FMC votes to propose rule allowing NVOs to offer service æarrangementsÆ
The U.S. Federal Maritime Commission voted Wednesday to issue a notice of proposed rulemaking that would allow non-vessel-operating common carriers to offer individually negotiated service contracts to shippers.
Meeting at FMC's Washington headquarters, the five-members commission voted unanimously to accept a recommendation of their staff to publish such a rule, which is likely to happen by the end of this week. A 15-day comment period will follow. The FMC will then finalize the rule, possibly by the end of November.
The regulation is expected to become effective no later than February, in time for the transpacific inbound contract season.
The proposed rule was developed in response to numerous petitions filed with the commission urging the FMC to grant NVOs the authority to offer service contracts, which only vessel-operating common carriers (VOCCs) are permitted to do.
The notice of proposed rulemaking would allow NVOs to offer what the FMC calls 'NVOCC service arrangements,' or NSAs.
NVOs that use such NSAs 'would be exempt from the tariff publication requirements of the Shipping Act of 1984,' the FMC said in a statement.
NVOs that 'do not wish to take advantage of this exemption would continue to be able to offer their services under published tariffs,' the commission explained.
The proposed NSA will essentially be treated like service contracts offered by VOCCs, which are filed confidentially with the FMC.
'The commission found that conditioning the proposed exemption upon the requirement that NVOs file NSAs with the commission would ensure that the agency retains adequate regulatory authority to ensure that competition and commerce are protected from market distortion and unreasonable discrimination,' the FMC said.
NVOs will only be able to enter NSAs as a carrier — not in their other capacity as a shipper.
VOCCs are able to offer or enter into service contracts collectively. However, under the proposed rule, only one NVO will be able to enter a service contract as a carrier.
The 'essential terms' of a NSA will be subject to publication requirements, just as service contracts.
The proposed rule is expected to require NVOs offering NSAs to register with the FMC in order to file their service contracts via the FMC's 'ServCon' online computer system. ServCon is an Internet-based system by which VOCCs can send copies of service contracts to the Commission as Word documents.
FMC chairman Steven R. Blust asked the commission's staff during the hearing if the system could handle a large volume of NVO-related documents. Blust was told the computer system recently 'has had a memory upgrade and is ready.'
Before VOCCs can use the 'ServCon' system, they are required to obtain a password and a user identification number. NVOs will have to do the same.
In voting to issue the proposed rule, 'the commission relied on upon Section 16 of the Shipping Act, which permits the agency to exempt any activity from the requirements of the act if the exemption will not result in substantial reduction in competition or be detrimental to commerce,' the FMC said.
'I am very optimistic that this proposal will give NVOCCs the kind of commercial flexibility they deserve,' Blust said.
'This is a positive development,' Peter Gatti, executive vice president of the National Industrial Transportation League, told Shippers' NewsWire after the commission voted. 'The NIT League had asked the commission to move quickly because of market changes in the industry.'
A spokesman for the World Shipping Council, the largest U.S. industry group representing liner carriers, said the WSC would have no immediate comment. The WSC recently indicated its support for NVOs to enter service contracts.
Every seat was taken at the hearing. There was a palpable atmosphere of expectation as the commissioners questioned the FMC's staff prior to voting. When asked by one commissioner if some NVOs today have more assets than ocean carriers, a staff member replied 'that may well be the case,' causing a ripple of laughter through the hearing room.
The vote came swiftly, 25 minutes into the public session of the FMC's meeting dealing with the NVO issue.
In other action during the public part of the FMC's meeting, the commission voted to issue a final rule in docket no. 03-15, 'Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984.'
In a closed portion of the meeting, the FMC voted to grant petition No. P5-04, 'Petition of American President Lines Ltd., and APL Co. Pte. Ltd. For a Full Exemption from the First Sentence of Section 9(c) of the Shipping Act of 1984,' as amended.
'In exercising its exemption authority ' the commission found that permitting APL to lower tariff rates in less than 30 days' notice would not result in a substantial reduction in competition or be detrimental to commerce,' the FMC said.