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US regulators move to ease NVOCC contracting rules

Last update on Nov. 17, 2017.

US regulators move to ease NVOCC contracting rules

US regulators move to ease NVOCC contracting rules
Published on JOC.com (https://www.joc.com) Joseph Bonney, Senior Editor | Nov 09, 2017 6:58PM EST
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The US Federal Maritime Commission is proposing three policy changes that NVOCCs have championed.
US maritime regulators have proposed changes designed to make it easier for non-vessel-operating common carriers (NVOCCs) to provide negotiated rate and service arrangements.
NVOCCs cheered the unanimous vote by the Federal Maritime Commission (FMC) to issue a notice of proposed rulemaking in response to a 2015 petition by the National Customs Brokers and Forwarders Association of America. The commission vote sets the stage for solicitation of public comments.
The FMC’s acting chairman, Michael A. Khouri, said the proposed changes will make it easier to offer negotiated service arrangements (NSAs) and negotiated rate arrangements (NRAs), both of which were created to allow NVOCCs to contract with beneficial cargo owners.
“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,” Khouri said.
The latest proposed changes are the most recent step in transportation intermediaries’ long effort to mesh the commercial requirements of NVOCCs, which handle more than one-third of US container volume, with the landmark Ocean Shipping Reform Act of 1998 (OSRA).
OSRA allowed ocean carriers and shippers to sign confidential service contracts instead of having to make their contracts’ essential terms public. But in the political horse-trading that preceded the act’s passage, NVOCCs were prohibited from confidential contracts.
As NVOCCs have expanded their market share, pressure to ease restrictions on their ability to offer customized rate and service packages has increased.
In 2004 the FMC authorized NSAs. These provided NVOCCs with the functional equivalent of shipper-carrier service contracts, but the agreements still had to be published and filed with the commission.
In 2011, the FMC went a step further by authorizing NRAs, which quickly overtook NSAs in popularity. NRAs do not have to be published, but cannot include credit and payment terms, rate methodology, minimum quantities, dispute forum selection or arbitration clauses, or other non-rate economic issues.
At its meeting Wednesday, the FMC proposed three changes: to end requirements that NSAs be filed with the commission, to make it easier for NVOCCs and shippers to amend NRAs, and to allow NRAs to be take effect when the cargo is tendered instead of requiring the contracting party’s signature.
Khouri said the notice of proposed rulemaking to be published soon in the Federal Register will include a request for comments on the changes, as well as for whether the commission should expand NRAs by allowing them to include non-rate economic terms.
Richard Roche, vice president, international transportation, at Mohawk Global Logistics, praised the proposed changes, and urged NVOCCs to support the simplified regulations and the inclusion of commercial terms within NRAs.
“With both NSAs and NRAs made easier to use, and more reflective of actual business practices, the FMC is providing two greatly improved alternatives to the ages-old and outdated practice of tariff filing,” he wrote in a note to clients.
NSAs are attractive for NVOCCs that contract with high-volume clients that require minimum volume commitments and other essential terms. The simpler NRAs often are used for low-volume or one-off moves.
The commission’s proposed changes for NRAs would allow them to be modified by mutual agreement instead of having to be scrapped and refiled, and would allow them to be accepted by booking instead of requiring a shipper’s written acceptance.

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