FMC's Proposed Rule on NVOCC Service Arrangements, (Part II)

This is Part II of a multi-part series of summaries on this proposed rule regarding NVOCC service arrangements (NSAs), and covers the proposed regulatory text of 46 CFR 531.1 - 531.3, as follows:

Purpose - 531.1

According to the FMC, proposed 46 CFR 531.1 (Purpose) would state that Part 531 exempts NVOCCs from certain provisions of the Act, and that the purpose of Part 531 would be to facilitate the filing of NSAs and the publication of certain essential terms of those NSAs as they are exempt from the otherwise applicable provisions of the Act.

1. CFR 531.1 would also state that Part 531 would enable the FMC to review NSAs to ensure that they and the parties to them comport with the conditions of the exemption as set forth in proposed Part 531.

Scope and Applicability - 531.2

Proposed 46 CFR 531.2 (Scope and applicability) would state that only individual NVOCCs compliant with the requirements of Section 19 of the Act and the FMC's regulations at 46 CFR Part 515 (Licensing, Financial Responsibility Requirements, and General Duties for Ocean Transportation Intermediaries (OTIs)) could enter into an NSA with one or more NSA shippers subject to the requirements of these rules.

This section would further state that any NVOCC who has failed to maintain its bond or license or had its tariff suspended or cancelled by the FMC would be ineligible to offer and file NSAs.

Definitions - 531.3

Proposed 46 CFR 531.3 (Definitions) would define the following terms (partial list):

Amendment- any change to a filed NSA which has prospective effect and which is mutually agreed upon by all parties to the NSA.

Authorized person - an NVOCC or duly appointed agent who is authorized to file NSA on behalf of the NVOCC and to publish the corresponding statement of essential terms and is registered by the FMC to file under proposed 46 CFR 531.5 and proposed Appendix A to Part 531.

Cancellation- an event which is unanticipated by the NSA, in liquidated damages or otherwise, and is due to the failure of the NSA shipper to tender minimum cargo as set forth in the contract, unless such tender was made impossible by an action of the NVOCC.

Common carrier - a person holding itself out to the general public to provide transportation by water of passengers or cargo between the U.S. and a foreign country for compensation that: (1) assumes responsibility for the transportation from the port or point of receipt to the port or point of destination; and (2) utilizes, for all or part of that transportation, a vessel operating on the high seas or the Great Lakes between a port in the U.S. and a port in a foreign country, except that the term does not include a common carrier engaged in ocean transportation by ferry boat, ocean tramp, or chemical parcel tanker, or by a vessel when primarily engaged in the carriage of perishable agricultural commodities: (i) if the common carrier and the owner of those commodities are wholly owned, directly or indirectly, by a person primarily engaged in the marketing and distribution of those commodities and (ii) only with respect to those commodities.

Correction - any change to a filed NSA that has retroactive effect.

Effective date - the date upon which an NSA or amendment is scheduled to go into effect by the parties to the NSA. An NSA or amendment would become effective at 12:01 a.m. Eastern Standard Time on the beginning of the effective date. The effective date would not be able to be prior to the filing date of the NSA or amendment with the FMC.

File or filing (of NSAs or amendments thereto) - the use of the FMC's electronic filing system for receipt of an NSA or an amendment thereto by the FMC, consistent with the method set forth in proposed Appendix A of Part 351, and the recording of its receipt by the FMC.

NSA shipper - a cargo owner, the person for whose account the ocean transportation is provided, the person to whom delivery is to be made, or a shippers' association. The term would not include NVOCCs or a shippers' associations whose membership includes NVOCCs.

NSA - a written contract, other than a bill of lading or receipt, between one or more NSA shippers and an individual NVOCC in which the NSA shipper makes a commitment to provide a certain minimum quantity or portion of its cargo or freight revenue over a fixed time period, and the NVOCC commits to a certain rate or rate schedule and a defined service level. The NSA could also specify provisions in the event of nonperformance on the part of any party.

Statement of essential terms- a concise statement of the essential terms of an NSA required to be published under proposed Part 531.

(See future issues of ITT for additional summaries.See ITT's Online Archives or 11/01/04 news, 04110105, for Part I.)

- written comments must be submitted no later than November 19, 2004

FMC proposed rule (D/N 04-12, served 10/28/04) available at http://www.fmc.gov/Dockets/04-12%20Proposed%20Rule.htm