[Federal Register Volume 75, Number 35 (Tuesday, February 23, 2010)]
[Notices]
[Pages 8077-8078]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-3325]


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FEDERAL MARITIME COMMISSION

[Petition P1-08]


Petition of the National Customs Brokers and Forwarders 
Association of America, Inc., for Exemption From Mandatory Tariff 
Publication

Comments of the U.S. Department of Justice

Christine A. Varney, Assistant Attorney General.
Donna N. Kooperstein, Chief.
William H. Stallings, Assistant Chief.
Molly S. Boast, Deputy Assistant Attorney General.
Michele B. Cano, Attorney.
Oliver M. Richard, Assistant Chief.
John R. Sawyer, Economist, Economic Analysis Group.

U.S. Department of Justice,
Antitrust Division,
Transportation, Energy & Agriculture Section,
450 Fifth Street, NW.,
Washington, DC 20530.

    Dated: February 5, 2010.

Comments

    The United States Department of Justice (``Department'') files 
these comments in support of the petition of the National Customs 
Brokers and Forwarders Association of America, Inc. (``the Petition'') 
requesting an exemption for non-vessel-operating common carriers 
(``NVOCCs'') from certain tariff publishing and enforcement 
requirements. NVOCC tariff publishing requirements impose significant 
costs that limit competition, resulting in higher shipping rates. These 
costs far outweigh any justification. The Department has long supported 
exempting NVOCCs from all tariff-publishing requirements to produce the 
greatest competitive benefits.\1\ Granting the relief requested by the 
Petition would represent a meaningful step in that direction by 
reducing unnecessary burden and enhancing competition.
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    \1\ See FMC Petition No. P3-03, Comments of the United States 
Department of Justice on Petition of United Parcel Service for an 
Exemption Pursuant to Section 16 of the Shipping Act of 1984 to 
Permit Negotiation, Entry and Performance of Service Contracts (Oct. 
10, 2003) (``DOJ Comments in P3-03''); Comments of the U.S. 
Department of Justice, FMC Docket No. 4-12 (Dec. 3, 2004) (``DOJ 
Comments in 4-12''); Comments of the U.S. Department of Justice, FMC 
Docket No. 05-06 (Oct. 20, 2005) (``DOJ Comments in 05-06'').
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A. NVOCC Tariff-Publishing Requirements

    Many shippers of overseas cargo, particularly smaller ones, book 
shipments through NVOCCs instead of contracting directly with the 
operators of ocean-going vessels (``vessel-operating common carriers'' 
or ``VOCCs''). NVOCCs provide a variety of services for their shipper 
customers. By negotiating service contracts with VOCCs for the 
aggregated volume of their shipper customers' cargoes, NVOCCs can 
obtain better rates than individual shippers could obtain on their own. 
In addition, many NVOCCs provide intermodal combinations of ocean and 
inland transportation services. Some add still other services to their 
transportation packages, such as packing, loading, labeling, 
warehousing, customs clearance, supply-chain management and other 
logistical services.
    The Shipping Act of 1984 requires that each common carrier, 
including NVOCCs, publish tariffs showing all ``rates, charges, 
classifications, rules, and practices between all points or ports.'' 
\2\ Tariffs must be published for all rates that are charged shippers 
regardless of whether the particular rate has been individually 
negotiated and, in addition to detailing the rates to be charged, must 
provide information about the places between which cargo will be 
carried, each classification of cargo in use, any rules that affect the 
total of the rates or applicable charges, and samples of contracts and 
bills of lading. The Act provides for substantial fines for each 
instance of non-compliance.
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    \2\ See 46 U.S.C. 40501 (formerly Section 8 of the Shipping 
Act).
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    Tariff publishing requirements place a particularly high burden on 
NVOCCs due to the nature of their business. As explained in multiple 
comments filed in this proceeding, NVOCCs typically handle small to 
mid-size shipments on a spot basis rather than through long-term 
contracts. Shippers routinely contact NVOCCs to negotiate rate quotes 
to move a particular shipment at a specific time. NVOCCs in turn deal 
with multiple VOCCs to provide the actual transportation, and the VOCCs 
frequently adjust rates and surcharges they impose on the NVOCCs. As a 
result, NVOCCs typically tailor their charged rates to the specific 
circumstances of each shipment and, accordingly, must make frequent 
tariff filings and adjustments to meet the regulatory requirements. 
This is a costly and burdensome process.\3\
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    \3\ For example, the National Customs Brokers and Forwarders 
Association of America, Inc. (``NCBFAA'') estimates that tariff 
publication expenses can be as much as $240,000 per year. NCBFAA 
Petition at 8. See also Comments of Global Link Logistics at 2 
(``The cost to a small NVOCC to comply with tariff publishing 
requirements is a hardship. At GLL we spend in excess of $200,000 
annually.''); Comments of A.N. Deringer at 2 (``Our tariff rate 
publishing and management costs are an additional expense. The labor 
needed to produce the number of quotes, manage carrier updates, and 
keep our tariff current requires an additional investment of over 
$75,000 annually.''); Comments of C.H. Robinson Worldwide at 2 
(``[T]he average cost for tariff filings per annum exceeds over 
$130,000.''); and Comments of NACA Logistics (USA) at 2 (``The full 
costs of establishing a tariff Web site, rate tariff publication, 
maintenance of same, internal IT development and the costs of 
personnel assigned to tariff compliance is estimated at $100,000 
annually in resources. We feel this is a high cost for a system that 
is not utilized by the shipping public.'').
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    The Federal Maritime Commission (``Commission'') has issued rule 
changes in which it has used its exemption authority under Sec.  16 of 
the 1984 Shipping Act, later broadened by the Ocean Shipping Reform Act 
(``OSRA''),\4\ to relieve NVOCCs from certain tariff publication 
requirements. Most notably, the Commission has exempted from full 
tariff-publishing requirements certain formal written contracts between 
NVOCCs and shippers (``NVOCC Service Arrangements'' or ``NSAs'').\5\ 
The rule allows the contracting parties to keep competitively sensitive 
aspects of the agreement (such as price and quantity) confidential. 
However, NVOCCs still have to file the agreements with the Commission 
and publish their essential terms in tariff form.\6\ This raises the 
same cost and burden issues NVOCCs face under the general tariff 
publishing rules.\7\ NSAs are not widely used.\8\
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    \4\ 46 App. U.S.C. 1715 (1998).
    \5\ An NSA is essentially a contract between an NVOCC and a 
shipper in which the 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. See 46 CFR 531.3(p) (2005).
    \6\ FMC Docket No. 04-12, 69 FR 75850 (Dec. 20, 2004).
    \7\ See, e.g., Comments of RS Express at 1-2 (filing NSAs is a 
cumbersome process that is worthwhile only for major contracts).
    \8\ In 1998, OSRA gave VOCCs and their shipper customers the 
right to enter freely into confidential service contracts, without 
the need to publish commercially sensitive terms and conditions. 
VOCCs typically enter into long-term contracts with large shippers 
that routinely ship significant quantities of cargo. In contrast, 
NVOCCs enter into formal, long term contracts much less frequently. 
The Petition states that in 2007, VOCCs filed 43,699 original 
service contracts compared to 762 original NSAs filed by NVOCCs for 
the same time period. NCBFAA Petition at 8.

