[Federal Register Volume 76, Number 41 (Wednesday, March 2, 2011)]
[Rules and Regulations]
[Pages 11351-11361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-4599]


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FEDERAL MARITIME COMMISSION

46 CFR Parts 520 and 532

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


Non-Vessel-Operating Common Carrier Negotiated Rate Arrangements

AGENCY: Federal Maritime Commission.

ACTION: Final rule.

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SUMMARY: The Federal Maritime Commission is exempting licensed non-
vessel-operating common carriers that enter into negotiated rate 
arrangements from the tariff rate publication requirements of the 
Shipping Act of 1984 and certain provisions and requirements of the 
Commission's regulations.

DATES: The final rule is effective April 18, 2011.

FOR FURTHER INFORMATION CONTACT:
    Legal information: Elisa Holland, 202-523-5740, 
[email protected].
    Technical information: George A. Quadrino, 202-523-5800; Gary G. 
Kardian, 202-523-5856, [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

a. Summary of Proposed Rule

    On May 7, 2010, the Federal Maritime Commission (FMC or Commission) 
issued a notice of proposed rulemaking (NPR), pursuant to its authority 
under sections 16 and 17 of the Shipping Act of 1984 (Shipping Act), 46 
U.S.C. 40103 and 46 U.S.C. 42101, seeking comments on a proposal to 
exempt licensed non-vessel-operating common carriers (NVOCCs) from the 
rate publication requirements of the Shipping Act, subject to certain 
conditions.\1\ The Commission found that it was within its statutory 
authority under Section 16 of the Shipping Act to grant such an 
exemption, subject to certain conditions, as doing so would not result 
in substantial reduction in competition or be detrimental to commerce, 
consistent with the Shipping Act. See 46 U.S.C. 40103(a). As proposed, 
the exemption would relieve licensed NVOCCs from their tariff rate 
publication obligations when entering into a ``negotiated rate 
arrangement'' (NRA). An NRA is defined 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).'' Proposed Section 532.3(a). The use of NRAs would be 
subject to several conditions, including (1) NVOCCs who use NRAs would 
be required to continue publishing standard rules tariffs containing 
contractual terms and conditions governing shipments, including any 
accessorial charges and surcharges, and would be required to make their 
rules tariffs available to shippers free of charge; (2) NRA rates 
charged by NVOCCs must be mutually agreed and memorialized in writing 
by the date cargo is received for shipment; and (3) NVOCCs who use NRAs 
must retain documentation confirming the agreed rate and terms for each 
shipment for a period of five years, and must make such documentation 
promptly upon request available to the Commission pursuant to the 
Commission's regulations at 46 CFR 515.31(g).
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    \1\ 75 FR 25151 (May 7, 2010). The proposed rule was issued 
following a petition filed by the National Customs Brokers and 
Forwarders Association of America, Inc. (NCBFAA) requesting the 
Commission to exercise its authority under 46 U.S.C. 40103 to exempt 
NVOCCs from provisions of the Shipping Act requiring publication and 
adherence to rate tariffs for ocean transportation to the extent 
such transportation is provided under individually negotiated rates 
with shipping customers and memorialized 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 (``Petition''), published for comment on 
August 11, 2008. After consideration of the Petition and the 
comments received, the Commission determined to initiate a 
rulemaking to relieve licensed NVOCCs from the costs and burdens of 
tariff rate publication.
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    Licensed NVOCCs, to the extent they enter into NRAs, would be 
exempt by regulation from the following provisions of the Shipping Act: 
Section 8(a), codified at 46 U.S.C. 40501(a)-(c) (obligation to publish 
an automated rate tariff); 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 increases may not be effective on less than 30 days notice 
but decreases may be effective immediately); Section 8(e), codified at 
46 U.S.C. 40503 (carrier refunds due to a tariff error); and Section 
10(b)(2)(A), codified at 46 U.S.C. 41104 (requiring adherence to 
published tariff rates).
    The Commission also sought public comment on whether the exemption 
should be extended 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). 
Additionally, the Commission requested interested parties to submit 
comments on whether the exemption should be extended to foreign-based 
NVOCCs who are unlicensed but bonded pursuant to 46 CFR 515.21(a)(3), 
and on which elements, if any, qualify an NRA for a ``safe harbor'' 
that affords a presumption that the corresponding shipment is not 
subject to the tariff rate publication requirement.

b. Comments Received

    The Commission received a total of forty-four public comments: one 
comment from two members of Congress; two comments from other federal 
agencies; nineteen from U.S.- based, licensed NVOCCs; seven from 
foreign unlicensed NVOCCs; four from U.S.-based trade associations; 
three from foreign-based trade associations; two from consultants; and 
six from tariff publishers and their employees.\2\ On

[[Page 11352]]

May 24, 2010, the Commission held a public meeting to receive oral 
comments.\3\ The Commission considered all comments in developing this 
final rule. A discussion of significant comments and the Commission's 
response to those comments as well as minor modifications and 
clarifications made to the proposed rule is provided below.
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    \2\ The Commission received written comments on the NPR from: 
Congressmen Mike Doyle, 14th District, Pennsylvania and Tim Murphy, 
18th District, Pennsylvania (Joint Congressional Commenter); the 
Department of Justice, Antitrust Division, Transportation, Energy & 
Agriculture Section; the Department of Transportation, Office of 
General Counsel; Econocaribe Consolidators, Inc.; John S. Connor, 
Inc.; AIReS, A1 Relocation Solutions; J.W. Allen & Co., Inc.; C.H. 
Powell Company, NVOCC Division; The Camelot Company; BDG 
International, Inc.; Hanseatic Container Line Ltd. and Mid-America 
Overseas, Inc.; Lori Fleissner, President, Global Fairways, Inc.; 
M.E. Dey & Co., Inc.; Nakamura (USA) Inc.; CV International; Mohawk 
Global Logistics; NACA Logistics (USA) Inc. d/b/a Vanguard Logistics 
Services; BDP Transport, Inc., CaroTrans International, Inc. and 
Mallory Alexander International Logistics, LLC (Joint Commenters); 
UPS Ocean Freight Services; UTi, United States, Inc.; DHL-Danzas d/
b/a DHL Global Forwarding d/b/a Danmar Lines Ltd.; Ocean World 
Lines, Inc.; Alfred Balguerie, S.A.; Damco A/S; Trans Service Line; 
Schenkerocean Limited; CDS Global Logistics, Inc.; Juerge Bandle, 
Senior Vice President, Kuehne + Nagel, Inc., agent of Blue Anchor 
Line, Division of Transpac Container System Ltd., Hong Kong; 
Panalpina, Inc. as agent for and on behalf of Pantainer, Ltd.; New 
York New Jersey Foreign Freight Forwarders & Brokers Association, 
Inc. (NYNJFFF&BA); National Industrial Transportation League (NIT 
League); Transportation Intermediaries Association (TIA); National 
Customs Brokers and Forwarders Association of America, Inc. 
(NCBFAA); China Association of Shipping Agencies & Non-Vessel-
Operating Common Carriers (CASA); British International Freight 
Association; Fedespedi-Federazione Nazionale delle Imprese di 
Spedizioni Internazionali; Albert Saphir d/b/a ABS Consulting; Stan 
Levy, Stan Levy Consulting, LLC; The Descartes Systems Group, Inc.; 
RateWave Tariff Services, Inc.; Laurie Zack-Olson; Dart Maritime 
Service, Inc.; Distribution Publications, Inc.; and the Kaslea 
Corporation d/b/a U.S. Traffic Service.
    \3\ Oral comments were made by from the following individuals: 
Edward D. Greenberg, Counsel for National Customs Brokers & 
Forwarders Association of America, Inc.; Paulette Kolba, Vice 
President of Ocean Compliance, Panalpina, Inc. as agent for 
Pantainer Ltd.; Robert J. Schott, President, SEASCHOTT, Division of 
AIRSCHOTT, Inc.; Robert A. Voltmann, President & CEO, Transportation 
Intermediaries Association; Neil Barni, President, CargoSphere; 
James E. Devine, President, Distribution Publications, Inc.; Stan 
Levy, President, Stan Levy Consulting; Gerard P. Wardell, President, 
and Laurie A. Zack-Olson, Vice President of Tariff Operations, 
RateWave Tariff Services, Inc.
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II. The Authority of the Commission to Grant the Exemption

