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Signals™ Headlines - July 5, 2012

Docket No. 11-22: NVOCC Negotiated Rate Arrangement Record Keeping Rules Revised

The U.S. Federal Maritime Commission (FMC) recently issued a revision to its regulations governing the use of NVOCC Negotiated Rate Arrangements (NRAs). In a direct final rule released June 5, 2012 the FMC made minor changes to reduce the record keeping requirements imposed on NVOCCs who offer NRAs. The FMC did not make any major changes to the NRA regulations. This revision is scheduled to take effect September 10, 2012. Once effective, this rule will be codified in the U.S. Code of Regulations, Chapter 46, Part 532.

This direct final rule will eliminate a number of minor NRA record keeping requirements and is aimed at lessening the record-keeping burden on NVOCCs utilizing NRAs. This rule will eliminate the requirement for NRA numbers to be included on House Bills of Lading or equivalent shipping documents. Under this rule, an NRA with written acceptance from the NRA shipper will satisfy the FMC’s record keeping requirements. The representative titles and office address of the parties agreeing to the NRA will no longer be required on each NRA. Information on affiliates will no longer be required, and the requirement to retain “all associated records, including written communications” will also be eliminated.

All of the key aspects of the NRA option are unchanged by this ruling. NRAs must be agreed to in writing by the NVOCC and the NRA shipper. NRAs must also clearly specify the freight rate and the shipment(s) to which the rate will apply. NRAs may not be modified after the time the initial shipment is received by the carrier or its agent. NVOCCs utilizing the NRA option must continue to publish rules tariffs that comply with FMC regulations and must include a prominent notice in these tariffs regarding NRA usage. The NRA option will continue to be restricted to licensed NVOCCs in the USA. The FMC did not extend the NRA option to NVOCCs outside of the USA who do not hold a valid FMC-OTI license.

In announcing this rule revision, the FMC did note that it will continue to consider suggestions and may again modify the NRA rules at a later date. This direct final rule will take effect September 10, 2012 unless the Commission receives significant adverse comments. Comments may be submitted to secretary@fmc.gov and are due August 10, 2012.

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Docket No. 12-07: FMC Proposes Freight Rate Indices for U.S. Agricultural Exports

The U.S. Federal Maritime Commission (FMC) recently released a Notice of Inquiry soliciting public comment on the development of FMC-maintained container freight indices for U.S. agricultural exports. These indices would be developed and maintained by the FMC based on a sampling of service contracts filed with the Commission.

Earlier this year, citing an increase in published containerized freight rate indices, the Commission issued a final rule allowing freight index-based service contracts and NVOCC Service Arrangements (NSAs). The Commission has now received a number of informal requests from several large U.S. agricultural shippers, intermediaries, and derivative brokers to consider issuing an index based on service contracts filed with the Commission. These entities argue that current available indices for U.S. agricultural exports fail to provide the level of market intelligence needed for sophisticated rate negotiations.

The Commission is considering developing these agricultural indices and believes such rate indices may assist U.S. exporters in meeting President Barack Obama’s export goals. In January 2010, President Obama launched a National Export Initiative with the goal of doubling U.S. exports over the next five years. The Commission seeks public comment in assessing the benefits and feasibility of FMC-maintained agricultural indices. Comments were originally due by July 9, 2012, but the Commission has determined to extend the comment period to August 8, 2012 after receiving extension requests from the National Customs Brokers and Forwarders Association of America, Inc. and the Agriculture Transportation Coalition. Comments may be emailed to secretary@fmc.gov.

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PierPASS Traffic Mitigation Fee at Los Angeles and Long Beach Increases August 1st

The West Coast MTO Agreement (WCMTOA) recently announced it will increase its PierPASS Traffic Mitigation Fee (TMF) at the Ports of Los Angeles and Long Beach from US$ 60 to US$ 61.50 per TEU in order to sustain continued operation of PierPass OffPeak night and weekend port gate hours. The current TMF rates are US$ 60.00 per TEU and US$ 120.00 per FEU. The increased TMF is effective August 1, 2012.

This 2.5 percent increase is announced in order to address recent labor cost increases. The TMF was increased last year on August 1, 2011 for the first time since 2006. The US$ 10 per TEU increase implemented last year came after hourly labor costs increased more than 31 percent for the same period. At that time, WCMTOA announced that beginning in mid-2012 it would begin adjusting the TMF annually to address labor cost increases. Terminal operators claim to have operated the off-peak gate hours at a loss since the program’s start in 2005. The shortfall between TMF revenues and OffPeak gate costs was US$ 55 million in 2011 and US$ 52.3 million in 2010.

Before PierPass was created in 2005, the ports and nearby roads were gridlocked, ships were backed up in the harbor unable to unload, and cargo owners suffered long delays in receiving and shipping vital goods. The program has been highly successful in its primary goal of easing congestion in and around the ports. Over the past seven years, PierPass OffPeak gates have grown to handle approximately 55 percent of all container traffic at the ports, accommodated more than 21 million truck transactions, and greatly eased congestion on city streets and nearby freeways during daytime business hours.

PierPASS is a not-for-profit company created by marine terminal operators at Los Angeles and Long Beach in 2005 to address multi-terminal issues such as congestion, security and air quality. Under the program, all international container terminals in the two ports established five new gate shifts per week. As an incentive to use the new OffPeak shifts and to cover the added cost of the shifts, a Traffic Mitigation Fee is required for most cargo movement during peak hours (Monday thru Friday, 3 am to 6 pm). Shippers are not charged a TMF when moving cargo during off-peak gate hours. Visit the PierPass website at http://pierpass.org for more information.

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TSA Carriers Implement Peak Season Surcharge for 2012, Increased Surcharges

Carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA have imposed a Peak Season Surcharge (PSS) effective June 10, 2012. TSA Carriers have also implemented higher surcharges for the July to September 2012 quarter as noted below.

The PSS as filed by most of the TSA Carriers is as follows: US$ 480 per 20′ container, US$ 600 per 40′ container, US$ 675 per 40′ hi-cube container, and US$ 760 per 45′ container for all cargo from Asia to the United States. However, some carriers have reduced PSS amounts in their tariff rules, individual service contracts, or tariff rates. PSS amounts for LCL shipments vary widely. Some carriers prefer to include PSS LCL amounts into their LCL selling rates instead of filing a separate PSS for LCL shipments in their tariff rules. This filing method is perfectly acceptable to the FMC.

The TSA’s New Formula Bunker Adjustment Factor (BAF) for the July to September 2012 quarter, with adjustment for slow steaming, is increased to US$ 580 per 40′ container to U.S. West Coast Ports and US$ 1119 per 40′ container to U.S. East and Gulf Coast Ports, with other sizes as per the formula. Inland Fuel Charges (IFC) for the same quarter will increase to US$ 380 per container for shipments to IPI destinations served via West Coast Ports, US$ 190 per container for shipments to RIPI destinations, and US$ 110 per container for shipments to Group 4 Points and to East Coast local store door points. The Currency Adjustment Factor (CAF) for the same period is 20 percent for shipments from Japan.

The TSA’s 15 carrier members are: American President Lines, CSCL, CMA-CGM, COSCO Container Lines, Evergreen Marine, Hanjin Shipping, Hapag-Lloyd Container Line, Hyundai Merchant Marine, “K” Line, Maersk Line, Mediterranean Shipping, NYK Line, OOCL, Yang Ming Marine and Zim Integrated Shipping Services. The group’s web site at www.tsacarriers.org provides additional information.

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