Reminder: FMC’s Final Rule on NVOCC Rate Tariffs Exemption is Effective April 18

Highlights of Final Rule

The following are highlights of the final rule:

Licensed/Bonded NVOCCs Exempt from Tariff Rate Publishing if Conditions Met

The final rule exempts duly-licensed and bonded NVOCCs from the tariff rate publication and adherence requirements of the Shipping Act of 1984 (see list below) as long as they meet the following requirements:

Free electronic access to rules tariffs. An NVOCC must provide electronic access to its rules tariffs to the public free of charge prior to entering into an NRA with a shipper.

Ensure NRA requirements are met. For the exemption to apply, the NRA must:

• be in writing;
• contain the legal name and address of the parties and any affiliates; and contain the names, title and addresses of the representatives of the parties agreeing to the NRA;
• be agreed to by both NRA shipper and NVOCC prior to the date on which the cargo is received by the common carrier or its agent (including originating carriers in the case of through transportation);
• clearly specify the rate and the shipment or shipments to which such rate will apply; and
• may not be modified after the time the initial shipment is received by the carrier or its agent (including originating carriers in the case of through transportation).

Indicate intent to invoke exemption. An NVOCC wishing to invoke the exemption must indicate that intention to the FMC and to the public by: (1) a prominent notice in its rules tariff and bills of lading or equivalent shipping documents; and (2) by so indicating on its Form FMC-1 on file with the Commission.

Maintain records. An NVOCC invoking this exemption must maintain original NRAs and all associated records, including written communications, in an organized, readily accessible or retrievable manner for 5 years from the completion date of performance of the NRA by an NVOCC, in a format easily produced to the Commission.

Produce records upon request. If requested, the NVOCC must promptly produce the NRAs and associated records, including written communications. All records produced must be in English or be accompanied by a certified English translation.

(Failure to keep or timely produce original NRAs and associated records and written communications will disqualify an NVOCC from the exemption and may result in a Commission finding of a violation of 46 USC 41104(1) (on false billing), 41104(2)(A) (on services not in accordance with published tariffs, service contracts, etc.) or other acts prohibited by the Shipping Act.)

NVOCCS with NRAs with Shippers Would Be Exempt from Certain Requirements

When the above conditions have been met, the final rule will exempt the NVOCC from the following requirements:

Final Rule’s Definitions

Under the final rule, the following definitions apply:

NVOCC NRA - means a written and binding arrangement between an NRA shipper and an eligible NVOCC to provide specific transportation service for a stated cargo quantity, from origin to destination, on and after receipt of the cargo by the carrier or its agent (or the originating carrier in the case of through transportation).

Rate - means a price stated for providing a specified level of transportation service for a stated cargo quantity, from origin to destination, on and after a stated date or within a defined time frame.

Rules tariff - means a tariff or the portion of a tariff, as defined by 46 CFR 520.2, containing the terms and conditions governing the charges, classifications, rules, regulations and practices of an NVOCC, but does not include a rate.

NRA shipper - means a cargo owner, the person for whose account the ocean transportation is provided, the person to whom delivery is to be made, a shippers’ association, or an ocean transportation intermediary, as defined in section 3(17)(B) of the Act (46 USC 40102(16)), that accepts responsibility for payment of all applicable charges under the NRA.

Affiliate - means two or more entities which are under common ownership or control by reason of being parent and subsidiary or entities associated with, under common control with or otherwise related to each other through common stock ownership or common directors or officers.

(The FMC also plans to initiate a process to seek additional comments on potential modifications to the final rule, especially regarding: (1) whether the rule’s exemption should be extended to foreign-based unlicensed NVOCCs; (2) whether NRAs should be expanded to include other economic terms such as credit terms, minimum quantities, etc.; and (3) whether NVOCCs using NRAs should be exempt from certain prohibitions against discriminatory practices and unreasonable preferences.)

(See ITT’s Online Archives or 03/02/11 news, 11030233, for BP summary of FMC’s final rule.

See ITT's Online Archives or 02/24/11 news, 11022420, for BP summary of NCBFAA's list of options for foreign unlicensed NVOCCs and pointing out limitations of the final rule.

See ITT’s Online Archives or 02/09/11 news, 11020924, for BP summary of the trade’s comments on the proposed rule, including the belief that the rule’s exemption should also apply to foreign-based NVOCCS.)

FMC press release, dated 03/01/11, available here.

(D/N 10-03)