    The strong balance of the comments expressed general support for 
exempting NVOCCs who use NRAs from the tariff rate publication 
requirements of the Shipping Act and the Commission's regulations. 
Notably, the Department of Justice opined that the proposed elimination 
of the NVOCC tariff publication requirements would meet the Section 16 
exemption authority standard and would be an appropriate exercise of 
the Commission's authority. Other commenters agreed with this analysis, 
further stating that the proposed exemption will allow NVOCCs to be 
more flexible and more responsive to their shippers, and will promote 
competition and commerce by eliminating substantial regulatory costs to 
NVOCCs, a savings that could be passed on to their customers. A number 
of commenters argued that the ability to enter into NRAs would allow 
them to quickly adjust service offerings and rates due to rapidly 
changing rates and surcharges imposed by ocean common carriers. Most 
commenters opined that the proposed rule would not result in a 
substantial reduction in competition or be detrimental to commerce and, 
in fact, would increase competition and promote commerce by making it 
easier and more efficient for NVOCCs to quote rates and to devote their 
resources to serving their customers. The NCBFAA argued that the 
issuance of the exemption for NVOCCs would increase, not decrease, 
competition in the NVOCC industry, and would not be detrimental to 
commerce, but would instead increase NVOCC efficiency, substantially 
reduce unnecessary costs, save jobs, permit NVOCCs to expend scarce 
resources in positive ways and allow NVOCC's to reduce rates for their 
shippers. Conversely, several commenters opined that the NPR did not 
meet these standards and was therefore beyond the Commission's current 
statutory authority.
    The Commission issued the NPR pursuant to its authority under 
section 16 of the Shipping Act, which allows the Commission to exempt 
future activity from the requirements of the Shipping Act if the 
Commission finds that the exemption will not result in a substantial 
reduction in competition or be detrimental to commerce. 46 U.S.C. 
40103. The Commission may attach conditions to such an exemption and 
may, by order, revoke an exemption. The Commission has granted 
exemptions in the past. For example, in 2004, the Commission used its 
authority under Section 16 to exempt NVOCCs who entered into negotiated 
service arrangements (NSAs) from the Shipping Act's tariff publication 
requirements.. The Commission has also denied such requests for 
exemption in the past.\4\
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    \4\ See Motor Vehicle Manufacturers Association of the United 
States, Inc. and Wallenius Lines, N.A.--Joint Application for 
exemption from certain requirements of the Shipping Act of 1984 for 
certain limited shipments of passenger vehicles, Petition, 26 S.R.R. 
1269 (1994) (Commission denied a petition for exemption based on the 
pre-Ocean Shipping Reform Act version of Section 16 of the Shipping 
Act of 1984).
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    The Commission, as previously stated, is authorized to grant an 
exemption under Section 16 when it finds that the exemption will not 
result in a substantial reduction in competition and, separately, will 
not be detrimental to commerce. The relevant competitive considerations 
in determining whether to grant the exemption and allow licensed NVOCCs 
to enter into NRAs were: competition among NVOCCs; competition between 
NVOCCs and VOCCs; competition among VOCCs; and competition among 
shippers.
    With regard to competition among NVOCCs, the Commission's records 
show that as of February 10, 2011, there were 3,368 NVOCCs licensed in 
the United States and 1,125 foreign unlicensed NVOCCs, indicating that 
customers can choose among a wide array of competing service providers. 
Additionally, allowing licensed NVOCCs the ability to opt out of the 
tariff rate publishing requirements of the Shipping Act could reduce 
entry costs for additional potential competitors in the NVOCC market, 
thereby resulting in more service providers and even greater 
competition. The Commission believes that allowing licensed NVOCCs to 
opt out of the requirement to publish tariff rates will enhance 
competition, rather than result in a substantial reduction in 
competition among licensed NVOCCs.
    One commenter voiced concerns that granting the exemption will put 
VOCCs at a competitive disadvantage to NVOCCs as not all cargo moves 
under VOCC service contracts. That lone commenter is not a 
transportation provider, either as an NVOCC or a VOCC. Such issues were 
not raised by any VOCC. Some commenters have argued that NVOCCs and 
VOCCs do not compete against each other, as NVOCCs tend to service 
small-to-medium sized shippers and VOCCs tend to serve larger customers 
that sign service contracts. The record demonstrated, however, that 
many shippers use both NVOCCs and VOCCs at one time or another, thereby 
creating a competitive market.
    The Joint Commenters, citing generally accepted industry 
statistics, noted that since the implementation of the Ocean Shipping 
Reform Act of 1998 (OSRA), over 90% of shippers' dealings with ocean 
common carriers have been in the form of confidential service 
contracts, rather than through tariff rates. Thus, VOCCs would appear 
to have had a statutory competitive advantage over NVOCCs, an advantage 
that will be somewhat reduced by this rule. As a result, NVOCCs will 
likely become more competitive with VOCCs.
    Providing NVOCCs the ability to opt out of tariff rate publishing 
is highly unlikely to reduce competition among VOCCs. All NVOCC cargo 
must eventually move with a VOCC which, in turn, competes with other 
VOCCs for NVOCC cargo. If NVOCCs were able to somehow increase their 
cargo share due to their ability to opt out of rate tariff publishing, 
then those VOCCs who are more reliant on NVOCC cargo could conceivably 
capture more cargo from VOCCs that do not rely as much on NVOCC cargo. 
This, however, is in the Commission's view extremely speculative and, 
if such a scenario actually came about, we believe that it would be 
more likely to lead to changed business models by affected VOCCs and 
ultimately lead to increased competition overall. Thus, the Commission 
finds that granting the exemption would not result in a substantial 
reduction in competition among VOCCs.
    Finally, many commenters asserted that their customers do not 
inquire as to published tariff rates, making such published rates 
effectively useless. Other commenters stated that their customers 
consult with multiple carriers directly, by e-mail or phone, in search

[[Page 11353]]

