[Federal Register Volume 70, Number 187 (Wednesday, September 28, 2005)]
[Rules and Regulations]
[Pages 56577-56580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-19369]


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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

AGENCY: Federal Maritime Commission.

ACTION: Final rule.

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SUMMARY: The Federal Maritime Commission has revised its exemption for 
non-vessel-operating common carriers (NVOCCs) from certain tariff 
requirements of the Shipping Act of 1984 to allow NVOCCs and shippers' 
associations with NVOCC members to act as shipper parties in NVOCC 
Service Arrangements.

EFFECTIVE DATE: October 28, 2005.

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 August 3, 2005, the Federal Maritime Commission (``FMC'' or 
``Commission'') proposed a revision to its regulations at 46 CFR part 
531, Non-Vessel-Operating Common Carrier Service Arrangements. 70 FR 
456267 (August 8, 2005) (``NPR''). The NPR proposed revisions to 46 CFR 
sections 531.3(o), 531.5(a), 531.6(c)(2), and 531.6(d) that would have 
the effect of allowing non-vessel-operating common carriers 
(``NVOCCs'') to act as either shippers or carriers in an NVOCC Service 
Arrangement (``NSA''). Id.
    On January 19, 2005, 46 CFR part 531 became effective, exempting 
NVOCCs from certain tariff publication requirements of the Shipping Act 
of 1984, 46 U.S.C. app. 1701 et seq. (``Shipping Act''). 69 FR 75850 
(December 20, 2004) (final rule) (``NSA Rule''). The NSA Rule was 
issued pursuant to the Commission's authority under section 16 of the 
Shipping Act, 46 U.S.C. app. 1715 (``Section 16''). The exemption 
relieved NVOCCs from certain tariff requirements of the Shipping Act, 
provided the carriage in question was done pursuant to an NSA filed 
with the Commission and the essential terms are published in the 
NVOCC's tariff. Id.
    The NSA Rule defined 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 specifically excluded

[[Page 56578]]

NVOCCs and shippers' associations with NVOCC members. As discussed 
below, this Final Rule now removes the limitation from the NSA Rule to 
allow NVOCCs and shippers' associations with NVOCC members to act as 
``NSA shippers.''

II. Summary of the Comments

    The Commission received eight comments in response to the NPR from: 
United States Department of Transportation (``DOT''); American 
Institute for Shippers'' Associations, Inc. (``AISA''); International 
Shippers'' Association (``ISA''); Fashion Accessories Shippers'' 
Association (``FASA''); BDP International, Inc. (``BDP''); Agriculture 
Ocean Transportation Coalition, BAX Global, Inc., FedEx Trade Networks 
Transport & Brokerage, Inc., the National Industrial Transportation 
League, North Atlantic Alliance Association, Inc., Transportation 
Intermediaries Association, and United Parcel Service (collectively, 
``Joint Commenters''); Carotrans International, Inc. (``Carotrans''); 
and the World Shipping Council (``WSC'').

