FMC Foreign NVOCC NRA Proposal Would Require New Registration of All Foreign NVOCCs

In 2011 the Federal Maritime Commission (FMC) exempted licensed non-vessel-operating common carriers (NVOCCs) from their rate tariff publishing obligations under the United States Shipping Act.    NVOCCs that opt to invoke this exemption do not have to adhere to the law’s requirement that they charge and collect rates published in their tariffs.  Instead, these NVOCCs are authorized to enter into Negotiated Rate Arrangements (NRAs) with their shipper-customers, where the rate charged is a written rate negotiated with the shipper.  While they have to adhere to specific regulatory requirements to use NRAs, many NVOCCs and shippers enjoy the commercial flexibility available in using spot market rates rather than published tariff rates.

Use of the NRA exemption is currently limited to NVOCCs licensed by the FMC.  At the time the NRA exemption was adopted there was concern that foreign-based, unlicensed NVOCCs are not subject to sufficient FMC oversight to permit their use of the NRA tariff exemption.  For example, licensed NVOCCs are required to have qualifying individuals and both these individuals and the NVOCC  are subject to a detailed background check.  Accordingly, for the past two years the use of NRAs has largely been limited to licensed NVOCCs that are U.S.-based entities.

The FMC has now issued a proposed rulemaking which, if adopted, would allow foreign NVOCCs to also offer exempt NRA rates to their customers.   The Commission’s proposal, however, goes farther than just allowing non-U.S. NVOCCs to offer NRAs.  If adopted, the Commission’s proposal would require all foreign-based unlicensed NVOCCs to register with the FMC.  Such registrations would be effective for 3 years and would be subject to termination by the Commission if the foreign-based NVOCC did not comply with certain regulatory requirements, such as maintaining a proof of financial responsibility and agent for service of process in the United States.

Under current FMC regulations foreign-based unlicensed NVOCCs are required to publish a tariff, file proof of financial responsibility with the Commission, and maintain a registered U.S. agent.  The Commission’s proposal would expand these requirements to include registration with the FMC.   While the Commission’s proposal does not include a proposed registration form, the FMC indicates that in requiring registration it will seek such information as the NVOCC’s legal name; trade names; principal address; name of contact person; and name, address, and contact person for a designated legal agent for service of process in the U.S.

The Commission’s proposed rule would also clarify that foreign-based NVOCCs using NRAs are subject to the Commission’s inspection and reproduction requests and that they must produce requested NRAs promptly in response to a Commission’s request.   All such records would have to be produced in English or be accompanied by a certified English translation.

The FMC already asserts some regulatory jurisdiction over foreign NVOCCs by requiring them to publish a tariff; have a U.S. agent; and file proof of financial responsibility with the FMC.  Depending on the information requested and how it is implemented, the Commission’s proposed registration requirement for foreign NVOCCs has the potential of asserting greater Commission oversight over these entities.   The Commission’s proceeding is FMC Docket No. 11-22, Non-Vessel Operating Common Carrier Negotiated Rate Arrangements; Tariff Publication Exemption.  The Notice appears in the February 26, 2013 edition of the Federal Register at 78 Fed. Reg. 13011.  Interested parties can submit comments or suggestions until April 29, 2013.



Posted in All Advisories, International Law, Practice & Industries, Shipping, Transportation

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