of the best quote and do not consult published tariffs. Several 
commenters stated that their shipper customers have never used a 
published tariff to review the marketability of an ocean freight 
rate.\5\ Accordingly, the record demonstrates that shippers, for the 
most part, do not presently use published NVOCC tariffs for price 
information. Exempting such publication requirements, therefore, would 
have little effect on competition and, certainly, would not have a 
substantial impact. The Commission also notes that since the advent of 
confidential service contracts offered by VOCCs and, to some extent, 
NSAs offered by NVOCCs, it appears that pricing competition has 
increased rather than decreased. For these reasons, the Commission does 
not believe that allowing NVOCCs to opt out of the requirement to 
publish tariff rates will result in a substantial reduction in 
competition among shippers.
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    \5\ Several commenters suggested that the Commission initiate a 
proceeding to review and reform its tariff regulations for NVOCCs 
and VOCCs. The Commission does not believe such action alone would 
provide benefits to NVOCCs or their customers that are as timely or 
significant as this final rule.
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    The Commission's authority under section 16 to grant exemptions 
from the statutory requirements of the Shipping Act, in whole or in 
part, requires the Commission to find not only that the exemption will 
not result in a substantial reduction in competition, but also that the 
exemption will not ``be detrimental to commerce.'' \6\ Ensuring that 
any exemption granted by the Commission is not detrimental to U.S. 
commerce is of particular importance at this time, considering the goal 
of the Administration's National Export Initiative to double U.S. 
exports over the next five years.\7\
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    \6\ Section 16, 46 U.S.C. 40103.
    \7\ See Executive Order No. 13534, 75 FR 37756 (March 10, 2010).
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    Initially, it is significant that no shipper or carrier--NVOCC or 
VOCC--has appeared in this proceeding to object to granting the 
exemption or to allege economic harm resulting from providing NVOCCs 
the option of entering into NRAs,\8\ a matter of significance in 
previous exemption cases. See, Petition for Exemption from Tariff 
Filing Requirements Previously Granted, etc., 22 S.R.R. 1040, 1043 
(1984); Tariff Filing Notice Periods--Exemptions, 24 S.R.R. 1604, 1605-
06 (1989). Indeed, the NIT League, a large organization of shippers in 
the United States, has submitted comments in support of the grant of 
the exemption.
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    \8\ Objections by commenters to certain of the conditions 
imposed on NRAs in the NPR are discussed, infra.
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    Moreover, the Commission has already concluded in this proceeding 
that authorizing licensed NVOCCs to enter into NRAs, subject to the 
conditions imposed, will reduce NVOCC operating costs and increase 
competition in the U.S. trades. Consequently, the Commission believes 
that allowing NRAs as proposed will result in a benefit to commerce. 
Accordingly, after reviewing all of the comments received, and in light 
of the relief sought and the conditions proposed in the NPR, the 
Commission finds that permitting licensed NVOCCs the option of 
operating under NRAs would not be detrimental to commerce.
    Numerous commenters argued that because shippers do not access 
NVOCC tariffs, the maintenance of such tariffs serves no purpose and 
imposes additional costs on NVOCCs. The Joint Commenters argued that 
the exemption, as proposed, will allow NVOCCs to eliminate unnecessary 
costs. In contrast, several commenters questioned whether any cost 
saving experienced by NVOCCs would be passed on to shippers and whether 
there will be a net gain in jobs since jobs could be lost as the 
function of coordinating rate filings and submitting them to a tariff 
publisher will no longer exist. However, with a highly competitive 
industry consisting of more than 3,300 licensed NVOCCs competing for 
cargo, the Commission believes it is likely any cost savings realized 
through use of NRAs will be passed through to shippers in the form of 
more competitive rates. Residual savings to NVOCCs, as well as savings 
from lower rates to shippers, will provide funds for reinvestment and 
growing their respective businesses. Accordingly, providing this 
exemption would likely result in economic growth that would ultimately 
increase jobs.
    Notwithstanding the ability of NVOCCs to enter into NSAs, a number 
of commenters expressed the view that there remained a need for NRAs 
that would exempt NVOCCs from tariff rate publication. One NVOCC 
commented that while some shippers may wish to work under a contract/
NSA basis and some NVOCCs may wish to issue an NSA to obtain a volume 
commitment, most small-to-medium enterprises work on a quotation basis, 
often for a variety of services, and these companies do not want or 
need to engage in a formal contract process. Although several 
commenters suggested the Commission revisit NSAs and their relatively 
infrequent usage by NVOCCs, the Commission does not believe it is 
necessary at this time to initiate such a proceeding, as NSAs were 
implemented to give NVOCCs and their customers additional flexibility 
to structure their shipping transactions and their usage is voluntary. 
NVOCCs' lack of widespread NSA usage does not bear on the question of 
whether the Commission should grant the instant exemption, except that 
it does tend to corroborate a point argued by supporters of the 
exemption--that NRAs are necessary because the business models of many 
NVOCCs are not conducive to using NSAs.
    Several commenters questioned whether NVOCCS entering into NRAs 
would continue to be common carriers at all. The answer is clearly yes. 
Entering into an NRA with a shipper, as opposed to providing service at 
tariff rates, would not change the common carrier status of an 
NVOCC.\9\ The publishing of a tariff is not what characterizes an 
entity as a common carrier, and NVOCCs would still be required to 
publish a rules tariff.\10\ Rather, the existence of a common carrier 
triggers the requirement to publish a tariff.
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    \9\ Indeed, VOCCs are ocean common carriers even when most of 
their business is done under service contracts.
    \10\ The Shipping Act defines a common carrier as a person who 
holds itself out to the general public to provide transportation by 
water of passengers or cargo between the United States and a foreign 
country for compensation; assumes responsibility for the 
transportation from the port or point of receipt to the port or 
point of destination; and uses, for all or part of that 
transportation, a vessel operating on the high seas or the Great 
Lakes between a port in the United States and a foreign port. 46 
U.S.C. 40102(6). Similarly, Black's Law Dictionary defines a common 
carrier as a commercial enterprise that holds itself out to the 
public as offering to transport freight or passengers for a fee. 
Black's Law Dictionary (8th ed. 2004). A common carrier is ``bound 
to take all goods of the kind which he usually carries, unless his 
conveyance is full, or the goods be specially dangerous; but may 
charge different rates to different customers.'' Thomas E. Holland, 
The Elements of Jurisprudence 299 (13th ed. 1924).
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    As discussed by the TIA, common carriage existed from 1916 to 1961 
under the Shipping Act of 1916 without a statutory requirement that 
common carriers file or publish tariffs. Congress added a filing 
requirement in 1961 at the time dual rate loyalty agreements were 
authorized for conferences and carriers. The tariff provision was 
intended to protect shippers against sudden and unannounced rate 
increases. H. Rep. No. 498, 87th Cong., 1st Sess. at 2-3 (1961); S. 
Rep. No. 860, 87th Cong., 1st Sess. at 10-19 (1961). Congress changed 
the filing requirement to a publication requirement in 1998 with the 
passage of the OSRA. The ability of an NVOCC to enter into NRAs with 
its shipper customers in lieu of

[[Page 11354]]

moving cargo under a published tariff rate, and to assess different 
rates to different customers, does not disqualify an NVOCC as a common 
carrier. The responsibilities associated with common carriage remain 
and NVOCCs entering into NRAs continue to be subject to the applicable 
requirements and strictures of the Shipping Act, including oversight by 
the Commission. For example, NVOCCs will continue to be subject to 
requirements that they establish and observe ``just and reasonable 
regulations and practices,'' 46 U.S.C. 41102(c), and prohibitions 
against false billing, false classification, false weighing or 
measurement, retaliating against shippers, engaging in unfair 
practices, and unreasonably refusing to deal or negotiate, 46 U.S.C. 
41104(1), (3), (4), and (10).
    The Commission recognizes the rapidly changing nature of the 
current shipping environment and believes that the ability of NVOCCs to 
enter into NRAs may increase competition and promote commerce by 
allowing NVOCCs to better serve their shipper customers. Based on the 
comments received and the Commission's experience, it appears that a 
vast majority of shippers obtain information regarding rates directly 
from NVOCCs without consulting published tariffs. It also appears that 
the systems used by NVOCCs to generate rate quotations are duplicated 
by those necessary to comply with tariff publishing requirements and 
the continuing requirement to publish rate tariffs may result in 
unnecessary costs to NVOCCs and their shipper customers. The decision 
to enter into an NRA rests with each shipper and NVOCC and is purely 
voluntary. Those licensed NVOCCs who find it more advantageous to use 
published tariff rates for some or all of their business may continue 
to do so, while those licensed NVOCCs and shippers who believe it will 
be more advantageous to enter into negotiated rate arrangements may 
choose to do so, within the requirements of the NRA regulations.
    Allowing licensed NVOCCs to enter into NRAs in lieu of publishing 
tariff rates will not result in substantial reduction in competition 
among NVOCCs, between NVOCCs and VOCCs, among VOCCs, or among shippers. 
The Commission has also found that use of NRAs by licensed NVOCCs will 
not be detrimental to commerce. It is, therefore, within the authority 
of the Commission to permit licensed NVOCCs to enter into NRAs with 
their customers subject to the terms and conditions set forth in this 
regulation.

