[Federal Register Volume 75, Number 88 (Friday, May 7, 2010)]
[Proposed Rules]
[Pages 25150-25156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-10476]


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FEDERAL MARITIME COMMISSION

46 CFR Parts 520 and 532

[Docket No. 10-03]
RIN 3072-AC38


NVOCC Negotiated Rate Arrangements

AGENCY: Federal Maritime Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Federal Maritime Commission proposes a new exemption for 
non-vessel-operating common carriers agreeing to negotiated rate 
arrangements from certain provisions and requirements of the Shipping 
Act of 1984 and certain provisions and requirements of the Commission's 
regulations.

DATES: Written comments are due by June 4, 2010. If an interested party 
requests an opportunity to present oral comments to the Commission 
concerning the proposed regulatory changes by May 14, 2010, the FMC 
will hold a public meeting on May 24, 2010.

ADDRESSES: Submit all comments concerning this proposed rule to: Karen 
V. Gregory, Secretary, Federal Maritime Commission, 800 North Capitol 
Street, NW., Room 1046, Washington, DC 20573-0001. [email protected].

FOR FURTHER INFORMATION CONTACT: Rebecca A. Fenneman, Deputy General 
Counsel, Federal Maritime Commission, 800 North Capitol Street, NW., 
Room 1018, Washington, DC 20573-0001. (202) 523-5740. 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Submit Comments: Submit an original and fifteen copies of written 
comments in paper form, and submit a copy in electronic form (Microsoft 
Word 2007 or 2003) by e-mail to [email protected] on or before June 4, 
2010. Include in the subject line: ``Docket No. 10-03 Comments on NVOCC 
Negotiated Rate Arrangements''. Interested parties may also request an 
opportunity to present oral comments to the Commission at a public 
meeting to take place on May 24,

[[Page 25151]]

2010, at the Commission's Main Hearing Room, Room 100, 800 North 
Capitol Street, NW., Washington, DC 20573. Requests to present oral 
comments must be received by the Commission on or before May 14, 2010. 
The Commission will announce the time of the meeting, the order of 
presentation, and time allotment via its Web site and service on 
interested presenters.
    On July 31, 2008, the National Customs Brokers and Forwarders 
Association of America, Inc. (NCBFAA) filed a petition with the Federal 
Maritime Commission (FMC or Commission), requesting the Commission 
exercise its authority under 46 U.S.C. 40103 to issue an exemption from 
provisions of the Shipping Act of 1984 (the Act) requiring non-vessel-
operating common carriers (NVOCCs) to publish and/or adhere to rate 
tariffs for ocean transportation in those instances where they have 
individually negotiated rates with their shipping customers and 
memorialized those rates in writing. Petition No. P1-08, Petition of 
the National Customs Brokers and Freight Forwarders Association of 
America, Inc. for Exemption from Mandatory Rate Tariff Publication at 
10 (``Petition''). Notice of the Petition was published on August 11, 
2008 and comments on it were due by September 26, 2008. 73 FR 46625-02 
(August 11, 2008).
    On December 24, 2009, NCBFAA filed a motion for leave to supplement 
the record and submit a verified statement on behalf of DJR Logistics, 
Inc. By order served January 5, 2010, the Commission granted NCBFAA's 
motion, accepted the verified statement, and reopened the record for 
the limited purpose of receiving updated tariff cost information, and 
any replies thereto, from previous commenting parties of record by 
January 21, 2010.

A. The Petition

    NCBFAA included as an attachment to its Petition a ``Statement of 
Common Principles Concerning a Section 16 Exemption for NVOCCs,'' 
issued in 2004 and agreed to by the National Industrial Transportation 
League (NITL), NCBFAA, and the Transportation Intermediaries 
Association (TIA). NCBFAA also attached to the Petition supporting 
verified statements on behalf of eight ocean transportation 
intermediaries (OTIs) (Econocaribe Consolidators, Inc.; Kuehne + Nagel, 
Agent of Blue Anchor Line, Division of Transpac Container System, Ltd.; 
John S. Connor, Inc.; Panalpina, Inc.; American International Cargo 
Service, Inc.; Barthco Transportation Services, Inc.; DHL Global 
Forwarding; and C.H. Powell Company).
    NCBFAA's proposal incorporated the following principles: the 
exemption is voluntary; the exemption would relate only to rates 
tariffs, not to rules tariffs; disputes relating to exempt contracts 
would be settled only under contract law; NVOCC Service Arrangements 
(NSAs), to the extent used, would continue to be filed with the 
Commission and NSA essential terms will continue to be published; 
exempt contracts would be memorialized in writing; the Commission would 
have access to documentation relating to exempt contracts; the 
exemption would not be construed to extend antitrust immunity to 
NVOCCs; and only NVOCCs that are licensed or registered ocean 
transportation intermediaries would be eligible to use the exemption.

