Details of FMC Proposed Rule for a NRA Exemption from NVOCC Rate Tariffs Publication

The Federal Maritime Commission has issued a proposed rule to amend 46 CFR Part 520 and create a new Part 532 to make available to licensed non-vessel-operating common carriers (NVOCCs) a new, voluntary exemption from the requirement to publish rate tariffs, if they agree to Negotiated Rate Arrangements (NRAs) with their shippers.

FMC states that the proposed rule would relieve licensed NVOCCs from the cost and burden of rate tariffs publication. Publication of rule tariffs would continue to be required. In addition, any NVOCC failing to maintain its bond or license, or who has had its tariff suspended by the FMC, would not be eligible to invoke an NRA exemption.

Comments on the proposed rule are due by June 4, 2010.

Proposed Exemption in Response to NCBFAA Petition

The proposed rule is in response to a petition filed by the National Customs Brokers and Freight Forwarders Association of America, Inc. that asked for an exemption from the requirement that NVOCCs publish and/or adhere to rate tariffs for ocean transportation in those instances where they have individually negotiated rates with their shipping customers and memorialized those rates in writing. Other supporters of the petition include the National Industrial Transportation League (NITL), the Transportation Intermediaries Association (TIA), and a number of ocean transportation intermediaries (OTIs).

The Florida Shipowners’ Group opposed the petition, while the World Shipping Council took no position, but submitted comments.

Definition of NVOCC NRA

The proposed regulation would recognize a NVOCC NRA¹ and would define that instrument as a written and binding arrangement between a shipper and an eligible NVOCC to provide specific transportation service for a stated cargo quantity, from origin to destination, on and after the receipt of the cargo by the carrier or its agent (or the originating carrier in the case of through transportation).

NVOCC Requirements for NRA Exemption

For the NRA exemption rule to apply, the NVOCC must:

• be duly licensed and have adequate proof of financial responsibility, as required by existing regulations;

• publish notice that the NVOCC is invoking the exemption and opting out of rate publication in a prominent place in its rules tariff (Alternatively, if an NVOCC seeks to invoke the exemption for all of its dealings with shippers, FMC states it could provide an indication of this election to the FMC on the NVOCC’s Form FMC-1 filing, which would then be reflected on the FMC’s website along with the NVOCC tariff location.)

• before entering into an NRA, provide electronic access to its rules tariff to the public free of charge, or for each NRA, provide the prospective shipper all applicable terms as set forth in its rules tariff;

• ensure the NRA:

1. is memorialized in writing;
2. includes the applicable rate(s) for each shipment or shipments;
3. is agreed to by both the shipper and NVOCC before the date on which the cargo is received by the common carrier or its agent (including originating carrier in the case of through transportation rates);
4. includes prominent notice of the existence and location of the NVOCC's rules tariff;
5. and its associated records, are retained for 5 years, in a format easily produced to the FMC upon request.

In addition, the NRA would not be able to be modified after the cargo is received by a carrier or its agent (or the originating carrier in the case of through transportation.

(The FMC adds that eligible NVOCCs would still be subject to the requirements of the Shipping Act and all applicable antitrust laws.)

NVOCC NRAs Would be Exempt From Certain Requirements

When the above conditions have been met, the regulation as proposed would exempt the NVOCC from the following requirements:

FMC Seeking Comments on a Number of Issues

The FMC is seeking comments on the proposed rule in general, as well as on the following specific issues:

• whether the exemption should be extended to unlicensed NVOCCs that are registered pursuant to 46 CFR 515.21(a)(3);

• whether additional terms should be required in the NRA documentation;

• whether the regulation should also specify that, when a tariff rate and a duly-executed NRA appear to address the same shipment, the lower rate shall prevail;

• whether the regulation should additionally exempt eligible NVOCCs from the prohibitions of 46 USC 41104(4) (prohibiting common carriers from unfair or unjustly discriminatory practices in service pursuant to a tariff), and 46 USC 41104(8) (prohibiting common carriers from undue or unreasonable preference or advantage or undue or unreasonable prejudice or disadvantage for tariff service); and

• what elements should be required to qualify the NRA for a safe harbor'' status that affords a presumption that the corresponding shipment is not subject to the tariff rate publication requirement.

Public Hearing to be Held if Requested

FMC states that while written comments are due by June 4, 2010, if an interested party requests an opportunity to present oral comments to FMC concerning the proposed rule by May 14, 2010, the FMC will hold a public meeting on May 24, 2010.

¹The proposed rule would not remove or revise the exemption regulations for NVOCC Service Arrangements (NSAs).

(See ITT’s Online Archives or 04/30/10 news, (Ref: 10043005), for BP announcement of proposed rule.)

FMC contact: Rebecca Fenneman (202) 523-5740

Proposed rule (D/N 10-03, FR Pub 05/07/10), available at http://edocket.access.gpo.gov/2010/pdf/2010-10476.pdf