Trade Says FMC Proposed Rate Tariffs Exemption Discriminates Against Foreign-Based NVOCCs
Comments by non-vessel operating common carriers (NVOCCs) overwhelmingly favored the Federal Maritime Commission’s May 2010 proposed rule to make available for licensed NVOCCs a new, voluntary exemption from the requirement to publish rate tariffs, if they agree to Negotiated Rate Arrangements (NRAs1) with their shippers.
However, most NVOCCs suggested revisions to the proposed rule, with the vast majority stating that the exemption should be extended to all lawfully operating NVOCCs and not exclude foreign-based NVOCCs that are only registered, but not licensed in the U.S.
(The proposed rule was issued in response to a petition from the National Customs Brokers and Freight Forwards Association of America (NCBFAA). See ITT’s Online Archives or 05/07/10 news, 10050749, for BP summary of the proposed rule.)
Exemption Should Be Applicable to Both Licensed and Registered NVOCCs
The majority of NVOCCs who submitted comments criticized the FMC’s proposal to only provide rate tariffs publishing relief to U.S. licensed NVOCCs and not to registered, but unlicensed NVOCCs, such as foreign based-NVOCCs.
They see no reason to discriminate against these foreign-based NOVOCCs as they also have to bear the costs and regulatory burdens of publishing rate tariffs and comply with U.S. regulations. They add that the shipping public makes no distinction between U.S. licensed NVOCCs and foreign registered NVOCCs, nor does it gain any more practical benefit from the regulatory burden placed on one type of NVOCC more than on the other. Several were concerned that foreign governments would take corresponding retaliatory action against U.S. licensed NVOCCs if FMC does not change this aspect of the rulemaking.
They also point out that NCBFAA’s original petition requested that the exemption from mandatory rate publication be available to all lawfully operating NVOCCs (whether they were U.S.-domiciled companies operating under a license or foreign-domiciled companies operating pursuant to FMC’s registration regulations) and note that FMC offered little explanation of its decision to limit the exemption to licensed NVOCCs.
Ongoing Adjustments to Rates/NRA Should Be Allowed if Documented in Writing
Several NVOCCs were concerned about the inflexibility of the proposed rule’s requirement that the rate be concluded and in place prior to the date the cargo is received and that the NRA cannot be modified after the cargo is received by the carrier or its agent.
They stated that the ocean shipping marketplace is dynamic and as rates and service offerings may be adjusted according to prevailing market conditions and services, some ongoing adjustments and amendments to agreements should be allowed, provided it is done in writing.
NVOCC Should Prominently Indicate in Writing If Invoking Exemption
Several NVOCCs stated that whether or not the NVOCC invokes the exemption for a specific dealing with a given shipper or for all of its dealings with prospective shippers,
they should be required to provide an indication of their choice in writing, in a prominent place.
Clarity Needed on Relationship of NRA and NVOCC’s Bill of Lading
One stated that the rule does not address the relationship of the NRA and the NVOCC’s bill of lading. While the rule suggests that each NRA would be a specific contract, the NVOCC questioned whether the NRA could contain terms that are not just about rates and their application; whether the bill of lading or the NRA would take precedence if there were a conflict; whether the NRA would simply be an unpublished tariff rate or a new unfiled version of an NVOCC Service Arrangement NSA that is agreed to in writing by the NVOCC and a Shipper; etc.
Identification of Surcharges on NRAs
Several NVOCCs requested that NRAs be allowed to clearly identify the surcharges which are applicable to the rate(s). One stated that if these surcharges are contained in the Rules Tariff, a website location where these rates may be contained should also be provided.
Recordkeeping Provisions Should be Clarified, Timeframe Shortened
A few NVOCCs were concerned that the proposed rule’s requirements to retain “associated records” is too vague and the extension “to all written communications” serves no purpose. One stated that the regulation should only require only the retention of those specific documents constituting the contract between the NVOCC and shipper, which includes any document necessary to interpret and enforce the contract.
Several also commented that the five year timeframe for document retention was too long and should be shortened.
FMC Should Extend Exemption to Undue Prejudice Prohibitions to Avoid “Nuisance” Disputes
A few NVOCCs stated that FMC should extend the exemptions under the rule to Shipping Act prohibitions in 46 USC 441104(4) and (8) (undue prejudice or advantage). This is because NRAs are intended to be highly flexible and confidential rate offerings designed to react quickly to a very fluid marketplace. If shippers have the possibility of pursuing complaint proceedings before FMC alleging that an NVOCC has discriminated by offering one shipper an NRA and declining to offer an NRA to another or with respect to terms offered in different NRAs, there exists the possibility for “nuisance disputes,” breach of confidentiality of NRA terms, etc. They argued that the notion of discrimination may be irrelevant where NRAs are concerned because by nature the NVOCCs will be discriminating, on shipper by shipper basis.
FMC’s Role in Disputes Between Shippers/NVOCCs on NRAs Is Unclear
One commenter stated that the role FMC would play in settling disputes between shippers and NVOCCs involving NRAs was unclear and wondered whether such disputes would be settled only under contract law as requested by NCBFAA in its petition.
FMC Says Proposed Rule Still Under Consideration and Is "Overdue"
Sources at the FMC state that the proposed rule and the comments received are still under consideration. On January 19, 2011, FMC Commissioner Khouri noted that the final rule on the rate tariff exemption was "overdue." (See ITT's Online Archives or 01/27/11 news, 11012715, for BP summary.)
1The proposed regulation would recognize a NVOCC NRA 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).