[Federal Register Volume 70, Number 151 (Monday, August 8, 2005)]
[Proposed Rules]
[Pages 45626-45628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-15641]


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FEDERAL MARITIME COMMISSION

46 CFR Part 531

[Docket No. 05-05]
RIN 3072-AC31


Non-Vessel-Operating Common Carrier Service Arrangements

August 3, 2005.
AGENCY: Federal Maritime Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Maritime Commission is proposing changes to its 
exemption for non-vessel-operating common carriers (NVOCCs) from the 
tariff publication requirements of the Shipping Act of 1984. The 
proposed rule would revise the exemption to allow NVOCCs and shippers' 
associations with NVOCC members to act as shipper parties in NVOCC 
Service Arrangements.

DATES: Submit original and 15 copies of comments (paper), or e-mail 
comments as an attachment in WordPerfect 10, Microsoft Word 2003, or 
earlier versions of these applications, no later than August 23, 2005.

ADDRESSES: Address all comments concerning this proposed rule to: 
Bryant L. VanBrakle, Secretary, Federal Maritime Commission, 800 North 
Capitol Street, NW., Room 1046, Washington, DC 20573-0001, 
[email protected].

FOR FURTHER INFORMATION CONTACT: Amy W. Larson, General Counsel, 
Federal Maritime Commission, 800 N. Capitol St., NW., Washington, DC 
20573-0001, (202) 523-5740, [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    On January 19, 2005, a final rule of the Federal Maritime 
Commission (``FMC'' or ``Commission'') exempting non-vessel-operating 
common carriers (``NVOCCs'') from certain tariff publication 
requirements of the Shipping Act of 1984, 46 U.S.C. app. 1701 et seq. 
(``Shipping Act''), became effective. 69 FR 75850 (December 20, 2004). 
The rule was issued pursuant to the Commission's authority under 
section 16 of the Shipping Act, 46 U.S.C. app. 1715. The exemption 
enables individual NVOCCs to offer NVOCC Service Arrangements 
(``NSAs'') to NSA shippers, provided that such NSAs are filed with the 
Commission and their essential terms are published in the NVOCC's 
tariff. The rule defines an NSA as ``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.'' 46 CFR 531.3(p). The rule 
also defines an ``NSA shipper'' as 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. 46 CFR 531.3(o). 
This definition, however, specifically excludes NVOCCs and shippers' 
associations with NVOCC members. Id.
    The Commission previously stated that it would continue to consider 
how it could remove the limitations on shipper participation while 
ensuring the criteria of section 16 were met. 69 FR at 75852. The 
Commission now proposes to remove those limitations.

II. Discussion

    An NVOCC is defined by the Shipping Act as ``a common carrier that 
does not operate the vessels by which the ocean transportation is 
provided, and is a shipper in its relationship with an ocean common 
carrier.'' 46 U.S.C. app. 1702(17)(B). An NVOCC simultaneously holds 
two transportation roles--as a carrier vis-[aacute]-vis the shipper to 
which it offers service, and as a shipper vis-[aacute]-vis the ocean 
common carrier from which it obtains service.
    The Commission was concerned that a court could interpret section 
7(a)(2) of the Shipping Act, 46 U.S.C. app. 1706(a)(2), to immunize 
NVOCCs acting under filed NSAs from the antitrust laws. Cf. United 
States v. Tucor, 189 F.3d 834 (9th Cir. 1999) (holding 46 U.S.C. app. 
1706(a)(4) immunized a price-fixing arrangement among NVOCCs related to 
the foreign inland provision of services). Therefore, the exemption did 
not allow NVOCCs either individually or as members of shippers' 
associations to act as NSA shippers. 46 CFR 531.3(p).
    On June 14, 2005, the U.S. Court of Appeals for the Fourth Circuit 
found, inter alia, that price fixing by two

[[Page 45627]]