III. The Scope of an NRA

    The Commission received a large number of comments and questions 
concerning the scope of an NRA.

a. Cargo Quantity

    Commenters questioned the meaning of ``cargo quantity'' in the 
definition of rate,\11\ specifically whether a single NRA could cover 
more than one shipment. Pursuant to Proposed Section 532.5(d), an NRA 
must clearly specify the rate and to which shipment \12\ or shipments 
such rate will apply. Therefore, the term ``cargo quantity'' 
contemplates that an NRA may cover more than one shipment so long as 
all shipments are specified in the NRA.
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    \11\ The NPR defined ``rate'' for the purposes of NRAs as the 
``price stated for providing a specified level of transportation 
service for a stated cargo quantity''. Proposed Section 532.3(b).
    \12\ A shipment, as defined in 46 CFR 520.2, is ``all of the 
cargo carried under the terms of a single bill of lading.''
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b. Election To Use Exemption

    A number of commenters questioned whether an NVOCC that elects to 
use NRAs may also move cargo pursuant to tariff rates. Under the final 
rule, NVOCCs are not required to choose to move all of their cargo 
under either NRAs or tariff rates. Eligible NVOCCs may choose to use 
NRAs on whatever basis best suits the market they serve. In order to 
ensure clarity as to whether an NVOCC is moving cargo under either an 
NRA or a tariff rate for a particular cargo quantity, Proposed Section 
532.6(a)(1) has been modified to include a requirement that an NVOCC 
moving cargo pursuant to an NRA for a particular cargo quantity (either 
shipment or shipments), must place a prominent notice to that effect on 
its bills of lading or equivalent documents for that cargo quantity, in 
addition to the general notice in its rules tariff and its FMC-1 filed 
with the Commission. All licensed NVOCCs will need to access the 
Commission's FMC-1 form in order to make an initial choice \13\ among 
(1) Moving all cargo pursuant to tariff rates; (2) moving all cargo 
pursuant to NRAs; or (3) moving cargo either via tariff rates or via 
NRAs. The Commission intends to modify the FMC-1 form to allow NVOCCs 
to notify the Commission of their intentions in advance of the 
effective date of the Final Rule and will make an announcement via its 
Web site when the ability to do so is available.
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    \13\ This initial choice may be modified by a licensed NVOCC at 
any time thereafter by further amendment of its FMC-1.
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c. Rate: Base and Surcharge

    There were also numerous comments filed regarding the meaning of 
``rate'' in an NRA and its relationship to surcharges, accessorials, 
and rules tariffs. A number of commenters recommended including in the 
NRA all components of the transportation costs and argued NVOCCs should 
have the flexibility to structure NRAs from one extreme of merely 
containing base rates (with all other terms left to the rules tariff) 
to inclusion in the NRA of all terms. Commenters recommended that the 
NRA include information as to which surcharges are to be added to the 
rate, either in the NRA itself or by reference to the NVOCC's rules 
tariff. The NIT League opined that parties to an NRA should be able to 
negotiate an all-inclusive rate or a base rate with itemized 
surcharges, or should be required to specifically incorporate and 
identify which surcharges or accessorials from the rules tariff will 
apply. In a related comment, NYNJFFF&BA questioned how an NVOCC would 
implement general rate increases in the context of an NRA.
    The Commission believes that NVOCCs and their shipper customers 
should have flexibility in structuring NRAs. As is the case with 
respect to tariff rates, the rate stated in an NRA may specify the 
inclusion of all charges (an ``all-in'' rate) or specify the inclusion 
of only certain accessorials or surcharges. Without specifying 
otherwise, the NRA would only replace the base ocean freight rate or 
published tariff rate. If the rate contained in an NRA is not an all-in 
rate, the NRA must specify which surcharges and accessorials from the 
rules tariff will apply. To the extent surcharges or accessorials 
published in the NVOCC's rules tariff will apply, the NRA must state 
that the amount of such surcharges and accessorials is fixed once the 
first shipment has been received by the NVOCC, until the last shipment 
is delivered. Rates stated in an NRA may not be increased via a GRI.

d. Terms of an NRA

    The NCBFAA's petition and the Commission's proposed rule suggested 
an NRA accompanied by an exemption from the published tariff rate upon 
satisfaction of certain conditions. Neither proposed changes to rules 
tariffs, NSAs, or service contracts. One commenter on the proposed rule 
suggested that an NRA should be expanded to include such economic terms 
as credit and payment terms, late payment interest, freight collect or 
prepay, rate methodology, including

[[Page 11355]]

minimum quantities, time/volume arrangements, penalties or incentives, 
the methods for implementation of rate changes, or provisions for 
arbitration, forum selection for disputes and variance of per-package 
liability limits. Commission Staff raised concerns that expanding the 
scope of the NRA beyond rates could cause overlap and confusion between 
NRAs and NSAs, which must be filed with the Commission. At this time, 
the Commissioners hold differing views on the commenter's proposal and 
the concerns raised by Commission Staff. Accordingly, the Commission 
will move forward with the current rule as proposed (and as requested 
in the Petition), under which an NRA is an alternative to a published 
rate and does not include other economic terms. Nor can an NRA under 
this final rule contain a volume commitment, minimum quantity 
commitment, or a penalty provision for failure to meet a minimum 
quantity.\14\ The Commission will commence proceedings to obtain and 
consider additional public comments on potential modifications to the 
final rule, including possible expansion of the terms that can be 
included in an NRA. The record in this proceeding will be incorporated 
into a new Commission proceeding.
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    \14\ An NRA may contain a maximum quantity limit in the case of 
an NRA covering multiple shipments.
---------------------------------------------------------------------------

e. Affiliates

    Although treatment of affiliates was not a focus of the commenters, 
the Commission finds no reason to treat affiliates differently under 
NRAs than they are treated under NSAs. Accordingly, a definition of 
affiliate has been added to Proposed Section 532.3. With the mutual 
concurrence of the NRA parties, affiliates of the shipper are entitled 
to access the NRA rates, in which case, the names and addresses of 
eligible affiliates shall be identified in the NRA. Proposed Section 
532.5(b) has been modified accordingly.

f. Household Goods and Other Limitations

    The Commission received other comments regarding the scope of an 
NRA. One commenter, Mr. Levy, suggested that rates covering shipment of 
household goods and personal effects should not be exempted from tariff 
rate publication, citing the Surface Transportation Board's rules 
governing domestic household goods carriage which require the 
publication of tariffs. Without opining on the merits of this 
suggestion, in light of the Commission's ongoing Fact-Finding 
Investigation concerning household goods shipments,\15\ the Commission 
has determined not to adopt the suggestion at this time as it may be 
more appropriate to revisit this issue after the Commission has the 
benefit of the Fact-Finding Officer's Final Report. Ms. Zack-Olson 
suggested that exemptions should be awarded on an individual basis 
based on certain criteria. The Commission notes that awarding the 
exemption on an NVOCC-by-NVOCC or customer-by-customer basis, based on 
specific criteria, would require an unnecessarily large expenditure of 
resources by both NVOCCs and the Commission and declines to adopt this 
suggestion.
---------------------------------------------------------------------------

    \15\ See Fact Finding Investigation No. 27, Potentially 
Unlawful, Unfair or Deceptive Ocean Transportation Practices Related 
to the Movement of Household Goods or Personal Property in U.S.-
Foreign Oceanborne Trades, Order issued June 23, 2010.
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IV. Extension of the Exemption to Foreign, Bonded, Unlicensed NVOCCS