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[[Page 8078]]

B. The Petition

    The Petition seeks to broaden the filing exemption to cover those 
instances where an NVOCC has individually negotiated rates with its 
shipping customers and memorialized those rates in writing.\9\ In other 
words, while the NSA rule exempts formal contracts from tariff 
publication and enforcement requirements, the Petition's request would 
cover short-term ``spot market'' rate agreements between NVOCCs and 
shippers, by far the most common transaction for NVOCCs. Other parties 
interested in this proceeding have submitted comments requesting that 
the Commission further expand the requested exemption to apply to 
service terms negotiated in conjunction with rates (i.e., vessel 
capacity, cargo loss and damage rules, equipment needs and delivery 
requirements).
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    \9\ The proposed exemption would incorporate the following 
principles: (1) The exemption would be voluntary, (2) the exemption 
would apply only to rate tariffs, not rules tariffs, (3) disputes 
concerning negotiated rates would be governed solely by contract 
law, (4) NSAs would continue to be filed with the FMC and NSA 
essential terms would continue to be published, (5) all negotiated 
rates would be required to be memorialized in writing, (6) the FMC 
would retain access to the negotiated agreements and any underlying 
written communications, (7) the exemption would not be construed to 
convey antitrust immunity to NVOCCs, and (8) the exemption would 
only apply to licensed or registered NVOCCs. NCBFAA Petition at 11.
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C. The Department Supports the Petition

    The proposed elimination of the NVOCC tariff publication 
requirements is an appropriate exercise of the Commission's exemption 
authority under 46 U.S.C. 40103(a), which allows the Commission to 
exercise its exemption authority if the exemption ``will not result in 
a substantial reduction in competition or be detrimental to commerce.'' 
That standard is clearly met here.
    As the Department explained in prior comments, ``exempting all 
NVOCCs from all tariff publication requirements would produce the 
greatest competitive benefits.''\10\ Even the more limited approach 
set-forth in the Petition would create important benefits. The current 
tariff filing requirement hampers an NVOCC's ability to respond quickly 
in the marketplace. The proposed exemption will allow NVOCCs to be more 
flexible in a dynamic contractual environment, thereby allowing them to 
be more responsive to their shippers' needs. It would likely promote 
competition and commerce by eliminating substantial regulatory costs to 
NVOCCs, a savings that could be passed on to its shipper customers in 
the form of lower shipping rates.
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    \10\ DOJ Comments in P3-03 at 1-2.
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    The costs associated with the tariff publication requirement 
greatly exceed any benefits. As the NCBFAA noted, tariffs are rarely, 
if ever, reviewed or consulted by shippers to determine ocean shipping 
rates.\11\ When even the purported beneficiaries of tariff publication 
requirements find little value in them, the cost of requiring 
publication of those tariffs clearly exceeds any competitive or 
commercial benefits. Moreover, if tariff publications were of value to 
shippers, any NVOCC would remain free to publish them.
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    \11\ NCBFAA Petition at 9, note 11.
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Conclusion

    In conclusion, the Department supports the goal of the relief 
requested in the Petition to further exempt NVOCCs from tariff 
publishing and enforcement requirements.
    U.S. Department of Justice, Antitrust Division, Transportation, 
Energy & Agriculture Section, 450 Fifth Street, NW., Washington, DC 
20530.

Michele B. Cano,
Attorney.
[FR Doc. 2010-3325 Filed 2-22-10; 8:45 am]
BILLING CODE 6730-01-M