NVOCCs was not immunized from the antitrust laws by section 7(a)(2). 
United States of America v. The Pasha Group and Gosselin World Wide 
Moving, N.V., ---- F.3d. ---- 2005 WL 1389531, Slip Op. No. 04-4877 
(4th Cir. June 14, 2005), reh'g denied, July 12, 2005 (``Gosselin''). 
Finding the case factually distinguishable from Tucor, the Fourth 
Circuit declined to decide whether conduct by NVOCCs could ever be 
immune from the antitrust laws under the Shipping Act, thus leaving the 
issue unsettled. Gosselin, Slip Op. at 11-12; 17 n.3.
    We disagree with Tucor's broader holding that the Shipping Act may 
be read to immunize any price-fixing agreement among NVOCCs from the 
antitrust laws. We continue to believe that the rationale of Tucor is 
incorrect, and that its precedential value is limited to section 
7(a)(4).
    With respect to the limitations the Commission placed on who may 
act as an NSA shipper, the agency was concerned that price fixing 
between NVOCCs acting as shippers and NVOCCs acting as carriers would 
adversely affect the price eventually paid by the end-user, i.e., the 
beneficial cargo owner. However, unlike horizontal price fixing, 
collusion is not inherent in an arrangement between an NVOCC acting as 
a carrier and an NVOCC acting as a shipper. Instead, a reduction in 
competition or detriment to commerce would occur only if (1) two or 
more NVOCCs chose to collude in violation of the antitrust laws; and 
(2) in the event of prosecution, the antitrust laws were then deemed 
not to apply to those NVOCCs because of the Tucor analysis.
    With regard to NVOCC coordination through shippers' associations, 
it may similarly be the case that ill effects on beneficial cargo 
interest shippers are unlikely. It appears that shippers' associations 
function only as buyers' collectives, and it is unlikely that shippers' 
associations with NVOCC members purchasing space pursuant to NSAs could 
effectively coordinate their resale of that space under the auspices of 
a shippers' association. Were they to do so, it is clear that they 
would no longer meet the U.S. Department of Justice's ``safe harbor'' 
provisions for joint purchasing agreements, and would likely be subject 
to enforcement action. See Antitrust Division Response to Request for 
Business Review Letter--Household Goods Forwarders Association of 
America, Inc., September 19, 1985, B.R.L. 85-21, 1985 WL 71889 (DOJ) 
(unopposed because there was no collective rate making or discussions 
and because the negotiation of rates for services in a market 
substantially controlled by the group expressly was not authorized).
    On the basis of the above, it appears that amending the exemption 
to allow NVOCCs and shippers' associations with NVOCC members to act as 
shippers in NSAs may satisfy the dual criteria of section 16. The 
Commission seeks comment on whether the proposed rule would or would 
not result in a substantial reduction in competition or be detrimental 
to commerce.

III. The Proposed Revisions

    For the foregoing reasons, the Commission proposes to make the 
following changes to 46 CFR part 531. First, the Commission proposes 
the deletion of the last sentence of 46 CFR 531.3(o), which currently 
reads: ``The term does not include NVOCCs or shippers' associations 
whose membership includes NVOCCs.'' The Commission proposes a revised 
definition that would mirror its definition of shipper in the Shipping 
Act. 46 U.S.C. app. 1702(21). The revised provision would thus read, 
``NSA shipper means a cargo owner, the person for whose account the 
ocean transportation is provided, the person to whom delivery is to be 
made, a shippers' association, or an ocean transportation intermediary, 
as defined in section 3(17)(B) of the Act, that accepts responsibility 
for payment of all applicable charges under the NSA.''
    Second, the Commission proposes to revise the final sentence of 46 
CFR 531.6(c)(2) to insert the phrase ``acting as carrier'' to describe 
which tariff appropriately may be cross-referenced, to read thus:

    (c) Certainty of terms. The terms described in paragraph (b) of 
this section may not: [* * *]
    (2) Make reference to terms not explicitly contained in the NSA 
itself unless those terms are contained in a publication widely 
available to the public and well known within the industry. 
Reference may not be made to a tariff of a common carrier other than 
the NVOCC acting as carrier party to the NSA.

    Third, for similar reasons the Commission proposes to insert the 
same phrase in 46 CFR 531.5 (a), as follows: ``(a) The duty under this 
part to file NSAs, amendments and notices, and to publish statements of 
essential terms, shall be upon the NVOCC acting as carrier party to the 
NSA.''
    Finally, the Commission proposes a provision to mirror the 
prohibition of the Shipping Act from concluding contracts with NVOCCs 
who are not in compliance with the Shipping Act. 46 U.S.C. app. 
1709(b)(12).