    The NPR proposed granting the exemption only to licensed NVOCCs, 
but requested comments on whether the exemption should be extended to 
foreign-based NVOCCs who are unlicensed, but bonded pursuant to 46 CFR 
515.21(a)(3) (hereinafter ``foreign unlicensed NVOCCs'').\16\ A large 
number of comments were received by the Commission in response to its 
query, with the strong majority of commenters supporting extension of 
the exemption to foreign unlicensed NVOCCs. Commenters mainly alleged 
adverse effects on competition and fears of discrimination or 
retaliation by regulators in other countries.
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    \16\ The Commission's Bureau of Licensing and Certification's 
records, as of February 10, 2011, show a total of 5,576 entities 
operating in the U.S. trade as ocean transportation intermediaries: 
1,083 licensed freight forwarders, 1,724 licensed NVOCCs, 1,589 
entities licensed as both freight forwarders and NVOCCs, 1,125 
foreign unlicensed NVOCCs and 55 licensed foreign-based NVOCCs 
operating in the U.S. trade.
---------------------------------------------------------------------------

    Commenters argued that foreign unlicensed NVOCCs will be 
disadvantaged because they will continue to be required to publish 
rates. The Commission recognizes there are, and would continue to be, 
under this final rule, differences between licensed and foreign 
unlicensed NVOCCs, not just in tariff publication costs, but also 
licensing costs and bonding costs. However, the Commission does not 
believe that the balance of such differences would be of such a 
magnitude that it would lead to a substantial reduction in competition.
    Commenters also argued that, if the exemption is limited to 
licensed NVOCCs, discrimination against United States-based NVOCCs 
operating in foreign countries will occur. Commenters cited these 
specific examples of possible discrimination: the levying of special 
retaliatory customs tariffs or duties on American products; a new 
requirement that United States-based NVOCCs file tariffs; a requirement 
for United States-based NVOCCs to hold bonds in higher amounts than 
currently required; and a requirement that United States-based NVOCCs 
be licensed in foreign countries. Commission Staff, however, provided 
the Commissioners their view that these predictions of discrimination 
against United States-based NVOCCs operating in foreign countries are 
speculative, because the path to licensure is readily available to 
foreign-based NVOCCs to the same extent as United States-based 
entities. Foreign unlicensed NVOCCs may apply for and, if qualified, 
obtain an NVOCC license. Not only would this provide the benefit of 
NRAs but also reduced bond costs. Currently, fifty-five foreign-based 
NVOCCs hold FMC-issued licenses.
    Commission Staff raised concerns that extending the exemption to 
foreign unlicensed NVOCCs could hamper their ability to protect the 
shipping public, as the exemption is predicated, among other things, on 
the prompt availability of records. The Commission Staff reports that 
the ability of the Commission and some private disputants \17\ to 
obtain NRA documentation from foreign unlicensed NVOCCs is likely to be 
adversely impacted by the foreign situs and unlicensed status of such 
companies. Presently, both the Commission and private litigants are 
able to access a foreign unlicensed NVOCC's rates and rules tariffs. If 
such foreign unlicensed NVOCCs are permitted to use NRAs, the 
Commission would have less timely access to the rate information for 
those cargo quantities moving pursuant to NRAs. The Commission could be 
reduced to obtaining such information only with the cooperation of the 
foreign unlicensed NVOCC or its customer, or through a Commission 
issued subpoena or order,\18\ and those private parties without their 
own copies may only be

[[Page 11356]]

able to obtain such information through the discovery process.\19\
---------------------------------------------------------------------------

    \17\ In a typical dispute between a shipper and a foreign 
unlicensed NVOCC, the shipper is likely to have its own copy of the 
NRA documentation that would be at issue. Commission Staff reports 
that some disputes involving foreign unlicensed NVOCCs, however, can 
involve VOCCs, freight consignees, freight forwarders, notify 
parties, and other affected parties who may be listed on a bill of 
lading for a shipment, but who may not have their own copy of NRA 
documentation.
    \18\ The issuance of a subpoena presupposes an active Commission 
investigation into violations of the Shipping Act. See 46 U.S.C. 
41303.
    \19\ The Commission's decisions (both before and after the 
passage of OSRA with its requirement that United States-based NVOCCs 
be licensed), have noted repeatedly ``the fact that foreign-based 
NVOCCs often ignore Commission proceedings and orders to furnish 
answers to BOE's discovery requests.'' Ever Freight Int'l. Ltd. et 
al., 28 S.R.R. 329, 335 (1998); see also Refrigerated Container 
Carriers Pty. Ltd., 28 Continued * * * S.R.R. 799 (1999) (``BOE has 
had to deal with the practical problem of obtaining evidence * * * 
when respondents are located overseas, do not cooperate, and, 
indeed, ignore Commission proceedings altogether.''); Kin Bridge 
Express Inc. and Kin Bridge Express, (U.S.A.) Inc., 28 S.R.R. 971 
(1999). In Universal Logistics Forwarding Co., Ltd., 29 S.R.R. 36, 
37 (2001), a foreign NVOCC refused to respond to discovery requests 
or the Administrative Law Judge's discovery order. The NVOCC was 
assessed civil penalties of $1,237,500. 29 S.R.R. 474, 475 (2002). 
In Transglobal Forwarding Co., Ltd, 29 S.R.R. 815, 821 (2002), a 
foreign NVOCC did not respond to Bureau of Enforcement discovery 
requests, and then failed to respond fully to an Administrative Law 
Judge order. The NVOCC was assessed civil penalties of $1,440,000. 
In Hudson Shipping (Hong Kong), Ltd. d/b/a Hudson Express Lines, 29 
S.R.R. 702 (2002), a Hong Kong-based NVOCC refused to respond to 
Bureau of Enforcement discovery requests or an Administrative Law 
Judge order. Ultimately, the NVOCC was assessed $7.9 million in 
civil penalties.
---------------------------------------------------------------------------

