FMC’s NVO rate agreement simplification moves to proposed rulemaking

The U.S. Federal Maritime Commission voted to move forward with issuing a notice of proposed rulemaking in the Federal Register calling for industry feedback into simplifying the agency’s rules and procedures for NSAs and NRAs.    The U.S. Federal Maritime Commission (FMC) on Wednesday voted to move forward with issuing a notice of proposed rulemaking in the Federal Register calling for industry feedback into simplifying the agency’s rules and procedures for non-vessel-operating common carrier (NVO) service arrangements (NSAs) and negotiated rate arrangements (NRAs).
   “I am pleased that the Commission has taken this step to move forward on a petition to reduce unnecessary regulatory burdens that increase complexity and costs in America’s ocean supply chain,” said Acting FMC Chairman Michael A. Khouri in a statement following the commission meeting.
   “Ultimate adoption of these rules will makes NSAs and NRAs more useful for consumers in the marketplace. Additionally, I hope to receive more comments on whether the rule could go further, as requested by NCBFAA in their petition, to expand the NRA to utilize non-rate commercial terms,” he said.
   NRAs are negotiated between NVOs and their shipper customers. The FMC published its regulations allowing NRAs in March 2001 and were amended in July 2013. However, the final rule excluded the ability to modify the arrangements after the initial shipment was tendered.
   The National Customs Brokers and Forwarders Association of America (NCBFAA) filed a petition (P2-15) with the FMC in April 18, 2015, calling for the commission to revise its regulations to allow for NRAs to include economic terms beyond rates, such as surcharges, credit terms, minimum quantities, forum selection and arbitration clauses, and be modified any time upon mutual agreement between an NVO and shipper.
   In addition, the petition requests eliminating the filing and essential terms publications requirement of NSAs or eliminate Part 531 in its entirety.
   The FMC Regulatory Reform Task Force in March identified P2-15 as an immediate objective to address burdensome, unnecessary and outdated directives.
   “The OTI (ocean transportation intermediary) commenters have made a substantial case that continuing the filing requirement for NSAs does not appear to offer any regulatory benefit. From staff’s view, our experience indicates that NSAs have been largely beneficial and not a source of competitive abuses or malpractice. NCBFAA correctly points to the absence of a larger base of shippers (BCOs) utilizing NSAs as an indicator that more needs to be done,” said Peter King, FMC’s deputy managing director, in a prepared statement to the commission.
   “In removing the NSA filing and essential terms publication requirements, the commission seeks to preserve the current range of pricing and contracting choices among those NVOs offering NSAs, while eliminating the attendant filing and publication costs,” he added. “Regulatory relief is likely to make NSAs a more attractive pricing and contracting tool and thereby encourage increased use of NSAs. NVOCCs preferring the flexibility of including both service and rate-related items in their contract offerings can readily use NSAs, provided they are relieved of the [tariff] filing and publication burdens of same.”