B. Comments in Response to the Petition

    Comments in response to the Petition were filed by members of 
Congress; two Federal government agencies; OTIs; associations; 
consultants; tariff publishers; and vessel-operating common carriers 
(VOCCs). Comments from members of Congress were received from Senator 
Bernard Sanders (Vermont); Representative Peter Welch (at-Large 
Vermont); and Representative Jerry Weller (11th District, Illinois). 
Comments were received from the following OTIs: A Customs Brokerage, 
Inc. (ABC); All Freight Transportation, Inc.; Alpha Sun International, 
Inc.; American International Forwarding; A.N. Deringer, Inc.; 
Balguerie; Camelot Company; Cargo-Link International, Inc.; CJ 
International, Inc.; CV International, Inc.; D.J. Powers Company, Inc.; 
DJR Logistics, Inc.; DJS International Services, Inc.; DT Gruelle 
Company; Diplomat Global Logistics; EMO Trans, Inc.; FedEx Trade 
Networks Transport & Brokerage; Fracht FWO; Global Fairways, Inc.; 
Global Link Logistics; Independent Brokerage, LLC; JAS Forwarding 
Worldwide; Logistics Worldwide USA, Inc.; Mid-America Overseas, Inc./
Hanseatic Container Line Ltd.; Multimodal International Shipping; NACA 
Logistics (USA); New Direx; New England Groupage; Norman G. Jensen, 
Inc.; North American Logistics, Inc.; O.T.S. Astracon LLC; ProTrans 
International; RIM Logistics; R.S. Express, Inc.; Schenker, Inc.; 
SeaSchott; Serra International; Shipco Transport, Inc.; Superior 
Brokerage Services, Inc.; Trans-Border Global Freight Systems, Inc.; 
and USA Shipping, LLC.
    The following associations filed comments in response to the 
Petition: Household Goods Forwarders Association of America, Inc.; 
National Industrial Transportation League (NITL); New York/New Jersey 
Foreign Freight Forwarders & Brokers Association, Inc.; Transportation 
Intermediaries Association; WorldWide Alliance; Florida Shipowners' 
Group, Inc. and World Shipping Council. Comments were received from the 
U.S. Department of Transportation (DOT) and the U.S. Department of 
Justice (DOJ).\1\ Two consultants filed comments: ABS Consulting and 
Stan Levy Consulting, LLC (Levy). Comments were also filed by two 
tariff publishers: Distribution Publications, Inc. (DPI), and Global 
Maritime Transportation Services, Inc. (GMTS).
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    \1\ The Department of Justice moved to file comments on February 
5, 2010 and the Commission determined to accept these late-filed 
comments on February 17, 2010.
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    Supplemental comments were received from the following OTIs: 
Balguerie; DHL Global Forwarding; Global Fairways International 
Transportation & Logistics; Kuehne + Nagel, Inc.; North American 
Logistics, Inc.; O.T.S. Astracon LLC; Panalpina, Inc.; RIM Logistics, 
Ltd.; and Trans-Border Global Freight Systems, Inc. Supplemental 
comments were also received from NITL, Levy, and DPI.

II. Summary of the Comments

A. Initial Comments in Support of the Petition

    Two members of Congress who filed comments in response to the 
Petition support granting the Petition on the grounds that tariff 
publication is expensive, adds little value to the shipping public, and 
is out of step with the modern ocean transportation environment (Welch 
at 1; Weller at 1). Senator Sanders noted that tariff publishing 
requirements have not been updated for a number of years and cost 
freight forwarders time and resources (Sanders at 1). The Department of 
Transportation states that it has supported exemption of NVOCCs from 
tariff filing since such relief was first sought (DOT at 2-3); the 
Commission's exemption for NSAs do not go far enough and impose 
unnecessary burdens and costs (Id. at 5-6); the 1998 Ocean Shipping 
Reform Act (OSRA) had made the requirements for exemption more 
flexible; and that other agencies have used their exemption authority 
to relieve regulatory burdens (Id. at 7-8). The Department of Justice 
also states that it has long supported an exemption for NVOCCs from all 
tariff publication requirements in order to produce the greatest 
competitive benefits. (DOJ at 1).
    OTIs state that complying with tariff publication requirements is 
expensive, with estimates of annual expenditures

[[Page 25152]]