    Commission Staff raised several other concerns about extending this 
exemption to foreign unlicensed NVOCCs in the absence of published 
tariff rates. For foreign unlicensed NVOCCs, there is no application 
and approval process as there is for United States-based NVOCCs. The 
licensing process for United States-based companies includes a detailed 
review of the experience and character of the application's Qualified 
Individual (QI) and the character, not only of the QI, but also of the 
major officers and shareholders. The QI must have a minimum of three 
years of qualifying NVOCC experience as verified by previous employers 
and personal references with knowledge of the QI's qualifications, who 
are interviewed by telephone or via e-mail by the Commission's Bureau 
of Certification and Licensing (BCL). BCL's review of applicants 
includes a thorough vetting of the Commission's complaint and 
enforcement records systems as well as commercial databases to analyze 
the applicant's financial background, including unsatisfied liens and 
judgments and any criminal history. Any information not consistent with 
that provided by the applicant is investigated and may result in denial 
of the application.
    Accordingly, when the Commission approves a license for a United 
States- based applicant, it is acting upon substantive, verified 
information under the experience and character standards of Section 19 
of the Shipping Act. By contrast, a foreign unlicensed NVOCC is not 
required to have a QI or anyone in its employ who has any experience 
shipping in the United States trades. Similarly, foreign unlicensed 
NVOCCs are not required to have the character necessary to provide 
NVOCC services to United States importers and exporters, as United 
States based companies do. The Commission knows little more than the 
name and address of such persons and the identity of their agent for 
service of process in the United States.
    Commenters suggested various methods to address this concern, 
including requiring all participating NVOCCs to agree in writing to 
produce NRA records as reasonably requested by the Bureau of 
Enforcement; requiring that foreign unlicensed NVOCCs maintain their 
NRA files at the offices of their U.S. agents or a third party Web 
site; or requiring that all foreign based NVOCCs place a statement in 
their rules tariff regarding the location of records and contact 
information. Another commenter suggested that the exemption be extended 
to unlicensed NVOCCs that are affiliates with licensed NVOCCs in good 
standing. Alternatively, one commenter suggested that the tariff rate 
exemption be limited to exports from the United States.
    These suggestions did not fully address the concerns raised by 
Commission Staff at this time. Congress, in providing for foreign-based 
companies to operate as NVOCCs, without being required to be licensed 
or vetted, recognized possible regulatory differences between United 
States and foreign-based NVOCCs. Congress directed the Commission to 
take into account that foreign-based unlicensed companies had not been 
reviewed as to experience and character and ``to consider the 
difference in potential for claims against the bonds between licensed 
and unlicensed intermediaries when developing bond requirements.'' 
Congress recognized the ``diversity of activities'' conducted by ocean 
transportation intermediaries and directed the Commission ``to 
establish a range of licensing and financial responsibility 
requirements commensurate with the scope of activities conducted by 
different ocean transportation intermediaries and the past fitness of 
ocean transportation intermediaries in the performance of intermediary 
services.'' S. R. Rep. No. 105-61, at 30-32 (1997). Accordingly, 
Congress recognized that not all NVOCCs were to be treated equally from 
a regulatory perspective and that the Commission was to take into 
account those factors necessary to ensure the public is protected.
    Commission Staff has raised further concerns over its ability to 
protect the shipping public with respect to possible exempted 
operations of foreign unlicensed NVOCCs. The proposed rule provides 
that NRAs and associated records are subject to inspection and 
reproduction requests under 46 CFR 515.31(g). However that provision 
only applies to a ``licensee.''
    Absent that limitation, obtaining records located overseas can be 
difficult and may involve considerable delay. The Hague Convention on 
the Taking of Evidence Abroad in Civil and Commercial Matters \20\ 
(Convention) provides procedures for obtaining evidence from entities 
in certain countries, but those procedures are time consuming and 
uncertain, at best. Moreover, while the United States is a signatory to 
the Convention, many of our trading partners are not.\21\ And, even 
among those nations party to the Convention, most have executed a 
``declaration'' that they will not honor requests to obtain pre-trial 
discovery of documentary evidence.\22\ The Commission Staff has raised 
concerns that Commission requests for documentation could be subject to 
delay due to the requirements of the Convention.
---------------------------------------------------------------------------

    \20\ Hague Conference on Private International Law, Hague 
Convention of 18 March 1970 on the Taking of Evidence Abroad in 
Civil and Commercial Matters, (Entered into force October 7, 1972), 
U.N.T.S. 37/1976.
    \21\ For example, neither Japan, Taiwan nor Brazil is a 
signatory to the Convention.
    \22\ Most countries who are party to the Convention (with the 
exception of the Czech Republic, Israel, the Slovak Republic and the 
United States), have executed a declaration under Article 23 of the 
Convention that they will not execute letters of request issued for 
the purpose of obtaining pre-trial discovery of documents. These 
declarations are meant to prevent general requests whereby one party 
seeks to find out what documents are in the possession of another 
party. The countries who have executed some form of declaration 
under Article 23 include Argentina, Australia, Bulgaria, China, 
Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, 
India, Italy, Lithuania, Luxembourg, Mexico, Monaco, Continued * * * 
Netherlands, Norway, Poland, Portugal, Romania, South Africa, 
Seychelles, Singapore, Spain, Sri Lanka, Sweden, Switzerland, 
Turkey, Ukraine, United Kingdom, and Venezuela. Hague Conference on 
Private International Law (2011) available at http://www.hcch.net/index_en.php?act=conventions.status &cid=82.
---------------------------------------------------------------------------

    Schenkerocean Limited cited the requirement that foreign unlicensed 
NVOCCs may only provide ocean transportation intermediary services in 
the United States through a licensed ocean transportation intermediary 
as support for the proposition that the Commission would have 
regulatory access to the bonds of both entities. If the licensed OTI in 
the United States acts as an agent, however, it is likely

[[Page 11357]]

only the bond of the foreign NVOCC would be available to satisfy any 
civil penalty or reparation awards, not the bond of the United States-
based company acting in an agency capacity.
    Commission Staff has raised concerns that the difficulties facing 
the Commission in compelling production of pertinent documentation and, 
what may be the inability of a private litigant to obtain 
documentation, could reduce the Commission's ability to protect the 
shipping public. At this time, Commissioners hold differing views on 
the concerns the Staff has raised, and on the relevance and weight 
those concerns should be given in the Commission's decision whether or 
not to extend the exemption to foreign unlicensed NVOCCs. Accordingly, 
the Commission will move forward with the current rule as proposed for 
licensed NVOCCs, but as noted above, will commence proceedings to 
obtain and consider additional public comment on potential 
modifications to the final rule, including possible extension of the 
exemption to include foreign unlicensed NVOCCs. The record in this 
proceeding will be incorporated into the new Commission proceeding.

V. Memorialization of NRAs and Recordkeeping Requirements

    Several commenters asked for clarification as to whether an NRA 
could consist of an electronic communication such as an e-mail or a 
facsimile with one commenter arguing that both methods of communication 
are internationally acceptable. It is the Commission's view that both 
may be satisfactory forms of NRA memorialization.\23\ UPS objected to 
the requirement of Proposed Section 532.7(a) to retain associated 
records, and argued the regulation should require only the retention of 
those specific documents constituting the contract between the NVOCC 
and shipper and any document necessary to interpret and enforce the 
contract. The Commission notes that the wording in Proposed Section 
532.7(a) is similar to that contained in the recordkeeping requirements 
for NSAs at 46 CFR 530.15(a) and believes the requirement that NVOCCs 
maintain original NRAs and associated records is appropriate. RateWave 
Tariff Services, Inc. sought guidance on what the Commission means in 
Proposed Section 532.7(a) by ``associated records,'' and recommended 
that the Commission provide a list of possible documents. Given the 
variety of documents which may be utilized by NVOCCs, it is impossible 
to provide a comprehensive list of documents and therefore, the 
Commission declines to do so.
---------------------------------------------------------------------------

    \23\ For example, the International Chamber of Commerce ICC 
eTerms 2004 provides a framework so that parties can agree to 
contract electronically. International Chamber of Commerce (2011), 
available at http://iccwbo.org/policy/law/id3668/index.html. 
Similarly, the Supplement to the Uniform Customs and Practice for 
Documentary Credits for Electronic Presentation (eUCP), a supplement 
to the Uniform Customs and Practice for Documentary Credits (2007 
Revision ICC Publication No. 600) (UCP) exists to accommodate 
presentation of electronic records alone or in combination with 
paper documents. The E-Sign Act of 2000, with some exceptions, 
prohibits the denial of legal effect, validity, or enforcement of a 
document solely because it is in electronic form. 15 U.S.C. 7001 et 
seq.
---------------------------------------------------------------------------

