Landstar Express America, Inc . and Landstar Global Logistics , Inc. v. Federal Maritime Commission and United States of America

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 21, 2009 Decided June 26, 2009
No. 08-1152
LANDSTAR EXPRESS A MERICA, I NC . AND LANDSTAR GLOBAL
LOGISTICS , I NC.,
PETITIONERS
v.
FEDERAL M ARITIME 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.

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Before: GINSBURG, H ENDERSON , 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 non-
vessel-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 A GENCY §
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 Non-
Vessel-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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