A. Comments in Support

    Comments supporting the adoption of the NPR were received from 
NVOCCs, shippers' associations with NVOCC members and the U.S. 
Department of Transportation. The overwhelming majority of the 
commenters support the revision as proposed in the NPR. DOT at 1; ISA 
at 1; AISA at 2; BDP at 1; Joint Commenters at 1; Carotrans at 6.
1. Commission Has Adequate Statutory Authority
    Carotrans, BDP and the Joint Commenters assert the Commission has 
sufficiently broad authority to adopt the changes proposed in the NPR 
and that the proposal meets the criteria of Section 16. Carotrans at 2; 
BDP at 1-2; Joint Commenters at 2, 4. The Joint Commenters attest that 
the voluminous record developed in the proceeding leading to the 
adoption of the NSA Rule also adequately supports this proposal. Joint 
Comments at 4.
2. Section 16 Criteria Are Met
    DOT, Carotrans, BDP and the Joint Commenters assert that the 
proposed revisions meet the two-part test of Section 16 inasmuch as the 
proposal would neither cause substantial reduction in competition nor 
be detrimental to commerce. DOT believes that shippers' associations 
are unlikely to effectively coordinate resale of space obtained via an 
NSA. DOT at 3. DOT asserts the revision will ``predictably enhance 
competition without detriment to commerce.'' DOT at 3.
a. No Substantial Reduction in Competition
    Carotrans and BDP further argue that the proposal will not result 
in a substantial reduction in competition. Carotrans at 4; BDP at 4. 
Rather, these commenters assert, competition at many levels of the 
international transportation industry will be stimulated by it. 
Carotrans at 4-5; BDP at 4-5. ``The carrier-to-shipper NVO[CC] 
relationships which have naturally proliferated in the marketplace will 
now evolve into more competitive relationships in a confidential NSA 
environment'' due to the greater flexibility NSAs afford over tariff-
based structures. Carotrans at 5; BDP at 5. These commenters believe 
that much of this is due to the confidential aspects of NSAs and 
predict that ``competition will flourish based on real commercial 
factors and not on the basis of transparencies of the tariff 
mechanism.'' Id.
    The Joint Commenters assert that ``removal of the restrictions * * 
* will foster greater competition in the industry by permitting NVOCCs 
to compete against vessel-operating common carriers (``VOCCs'') in 
securing the business of both individual NVOCCs (acting as shippers) 
and shippers' associations with NVOCC members.'' Joint Commenters at 2. 
Without the adoption of the proposed changes, the Joint Commenters 
argue, VOCCs will continue to ``enjoy a distinct commercial advantage'' 
over NVOCCs. Joint Commenters at 2-3.
b. No Detriment To Commerce
    Carotrans and BDP argue adoption of the NPR will not be detrimental 
to commerce because the Commission's regulations already provide that 
NVOCCs may deal with each other in co-loading arrangements rated under 
tariffs. Carotrans at 3; BDP at 3. These NVOCCs assert that the NPR's 
extension of co-loading practices into more formal contractual 
arrangements will stabilize those practices, and ultimately result in 
better pricing opportunities for shippers because NVOCCs will be better 
able to aggregate cargo to negotiate more favorable rates and terms 
with VOCCs. Id. Carotrans and BDP believe the Commission's rationale 
expressed with respect to VOCC service contracts is equally applicable 
to NSAs between NVOCCs and therefore ``patently not detrimental to 
commerce at any level.'' Carotrans at 3-4; BDP at 3-4.

B. Comment in Opposition

    FASA is the sole commenter that opposes adoption of the NPR. FASA 
at 2. FASA argues the Commission lacks the statutory authority under 
Section 16 to have adopted 46 CFR part 531 originally. Id. at 1-2. FASA 
re-submits the comments it had made on the NSA Rule. FASA at 1.
    In comments dated September 29, 2004, FASA urged the Commission to 
either reject an industry proposal for a conditional exemption or 
initiate a new proceeding and re-open the record to ``afford the 
further opportunity to develop a record specifically addressed to the 
proposed conditional exemption.'' FASA comments of September 29, 2004 
at 2. FASA observed that ``diverse segments of the ocean transportation 
industry'' had ``repeatedly stressed'' that the petitions, and the 
joint comments, involved fundamental issues of the Commission's 
statutory exemption authority. Id. FASA urged that the ``Commission's 
deliberation should not be compromised by the premature adoption now of 
the conditional exemption.'' Id.
    FASA also expressed its belief that the arguments it had raised had 
not been addressed. Id. Specifically, FASA argued that the (then-
proposed) NSA Rule was inconsistent with the statutory scheme of the 
Shipping Act, as revised by the Ocean Shipping Reform Act of 1998 
(``OSRA'') because (1) it might free NVOCCs from the requirement that 
they publish tariffs; (2) it might lead to the result of shippers' 
associations being required to seek redress of grievances outside the 
FMC; and (3) it might enable NVOCCs to undertake otherwise prohibited 
actions under section 10 of the Shipping Act. Id. at 4-5. Finally, FASA 
argued a conditional exemption would put shipper/customers at risk of 
``dead freight'' for not meeting a minimum volume commitment to an 
NVOCC under an NSA, although the NVOCC might have already met its 
volume commitment to the VOCC by aggregating other cargo. Id. at 5.
    In comments filed in response to the Commission's October 31, 2004 
Notice of Proposed Rulemaking, 69 FR 63981 (November 3, 2004), FASA 
asserted that exemption from the tariff publication requirements of the 
Shipping Act, whether or not conditional upon filing of an NSA, was not 
appropriate under Section 16. FASA comments of November 19, 2004 at 2. 
FASA, however, suggested several additions and revisions to that 
proposal.\1\ Id. at 5.
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    \1\ FASA had suggested that the Commission adopt additional 
prohibitions in the NSA Rule mirroring section 10(c)(8), 46 U.S.C. 
app. 1709(c)(8), to prohibit NOVCCs offering NSAs from 
discriminating against shippers' associations or ocean 
transportation intermediaries based on status. The Commission did 
not adopt this recommendation because, with the exception of 
affiliates, the NSA rule neither contemplates nor sanctions any 
concerted NSA activity. See NSA Rule, 69 FR at 75851-75852. See also 
Docket No. 04-12, Non-Vessel-Operating Common Carrier Service 
Arrangements, 70 FR. See Docket No. 05-06, Non-Vessel-Operating 
Common Carrier Service Arrangements (August 30, 2005) (Notice of 
Inquiry) (requesting public comment on joint unaffiliated NVOCC-
offered NSAs).

