FMC approves changes in service contract, NSA regulations

Federal Maritime Commission Acting Chairman Michael Khouri said the
change will eliminate requirements that were obstacles to efficiency
and added unnecessary costs.



The Federal Maritime Commission (FMC) voted unanimously this week to
amend its rules involving service contracts entered into between
liner companies and shippers, and similar contracts called NVOCC
Service Arrangements (NSAs) between NVOCCs and shippers.
The FMC said the action will "ease regulatory burdens and make the
agency’s rules more consistent with how the ocean shipping business
is now practiced."
Both the World Shipping Council (WSC), the trade organization for
major liner companies, and the National Customs Brokers and
Forwarders Association of America (NCBFAA), many of whose members are
NVOCCs, had supported the rule changes.
“We are very pleased the commission has now taken action,” WSC
President John Butler said. “It’s really a matter of evening-out
the paperwork.”
Today, if there is a commercial agreement to amend an agreement
between a carrier and shipper - a change in rates, a new commodity or
new port pairs - cargo cannot be moved until a filing is made with
the FMC.
Although the new regulation has yet to be published, Butler said
the press release from the FMC announcing the change indicated how
once a commercial agreement is reached, the parties will be able to
immediately implement it and then do the filing within 30 days.
NCBFAA spokesman Tom Mathers said the association had been "very
supportive" of the changes and was hopeful that it was the first of
other changes the FMC will make to help the industry.
Edward Greenberg, transportation counsel to the NCBFAA, explained
how in the past, changes had to be filed before the contract or
amendment was filed with the agency. "If you have lots of customers
and lots of contracts, and every time you want to make a change you
have to file those amendments, it becomes very difficult without
significant lead time to get that accomplished," he said.
"It removes an important obstacle to the amendment of service
contracts," Greenberg added. "The industry is rather dynamic in terms
of pricing, so rates are changing all the time, but if you have to go
through the filing process before you can make a rate change, then
things get delayed."
FMC Acting Chairman Michael Khouri said, "The Commission examined
regulatory requirements for service contracts and NVOCC Service
Arrangements in light of current commercial practice and has
eliminated a number of burdensome regulatory requirements that served
as obstacles to efficient ocean transportation arrangements, added
unnecessary transactional costs, and served no regulatory purpose."
Khouri said the action was "consistent with recent executive
orders highlighting the benefits of reducing unnecessary and costly
regulations. I am committed to continuing to identify rules that are
outdated, or impede the efficient operation of business, and
eliminating them whenever possible."
FMC Commissioner Rebecca Dye said the vote was in the spirit of
President Trump''s Executive Order on Reducing Regulation and
Controlling Regulatory Costs and "an important first step toward
eliminating unnecessary regulatory of compliance costs from our
international supply chain." Dye also said, "Of equal importance, the
rule will increase commercial flexibility in freight transportation
for American exporters and importers."
FMC Commissioner William Doyle said, "This regulatory adjustment
will help expedite commerce through streamlining the contractual
relationship between carriers, NVOCCs and shippers."
The FMC said the rulemaking (Docket No. 16-05) is the first
comprehensive review of the FMC''s service contract regulations in
part 530 since promulgating the implementing rules pursuant to the
1998 Ocean Shipping Reform Act and first substantive revision to
NVOCC Service Arrangements since being introduced in 2005.
FMC said the rulemaking makes the following key changes to its
regulations:
• It allows the filing of sequential service contract amendments
with the FMC within 30 days of the effective date of an agreement
between a shipper and carrier;
• It allows up to 30 days for filing NVOCC Service Arrangement
Agreements with the FMC after their effective date;
• It allows additional time to correct technical data
transmission errors from 48 hours to 30 days;
• And, it extends the period in which one can file a service
contract correction request from 45 days to 180 days.
The FMC said text of the final rule should be available on the
Commission’s website soon. Greenberg said that will clarify whether
the regulators'' changes go into effect immediately or if there is a
waiting period.
Mathers noted that on March 3, NCBFAA leaders - President Geoffrey
Powell, Legislative Representative Jon Kent, Transportation Committee
Chair Jan Fields and Greenberg - spent two hours discussing areas for
improving regulations with Khouri.
Greenberg said there are a number of reforms NCBFAA would like
implemented.
These include “total elimination of NVOCC rate tariffs,” or, if
the FMC is unwilling to take that step, expansion of exemptions for
Negotiated Rate Arrangements (NRAs). "NRAs are written and binding
arrangements between a shipper and a licensed NVOCC to provide
specific transportation service for a stated cargo quantity, from
origin to destination, on and after a stated date or within a defined
time frame," the FMC said. "If an NVOCC uses NRAs and meets the
conditions below, it need not publish that rate in the tariff it
makes available to the public.”
The NCBFAA would also like the FMC to eliminate the obligation of
NVOCC''s to file NSAs or publish essential terms.
The written decision from the FMC will state whether the changes
approved by the FMC will go into effect immediately or not.
Neither Butler or Greenberg thought the rule will lead to any
increase in volatility in freight rates.
"The market is what determines rates," Greenberg said. "The point
of this is that the commission''s regulations should not get in the
way of what the market is."