The Federal Maritime Commission voted unanimously Wednesday to approve new regulatory language it says will relieve regulatory burdens on non-vessel operating common carriers (NVOCCs) and give shippers more choices and flexibility.
The National Customs Brokers and Forwarders Association of America (NCBFAA) said that the action would provide "groundbreaking relief for NVOCCs."
FMC commissioners voted to move forward with a final rule that simplifies requirements for the use of NVOCC Service Arrangements (NSAs) and Negotiated Rate Arrangements (NRAs).
"The vote by the Commissioners made it very clear that the
agency would no longer be content to let early 20th century regulatory
theory impede the dynamic nature of the ocean shipping industry," wrote Edward Greenberg, the general counsel of the NCBFAA, in a note explaining the changes
NSAs are an alternative way for NVOCCs to negotiate confidential
shipping arrangements with their shippers, says the FMC. They are a
“written contract, other than a bill of lading or receipt, between one
or more NSA shippers and an individual NVOCC or two or more affiliated
NVOCCs, in which the NSA shipper makes a commitment to provide a certain
minimum quantity or portion of its cargo or freight revenue over a
fixed time period, and the NVOCC commits to a certain rate or rate
schedule and a defined service level.”
NRAs, the agency explains, “are written and binding arrangements
between a shipper and a licensed NVOCC to provide specific
transportation service for a stated cargo quantity, from origin to
destination, on and after a stated date or within a defined time frame.”
If an NVOCC uses NRAs and meets certain conditions it does not have to
publish the rate in the tariff it makes available to the public.
Acting FMC Chairman Michael Khouri said, “The purpose of NRAs
and NSAs was to make it faster, simpler and less burdensome for shippers
and NVOCCs to conduct business and move cargo efficiently.”
Greenberg said "Since the enactment of the Ocean Shipping Reform Act of 1998, the NCBFAA has been urging the FMC to lift archaic, burdensome regulatory barriers on the NVOCC industry. The association's efforts were pursued through a series of petitions that asked the FMC, among other things, to use its authority to exempt NVOCCs from the obligation to file or publish the rates in tariffs. Consistent with the FMC's exemption statute, the NCBFAA has contended that granting this exemption would not be detrimental to commerce or reduce competition. To the contrary, the association has been arguing that freeing NVOCCs from the tariff publication requirements would reduce costs and enhance efficiency in the obviously highly competitive NVOCC industry.
"To its credit, the FMC has been receptive to the series of petitions the association filed, but the progress toward the goal has been slow. Initially, the Commission permitted NVOCCs to have NVOCC Service Arrangements (NSAs), so that they could have written contracts with customers that were comparable to service contracts. However, these needed to be formal contracts, filed with the FMC and accompanied by the publication of essential terms publications.
"Next, the FMC authorized NVOCCs to enter into Negotiated Rate Arrangements (NRAs), but the scope of those was initially limited. Because of a further petition by the NCBFAA, the NRA exemption became more user friendly, but there were still significant limitations on how they could be used. Chief among the problems was the fact that they could not be amended and that they could only include the actual freight rates, but not other economic terms."
As a result, in 2015, he noted the NCBFAA filed another petition that again sought FMC approval to lift these types of restrictions; at the same time, the NCBFAA requested that the filing/tariff requirements for NSAs should be removed as unnecessary.
“I believe that whenever a Section 16 (a section of the Shipping Act) exemption request will not result in substantial reduction in competition or be detrimental to commerce, then we have an obligation to openly consider well-founded petitions that seek exemptions from requirements of the Shipping Act,” said Khouri. “I am pleased that today we have moved this petition forward.”
As a result of Wednesday’s action addressing NRAs, the FMC said it will be implementing three key changes: allowing NRAs to be amended at any time; allowing the inclusion of non-rate economic terms; and allowing an NVOCC to provide for shipper’s acceptance of the NRA by booking a shipment.
The FMC said it make NSAs easier and more attractive to use by removing filing and essential terms requirements.
The FMC plans to publish a final rule incorporating the changes early this summer.
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