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Signals™ Headlines - March 5, 2013

FMC Issues Proposed Rulemaking to Extend Use of NRAs for NVOCCs Outside of the USA

The Federal Maritime Commission (FMC) has released for comment a Notice of Proposed Rulemaking that, when final, will allow all Non Vessel Operating Common Carriers (NVOCCs), including NVOCCs outside of the USA, the option to utilize Negotiated Rate Arrangements (NRAs). NRAs are already available to licensed NVOCCs operating in the USA. The proposed rule would require unlicensed NVOCCs operating outside of the USA to register with the FMC before utilizing NRAs.

An NRA is defined as “a written and binding arrangement between a shipper and an eligible NVOCC to provide specific transportation service for a stated cargo quantity from origin to destination.” Qualifying NVOCCs who enter into NRAs with their customers are exempted from the requirement of publishing their rates in tariffs for shipments moving under these NRAs as long as they satisfy several conditions including:

  1. NVOCCs must continue to publish rules tariffs containing terms and conditions governing shipments, including surcharges and fees applicable in addition to freight rates;
  2. NVOCCs are required to provide their rules tariffs to the shipping public free of charge;
  3. Rates applicable on shipments moving under NRAs must be agreed to by Shippers in writing by the date cargo is received for shipment and may not be changed after receipt of cargo; and
  4. NVOCCs must retain documentation of the agreed rate and terms for each shipment for a period of five years, and must make that documentation available promptly to the Commission upon request.

The FMC proposes to impose registration requirements on NVOCCs outside of the USA who utilize the NRA pricing option. These NVOCCs outside of the USA who wish to operate as a registered NVOCC in the U.S. foreign trades will be required to complete and submit a registration form to the FMC. It will be a violation of the FMC’s regulations for any NVOCC outside of the USA to provide NVOCC services in the U.S. foreign trade without a valid registration and an effective FMC tariff. Registrations will be effective for a period of three (3) years with required renewals for sequential three year periods upon submission of an updated registration form. This registration form has yet to be made available by the FMC. However, we expect it will be similar to Form FMC-1 provided by the Commission.

The option to utilize NRAs remains voluntary. NVOCCs may choose to continue publishing rates in their tariffs for some or all cargo shipments. Tariff rates do not require shippers to sign a written agreement prior to cargo movement, and tariffs may be updated by NVOCCs at any time subject to FMC regulations governing effective dates. NVOCCs will also continue to have the option to utilize NVOCC Service Arrangements (NSAs) with their shipper customers; NSAs are contracts which apply for fixed time periods for a minimum quantity of cargo and may incorporate other unique contract terms which are not permitted in NRAs or tariff rates.

Until the proposed rulemaking is presented as a final rule with an effective date, the NRA exemption will continue to apply to NVOCCs holding the Ocean Transportation Intermediary (OTI) license. The current NRA regulations exclude more than 1100 NVOCCs operating outside the USA who do not hold the OTI license. These unlicensed NVOCCs are fully authorized by the Commission to issue their bills of lading for shipments to/from the USA and may enter into service contracts with ocean carriers. They are not required to hold the OTI license because they do not have offices or staff in the USA.

While this rulemaking is pending, NVOCCs outside of the USA must continue to comply with the Commission’s current tariff regulations. Changes to the NVOCC tariff publication requirements will occur only after the Commission considers public comments on this proposed rulemaking, and publishes a Final Rule and sets an effective date. Comments may be submitted to FMC Secretary Karen Gregory at secretary@fmc.gov before April 29, 2013.

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FMC Issues Final Rule Increasing Passenger Vessel Operator Financial Responsibility Requirement

The Federal Maritime Commission (FMC) has issued a final rule in Docket 11-16 amending its rules that require passenger vessel operators (PVOs) to provide the Commission with evidence of financial responsibility for nonperformance of transportation. The final rule will increase the cap on the financial responsibility required of PVOs from US$ 15 million to US$ 30 million. The rule includes a phase-in period of two years in order to allow the industry time to adjust. One year after the rule becomes effective the cap increases to US$ 22 million. The second year after the rule goes into effect the cap increases to US$ 30 million. Thereafter, the limit will be adjusted biennially to the nearest US$ 1 million using the Consumer Price Index for all Urban Consumers (CPI).

This increase reflects the effects of inflation and the growth of the cruise industry since the current US$ 15 million cap was set in 1990. The rule will also: adjust the amount of coverage required for smaller passenger vessel operators by providing for consideration of alternative forms of protection; remove the application form for issuance of certificates of financial responsibility from the Commission’s regulations and make it available online; add an expiration date to the Certificate; and make technical adjustments to the regulations. This Final Rule is effective April 2, 2013.

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Transpacific Eastbound Carriers Reduce Surcharges, Announce General Rate Increase April 1

Carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223 serving the East Asia/USA trade lane will reduce several surcharges effective April 1, 2013. TSA Carriers have also announced General Rate Increases (GRIs) effective April 1, 2013 in preparation for the post-Lunar New Year shipping period and as 2013-14 service contract negotiations intensify.

The TSA’s New Formula Bunker Adjustment Factor (BAF) for the April to June 2013 quarter, with adjustment for slow steaming, is reduced to US$ 536 per 40ft container (FEU) to U.S. West Coast Ports and US$ 1015 per FEU to U.S. East and Gulf Coast Ports, with other sizes as per the formula. The new BAF to IPI/MLB destinations moving via the U.S. West Coast is US$ 905 per FEU. This IPI/MLB BAF includes the newly established Inland Fuel Charge (IFC) component. The Currency Adjustment Factor (CAF) for the same period is 17% for shipments from Japan.

Several carriers have announced a GRI of US$ 400 per 40-foot container (FEU) to the U.S. West Coast and US$ 600 per FEU to all other U.S. destinations. TSA Carriers note that freight rates remain below compensatory levels despite previous rate increases, and carrier members want to ensure that 2013-14 contract rates contain meaningful net increases relative to 2012 contract levels.

TSA is a research and discussion forum of major container shipping lines serving the trade from Asia to ports and inland points in the United States. The group’s web site at www.tsacarriers.org provides additional information.

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WTSA Carriers Reduce Surcharge Amounts for April to June 2013 Quarter

The Westbound Transpacific Stabilization Agreement (WTSA), FMC Agreement No. 011325, whose member carriers serve the U.S. export trades from the USA to East Asia will reduce surcharges for the April to June 2013 quarter.

WTSA Bunker Adjustment Factors (BAF) for the April-June 2013 quarter, with adjustments for slow steaming, are US$ 1121 per 20ft dry container, US$ 1393 per 40ft/45ft dry container, and US$ 1843 per 40ft/45ft reefer container for shipments from and via U.S. Atlantic/Gulf Coast Ports. BAF for shipments from or via U.S. Pacific Coast Ports is US$ 570 per 20ft dry container, US$ 712 per 40ft/45ft dry container, and US$ 1002 per 40ft/45ft reefer container. The Inland Fuel Charges (IFC) for the same period is US$ 369 per container for rail and intermodal rail/truck shipments and US$ 107 per container for local/regional truck shipments. Currency Adjustment Factors (CAF) for the same period are 7% for Taiwan and 22% for Singapore. For more information visit www.wtsacarriers.org.

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