NCBFAA Urges FMC to Reopen NVOCC NRA Exemption Rule
On April 12, 2011 the National Customs Brokers and Forwarders Association of America, Inc. sent a letter to the Federal Maritime Commission stating that more work is needed to ensure the benefits of FMC's final rule to exempt licensed non-vessel operating common carriers (NVOCCs) from the rate tariff publication requirements of the Shipping Act of 1984, if they agree to negotiated rate arrangements (NRAs) with their shippers.1
Says Proceeding Should be Immediately Reopened to “Complete the Job”
Although NCBFAA states that the final rule’s exemption will result in a significantly more efficient and competitive environment for NVOCCs and their customers, it believes that there is more work to be done. The benefits of the exemption have been mitigated by the retention and/or imposition of unnecessary restrictions.
NCBFAA requests that the FMC immediately reopen its proceeding to complete the job started by the final rule. NCBFAA realizes that FMC is planning to further examine some of the issues raised in the final rule, but it is worried that waiting will not give FMC the additional information it needs on the nature of the relationship between NVOCCs and the other members of the shipping industry, how the exemption is working, and how the remaining barriers to efficient operations are unnecessary and irrelevant.
Reconsider Exclusion of Foreign NVOCCs, Limits on GRIs & Other Terms in NRA, Etc.
According to NCBFAA, the benefits of the final rule’s exemption would be substantially enhanced if the FMC reconsidered the following issues:
Exclusion of foreign NVOCCs. NCBFAA urges FMC to immediately begin the process FMC stated it would undertake to consider whether to extend the NRA exemption to foreign-based registered, unlicensed NVOCCs. While FMC staff believes that the possibility of retaliatory discrimination against U.S.-based NVOCCs operating in foreign countries may be speculative, and that foreign companies can easily circumvent the restriction by opening offices in the U.S., NCBFAA does not agree. It believes that China, at least, has mirrored the FMC’s implementation of the Shipping Act as its model for regulating carriers and NVOCCs alike and that it is just a matter of time before China reacts and imposes the same or greater disadvantages for U.S. licensed NVOCCs doing business in China. It adds that FMC concerns about access to foreign-based NVOCC records are unjustified as FMC has ample authority to ensure its requests for records are not foreclosed (by blocking statutes, increasing bonding requirements, etc.)
Limits on including certain economic issues. Although the parties are currently able to agree on including surcharges and accessorials in NRAs, the same is not true for general rate increases (GRIs). NCBFAA states that precluding NVOCCs and their customers from covering this topic in an NRA reduces the value of the exemption and seems arbitrary. Additionally, NCBFAA finds it difficult to understand why an NRA should not include items such as credit, minimum quantities, penalty provisions, and similar economic terms if the shipper and NVOCC agree.
Modification. According to NCBFAA, virtually every commenting party agreed that one of the significant purposes of the exemption was to give NVOCCs and their customers the flexibility to respond to today’s dynamic marketplace as many fundamental components of rates change daily if not hourly. Therefore, it disagrees with the final rule’s restriction against modification of NRAs. It believes that the party most likely to be punished by the restriction against modification is the shipper, since its NVOCC service provider would be unable to reduce its rates in response to more attractive vessel operator rate offerings even if it wished to do so. It is not clear to NCBFAA how this restriction, which it believes is even more rigid than would be the case if the rates were memorialized in tariff form, benefits anyone.
Discrimination provisions. NCBFAA states that as is the case with service contracts and NSA, the purpose of the NRAs is to give the shipper and the carrier the ability to negotiate individualized rate offerings on a one-on-one basis. Since the FMC properly found that the NVOCC industry is highly competitive, the reluctance to exempt NVOCCs from the discrimination provisions of sections (10(b)(4) and 10(b)(8) of the Shipping Act when they have negotiated rates with their customers is outdated. If the shipper wants to consider moving its traffic under a regulatory scheme that includes rate tariffs and these antidiscrimination provisions, it need not enter into an NRA. NCBFAA believes that limiting the scope of the exemption just imposes burdens on those shippers for whom these sections are functionally irrelevant.
FMC’s procedure. The association also raised concerns about FMC’s deliberative process, as it seems to NCBFAA that some staff members have taken on an advocacy role. It suggests that staff views should be made on the public record, that staff participate as a party to proceedings in which some office or bureau apparently has strong views and is actively advocating specific results, and/or that staff concerns and objections be clearly articulated in notices to the public to permit interested parties to address staff positions in their comments.
1Note that FMC’s rulemaking was in response to a petition filed by NCBFAA.
(See ITT’s Online Archives or 03/02/11 news, 11030233, for BP summary of the FMC’s final rule.
See ITT’s Online Archives or 04/19/11 news, 11041931, for BP summary of FMC guidance on the final rule.
See ITT’s Online Archives or 04/08/11 news, 11040819, for BP summary of FMC withdrawing the requirement that NVOCCs amend their Form FMC-1 to provide notice they are using NRAs.
See ITT's Online Archives or 02/24/11 news, 11022420, for BP summary of NCBFAA listing limitations of the FMC's final rule, etc.
See ITT's Online Archives or 02/09/11 news, 11020924, for BP summary of comments submitted by the trade on FMC's NRA proposed rule)
Copy of letter is available by emailing documents@brokerpower.com.