NCBFAA’s Efforts to Ease Regulatory Burdens on NVOs Moves Forward
The November 30, 2017, edition of the Federal Register, beginning at page 56781, announced a new Notice of Proposed Rulemaking (NPRM) that could lead to a significant loosening of unnecessary regulatory burdens on NVOCCs. As you are hopefully well aware, the NCBFAA has long been urging the FMC to use its exemption authority to end mandatory rate tariff requirements for NVOs.
Those efforts resulted initially in the FMC’s decision to permit NVOs to enter into contracts with their customers, called NVOCC Service Arrangements (NSAs), in a manner that is comparable to the service contracts that the carriers have. Subsequently, the NCBFAA’s efforts resulted in the Negotiated Rates Arrangement (NRA) exemption that made it possible for NVOCCs to avoid publishing rate tariffs. However, as both the NSA and NRA exemptions had conditions that somewhat limited their use, the NCBFAA filed, in 2015, another petition with the FMC seeking to end those restrictions.
In this new NPRM, which is entitled Docket No. 17-10, Amendments to Regulations Governing NVOCC Negotiated Rate Arrangements and NVOCC Service Arrangements, the Commission has signaled that the agency may be willing to grant most or possibly all of the relief that the NCBFAA requested. Although this is just the initial state of the process and parties still need to file comments that will persuade the Commission to issue final rules, the language of this NPRM suggests that the FMC may agree that the existing restrictions associated with the use of NSAs and NRAs are unnecessary and interfere with efficient NVOCC operations.
With respect to NSAs, the NPRM provisionally agrees with the NCBFAA’s long-standing position that there is no reason for NVOCCs to have file NSAs with the Commission or publish their essential terms in tariffs. As a result, assuming the FMC adopts the proposed rule, NVOCCs would no longer be required to file their NSAs with the FMC or publish the essential terms. Instead, to have a valid NSA, one would only need to assign a distinct number to each contract and amendment. Accordingly, the FMC has invited public comments as to whether these potential changes should be adopted.
As for NRAs, the NCBFAA requested that the FMC remove the significant limitation that precluded NVOCCs from amending them. Under the current regulation, the parties cannot amend any NRA to meet fluctuating carrier rates and surcharges even if the shipper and NVOCC agree. The Association believes that this restriction both makes little sense and limits the use of NRAs. In addition, the Association suggested that NVOCCs entering into NRAs need not insist that their customers actually sign any rate quote or other offering; as long as the customer tendered cargo in reliance on the quote, should be sufficient. The NPRM invites comments on both issues.
The NCBFAA had also requested that the Commission end the restriction that precludes NVOCCs from including economic terms other than rates in their negotiated NRAs. Under the current rules, it is not appropriate for NRAs to include minimum volumes, liquidated damages for non-performance, arbitration clauses, surcharges & GRIs, service guarantees, etc. At this point, the Commission has not included this issue in the proposed rule but has specifically invited the shipping public, particularly shippers, to provide comments on how broadening the NRA exemption in this way would be beneficial to their business.
The NCBFAA had suggested that the FMC could properly go even further with the NRA exemption and essentially eliminate any conditions or restrictions on their use. In that way, NVOCCs and their customers would have complete freedom to negotiate rates and service issues without any restrictions or filing requirements. And, if the agency agreed to do so, the NSA mechanism would no longer be necessary as NVOCCs could then properly enter into any negotiated arrangement with their customers in a completely deregulated manner. Nonetheless, although the FMC has tentatively decided not to permit NVOCCs to include other economic terms in NRAs, the fact that NSAs may no longer need to be filed suggests that the NSA mechanism could now become much more user-friendly to NVOCCs and their customers.
The Commission has, as noted above, invited comments relating to these proposals. This is an important opportunity for NCBFAA members to continue to push this agenda and, especially, to request customers to support expansion of the NRA so that they can include any and all service and rate terms. Anyone wishing to do so must submit those comments on or before January 29, 2018, by sending those either via email to email@example.com or via mail to Rachel E. Dickon, Assistant Secretary, Federal Maritime Commission, 800 North Capitol Street, NW, Washington DC 20523. In either case, make sure to include, in the subject line, “Docket 17-10, Comments on Proposed NSA/NRA Regulations.