Federal Maritime Commission Chairman Richard Lidinsky Jr. says the FMC is at a “key moment” in its regulation of non-vessel-operating common carriers, the intermediaries that handle one-third of U.S. containerized imports.
During the next several months, the commission will work “to modernize the rules for NVOCCs, from top to bottom,” Lidinsky told the annual conference of the National Customs Brokers and Forwarders Association of America.
The FMC’s May meeting will include discussion of possible changes to rules for licensing, registration and proof of financial responsibility for NVOs and freight forwarders. The commission also is reviewing regulations for NVOCC service arrangements, which allow NVOs to enter confidential service contracts, and negotiated rate arrangements, which the intermediaries can use instead of filed tariffs.
Intermediaries and organizations such as the NCBFAA and the National Industrial Transportation League cheered the proposed changes. They say it’s time to ease regulatory impediments and end mandatory filing of tariffs and terms of NVOCC service arrangements and negotiated rate agreements.
“The industry is looking for an explanation as to why rate regulation, which serves no useful purpose, could not be removed,” David Schlenger, president of the New York-New Jersey Foreign Freight Forwarders & Brokers Association, said in comments to the FMC. “Regulation and enforcement of transactions that are agreed to by both parties are a waste of resources at all levels.”
The FMC, Lidinsky emphasized, is trying to balance the need to reduce regulatory burdens on NVOs, which have no antitrust immunity and are required to post bonds, with the need to protect the shipping public against fraud and unfair practices.
He proposes to start the FMC’s review with technical changes such as ending requirements that negotiated rate arrangements include titles, addresses and affiliates of the shipper who accepted the rate. He said these changes, which appear noncontroversial, could be enacted within weeks. A second step would include more substantive changes. One change under study would allow foreign, unlicensed NVOs to use negotiated rate arrangements instead of tariffs. Several U.S.-based and international NVOs said they saw no harm in this. Lidinsky said he would demand assurances that foreign intermediaries comply with FMC processes, document requests or orders, even if their country has a “blocking statute” that limits U.S. regulatory reach.
Other proposed changes would allow negotiated rate arrangements to include non-rate terms, and ease restrictions on amendments. Many intermediaries say they avoid NRAs because it’s too cumbersome to update them every time a vessel operator adjusts a surcharge. Since the commission authorized negotiated rate arrangements a year ago, only about 150 of the 3,600-plus licensed NVOs have used them.
When the commission solicited industry views last December on how to improve regulation of negotiated rate arrangements, about two dozen companies and groups called for easing restrictions and ending requirements that NVOs file tariffs and NRA terms with the commission.
“NVOCCs are paying exorbitant costs to maintain tariffs that are infrequently, if ever, viewed by the shipping public,” said Paulette Kolba, vice president and U.S. area export and ocean compliance manager at Panalpina.
Melanza Wilson, vice president of compliance at Mallory Alexander International Logistics in Memphis, said that in the 10 years she has worked with ocean rates, no one has ever asked to see the company’s tariffs on file at the FMC.
“If rates are truly exempted and unregulated, why is publication necessary?” asked W.J. Yennie, vice president of Kenner, La.-based freight forwarder J.W. Allen & Co. “Records of NRAs are easily maintained and can be presented promptly upon written request, so is public publication truly necessary?”
Along with its review of negotiated rate arrangements, the FMC is studying changes to negotiated service arrangements. The commission authorized NSAs in 2004 to allow NVOs to offer the equivalent of confidential service contracts, which the Ocean Shipping Reform Act of 1998 authorized for vessel operators.
The FMC has asked for comments on proposals including whether to allow unaffiliated NVOs to jointly offer negotiated service arrangements. Lidinsky said he also wants industry views on whether to keep or drop requirements such as the mandate that negotiated service arrangement terms be filed publicly.