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.”