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[[Page 56579]]

C. Comments of the World Shipping Council

    WSC takes no position as to whether the proposed amendments would 
be consistent with Section 16. WSC at 1. WSC is concerned, however, 
that the proposed rule may enable NVOCCs to avoid the obligations they 
have as common carriers under the regulations of U.S. Customs and 
Border Protection (``CBP''), specifically 19 CFR 4.7(b)(2) (``24-Hour 
Rule'') (requiring carriers to submit vessel manifests to CBP at least 
24 hours prior to lading at the foreign port). Id. WSC therefore 
recommends that the Commission clarify that nothing in this rule may be 
interpreted to release NVOCCs from their duties as ``carriers'' under 
the 24-Hour Rule, even when acting as ``shippers'' with respect to 
other NVOCCs. Id. at 3.

III. Discussion

    Section 16 authorizes the Commission, ``upon application or on its 
own motion * * * to exempt for the future any * * * specified activity 
of [persons subject to the requirements of the Shipping Act] from any 
requirement of this Act if it finds that the exemption will not result 
in substantial reduction in competition or be detrimental to 
commerce.'' 46 U.S.C. app. 1715. Section 16 also authorizes the 
Commission to ``attach any conditions to any exemption.'' Id. As it did 
when originally proposing the NSA Rule in late October, 2004, the 
Commission again notes that Section 16 authorizes the Commission to 
exempt by rule or order matters it regulates under the Shipping Act. 
See 69 FR 63981, 63985 (November 3, 2004) (matter concerns ``specified 
activity'' subject to a ``requirement'' of the Shipping Act as those 
terms are used in Section 16). The Commission continues to believe that 
the NSA Rule falls within its exemption authority and comports with the 
goals of the Shipping Act and Congress's legislative intent as 
expressed most recently by OSRA. We note that 46 CFR part 531 does not 
completely exempt NVOCCs from the tariff publication requirements of 
the Shipping Act, as some commenters in the original proceeding had 
urged. We again disagree with FASA's assertion that the exemption is 
beyond the Commission's authority to exercise. See 69 FR at 63985.
    The Commission is mindful that the authority of Section 16 can be 
exercised only when the Commission finds that such action will result 
neither in substantial reduction in competition nor be detrimental to 
commerce. 46 U.S.C. app. 1715. The Commission has now, through 
publication and request for comment, sought information to help it 
determine whether the proposed revision to 46 CFR part 531 would cause 
either of these untoward effects. As explained more fully below, the 
Commission finds the proposed revision would cause neither substantial 
reduction in competition nor be detrimental to commerce.