for compliance ranging from approximately $450 plus additional charges 
per rate item filed (Independent Brokerage, LLC at 2), to $200,000 
(Global Link Logistics at 2; RIM at 2). They also state that NVOCCs' 
customers do not request tariff information and do not rely on tariffs, 
as rates are negotiated individually (American International Forwarding 
at 2; DT Gruelle Company at 1). In addition, they maintain that there 
are generally no rate disputes with shippers (Camelot Company at 2; 
Diplomat Global Logistics at 2). OTIs state that NSAs have not provided 
adequate relief from tariff publication requirements, and, as NSAs are 
required to be filed with the FMC and their essential terms published 
in a tariff, they do not provide cost savings. In addition, OTIs state 
that shippers balk at the contractual commitments required by NSAs 
(American International Forwarding at 2; DJR Logistics, Inc. at 2).
    A number of OTIs state that since 2001, they have added costs 
associated with security requirements such as Customs-Trade Partnership 
Against Terrorism (C-TPAT) certification and the 24-hour advance 
manifest reporting requirement; and that, as small businesses, they 
need ``regulatory offsets'' so that their limited resources can be 
invested in programs that benefit the shipping public and contribute to 
the nation's security (New Direx, Inc. at 2-3; Superior Brokerage 
Services, Inc. at 2-3). Finally, several OTIs take the position that 
the proposed exemption should include charges as well as rates 
(Schenker, Inc. at 4-6; Shipco at 3-4), and Schenker, Inc. argues that 
rules should be exempt as well as rates and charges (Schenker, Inc. at 
6).
    The Household Goods Forwarders Association of America, Inc. (HGFAA) 
states that the publication of NVOCC rates for household goods 
movements is particularly burdensome, because these rates are door-to-
door rates from inland point to inland point and are determined on an 
individual basis for each shipment through negotiations between 
competing NVOCCs and a shipper (HGFAA at 2). HGFAA states that tariff 
publication is of no benefit to household goods shippers, as published 
rates are limited in duration and geographic application and shippers 
of household goods do not use NVOCC tariffs to compare rates of various 
NVOCCs (Id. at 2-3).
    NITL states that tariffs are rarely reviewed or consulted by 
shippers to determine ocean transportation pricing, and that they 
function more as a costly regulatory afterthought (NITL at 1). NITL 
argues that the proposed exemption meets statutory exemption standards 
and is likely to promote competition by reducing regulatory costs for 
NVOCCs, increasing their potential to offer competitive ocean rates to 
shippers (Id. at 5). With regard to detriment to commerce, NITL argues 
that the exemption would not be detrimental to commerce as it would 
allow NVOCCs to respond more efficiently to changing market conditions; 
establish a regime for NVOCC pricing that is consistent with regulation 
of intermediaries in other U.S.-based transportation industries; and 
would promote the growth of U.S. exports by placing a greater reliance 
on the marketplace (Id. at 6-7).
    The New York/New Jersey Foreign Freight Forwarders & Brokers 
Association, Inc. (NYNJFFF&BA) argues that the tariff publication 
requirement inhibits the beneficial effects of competition for shippers 
(NYNJFFF&BA at 3); that the tariff publication requirement is costly 
and unnecessary in the contract carriage system that exists (Id. at 4); 
and that NSAs are not a viable option for most NVOCC movements (Id.).
    The Transportation Intermediaries Association (TIA) states that FMC 
regulations require NVOCCs to keep complete accounting records for 
every shipment, and tariff publication requirements duplicate that 
requirement (TIA at 6). TIA states that intermediaries often act as 
both forwarder and NVOCC on different segments of a movement, and the 
way that these arrangements are expressed in tariff language can cause 
confusion (Id. at 8-9). The WorldWide Alliance (WWA) states that tariff 
publishing does not exist in any trade lanes other than those involving 
the U.S., and this puts U.S. traffic at a disadvantage as NVOCCs cannot 
respond as quickly to rate and charge fluctuations as they can in other 
non-U.S. trades (WWA at 2). ABS Consulting (ABS) states that NVOCC rate 
tariffs have become obsolete and no longer serve their original purpose 
(ABS at 1). In addition, ABS states that the current tariff publication 
process adds unnecessary costs to NVOCCs, and thus increases shipping 
rates (Id. at 2).

B. Initial Comments Opposing the Petition

    Levy, DPI, and GMTS oppose granting the relief sought by the 
Petition. Levy argues that the Petition does not substantiate with 
facts that the requested exemption would not result in substantial 
reduction in competition or be detrimental to commerce, as based on 
Levy's assertion that NCBFAA has offered no new facts or information 
since its previous petition seeking the same relief was filed in 2003 
(Levy at 4). Levy states that tariffs may not be used on a daily basis 
by shippers, but they provide a framework governing shipments so that 
when there is a cost or service issue, there is a legal tariff binding 
on all parties (Id. at 5). Levy states that if the exemption is 
granted, NVOCC shippers would lose the ability to use the FMC as a 
forum for complaints, contrary to the intent of the Act (Id. at 6). 
Finally, Levy argues that it is more appropriate for Congress to revise 
the Act and that the Petition should be denied, but that the FMC should 
initiate a proceeding to review and reform tariff regulations for both 
NVOCCs and VOCCs, to make tariff compliance less burdensome, tariffs 
more accessible, and tariff information more useful (Id. at 5, 7).
    Tariff publishers DPI and GMTS state that tariffs published on 
their Web site are frequently used to verify rates in order to settle 
disputes (DPI at 13; GMTS at 7). FMC access to tariffs, the tariff 
publishers argue, is essential for the agency to monitor NVOCC 
activities and protect the public from violations of Section 10 of the 
Shipping Act (DPI at 13; GMTS at 10; DPI at 14), and the exemption 
would shift the cost and burden of enforcement away from the industry 
to the FMC and the public (GMTS at 10). DPI argues that granting the 
Petition would cause detriment to commerce because elimination of the 
30-day notice requirement for tariff rates would produce rate 
quotations that would be valid for short periods of time. GMTS urges 
the Commission to clarify its regulations so that carriers reduce the 
number of published tariff items to those rates that actually move the 
cargo (Id. at 9).
    Florida Shipowners' Group Inc. (FSG) (on behalf of Bernuth Lines, 
Ltd.; CMA CGM SA; Crowley Caribbean Services, LLC; Seaboard Marine, 
Ltd.; Sea Freight Line, Ltd.; and Tropical Shipping USA, LLC) states 
that NVOCCs compete with VOCCs in reselling VOCC transportation 
services to beneficial cargo owners, and eliminating tariff publication 
requirements for NVOCCs while leaving them in place for VOCCs will 
affect the competitive balance between them (FSG at 2). With regard to 
tariff costs, FSG states that the costs borne by VOCCs to develop and 
maintain vessels, equipment, and infrastructure needed to move 
international trade, dwarfs the costs borne by NVOCCs to comply with 
tariff requirements (Id. at 3). FSG states that Congress chose to 
retain the tariff publication requirement on both NVOCCs and VOCCs, and 
the FMC

