Lawyer Carlos Rodriguez offers insight on Federal Maritime Commission and hours-of-service regulations and opportunities in e-commerce.
The following is a short, to-the-point summary of recent developments that impact transportation intermediaries. Some can be implemented simply without fanfare. Others bear careful monitoring.
The Federal Maritime Commission recently passed new regulations related to Negotiated Rate Arrangements (NRAs), and NVOCC Service Arrangements (NSAs) that require some simple implementation but little else. The Federal Motor Carrier Safety Administration has amended hours-of-service regulations that provide for strict usage of electronic logging devices (ELDs) and a corresponding obligation for those who select motor carriers for transport. Last but not least, where is the transport intermediary industry headed in the evolving e-commerce revolution?
1. Implementation of New FMC NRA/NSA regulations. The first and only FMC technical requirement for implementing NRAs and NSAs is that there be a provision in the NVOCCs rules tariff that indicates that they will use NRAs/NSAs exclusively or in tandem with publishing rates. On the NRA side, the only formulaic requirement is that the exact following statement (in “uppercase and bold font”) be included in the collection of communications, usually emails, that result in NRAs: “THE SHIPPER’S BOOKING OF CARGO AFTER RECEIVING THE TERMS OF THIS NRA OR NRA AMENDMENT CONSTITUTES ACCEPTANCE OF THE RATES AND TERMS OF THIS NRA OR NRA AMENDMENT.”
This is somewhat a regulatory overreach, but this statement on the emails and/or other documents that result in the final NRA is easy enough to provide. As a precautionary measure, we generally counsel that this statement be included in all emails under the signature block by staff that negotiates NRAs. Therefore, NRAs do not require a signature or actual assent in any manner of the NRA other than the booking of cargo. Additionally, neither NSAs nor NRAs require filing with the FMC or publishing in tariffs. A final requirement is that these records be maintained for five years.
2. The e-commerce impact on intermediaries — opportunities. According to the U.S. Department of Commerce statistics, U.S. purchasers buy at the pace of $1.2 billion a day online; this number has doubled in the last five years; and the e-commerce industry met levels in excess of $107 billion in holiday sales for online orders this year, making 2017 the first to reach the $100 billion mark.
Transportation intermediaries are uniquely positioned to participate in this disruption of business as usual and already have become significantly involved in this paradigm shift away from just servicing the brick-and-mortar business model. It is not coincidental or accidental that Amazon and other significant e-commerce companies are either directly or through subsidiaries acting as FMC licensed or registered non-vessel operating common carriers.
The successful e-commerce players quickly have determined that their revenue streams are not only concentrated on the electronic marketing of products in the United States and other consumer markets. They quickly have focused on the other revenue streams commencing with transport from Asian supplier points to consolidation hub centers in Asia, usually in Hong Kong, or in the PRC.
The Asian hub consolidation centers are significant revenue centers in and of themselves, and, of course, there is the transport stream from the consolidation hubs to the consumer markets in the United States, Europe and other market centers. The more obvious area of interest to intermediaries should be their participation with the fulfillment service process in the U.S., Europe and other major consumer regions.
The intermediary opportunities are quickly developing in the following areas:
• The fulfillment service center areas. We have seen transport intermediaries immerse themselves in providing these unique services in the United States and Europe. While there are different skill sets involved in the NVOCC delivery model than there are for e-commerce fulfillment centers, there also is plenty of overlap, which creates natural efficiencies for transportation intermediaries.
Groups of NVOCCs with strategic geographic warehouse locations are considering joint services to accomplish efficient national e-commerce delivery services. Third-party IT companies are available to partner with these companies to achieve the high IT requirements for last-mile deliveries, warehouse management and customer transparency. This is an area of activitynot waiting to happen; it is already happening.
• The transport opportunities. The larger multinational logistics firms may be better suited for the purchase of ocean and air transportation to offer e-commerce companies transportation efficiencies from supplier locations to consolidation hubs to marketplace delivery fulfillment centers. However, there are various large networks of existing smaller and midsized global NVOCCs that are already in planning stages, which may bring these efficiencies into play in the not-so-distant future.
• The hub consolidation functions. While these functions are best suited for larger multinational logistics companies, we have seen a development of these functions by U.S. warehouse distribution companies with the objective of participating and fulfilling this niche.
3. Arranging motor carrier transport: How will new HOS resgulations impact property brokers and other intermediaries? MAP-21 clarified the requirement for intermediaries to obtain a property broker permit for arranging motor carrier transportation from and to port areas involving ocean transport from origin or destination inland points. These activities involve ocean and air freight forwarders, Customs brokers, NVOCCs and other entities, which act exclusively as property brokers. In any case, such intermediaries must become aware of the new HOS requirements and that motor carriers that they employ for surface transport in the U.S. are meeting the new HOS requirements.
In an oversimplification of the new HOS rules, these require that certain technical/mechanical devices be employed to measure driver activity during a 14-hour period, which must not exceed 11 hours during that period. This is an area drawing immense enforcement focus. As a result, intermediaries arranging for motor carriage have to be alert in their vetting of truckers to ensure that the motor carriers they employ are meeting these requirements.
Intermediaries, while not generally treated as carriers in court cases involving wrongful death and injury cases, do have agent duties and are responsible to act prudently in the selection of responsible motor carriers meeting the new HOS requirements.
Carlos Rodriguez is a Washington, D.C.-based partner with the law firm Husch Blackwell LLP. He practices in the international trade and supply chain group of the firm’s technology, manufacturing and transportation industry team.