Federal Maritime Commission To Open Use Of Liner Negotiated Rate Agreements To Foreign NVOCCs

J. Michael Cavanaugh is a Partner in our Washington, D.C. office

The United States Federal Maritime Commission (FMC) has issued a Notice of Proposed Rulemaking under which foreign unlicensed Non-Vessel Operating Common Carriers (NVOCCs) will be allowed to register with the Commission and begin using Negotiated Rate Agreements (NRAs) with their shippers.

NRAs are simple written rate contracts (which can be concluded by email) in which a shipper and NVOCC may agree to confidential negotiated rates for carriage of cargo in U.S. trades subject to the NVOCC's rules tariff without the need for a published rate tariff or filing of the NRA with the FMC.

Ongoing Deregulation of NVOCC Tariff Rules

This latest step taken by the FMC follows a progressive deregulation of NVOCC tariff rules that began in 2005 with an exemption in Petition P3-03 et al. to permit NVOCCs to enter confidential service contracts called NVOCC Service Arrangements (NSAs) with shippers. NSAs are similar to service contracts used by Vessel Operating Common Carriers. They may contain confidential non-tariff rates, but must meet extensive content and format requirements and be filed with the FMC. The "essential terms" in NSAs (origin, destination, commodities, minimum volume, length of term) must be published in the NVOCC's tariff. This was followed in March 2011 by the FMC's initial NRA rule in Docket 10-03, which allowed use of unfiled simple written rate agreements, provided the NVOCC published and gave free access to a rules tariff and maintained transaction records for subsequent audit. The FMC further liberalized rules as to the contents of NRAs in Docket 11-22 in June 2012.

However, the FMC has previously only allowed licensed NVOCCs to use NRAs. Under FMC licensing regulations in 46 CFR Part 515, domestic U.S. NVOCCs that ship in the outbound direction must publish an ocean tariff, be bonded and be licensed, which entails submission of detailed corporate information covering ownership, officers and directors and designating a "Qualifying Individual" with three years of requisite ocean transport intermediary experience. Foreign NVOCCs may ship into the United States without a license, provided they publish a tariff and are bonded. FMC staff took the position that the Commission lacks sufficient jurisdiction and control over foreign unlicensed NVOCCs and their offshore records to regulate them properly as to use of unfiled NRAs.

The industry, including shippers, carriers...