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should not remove that requirement from one class of competitors (Id.).

C. Other Comments

    The World Shipping Council (WSC), a trade association of over 25 
international liner shipping ocean carriers, takes no position on the 
Petition but offers corrections to inaccurate statements in the 
Petition. WSC states that neither vessel capacity nor container 
availability is connected with tariff publication (WSC at 2). WSC 
argues that claims of short-notice VOCC rate changes are inaccurate, as 
most NVOCCs structure their dealings with VOCCs through service 
contracts so that any rate changes would be mutually agreed (Id.). WSC 
states that the generalization that NVOCCs have greater numbers of 
customers than VOCCs is misleading, as some VOCCs deal with thousands 
of beneficial cargo owners and NVOCC customers, and this should be 
taken into consideration in connection with relative tariff filing 
burdens (Id. at 2-3).

D. Supplemental Comments Supporting the Petition

    NCBFAA submitted a verified supporting statement from DJR Logistics 
(DJR), to supplement the record. DJR states that virtually every rate 
change by ocean carriers requires it to make multiple changes in its 
tariff rates, at a cost of between $3.25 and $13 per change (DJR at 2). 
DJR estimates its annual tariff publishing bill will be between $25,000 
and $30,000 (Id.). DJR states that none of its customers review its 
tariffs. Instead, DJR memorializes rate changes via e-mails or other 
written communications (Id. at 3).
    The OTIs submitting supplemental comments generally state that they 
have increased their tariff filings due to changes in VOCC rates and 
surcharges. Their average annual tariff publication costs are estimated 
to be from $2,000 (O.T.S. Astracon at 2), to $240,000 (DHL Global 
Forwarding at 2, based on stated average monthly costs of $20,000). 
Some of the OTIs state that a written quotation is the accepted 
practice in rate negotiation, and therefore there is always written 
communication that can be used by the FMC (See, e.g., Kuehne + Nagel at 
2; Panalpina at 1). Kuehne + Nagel and O.T.S. Astracon state that NSAs 
have not provided the relief needed from the burden and expense of 
tariff publication (Kuehne + Nagel at 1; O.T.S. Astracon at 2).
    NITL states that the primary purpose of tariff publication, to 
prevent discriminatory pricing among shippers, is no longer a 
protection that is required or desired by shippers (NITL at 1). NITL 
states that the great majority of international ocean shipments move 
under service contracts, and therefore, tariffs are rarely reviewed by 
shippers to determine pricing (Id. at 1-2). NITL states that there are 
substantial costs associated with maintaining tariffs and these costs 
must either be passed on to shippers or absorbed by the NVOCC (Id. at 
2). NITL argues that the proposed exemption would allow for a 
regulatory system that is more closely aligned with real time business 
practices (Id.).

E. Supplemental Comments Opposing the Petition

    Levy states that when Congress decided to keep tariffs in 1984, it 
was mindful that it was continuing to impose a regulatory cost on 
carriers (Levy at 2). DPI also states that it publishes and maintains 
FMC tariffs for 1,019 NVOCCs, and in 2009, annual tariff costs for its 
NVOCC clients ranged from $400 to $75,000 (DPI at 4).
    Levy states that tariffs are required to assist shippers and enable 
the FMC to fulfill its statutory duties (Id. at 3). DPI states that 
shippers can rely on tariff rates to be accurate, complete and in 
effect for 30 days; in the event of a dispute, the tariff can be easily 
accessed and reviewed (DPI at 5). DPI states that tariffs maintained at 
its Web site have been used thousands of times to verify rates in order 
to settle disputes (Id.). DPI states that tariffs help protect the 
public from violations by carriers of Section 10 of the Shipping Act, 
and enable the Commission to assist in resolving disputes (Id.). DPI 
argues that granting an exemption will produce an increase in disputes 
between shippers and NVOCCs over applicable rates and charges (Id. at 
6). Levy also argues that exempting carriers from tariff compliance 
could be detrimental to commerce because there would be higher legal 
costs associated with settling disputes in court instead of at the FMC 
(Id.). Levy states that the issues of overly burdensome regulations, 
access to tariffs and their usefulness should not be ignored, and the 
FMC should consider reforming its tariff regulations so that it can 
perform its duty and maintain the regulatory framework envisioned by 
Congress, rather than exempting NVOCCs from the Act's requirements 
(Id). Levy strongly supports having the FMC initiate a proceeding to 
review and reform tariff regulations for both NVOCCs and VOCCs, to make 
tariff compliance less burdensome, tariffs more accessible and tariff 
information more useful (Id.).