IV. Statutory Reviews and Requests for Comment

    In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et 
seq., the Chairman of the Federal Maritime Commission certifies that 
this rule, if promulgated, will not have a significant economic impact 
on a substantial number of small entities. The Commission recognizes 
that the majority of businesses that would be affected by this rule 
qualify as small entities under the guidelines of the Small Business 
Administration. The proposed rule, however, would broaden the optional 
method for NVOCCs to carry cargo for their customers to be used at 
their discretion. The rule would pose no economic detriment to small 
business entities.
    This regulatory action is not a ``major rule'' under 5 U.S.C. 
804(2).
    The collection of information requirements contained in this 
proposed revision to 46 CFR part 531 have been submitted to the Office 
of Management and Budget (``AOMB'') for review in accordance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). The estimated 
total annual burden for the estimated 635 annual respondents is 190,252 
manhours. This estimate includes, as applicable, the time needed to 
review instructions, develop, acquire, install, and utilize technology 
and systems for the purposes of collecting, validating, and verifying 
information, processing and maintaining information, and disclosing and 
providing information; adjust the existing ways to comply with any 
previously applicable instructions and requirements; train personnel to 
respond to a collection of information, search existing data sources, 
gather and maintain the data needed, and complete and review the 
collection of information; and transmit or otherwise disclose the 
information.
    Send comments regarding the burden estimate or any other aspect of 
this collection of information, including suggestions for reducing this 
burden, to Derek O. Scarbrough, Deputy Director/Chief Information 
Officer, Office of Administration, Federal Maritime Commission, 800 
North Capitol Street, NW., Washington, DC 20573 or by electronic mail 
to [email protected]; and to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: Desk Officer for 
the Federal Maritime Commission, Washington, DC 20503. Please reference 
the information collection's title and OMB number in your comments. A 
copy of the OMB submission may be obtained by contacting Jane Gregory 
by telephone

[[Page 45628]]

at (202) 523-5800 or by electronic mail at [email protected].

List of Subjects for 46 CFR Part 531

    Exports, Non-vessel-operating common carriers, Ocean transportation 
intermediaries.
    For the reasons set forth in the preamble, the Federal Maritime 
Commission proposes to amend 46 CFR part 531 as follows:

PART 531--NVOCC SERVICE ARRANGEMENTS

    1. The authority citation for part 531 continues to read as 
follows:

    Authority: 46 U.S.C. app. 1715.

    2. Revise paragraph (o) of Sec.  531.3 to read as follows:


Sec.  531.3  Definitions.

* * * * *
    (o) NSA shipper means a cargo owner, the person for whose account 
the ocean transportation is provided, the person to whom delivery is to 
be made, a shippers' association, or an ocean transportation 
intermediary, as defined in section 3(17)(B) of the Act, that accepts 
responsibility for payment of all applicable charges under the NSA.
* * * * *
    3. Revise paragraph (a) of Sec.  531.5 to read as follows:


Sec.  531.5  Duty to file.

    (a) The duty under this part to file NSAs, amendments and notices, 
and to publish statements of essential terms, shall be upon the NVOCC 
acting as carrier party to the NSA.
* * * * *
    4. Revise paragraph (c)(2) and add paragraph (d)(4) to Sec.  531.6 
to read as follows:


Sec.  531.6  NVOCC Service Arrangements.

* * * * *
    (c) * * *
    (2) Make reference to terms not explicitly contained in the NSA 
itself unless those terms are contained in a publication widely 
available to the public and well known within the industry. Reference 
may not be made to a tariff of a common carrier other than the NVOCC 
acting as carrier party to the NSA.
* * * * *
    (d) * * *
    (4) No NVOCC may knowingly and willfully enter into an NSA with an 
ocean transportation intermediary that does not have a tariff and a 
bond, insurance, or other surety as required by sections 8 and 19 of 
the Act.
* * * * *

Bryant L. VanBrakle,
Secretary.
[FR Doc. 05-15641 Filed 8-5-05; 8:45 am]
BILLING CODE 6730-01-P