WHEN? On June 6, 2018, the Federal Maritime Commission took steps to simplify freight pricing requirements for Non-vessel Operating Common Carriers (“NVOCCs”) by “approving” changes to Negotiated Rate Arrangements (NRAs) and NVOCC Service Arrangements (NSAs). While many NVOCCs are still utilizing the fast disappearing tariff publication methods of meeting the regulatory shipping requirements, it is our opinion that the contemplated changes to NRAs and NSAs will win over the NVOCC community to their almost exclusive usage. While the “Final Rules” were approved, it was clear from the FMC meeting, that the written provisions were still at a drafting stage. In discussions with senior FMC staff, it is our understanding that the so-called “Final Rules” will be going to the Federal Register later this week. By law they are required to be posted on the Federal Register for 30 days before becoming effective. Therefore, a good bet would be that these rules will be effective sometime in the first week of August, 2018.
WHAT WILL NRAs, NSAs LOOK LIKE? The devil is in the details as it is for many other things! As noted above, at the meeting on June 6, 2018, there were no final public versions of rules to address. Rather, the Commission voted on its own proposed rules as propounded in its Docket 17-10 with oral modifications which emanated from the June 6 meeting. The staff was instructed to incorporate those into a final rule. Therefore, the first public viewing of the final version of the rules to modify NRAs and NSAs will be seen later this week when the Final Rules are submitted to the Federal Register. There were some interesting exchanges between Commission members and FMC staff during the June 6 meeting which underscores the possibility that there may be surprises in the Final Rules.
Proposed NRAs. The Commission proposed the following three key changes to NRAs in its Proposed Rulemaking in Docket 17-10 issued November 29, 2017:
a) Would allow NRAs to be amended at any time; (Comment: In the writer’s opinion, not a major deal, since NRAs could be stopped and new one’s issued pretty much at will);
b) Allowing the inclusion of non-rate economic terms in NRAs; (Comment: this is significant in that these changes could have an NRA mirror an NSA and blur the difference between the two); and,
c) Allowing an NVOCC to provide for shipper’s acceptance of the NRA by booking a shipment. (Comment: this was intended to change the requirement that a shipper had to accept the NRA by a writing; at the June 6 meeting, it became clear that the new regulation would still require language on the NRA communication that a booking constituted acceptance by the shipper).
Proposed NSAs. With the Final Rule, the Commission would make NSAs easier to use by removing the filing requirements with the FMC, and the publishing of essential terms requirements. (Comment: this will change the burdensome requirement that an NSA and amendments have to be filed with the Federal Maritime Commission).
Conclusion. The following are my views and concerns with this purported deregulatory process which is about to be implemented and will require analysis when the Final Rules are submitted to the Federal Register:
a) It will be interesting to see next week when the Final Rules are submitted to the Federal Register what the Final Rules will look like, given some of the back and forth at the June 6, 2018 meeting between FMC staff and some of the Commissioners. Will there be more deregulation than what initially seemed the case when the Proposed Rules were issued in November 29, 2017?
b) The Final Rules will dictate whether the apparent blend of the NRAs and NSAs is real. Or will the two be more clearly distinguished in the Final Rules?
c) Are the signature requirements of NSAs sufficient to discourage their use over NRAs which will not require a writing if a booking is made after receipt of an NRA offer?
d) Currently NRAs are not contracts until cargo is tendered by the shipper to the NVOCC. Will this element be changed in the Final Rules?
e) In reviewing the rulemaking history of the current NRAs and NSAs, which are supported by the exemption of specific statutory tariff requirements, it is noted that while NSAs are specifically exempted from 46 U.S. Code § 41104, NRAs are not exempt. 46 U.S. Code § 41104 states:
A common carrier, either alone or in conjunction with any other person, directly or indirectly, may not—(1) allow a person to obtain transportation for property at less than the rates or charges established by the carrier in its tariff or service contract by means of false billing, false classification, false weighing, false measurement, or any other unjust or unfair device or means;
Will this preclude NRAs from offering volume incentive discounts to shippers via NRAs, and only allow this practice via NSAs? It seems odd, but remember that both NSAs and NRAs exist only as exemptions of specific Shipping Act provisions. The above and a myriad of other details still need to be reviewed to determine how the modified NRA and NSA regulations will end up. More to come.