III. Commission Action

    After consideration of the Petition and all comments at a meeting 
on February 18, 2010, the Commission determined to initiate a 
rulemaking to relieve licensed NVOCCs from the costs and burdens of 
tariff rate publication.\2\ The Commission specifically found that it 
was within its statutory authority and discretion under Section 16 of 
the Shipping Act to grant such an exemption with certain conditions, 
after having considered all the comments filed in support and in 
opposition to the Petition, as doing so would not result in substantial 
reduction in competition or be detrimental to commerce, consistent with 
the Act. See 46 U.S.C. 40103(a). Section 16 of the Act, as recodified, 
reads:
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    \2\ Commissioner Joseph E. Brennan dissented.

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40103. Administrative exemptions:

    (a) In General.--The Federal Maritime Commission, on application 
or on its own motion, may by order or regulation exempt for the 
future any * * * specified activity of [persons subject to this 
part] from any requirement of this part if the Commission finds that 
the exemption will not result in substantial reduction in 
competition or be detrimental to commerce. The Commission may attach 
conditions to an exemption and may, by order, revoke an exemption.
    (b) Opportunity for Hearing.--An order or regulation of 
exemption may be issued only if the Commission has provided an 
opportunity for a hearing to interested persons and departments and 
agencies of the United States Government.

    The Commission determined to issue this notice of proposed 
rulemaking, providing the licensed NVOCCs relief from tariff rate 
publication requirements and imposing several conditions, including the 
following: NVOCCs would continue to publish standard rules tariffs 
containing contractual terms and conditions governing shipments, and 
would be required to provide these rules free of charge; rates charged 
by NVOCCs must be agreed to and memorialized in writing by the date 
cargo is received for shipment by the common carrier; and NVOCCs must 
retain documentation of the agreed rate and terms for each shipment for 
a period of five years, and must make this documentation available 
promptly to the Commission on request pursuant to the Commission's 
regulations at 46 CFR 515.31(g).

IV. Discussion

    As described above, the Commission voted at its meeting of February 
18, 2010, exercising its discretion under Section 16 of the Act, 
codified at 46 U.S.C. 40103, to exempt licensed NVOCCs by regulation 
from these

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requirements of the Act: The requirement in Section 8(a), codified at 
46 U.S.C. 40501(a)-(c) that each common carrier keep open to public 
inspection in an automated tariff system tariffs showing all its rates; 
Section 8(b), codified at 46 U.S.C. 40501(d) (time volume rates); 
Section 8(d), codified at 46 U.S.C. 40501(e) (tariff rate increase may 
not be effective on less than 30 days' notice but decrease effective 
immediately); Section 8(e), codified at 46 U.S.C. 40503 (carrier 
application to grant refunds); and Section 10(b)(2)(A)'s requirement of 
adhering to the published tariff rate, codified at 46 U.S.C. 
41104(2)(A). The Commission also determined to seek public comment on 
whether the regulation should also extend the exemption to the 
prohibitions of Section 10(b)(4), codified at 46 U.S.C. 41104(4) 
(prohibiting common carriers from unfair or unjustly discriminatory 
practices in services pursuant to a tariff), and Section 10(b)(8), 
codified at 46 U.S.C. 41104(8) (prohibiting common carriers from undue 
or unreasonable preference or advantage or undue or unreasonable 
prejudice or disadvantage for tariff service). The Commission voted to 
make this exemption subject to several conditions, as described below. 
The Commission now publishes a proposed regulation and seeks comment 
from the public on the proposal.
    The regulation, as proposed, would exempt licensed NVOCCs from 
certain provisions of the Act, specified as follows. The Petition also 
requests that the exemption be applicable for NVOCCs unlicensed but 
registered pursuant to 46 CFR 515.21(a)(3). The Commission will 
consider comments on whether the exemption should be extended to such 
NVOCCs. The proposed regulation would recognize NVOCC negotiated rate 
arrangements (NRAs) and proposes defining that instrument as ``a 
written and binding arrangement between a shipper and an eligible NVOCC 
to provide specific transportation service for a stated cargo quantity, 
from origin to destination, on and after the receipt of the cargo by 
the carrier or its agent (or the originating carrier in the case of 
through transportation).''
    For the exemption rule to apply to an NVOCC, the NVOCC must meet 
the following conditions:

 Notice that the NVOCC is invoking the exemption and opting out 
of rate publication must be published in a prominent place in a rules 
tariff;
 Public access to the rules tariff must be free of charge or 
the rules tariff must be provided with each of the NVOCC's proposed 
NRAs or rate quotes;
 NRAs must:
    [cir] Be agreed to by both parties;
    [cir] Be memorialized in writing;
    [cir] Include the applicable rate for each shipment;
    [cir] Be agreed and memorialized on or before the date on which the 
cargo is received by the common carrier or its agent (including 
originating carrier in the case of through transportation rates);
    [cir] Include prominent notice of the existence and location of the 
NVOCC's rules tariff; and
 NRAs and associated records must be retained for five years 
and are subject to the records availability requirements of the 
Commission's regulations at 46 CFR 515.31(g).

