On November 8, the Federal Maritime Commission (FMC) issued a Notice for Proposed Rulemaking regarding modifications to NVOCC Service Arrangements (NSAs) and Negotiated Rate Arrangements (NRAs).
NSAs will continue to serve as basic agreements between NVOCCS and their customers for comprehensive longer-termed ocean transport agreements with provisions similar to those included in ocean carrier service contracts, with two basic differences:
- NSAs and amendments are no longer required to be filed with the FMC in order to take effect.
- Essential Terms are no longer required to be published in an Essential Terms tariff.
NSAs would thus take the shape of traditional shipping agreements with a minimum of regulatory overlay. “This move will make NSAs even more attractive,” stated Rich Roche, Vice-President of Mohawk Global Logistics, who attended the FMC open meeting that led to the proposed Notice, “the 30-day effective date rule for implementing new rates and increasing existing rates will never be triggered if there is no filing requirement because the filing date is what starts the clock for the wait period.” This is an area that needs to be watched when the final rules come out after November 17, 2017.
NRAs: NRAs terms would now:
- Include that quotes are considered accepted by a shipper through the act of booking/tendering cargo after an agreement is reached on the quotations made by the NVOCC. The written acceptance of quotes will be removed to stay more in line with actual commercial practices.
- May be amended by agreement of the parties versus having to terminate and reinitiate a new agreement.
- Include additional services and other terms to expand their service scope with respect to “non-rate economic terms” (this last qualification appears to still have some regulatory tone to it). We will need to watch this carefully when the final rules are proposed, and comments should be prepared in the event that these appear to be too restrictive.
The acceptance of an NRA via a booking and the amendment allowance are welcomed departures from prior regulatory positions taken by the FMC, however the limitations noted in item three, may make NRAs unappealing depending on the language which is finally adopted in this regard.
What it Means: The FMC will be taking final steps to adopt the proposed Notice for issuance and publication in the Federal Register. Acting FMC Chairman Khouri directed that the Notice be amended to allow for public comments on whether the FMC should expand the NRA exemption allowing inclusion of “non-rate economic terms” in NRAs. The amended Notice is to be circulated to the FMC for consideration and vote by Friday, November 17.
Next Steps: NRA and NSA structures are beginning to look somewhat alike. Ultimately, an acceptable structure (whatever it is called) is likely to incorporate all of the above features, creating a more normal (non-regulated) contracting environment with minimum government interference. If the FMC’s final rules make NRAs somewhat more restrictive than NSAs, then NVOCCs and shipper customers will likely move to exclusive use of NSAs in order to avoid arbitrary regulatory overview that may exist under an NRA. The short side of NSAs, though, might still be whether a signed document will be required initially. However, If NSAs are to follow service contracts, amendments to NSAs would not require a signed document.