A. Section 16 Criteria

1. Substantial Reduction in Competition
    The Commission has evaluated the possible impact of its proposal on 
competition between NVOCCs, between NVOCCs and VOCCs, and between 
shippers' associations. Most commenters suggest that the NPR, which 
would allow NVOCCs and shippers' associations with NVOCC members to act 
as NSA shippers, will not result in a substantial reduction in 
competition among any of these groups. As Carotrans points out, NVOCCs 
may already deal with each other commercially in shipper-to-carrier co-
loading arrangements subject to the Commission's tariff rules. Indeed, 
rather than reducing competition, NSAs among NVOCCs may lead to a more 
competitive environment for NVOCCs who serve other NVOCCs.
    Similarly, the Commission finds persuasive the assertions of AISA, 
ISA and DOT that allowing shippers' associations with NVOCC members to 
act as NSA shippers will not result in substantial reduction in 
competition among shippers' associations, nor will it have an effect on 
the resale of space that NVOCCs may obtain as members of a shippers' 
association. We are persuaded that, as DOT phrases it, this ``leveling 
of the playing field'' for all shippers' associations will enhance 
competition.
    Furthermore, recent case law gives us some assurance that courts 
are not likely to find that NVOCCs acting concertedly in NSAs to be 
immune from the prohibitions of the antitrust laws. United States v. 
Gosselin World Wide Moving, N.V., 411 F.3d. 502 (4th Cir 2005). 
Therefore, the Commission's previous concerns, that allowing NVOCCs to 
act as both shipper and carrier parties in an NSA would create a 
potential for reduction in competition through immunity from the 
antitrust laws, have been largely alleviated.
    Moreover, as Carotrans and BDP assert, the Commission's regulations 
have recognized and provided for the sale of ocean transportation 
services by one NVOCC acting as carrier to another acting as shipper 
under tariff regulations. See 46 CFR 520.11(c)(iii) (co-loading). 
Although this Final Rule addresses basically the same commercial 
relationship, it should, as the commenters suggest, provide greater 
flexibility over such transactions done under a tariff.
2. Detriment to Commerce
    We find that the Final Rule will not be detrimental to commerce. 
See 69 FR 63987 (discussion of criterion). Neither the original 
rulemaking nor this Final Rule eliminates the requirement that common 
carriers publish tariffs and adhere to rates that are either published 
in tariffs or filed in NSAs. Principles of common carriage inherent in 
the Shipping Act are preserved by the continuing application of all of 
the prohibitions contained in section 10 of the Shipping Act, 46 U.S.C. 
app. 1709, e.g., against retaliation, deferred rebates, unreasonable 
refusals to deal, etc. Accordingly, the protections provided to the 
shipping public will be preserved and detriment to commerce will not 
occur.
    The Joint Comments assert that the proposal will promote commerce 
by expanding the opportunity for NVOCCs acting as shippers to choose 
their service provider and will ultimately lead to greater commercial 
efficiencies. We are persuaded by the comments that no detriment to 
ocean commerce will arise from extending the exemption of 46 CFR part 
531 to enable NVOCCs to provide all their customers, whether they be 
other NVOCCs or beneficial cargo owners or shippers' associations, with 
NSAs tailored to meet the individual needs of those customers. We 
believe that not only will the exemption not be detrimental to commerce 
as required by Section 16, but there may also be merit to the assertion 
that the expansion of the exemption will prove beneficial to commerce.
    In summary, the Commission finds the proposed revision meets the 
criteria of Section 16 as it will cause neither substantial reduction 
in competition nor detriment to commerce. Further, this Final Rule in 
no way relieves NVOCCs of any other requirements of the Shipping Act, 
Commission regulations, or the requirements of other statutes and

[[Page 56580]]

regulations (e.g., the 24-hour Rule) to which they are subject.

IV. Statutory Reviews

    In accordance with the Paperwork Reduction Act, 44 U.S.C. 3507, the 
collection of information requirements contained in this Final Rule 
have been submitted to the Office of Management and Budget (``OMB'') 
for review. The estimated total annual burden for the estimated 635 
annual respondents is 190,252 person-hours. No comments were received 
on this estimate.
    In accordance with the Regulatory Flexibility Act, 5 U.S.C. 605, 
the Chairman of the Federal Maritime Commission has certified to the 
Chief Counsel for Advocacy, Small Business Administration, that the 
Final Rule will not have a significant impact on a substantial number 
of small entities. Although NVOCCs as an industry include small 
entities, the Final Rule provides, but does not require, an alternative 
for NVOCCs from certain tariff requirements of the Shipping Act and the 
Commission's regulations. It potentially relieves a burden. Therefore, 
the Commission has found that the Final Rule will have no significant 
economic impact on a substantial number of small entities.

List of Subjects for 46 CFR Part 531

    Exports, Non-vessel-operating common carriers, Ocean transportation 
intermediaries.

0
For the reasons set forth in the preamble, the Federal Maritime 
Commission amends 46 CFR part 531 as follows:

PART 531--NVOCC SERVICE ARRANGEMENTS

0
1. The authority citation for part 531 continues to read as follows:

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


0
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.
* * * * *

0
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.
* * * * *

0
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.
* * * * *

    By the Commission.
Karen V. Gregory,
Assistant Secretary.
[FR Doc. 05-19369 Filed 9-27-05; 8:45 am]
BILLING CODE 6730-01-P