    When these conditions have been met, the regulation as proposed 
would exempt the NVOCC from the following requirements of the Act and 
the Commission's related regulations:
    1. The requirement in Section 8(a)(1)(codified at 46 U.S.C. 
40501(a)), (requirement that a tariff containing the applicable rate be 
published in an automated tariff system);
    2. Section 8(b) (codified at 46 U.S.C. 40501(d)) (a rate under 
which a tariff may vary with the volume of cargo over a specified 
period of time);
    3. Section 8(d), (codified at 46 U.S.C. 40501(e)) (tariff rate 
increase may not be effective on less than 30 days' notice but may 
decrease effective on publication);
    4. Section 8(e), (codified at 46 U.S.C. 40503) (common carrier may 
apply for Commission authority to grant refunds); and from
    5. Section 10(b)(2)(a)'s requirement to adhere to a published 
tariff rate (codified at 46 U.S.C. 41104(2)(A)).
    Other than the specific provisions of the Act and the Commission's 
related regulations referenced above, eligible NVOCCs will be subject 
to the requirements of the Act and all applicable antitrust laws under 
the proposed regulation.
    The Commission seeks comment on whether the regulation should 
additionally specifically exempt eligible NVOCCs from the prohibitions 
of Section 10(b)(4), codified at 46 U.S.C. 41104(4) (prohibiting common 
carriers from unfair or unjustly discriminatory practices in service 
pursuant to a tariff), and Section 10(b)(8), codified at 46 U.S.C. 
41104(8) (prohibiting common carriers from undue or unreasonable 
preference or advantage or undue or unreasonable prejudice or 
disadvantage for tariff service).
    The Commission also requests comment on additional terms to be 
required in the NRA documentation. In addition, the Commission requests 
comments on which elements should be required to qualify the NRA for a 
``safe harbor'' status that affords a presumption that the 
corresponding shipment is not subject to the tariff rate publication 
requirement.
    Finally, the Commission proposes to add 46 CFR 520.13(e) to its 
current tariff regulations indicating the interaction of NRAs and 
otherwise applicable tariff publication requirements of that section.

V. Section-by-Section Analysis

A. Section 532.1--Purpose

    The NPRM proposes an exemption from certain provisions of the Act. 
Section 532.1 sets forth the purpose for the exemption and its 
conditions.

B. Section 532.2--Scope and Applicability

    This provision describes the scope and applicability of the 
proposed exemption. Notably, the Commission has proposed that the 
exemption be limited to NVOCCs that are licensed pursuant to 46 CFR 
Part 515. Further, it states that any NVOCC who fails to maintain its 
bond or license or has had its tariff suspended or cancelled by the 
Commission is ineligible to avail itself of the exemption.
    The Commission has proposed that, as the exemption as proposed will 
only apply to rates, but not the other terms of the agreement between 
shipper and carrier, standard terms (``tariff rules'') will continue to 
be required to be made public in the NVOCC's tariff publication.

C. Section 532.3--Definitions

    This provision defines the terms used in the exemption regulation. 
Specifically, the Commission introduces a new term, ``NVOCC Negotiated 
Rate Arrangement'' (NRA). The Commission notes that it does not propose 
to remove or revise the exemption regulations for NVOCC Service 
Arrangements (NSAs), 46 CFR Part 531.
    The rule as proposed would define an NRA as, ``a written and 
binding arrangement between a shipper and an eligible NVOCC to provide 
specific transportation service for a stated cargo quantity, from 
origin to destination, on and after the receipt of the cargo by the 
carrier or its agent (or the originating carrier in the case of through 
transportation).'' This definition is based on that of ``rate'' as it 
appears in the Commission's rules at 46 CFR 520.2. The proposed 
exemption regulation would also define the term ``rules tariff.''

[[Page 25155]]

D. Section 532.4--Duties

    This proposed provision imposes the duty to provide all terms of an 
NRA upon the offering NVOCC and is intended for the protection of the 
shipper. The proposed rule requires that an NVOCC invoking the 
exemption either (1) provide the public electronic access to its rules 
tariff free of charge or (2) provide a copy of its rules tariff with 
each of its proposed NRAs.

