NSAs slow on uptake, but expected to take off in 2007

NSAs slow on uptake, but expected to take off in 2007    Non-vessel-operating common carriers have been slow to enter confidential service arrangements with their shipper customers, but a federal regulator and industry analysts anticipate these arrangements will gain momentum by 2007.
   Out of 3,398 NVOs operating in U.S. international trades, only 351 have registered with the U.S. Federal Maritime Commission to become NVO service arrangement (NSA) filers. Of that group, only 53 NVOs have actually filed NSAs with the commission. As of Feb. 14, the FMC received 222 original NSAs and 144 amendments to those contracts.
   “Three NVOCCs are responsible for almost half of those contracts,” said FMC Commissioner Harold J. Creel Jr. at the International Transportation Management Conference in Houston on Monday.
   Ocean carriers have been filing confidential service contracts with the FMC since the implementation of the 1998 Ocean Shipping Reform Act. Last year, ocean carriers filed 46,809 original service contracts and 236,921 service contract amendments.
   Between July 2003 and March 2004, a handful of large NVOs, the National Industrial Transportation League and Transportation Intermediary Association filed petitions asking the FMC to use its section 16 exemption authority in OSRA to allow NVOs to enter confidential service contracts similar to ocean carriers. The commission adopted the NSA rule, effective Jan. 19, 2005.
   Creel attributed the slow take off of NSAs within the NVO industry to the “newness of the concept” and pending litigation in the court of appeals that questioned the FMC’s authority to grant NVOs the privilege to enter NSAs.
   “Another possibility is that NVOCCs are waiting until they complete their negotiations with ocean carriers for service contracts for the 2006 season,” Creel added. “These arrangements will generally become effective on May 1.
   “Until those contracts are locked in, some NVOCCs may not know what terms they can negotiate with their shipper customers,” he said. “I expect that next year at this time the number of NSAs will have increased significantly.”
   The FMC commissioner believes “large integrators will go head-to-head with vessel operators for high-value commodities in certain trades.” He cited the recent report by IBM Consulting Services that affirms this.
   “I don’t believe (integrators) came to the FMC seeking to offer NSAs if they weren’t going to use them,” Creel said.
   Industry experts generally agreed with the FMC commissioner that NSAs will begin to take off by 2007 as a means for large NVOs in particular to conduct business with shippers.
   “We see NVOs behaving in a whole different way,” said Garry Mansell, managing director of U.K.-based Freight Traders, and former chairman of the European Shippers’ Council. “The market place is shifting to a system that is much more free.”
   The big question is “can the NVO uncommoditize itself” to be able to enter NSAs? said Tom Craig, president of consulting firm LTD Management. “Shippers aren’t going to want just the rate. They’re going to want the service that goes along with it.”