    UPS argued that the required retention period for documentation 
should be shortened to three years. The requirement to maintain 
documentation for five years is, however, consistent with the statute 
of limitations for violations of the Shipping Act found at 46 U.S.C. 
41109(e). Therefore, the Commission believes it is necessary that 
documentation be available for five years. UPS also requested that the 
Commission clarify that the requirements of 46 CFR 515.33 do not apply 
to NRAs. That provision contains detailed requirements regarding the 
retention of financial data and shipment records by ocean freight 
forwarders. Since the requirements of 46 CFR 515.33 apply only to 
freight forwarders, they would not apply to any NVOCC.
    Panalpina, Inc. recommended against a requirement for centralized 
record keeping and urged the Commission to model the NRA recordkeeping 
requirements on 46 CFR 515.33. Another commenter, Ms. Zack-Olson, 
argued that, for ease of access to documents by the Commission, the 
documents should be stored both in the shipping file and at a remote 
location such as a third-party Web site. Yet another commenter, Mr. 
Levy, also suggested that NRAs be filed with the Commission at no cost, 
arguing this would lead to better uniformity and access. The Commission 
declines to adopt these suggestions. Each NVOCC appears to be best able 
to determine the most suitable, efficient way for it to ensure 
compliance with the documentation, retention and access requirements of 
the Commission's regulations.
    RateWave Tariff Services, Inc. requested that the Commission 
clarify when the five-year period for retaining NRAs and associated 
documents begins. CASA suggested the 5-year record keeping period be 
measured commencing from the date upon which the last shipment covered 
by an NRA is received by the NVOCC or its agent (including the 
originating carrier in the case of an NRA rate for through 
transportation). As discussed above, an NRA may cover a period of time 
and involve multiple shipments. In order to ensure availability of 
documentation, the Commission has determined that the 5-year record 
keeping period should commence from the completion date of performance 
of the NRA by an NVOCC, rather than the date when the initial shipment 
is received by the carrier or its agent. Proposed Section 532.7(a) is 
modified accordingly.
    Mr. Levy recommended changing the wording of Proposed Section 
532.7(b) to be consistent with the NSA regulations at 46 CFR 531.12(a), 
which state that records must be readily available and usable to the 
Commission. The Commission has modified Proposed Section 532.7(b) 
slightly in accord with this suggestion. Several commenters suggested 
that the Commission should specify that all NRA records be in English 
or contain a certified English translation.\24\ While it may not be 
necessary to require that the documentation for all NRA shipments be in 
English, Proposed Section 532.7(b) is modified to include a requirement 
that any records produced in response to a Commission request must be 
in English or accompanied by a certified English translation.
---------------------------------------------------------------------------

    \24\ This suggestion is similar to the requirement in 46 CFR 
502.7 that documents written in a foreign language other than 
English, filed with the Commission or offered in evidence in any 
proceeding before the Commission, be filed or offered in the 
language in which it is written and shall be accompanied by an 
English translation duly verified under oath to be an accurate 
translation.
---------------------------------------------------------------------------

    Distribution Publications, Inc. asserted that, under Proposed 
Section 532.2 (Scope and Applicability), NVOCCs who satisfy the 
requirements of the proposed regulations are exempt from 46 CFR 520.6. 
The Commission notes that Proposed Section 532.2 exempts NVOCCs solely 
from the requirements of 46 CFR 520.6(e), which relates to rates, and 
not its other requirements.\25\ Dart Maritime Services, Inc. expressed 
a concern that data may cease to become available if the NPR is adopted 
without the continued requirements of 46 CFR 520.10(a). The Commission 
notes that an NVOCC's rules tariff will continue to be subject to the 
history requirements of 46 CFR 520.10(a) and NRAs will be subject to 
these requirements. Therefore, all documentation should be covered and 
consistent as to recordkeeping.
---------------------------------------------------------------------------

    \25\ The other requirements of 46 CFR 520.6 generally address 
search capabilities and retriever selections.
---------------------------------------------------------------------------

    RateWave Tariff Services, Inc. expressed concerns with the burden 
if

[[Page 11358]]

an NVOCC had to recreate an NRA every time anything in the original NRA 
changes. The Commission notes that an NRA, by definition, is a written 
and binding arrangement between a shipper and an NVOCC to provide 
specific transportation service for a stated cargo quantity from origin 
to destination and therefore, an NVOCC must enter into a new NRA for 
each specific transportation service and cargo quantity. An NVOCC may 
use a form agreement for an NRA and, in as much as an NRA may not 
contain other contractual terms, the requirement to enter into a new 
NRA for each stated cargo quantity should not be a significant burden.

VI. Access to Rules Tariffs

    The NPR provided licensed NVOCCs offering NRAs the option of 
providing their rules tariff free of charge to the public or providing 
each prospective shipper with a copy of all the applicable terms set 
forth in its rules tariff. Upon further review and consideration of the 
comments received, which generally did not object to providing access 
to rules tariffs free of charge, Proposed Section 532.4 has been 
amended to require licensed NVOCCs, as a condition to offering NRAs, to 
provide their rules tariffs to the public free of charge. UPS expressed 
concerns that shippers moving cargo in the absence of a tariff rate 
could shop through an NVOCC's effective NRAs looking for the most 
advantageous rate. The rule only requires that access to an NVOCC's 
rules tariff be available to the public and does not require public 
access to an NVOCC's effective or proposed NRAs.

VII. Terms of an NRA

    A number of commenters recommended that Proposed Section 532.5(d) 
be changed to allow modification of the rate in an NRA at any time, as 
long as it is clearly stated in writing that the party to whom the 
request was made agrees to the change. The commenters argued that what 
was important is that a shipper and consignee agree to the rate and the 
effective date. The Commission disagrees. While NRAs are defined as 
``written and binding'' arrangements, they function more like tariff 
rates and, like tariff rates, they may not be amended by the parties 
once the subject cargo has been received. The Commission believes 
maintaining the integrity of NRA rates protects both the shipper and 
the NVOCC. Accordingly, the Commission declines to modify the rule to 
allow for amendment of an NRA after receipt of the cargo by the carrier 
or its agent. To address situations where an NRA may cover multiple 
``shipments,'' the word ``initial'' is added to Proposed Section 
532.5(e) to clarify that an NRA may not be modified after the time the 
initial shipment in an NRA is received by the carrier or its agent. 
RateWave Tariff Services, Inc. questioned whether an NRA may be 
canceled, (for example, if an NVOCC bases its NRA on the service of a 
specific VOCC which then changes its service level). By definition, an 
NRA is a written and binding arrangement between a shipper and an 
eligible NVOCC and therefore, could only be canceled by operation of 
law or by agreement of both parties prior to receipt of the cargo.
    Several commenters recommended allowing an NRA to have an effective 
date. The definition of rate contained in the rule is ``a price stated 
for providing a specified level of transportation service for a stated 
cargo quantity, from origin to destination, on or after a stated date 
or within a defined time frame.'' Proposed Section 532.3(b) (emphasis 
added). Accordingly, an NRA may have an effective date or cover a 
particular period of time.
    Dart Maritime Services, Inc. questioned what methods or instruments 
will properly serve as acceptance by a shipper, given the use of 
generic e-mail addresses by NVOCC clients, and recommended that in 
order to have an ``agreement'' by both parties there must be some level 
of proof of identity from the authorizing party similar to that 
required in 46 CFR 531.6(b)(9). The Commission has modified Proposed 
Section 532.5 accordingly, requiring that an NRA contain the legal name 
and address of the parties and the names, title and addresses of the 
representatives of the parties agreeing to the NRA. RateWave Tariff 
Services, Inc. suggested that the Commission clarify that there is a 
requirement for a formal acceptance by the shipper before cargo begins 
moving under the NRA, noting that shippers often decide to use a rate 
quote before informing the NVOCC of their acceptance of the rate. This 
practice, they asserted, causes problems under current regulations and 
could also cause problems under the proposed regulation. While the 
Commission declines to specify in the rule what form the acceptance 
should take, as many processes can indicate acceptance, in order for a 
valid NRA to exist, Proposed Section 532.5(c) requires agreement by 
both shipper and NVOCC.
    Dart Maritime Services, Inc. suggested that Proposed Section 532.5 
be amended to include the filing requirements of 46 CFR 531.6(a) and 
selected requirements for NSA contents contained in 46 CFR 531.6(b) (46 
CFR 531.6(b)(1), (2), (3), (6), (8), and (9)). Similarly, RateWave 
Tariff Services, Inc. provided an 11-point list of suggested items to 
require for inclusion in an NRA. The Commission has included in Section 
532.5(a) the requirement in 46 CFR 531.6(b)(9) that the arrangement be 
in writing. The other requirements and suggestions are already included 
or adequately addressed in the rule.
    Distribution Publications, Inc. contended that the exemptions in 
the Proposed Section 532.2 do not include 46 CFR 520.5, Standard Tariff 
Terminology or its Appendix A, and argued that these standards should 
also be used in NRAs. The Commission notes that the purpose of the use 
of Standard Tariff Terminology per 46 CFR 520.5 is to ``facilitate 
retriever efficiency'' which would not appear relevant for unfiled, 
unpublished NRAs.
    Although not addressed by the commenters, the Commission wishes to 
make clear that it did not intend to preclude an eligible NVOCC from 
entering into an NRA with another NVOCC. Accordingly, the term ``NRA 
shipper'' has been added to Proposed Section 532.3--Definitions. An NRA 
shipper is defined as ``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 (46 U.S.C. 40102(16)), that 
accepts responsibility for payment of all applicable charges under the 
NRA.'' Additionally, the definition of NRA in Proposed Section 532.3(a) 
has been modified to read a written and binding arrangement between an 
NRA shipper and an eligible NVOCC and Proposed Section 532.5(c) is 
modified to require agreement by both the NRA shipper and the NVOCC 
(emphasis added). This definition is consistent with the Commission's 
NSA regulations at 46 CFR 531.2.