E. Section 532.5--Requirements for NVOCC Negotiated Rate Arrangements

    This provision details the requirements for the timing, contents 
and documentation of NRAs. NRAs must be agreed to and memorialized in 
writing. Specifically, the Commission wishes commenters to take notice 
of the timing requirements of the exemption regulation. NRAs must be 
concluded and in place prior to the date the cargo is received by the 
common carrier or its agent (including originating carriers in the case 
of through transportation). These requirements are based on the 
applicable rate provision of the Commission's tariff regulations found 
at 46 CFR 520.7(c). The Commission wishes to note that the regulation 
as proposed does not allow for any modification to the NRA after the 
cargo is received by the carrier or its agent (or the originating 
carrier in the case of through transportation).

F. Section 532.6--Notices

    This section provides details of the required notices that an NVOCC 
invoking the exemption must provide to the Commission and to potential 
customers. The proposed regulation requires NVOCCs invoking the 
exemption to continue to publish a rules tariff, which contains terms 
and conditions for shipments, but not the agreed rate for a particular 
shipment. The proposed rule requires that the published rules tariff 
include prominent notice that the NVOCC has chosen to operate under the 
exemption and opt out of publishing rates in its tariffs.
    Alternatively, if an NVOCC seeks to invoke the exemption for all of 
its dealings with shippers, it may be simpler to provide an indication 
of this election to the Commission on the NVOCC's Form FMC-1 filing, 
which would then be reflected on the Commission's Web site along with 
the NVOCC's tariff location. The Commission seeks comment on whether 
the regulation should also specify that, when a tariff rate and a duly-
executed NRA appear to address the same shipment, the lower rate shall 
prevail.

G. Section 532.7--Recordkeeping and Audit

    This provision would require an NVOCC invoking the exemption to 
maintain original NRAs and associated records for 5 years in a format 
easily produced to Commission. An NVOCC would be required to make the 
NRAs and associated records available to the Commission promptly in 
response to a request pursuant to 46 CFR 515.31(g).
    Failure to keep records would remove the operation of the exemption 
(even if it had been invoked by a notice as set forth in foregoing 
sections) and therefore would make the NVOCC subject to penalties for 
violations of the Act including, for example, 46 U.S.C. 41104(1) 
(prohibition against a common carrier allowing a person to obtain 
transportation at less than applicable tariff rates by an unjust or 
unfair means or device), and 41104(2)(A) (prohibition against a common 
carrier providing service not in accordance with a tariff).

VI. Statutory Reviews and Request 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 
the proposed rule, if promulgated, would not have a significant 
economic impact on a substantial number of small entities. The 
Commission recognizes that the majority of businesses affected by this 
rule qualify as small entities under the guidelines of the Small 
Business Administration. The rule, however, would establish an 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. Rather, it exempts NVOCCs from the otherwise 
applicable requirements of the Act when such entities comply with the 
rules set forth herein.
    This regulatory action is not a ``major rule'' under 5 U.S.C. 
804(2).
    The collection of information requirements contained in this 
proposed 46 CFR Part 532 have been submitted to the Office of 
Management and Budget for review under section 3504(h) of the Paperwork 
Reduction Act of 1980, as amended. Send comments regarding the burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to Ronald D. Murphy, 
Managing Director, Federal Maritime Commission, 800 North Capitol 
Street, NW., Washington, DC 20573, e-mail: [email protected], or fax: (202) 
523-3646; and to the Office of Information and Regulatory Affairs, 
Office of Management and Budget, Attention: Desk Officer for Federal 
Maritime Commission, 17th Street and Pennsylvania Avenue, NW., 
Washington, DC 20503, e-mail: [email protected], or fax: (202) 
395-5806.

List of Subjects

46 CFR Part 520

    Common carrier, Freight, Intermodal transportation, Maritime 
carrier, Reporting and recordkeeping requirements.

46 CFR Part 532

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

    Accordingly, the Federal Maritime Commission proposes to amend 46 
CFR Part 520 and add 46 CFR Part 532 as follows:

PART 520--CARRIER AUTOMATED TARIFFS

    1. The authority for Part 520 continues to read as follows:

    Authority: 5 U.S.C. 553; 46 U.S.C. 305, 40101-40102, 40501-
40503, 40701-40706, 41101-41109.

Sec.  520.13  [Amended]

    2. In Sec.  520.13, add a new paragraph (e) to read as follows:


Sec.  520.13  Exemptions and exceptions.

* * * * *
    (e) NVOCC Negotiated Rate Arrangements. A licensed NVOCC that 
satisfies the requirements of part 532 of this chapter is exempt from 
the requirement in this part that it include rates in a tariff open to 
public inspection in an automated tariff system.
    3. Add part 532 to read as follows:

PART 532--NVOCC NEGOTIATED RATE ARRANGEMENTS

Subpart A--General Provisions
Sec.
532.1 Purpose.
532.2 Scope and applicability.
532.3 Definitions.
Subpart B--Procedures Related to NVOCC Negotiated Rate Arrangements
532.4 Duties of the NVOCC.
532.5 Requirements for NVOCC Negotiated Rate Arrangements.
532.6 Notices.
Subpart C--Recordkeeping Requirements
532.7 Recordkeeping and audit.
532.91 OMB control number assigned pursuant to the Paperwork 
Reduction Act.

