FMC Issues Final Rule to Amend NVOCC Regulations

The Federal Maritime Commission (FMC) has issued the final rule for its Docket No. 17-10, “Amendments to Regulations Governing NVOCC Negotiated Rate Arrangements and NVOCC Service Arrangements” and set an effective date of August 22, 2018. This final rule will simplify requirements for using NVOCC Service Arrangements (NSAs) and NVOCC Negotiated Rate Arrangements (NRAs). These are optional alternatives to the FMC tariff rate filing requirements for non-vessel operating common carriers (NVOCCs).

With this action the FMC will make NVOCC Service Arrangements (NSAs) easier and less costly to use. An NSA is a written contract between an NVOCC and its shipper customer. The terms and freight rates provided in each NSA are unique to the named NSA shipper, and may be subject to the NVOCC’s tariff rules and surcharges. The revised FMC regulations continue to authorize the use of NSAs as an alternative to tariff rate filing. In the past, FMC required each NSA to be filed into its SERVCON database. Under the new regulations the SERVCON filing requirement and the requirement for the publication of NSA essential terms are eliminated. Instead, FMC will implement an ‘honor system’ for NSAs. NVOCCs who use NSAs must continue to prepare each NSA in the manner required by FMC’s regulations as provided 46 CFR Part 531 and must keep careful records of each NSA and shipper acceptances for five (5) years for FMC review and audit.

To make the NVOCC Negotiated Rate Arrangement (NRA) option more useful to NVOCCs FMC’s regulations as provided in 46 CFR Part 532 will be updated to implement three key changes: allowing NRAs to be amended by the NVOCC at any time before cargo moves; allowing the inclusion of non-rate economic terms; and, allowing an NVOCC to provide for shipper’s acceptance of the NRA by booking a shipment. NVOCCs who offer NRAs are required to keep records of each NRA for FMC review and audit for five (5) years. An NRA documents the NVOCC’s selling rates for shipments of a specific cargoes, and acts as a substitute for tariff rate filing. The rates provided in an NRA are unique to the named NRA shipper.

The changes to FMC’s regulation of NRAs made by Docket 17-10 simplify the regulations and remove two of the key reasons why many NVOCCs have not utilized these in the past. The first reason is NRA amendments will be allowed; previously, the FMC regulations prohibited NRA amendments, and for most NVOCCs this limited the use of NRAs to single shipments. The second reason is a separate written agreement by the NRA shipper to each NRA will no longer be required, provided the NVOCC includes this statement on its NRA in bold font and all uppercase letters: “THE SHIPPER’S BOOKING OF CARGO AFTER RECEIVING THE TERMS OF THIS NRA OR NRA AMENDMENT CONSTITUTES ACCEPTANCE OF THE RATES AND TERMS OF THIS NRA OR NRA AMENDMENT.”

The final rule in Docket No. 17-10 makes no changes to the existing FMC tariff regulations which are provided in 46 CFR Part 520. It will apply only to the NSA and NRA options. NVOCCs who prefer to continue to file tariff rates to comply with FMC’s regulations may do so. For some NVOCCs, tariff rate filing will continue to be the most efficient process for FMC compliance because the NSA and NRA options would require them to implement new processes and new documents which would add new costs.

FMC Collects USD 618,000 in Penalty Payments

The Federal Maritime Commission (FMC) announced it has recently entered into compromise agreements with eight non-vessel-operating common carriers (NVOCCs), recovering a total of USD 618,000 in civil penalties. The agreed penalties resulted from investigations conducted by the Commission’s Area Representatives in Houston, and New York/New Jersey, and by Washington D.C. headquarters staff. These eight NVOCCs paid penalties but did not admit to violations of the Shipping Act or Commission regulations.

The alleged violations and the NVOCCs who were penalized are as follows. The links under each NVOCC’s name provide the full text of the compromise agreements, and the penalty amounts paid by each. Each of these NVOCCs cooperated with the FMC and terminated the practices that are the basis of the alleged violations set forth herein and has committed to maintain measures designed to eliminate such practices in the future.

Separate compromise agreements were entered with Blue Cargo Group, LLC, of Miami, FL, and Trans Orient Express, Inc., of Los Angeles, CA, both licensed NVOCCs; and with Bondex Logistics, Inc., a registered NVOCC based in the People’s Republic of China. It is alleged that each of these unrelated NVOCCs knowingly and willfully obtained transportation at less than applicable rates and charges by improperly utilizing rates contained in service contracts limited to certain named shipper accounts for unrelated shipments of cargo. The compromise agreement with Bondex Logistics also alleged that it provided service in the liner trade that was not in accordance with its published tariff.

The compromise agreement with Jiangsu Feiliks International Logistics, Inc., a registered NVOCC located in the People’s Republic of China, alleged that it knowingly and willfully allowed another NVOCC to access its service contracts and thereby unlawfully permitted a non-contract party to enjoy the benefits of service contracts contrary to the terms of its contract with the respective ocean common carrier.

A compromise agreement with North Star World Trade Service, Inc., of Mendota Heights, MN, a licensed NVOCC and freight forwarder, alleged that it operated without a Qualifying Individual (QI) for a period in excess of one year; this does not comply with FMC’s licensing regulations which require the application for a replacement QI to be submitted to the Commission within 30 days after the previous QI terminates his or her employment with the licensee.

Separate compromise agreements with licensed NVOCCs Walmay Logistics, Inc., of Diamond Bar, CA; Prime Shipping International, Inc. dba Prime Agency, of City of Industry, CA; and SWAT International, Inc., of Jamaica, NY, alleged that each of these unrelated NVOCCs knowingly and willfully obtained transportation at less than applicable rates and charges by unlawfully accessing service contracts to which they were not a party. The compromise agreements also alleged that each provided transportation in the liner trade that was not in accordance with its published tariff.

Transpacific Eastbound Carriers File GRIs Effective August 15 and September 1, 2018

Several carriers updated their respective tariffs to include new General Rate Increases (GRIs) effective August 15, 2018, including APL, CMA CGM, COSCO, Evergreen, Hapag Lloyd, Hyundai Merchant, Ocean Network Express, and Yang Ming. See table below for GRI amounts per 40ft container; GRI amounts for all other container sizes are as per formula. The August 15th GRIs will be the fifteenth GRI of 2018 for the East Asia/USA trade lane.

Note 1: COSCO GRIs apply on all cargo moving under service contracts only.

Some carriers updated their respective tariffs to include new General Rate Increases (GRIs) effective September 1, 2018, including APL, CMA CGM, COSCO, Evergreen, Hapag Lloyd, Hyundai Merchant, and One Network Express, and Yang Ming. See table below for GRI amounts per 40ft container; GRI amounts for all other container sizes are as per formula. The September 1st GRIs will be the sixteenth GRI of 2018 for the East Asia/USA trade lane.

Note 1: COSCO GRIs apply on all cargo moving under service contracts only.

Each carrier maintains its own tariffs and controls its own pricing.