China Implements NVOCC "Freight Rates" Filing Rules

Freight Rates Filing Effective Oct 1, But with 60-Day Grace Period

The Implementing Rules were scheduled to take effect on October 1, 2010, with a sixty day transitional period that ends on approximately November 29, 2010.

Under the Implementing Rules, NVOCCs are required to file freight rates in accordance with Article 20 of the Regulations of the People’s Republic of China on International Maritime Transportation.

Overview of Implementing Rules

According to the National Customs Brokers and Forwarders Association of America Inc. (NCBFAA), which states it is working with the Federal Maritime Commission (FMC) to rescind the rules, the Implementing Rules impose the following requirements:

Licensed entity should file. The Chinese legal entities with NVOCC license and the foreign enterprises licensed for NVOCC business at the Chinese ports are the obligors of freight filing.

“Range of rates” must be filed. A NVOCC should file the range of ocean freight rates (i.e. maximum rates and minimum rates of the public quotes) of exported containerized goods carried from China’s ports to foreign base ports.

NVOCC to decide range. A NVOCC may decide the range of freight rates based on its own conditions and business scope; however, the range to be filed should be normal and reasonable, and higher than the negotiated rates concluded with liner companies.

Range of rates may be adjusted. A NVOCC may at its own discretion adjust the range of freight rates. The filed range of tariff rates shall take effect thirty (30) days after the date upon which the range is accepted for filing. However the first filed range of freight rates after these Rules’ entry into force shall immediately become effective on the date of acceptance.

Submissions to Shanghai Shipping. Shanghai Shipping Exchange is designated as the agency accepting the freight rates filing. The filing should be in the format developed by Shanghai Shipping Exchange and accepted for filing by the Ministry of Transport.

In addition, Shanghai Shipping Exchange should develop the operational guidelines for NVOCC freight filing in light of this Implementing Rules and provide the relevant technology service.

Confidentiality of filing. Shanghai Shipping Exchange and its staff members must properly keep the filed freight information without prejudice to any commercial confidentiality.

Supervision and inspection. All the provincial authorities in charge of traffic and transport as well as port and shipping affairs shall reinforce their supervision over their local international maritime transport market and strengthen the on-site inspection. Any enterprise in breach of the Regulations shall be subject to rectification within a certain time limit and the case shall be reported to the Ministry of Transport.

Penalties for failure to comply. The NVOCC shall, in case of failure to go through filing formalities or apply the freight rates as filed, be required to rectify within a certain time limit and a fine of no less than RMB20,000 but no more than RMB100,000 shall be imposed.

Investigation of unfair competition. Where the filed freight rates go beyond the normal and reasonable scope, or are lower than the negotiated rates level concluded with liner operators, or seriously deviate from the average level of the filed rates by the operators of the same scale offering the same service that may impair the market fair competition, the Ministry of Transport will conduct an investigation. During the investigation, the NVOCC in question shall faithfully provide the investigatory authorities with all the transport documents, freight invoices, service contracts, account billings and other relevant materials of each voyage without any refusal, concealment or misstatement.

Penalties for non-cooperation in investigation, unfair competition. In case of refusal of investigation or unfaithful providing materials, the NVOCC in question shall be required to rectify and a fine of no less than RMB20,000 but no more than RMB100,000 shall be imposed.

In addition, the Ministry of Transport will adopt restrictive or prohibitive measures such as ordering to amend relevant agreements, limiting the frequency of liner services, suspending the application of freight rates, or stopping for the time being the filing of freight rates, or ordering to submit relevant materials on a regular basis towards the NVOCC whose business conducts impair the fair competition.

(China states that the NVOCC industry is an important component of China’s international maritime businesses. A NVOCC accepts the cargo of the shipper as the carrier, collects the freight charges and bears the responsibilities of the carrier. Based on the business characteristics and market supply and demand conditions of non-vessel shipping industry, a NVOCC should issue its own bills of lading or other transport documents and provide corresponding transport services based upon its own operational cost.

A NVOCC should charge normal and reasonable freight rates and any cargo soliciting by “zero” or “negative” freight rate is prohibited.)

(See ITT’s Online Archives or 05/07/10 news, 10050749, for BP summary of FMC proposed rule to create a voluntary exemption from the requirement to publish rate tariffs, if the NVOCC agrees to Negotiated Rate Arrangements (NRAs) with their shippers. FMC has stated that this change would relieve U.S. licensed NVOCCs from the cost and burden of rate tariffs publication. Publication of rule tariffs would continue to be required. In addition, any NVOCC failing to maintain its bond or license, or who has had its tariff suspended by the FMC, would not be eligible for NRA exemptions.)

NCBFAA summary of Implementing Rules available by emailing documents@brokerpower.com