New FMC rule a big step for NVOCCs

By: | at 08:00 PM | Channel(s): International Trade  Logistics  

They receive exemption from tariff filing, may enter into “negotiated rate agreements”By Peter A. Buxbaum, AJOTAfter several months of proposed rulemaking, consideration of public comments, and a public hearing, the Federal Maritime Commission last month published a final rule that exempts licensed Non-Vessel Operating Common Carriers from the tariff rate publication requirements of the Shipping Act of 1984. Licensed NVOCCs meeting the conditions of the final rule will be allowed to discontinue the publication of their tariff rates 45 days after the final rule was published on February 23.
The FMC’s docket on NVOCC tariffs was opened in July 2008, when the National Customs Brokers and Forwarders Association of America petitioned the commission for the exemption. The commission voted three to one to issue the final rule. Some 3,368 NVOCCs licensed in the United States will be effected by the rule, which could save NVOCCs, depending on their size, from several thousand to hundreds of thousands of dollars per year to comply with the old tariff requirements. Foreign unlicensed NVOCCs are not covered by the new rulemaking.
In lieu of filing tariffs, the commission has created a new contractual construct between NVOCCs and their customers called a negotiated rate arrangements, or NRA. The NRA is essentially a contract for cargo carriage on a spot basis for an individually negotiated rate. In order to be valid, the NRA would need to be written and signed by the parties on or before the date of receiving the cargo for loading and clearly include the freight rate applicable to the shipment. NRAs will not need to be filed with the FMC and the individually negotiated freight rates will not need to be published by the NVOCC. NRAs may cover multiple shipments.
The rulemaking also required that NVOCCs continue to publish rules tariffs containing terms and conditions governing shipments and that they provide those rules to the public free of charge.
“Exemptions are always discretionary,” noted Ed Greenberg, a partner in the Washington law firm of GKG Law and general counsel to the NCBFAA. “There is nothing in the law requiring the FMC to take this particular action.”
The overwhelming majority of comments received by the commission supported the exemption, according to a document released by the FMC. These included comments from the U.S. Department of Justice and other federal agencies, NVOCCs, steamship lines, and industry groups such as the National Industrial Transportation League.
One notable exception to the overwhelming support for the exemption came in the form of a letter from two members of Congress from Pennsylvania, Mike Doyle, a Democrat, and Tim Murphy, a Republican. They contended that the FMC lacked the authority to issue an exemption in this case. “We believe that Congress was clear in that the exemption authority granted to the FMC was to be utilized only when there is a situation where congressional deliberations are silent – and that the exemption process would be used by the agency to advance regulatory reform that does not conflict with the underlying statutory basis,” they wrote. “In the case of tariff publication, Congress carefully examined,” in the Ocean Shipping Reform Act of 1998 (OSRA), “how best to introduce a more relaxed set of regulatory requirements, while preserving public disclosure of rate information. We believe that the Federal Maritime Commission might be over-reaching in this rulemaking, where Congress has clearly articulated the framework in which the agency is to function and regulate an industry.”
FMC Commissioner Joseph Brennan, in his dissent from the final rulemaking agreed with Doyle and Murphy. He argued that Congress did not intend to allow the FMC to exempt NVOCCs from filing tariffs, and that, contrary to prevailing opinion, the practice of having NVOCCs file tariffs served a valid purpose.
“Far from being antiquated, tariffs are consistent with a 25-year trend of Congress repeatedly determining to regulate NVOs,”

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Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as [em]Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly[/em]. He was educated at Columbia University.