    Authority: 46 U.S.C. 40103.

[[Page 25156]]

Subpart A--General Provisions


Sec.  532.1  Purpose.

    The purpose of this Part, pursuant to the Commission's statutory 
authority, is to exempt licensed and bonded non-vessel-operating common 
carriers (NVOCCs) from the tariff rate publication and adherence 
requirements of the Shipping Act of 1984, as enumerated herein.


Sec.  532.2  Scope and applicability.

    This Part exempts NVOCCs duly licensed pursuant to 46 CFR 515.3, 
holding adequate proof of financial responsibility pursuant to 46 CFR 
515.21; and meeting the requirements of 46 CFR 532.4 through 532.7; 
from the following requirements and prohibitions of the Shipping Act 
and the Commission's regulations:
    (a) The requirement in 46 U.S.C. 40501(a)-(c) that the NVOCC 
include its rates in a tariff open to public inspection in an automated 
tariff system;
    (b) 46 U.S.C. 40501(d);
    (c) 46 U.S.C. 40501(e);
    (d) 46 U.S.C. 40503;
    (e) The prohibition in 46 U.S.C. 41104(2)(A); and
    (f) The Commission's corresponding regulation at 46 CFR 520.3(a) 
that the NVOCC include its rates in a tariff open for public inspection 
in an automated tariff system;
    (g) The Commission's corresponding regulations at 46 CFR 
520.4(a)(4), 520.4(f), 520.6(e), 520.7(c), (d), 520.8(a), 520.12, and 
520.14. Any NVOCC failing to maintain its bond or license as set forth 
above, or who has had its tariff suspended by the Commission, shall not 
be eligible to invoke this exemption.


Sec.  532.3  Definitions.

    When used in this part,
    (a) ``NVOCC Negotiated Rate Arrangement'' means a written and 
binding arrangement between a shipper and an eligible NVOCC to provide 
specific transportation service for a stated cargo quantity, from 
origin to destination, on and after receipt of the cargo by the carrier 
or its agent (or the originating carrier in the case of through 
transportation).
    (b) ``Rate'' means a price stated for providing a specified level 
of transportation service for a stated cargo quantity, from origin to 
destination, on and after a stated date or within a defined time frame.
    (c) ``Rules tariff'' means the portion of a tariff, as defined by 
46 CFR 520.2, containing the terms and conditions governing the 
charges, classifications, rules, regulations and practices of an NVOCC, 
but does not include a rate.

Subpart B--Procedures Related to NVOCC Negotiated Rate Arrangements


Sec.  532.4  Duties of the NVOCC.

    Before entering into an NRA under this Part, the NVOCC must:
    (a) For each NRA, provide the prospective shipper all the 
applicable terms as set forth in its rules tariff; or
    (b) Provide electronic access to its rules tariffs to the public 
free of charge.


Sec.  532.5  Requirements for NVOCC Negotiated Rate Arrangements

    In order to qualify for the exemptions to the general rate 
publication requirement as set forth in section 532.2, an NRA must:
    (a) Be in writing;
    (b) Be agreed to by both shipper and NVOCC prior to the date on 
which the cargo is received by the common carrier or its agent 
(including originating carriers in the case of through transportation);
    (c) Clearly specify the rate and to which shipment or shipments 
such rate will apply; and
    (d) may not be modified after the time the shipment is received by 
the carrier or its agent (including originating carriers in the case of 
through transportation).


Sec.  532.6  Notices.

    (a) An NVOCC wishing to invoke an exemption pursuant to this part 
must indicate that intention to the Commission and to the public by one 
or more of the following:
    (1) A prominent notice on its rules tariff; or
    (2) By so indicating on its Form FMC-1 on file with the Commission.
    (b) [Reserved]

Subpart C--Recordkeeping Requirements


Sec.  532.7  Recordkeeping and audit.

    (a) An NVOCC invoking an exemption pursuant to this part must 
maintain original NRAs and all associated records including written 
communications for 5 years in a format easily produced to Commission.
    (b) NRAs and all associated records and written communications are 
subject to inspection and reproduction requests under section 515.31(g) 
of this chapter. An NVOCC shall produce the requested NRAs and 
associated records, including written communications, promptly in 
response to a Commission request.
    (c) Failure to keep or timely produce original NRAs and associated 
records and written communications will disqualify an NVOCC from the 
operation of the exemption provided pursuant to this part, regardless 
of whether it has been invoked by notice as set forth above, and may 
result in a Commission finding of a violation of 46 U.S.C. 41104(1), 
41104(2)(A) or other acts prohibited by the Shipping Act.


Sec.  532.91  OMB control number issued pursuant to the Paperwork 
Reduction Act

    The Commission has received OMB approval for this collection of 
information pursuant to the Paperwork Reduction Act of 1995, as 
amended. In accordance with that Act, agencies are required to display 
a currently valid control number. The valid control number for this 
collection of information is [3072-XXX].

    By the Commission.
Karen V. Gregory,
Secretary.
[FR Doc. 2010-10476 Filed 5-6-10; 8:45 am]
BILLING CODE P