Source: www.fmc.gov
The U.S. Federal Maritime Commission Thursday released for comment a notice of proposed rulemaking that would relieve nearly 3,300 FMC-licensed non-vessel-operating common carriers from publishing tariffs for rates they charge for cargo shipments.
The exemption was requested by the National Customs Brokers and Forwarders Association of America Inc. in a petition filed on July 31, 2008.
The rule proposes to establish an instrument called a "negotiated rate arrangement." Licensed NVOs who enter into negotiated rate arrangements with customers would be exempted from publishing their rates in tariffs, so long as they meet several conditions, including:
• NVOs would continue to publish "rules tariffs" containing terms and conditions governing shipments.
• NVOs would be required to provide those rules to the public free of charge.
• Rates NVOs charge must be agreed to and memorialized in writing by the date cargo is received for shipment.
• NVOs 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 on request.
Chairman Richard A. Lidinsky Jr., and commissioners Rebecca F. Dye and Michael A. Khouri voted to issue the proposed rulemaking, while Joseph E. Brennan dissented.
In February when the commission voted to initiate the rulemaking Brennan said granting the petition would give NVOs an unfair advantage over vessel-operating carriers and would effectively exempt NVOs from FMC regulatory oversight.
The FMC summarizes comments for and against the change in its 27-page notice of proposed rulemaking.
Those supporting it included Sen. Bernard Sanders, I-Vt., and Reps. Peter Welch, D-Vt., and Jerry Weller, R-Ill. Welch and Weller said publication is expensive, adds little value to the shipping public, and is out of step with the modern ocean transportation environment. Sanders noted that tariff-publishing requirements have not been updated for a number of years and cost freight forwarders time and resources.
The Department of Transportation said it has supported exemption of NVOs from tariff filing since such relief was first sought. The agency said the FMC’s exemption for NVOCC Service Arrangements (NSAs) does not go far enough and imposes unnecessary burdens and costs.
The Justice Department also said it supports an exemption for NVOs from all tariff publication requirements in order to produce the greatest competitive benefits.
A number of ocean transportation intermediaries said complying with tariff publication requirements is expensive and NVO customers do not request tariff information and do not rely on tariffs, as rates are negotiated individually.
OTIs gave average annual tariff publication costs ranging from $2,000 to $240,000, the latter number from DHL Global Forwarding based on stated average monthly costs of $20,000.
Some OTIs said NSAs have not provided adequate relief from tariff publication requirements, and that as NSAs are required to be filed with the FMC and their essential terms published in a tariff, they do not provide cost savings. Some OTIs state that shippers balk at the contractual commitments required by NSAs.
A number of OTIs state that since the terrorist attacks of 2001, they have added costs associated with security requirements such as Customs-Trade Partnership Against Terrorism certification and the 24-hour advance manifest reporting requirement. They said they need “regulatory offsets” so that their limited resources can be invested in programs that benefit the shipping public and contribute to the nation’s security.
The National Industrial Transportation League, one of the largest shipper organizations, said shippers rarely review or consult tariffs to determine ocean transportation pricing, and that they function more as a costly regulatory afterthought. The NIT League suggested the proposed exemption would likely promote competition by reducing regulatory costs for NVOs, increasing their potential to offer competitive ocean rates to shippers.
The New York-New Jersey Foreign Freight Forwarders & Brokers Association Inc. said the tariff publication requirement inhibits the beneficial effects of competition for shippers, and is costly and unnecessary. It said NSAs are not a viable option for most NVO movements.
The Transportation Intermediaries Association said FMC regulations require NVOs to keep complete accounting records for every shipment, and tariff publication requirements duplicate that requirement. TIA said intermediaries often act as both forwarder and NVO on different segments of a movement, and the way that these arrangements are expressed in tariff language can cause confusion.
Opponents of the rulemaking, include firms such as Stan Levy Consulting and the tariff publishers: Distribution Publications Inc. (DPI), and Global Maritime Transportation Services Inc. (GMTS).
Levy said while shippers may not use tariffs on a daily basis, they provide a framework governing shipments so that when there is a cost or service issue, there is a legal tariff binding on all parties. And it said if the exemption is granted, NVO shippers would lose the ability to use the FMC as a forum for complaints, contrary to the intent of the Shipping Act. Levy said it would be more appropriate for Congress to revise the act.
DPI and GMTS said the tariffs published on their Web site are frequently used to verify rates in order to settle disputes and that the information is essential for the FMC to monitor NVO activities and protect the public from violations of Section 10 of the Shipping Act. GMTS said the exemption would shift the cost and burden of enforcement away from the industry to the FMC and the public.
Florida Shipowners’ Group Inc., commenting on behalf of Bernuth Lines, CMA CGM, Crowley Caribbean Services, Seaboard Marine, Sea Freight Line, and Tropical Shipping, agreed with one of the points raised by Brennan. Because NVOs compete with vessel operators, eliminating tariff publication requirements for NVOs while leaving them in place for vessel-operating common carriers (VOCCs) would affect the competitive balance between them. Costs borne by VOCCs to develop and maintain vessels, equipment and infrastructure needed to move international trade, dwarfs the costs borne by NVOs to comply with tariff requirements, they argued. Congress chose to retain the tariff publication requirement on both NVOs and VOCCs, and the FMC should not remove that requirement, they said.
The FMC asked that comments on the proposed rule be submitted by June 4. If an interested party requests an opportunity to present oral comments to the commission by May 14, the FMC said it will hold a public meeting to receive those comments on May 24.
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