title 46 is being amended in the ways that follow, and subparagraph (1) gives us the section of Title 46 being amended. So let’s move forward right to the meat with the actual changes.

Subparagraph (A) changes the title of Section 41107 of Title 46, adding “or refunds.” This pretty much tells the reader right away how the law is being changed here. OSRA is adding refunds to the monetary penalties offenders face when breaking U.S. shipping code.

Summary of Subparagraphs (1)(B) and (C)

Subparagraphs (B) and (C) both add the same phrase, “or, in addition to or in lieu of a civil penalty, is liable for the refund of a charge,” after “civil penalty” in the two paragraphs of section 41107. Worth noting is that offenders may have to refund charges instead of paying fees or in addition to paying fees.

Summary of Subparagraph (2)(A)

Subparagraph 2 starts off by deleting a couple of paragraphs from Section 41109 of Title 46 and replacing them several paragraphs/subparagraphs. Previously, this section allowed the Federal Maritime Commission (FMC) to assess civil penalties against U.S. shipping code violators. It also gave a brief outline as to how these civil penalties were to be derived.

The new text still allows for such civil penalties to be assessed by the FMC, but it also adds refunds of money to what the FMC can assess. Of particular interest, violators can be ordered to give additional money with the full interest. As we saw earlier, these refunds can be in the place of civil penalties or in addition to them.

It is interesting that the final subparagraphs added by Section 8’s subparagraph (2)(A) subtract the refunds, and any additional money awards along with them, from the civil penalties assessed against violators and the total amount of damages awarded to claimants. This makes awarded refunds feel less like double whammies against violators.

Summary of Subparagraph (2)(B)-(2)(E)

Subparagraphs (2)(B), (2)(C), (2)(D), and (2)(E) are very straightforward. They simply add the possibility of refund to all the remaining things Section 41109 of Title 46 specifies in regard to penalties.

Conclusion

For you shippers out there, Section 8 of OSRA means that if carriers, terminal operators, etcetera violate U.S. Title 46 shipping code by doing something like charging you unfair detention and demurrage fees, you can be refunded your money instead of or in addition to civil penalties charged against the violators. As we’ve been seeing throughout OSRA, the FMC is in charge of determining whether any refund or additional money is due to a claimant and if the accused party is guilty of violating U.S. shipping law.

If there’s anything you think I missed in this section of OSRA, please share it in the comments section below.

Stay tuned for when Decoding OSRA continues, examining Section 9….