VIII. NRA Disputes, Dispute Resolution Services and Safe Harbor 
Provisions

    A number of commenters addressed the question of NRA disputes and 
the Commission's question of what rate should apply in the event of a 
dispute. CV International opined that the principles of contract law 
currently manage the relationship between shippers and NVOCCs and the 
proposed rule appropriately adopts that system. Several commenters 
argued that, because the NRA is a mutually agreed upon rate tailored to 
the requirements of both parties, it should take precedence over a 
tariff rate. Commenters suggested

[[Page 11359]]

that the final rule should clarify that, in the event of a discrepancy 
between the terms set forth in the NRA and the NVOCC rules tariff, the 
terms of the NRA will govern.
    The TIA and NCBFAA pointed out that Section 13(f) of the Act, now 
codified at 46 U.S.C. 41109(d), makes the ``amount billed and agreed 
upon in writing'' between the carrier and the shipper controlling, even 
if the tariff for whatever reason does not conform to that rate. Both 
argued that this section answers the question asked in the NPRM as to 
whether the lower rate should prevail if there is a conflict between 
the tariff rate and the NRA rate. The Commission agrees with the 
commenters that, in the event of a dispute, the NRA rate will apply. 
Also, as with tariffs, to the extent the language of an NVOCC-drafted 
NRA is found to be unclear, that language is to be interpreted in favor 
of the shipper.
    With regard to disputes, commenters stated that most disputes are 
quickly resolved commercially between shipper and carrier, particularly 
when a long-term customer relationship is at stake, and disagreements 
under NRAs should be resolved like other commercial disputes, i.e., 
without the need for intervention by the Commission. Similarly, the 
NCBFAA did not believe there is a need to mandate that parties with NRA 
disputes bring them to the Commission's Office of Consumer Affairs and 
Dispute Resolution Services (CADRS), as most disputes are resolved 
quickly and it is possible that a dispute may not be a potential 
violation of the Act, leaving the Commission without jurisdiction. The 
NCBFAA also argued that while parties may elect to use the services of 
CADRS, it is more appropriate to leave the choice of forum to the 
parties. The TIA stated that, if a dispute is brought to the Commission 
because it involves an alleged violation of the Shipping Act, in 
accordance with Commission regulations which strongly encourage 
alternative dispute resolution (ADR) procedures, they would not object 
to continuing such a requirement for complaints involving NRAs.
    The Commission concurs that the parties themselves are best able to 
resolve most disputes, quickly and without recourse to an outside 
party. Accordingly, the Commission does not impose, as some commenters 
appear to suggest, a requirement that all disputes be referred to 
CADRS. The Commission does note, however, that its current regulations, 
which allow disputes to be brought before the Commission at the 
discretion of the parties, and which encourage alternative dispute 
resolution, are equally applicable to NRAs. Some commenters, though, 
appear to misunderstand CADRS' role in dispute resolution. CADRS 
provides a variety of ADR services. Some of these services, such as 
mediation, are ideal in situations where parties have a longstanding, 
commercial relationship and it is in their interest to continue that 
relationship. The parties themselves, in consultation with CADRS, 
decide which process is best for their situation. Ultimately, the 
parties determine the terms of any resolution; CADRS merely assists 
them in arriving at agreement. CADRS' role is not limited to disputes 
involving possible violations of the Shipping Act. Rather, the full 
panoply of CADRS dispute resolution procedures, formal and informal, 
are available to assist the parties to resolve any dispute involving 
liner ocean transport, even when a Shipping Act violation is not 
involved.
    The Commission requested comments as to which elements should be 
required to qualify the NRA for a ``safe harbor'' status that would 
afford a presumption that the corresponding shipment is not subject to 
the tariff rate publication requirement. In response, the NIT League 
stated they supported the incorporation of a ``safe harbor'' provision, 
noting that shippers may already be entitled to protection pursuant to 
46 U.S.C. 41109(d), while acknowledging the possibility that the 
Commission could determine that an NRA is defective prior to the 
issuance of an invoice for a particular shipment. The TIA, on the other 
hand, argued it is unnecessary in their view to prescribe a ``safe 
harbor'' for the form and content of NRAs as NVOCCs need flexibility. 
In light of the comments, the Commission declines to incorporate a 
``safe harbor'' provision in the final rule. The Commission intends 
that the parties should have flexibility in tailoring the NRA to their 
specific situation.

IX. Extending the Exemption to Sections 10(b)(4) and 10(b)(8), 46 
U.S.C. 41104(4) and (8)

    The Commission also sought public comment in the NPR as to whether 
the final rule should exempt NVOCCs entering into NRAs from the 
prohibitions contained in Sections 10(b)(4) and 10(b)(8). Section 
10(b)(4), 46 U.S.C. 41104(4), prohibits a common carrier, for service 
pursuant to a tariff, from engaging in any unfair or unjustly 
discriminatory practice in the matter of rates or charges; cargo 
classifications; cargo space accommodations or other facilities, 
loading and landing of freight; or adjustment and settlement of claims. 
Section 10(b)(8), 46 U.S.C. 41104(8), prohibits a common carrier, for 
service pursuant to a tariff, from giving any undue or unreasonable 
preference or advantage or imposing any undue or unreasonable prejudice 
or disadvantage. Most commenters supported extending the exemption to 
both sections. As justification, some argued that the high level of 
competition between NVOCCs would make it difficult for them to 
discriminate and therefore these prohibitions were not necessary for 
NVOCCs entering into NRAs. Others argued that prohibiting NVOCCs from 
discriminating or providing preferences in NRAs would be inconsistent 
with the stated purpose of NRAs and contract-based shipping practices 
and NVOCCs entering into NRAs will by definition be discriminating.
    As a preliminary matter, the Commission Staff point out that cargo 
moving pursuant to an NRA may properly be interpreted as service 
pursuant to a tariff; tariff rules will apply, as will the prohibitions 
contained in Sections 10(b)(4) and 10(b)(8). An NVOCC entering into an 
NRA is still a common carrier. As discussed above, an NRA is not a 
service contract or an NSA. An NRA merely replaces the requirement in 
the Commission's regulations that an NVOCC publish a tariff rate.
    Commenters argue that, because an NVOCC may enter into NRAs with 
different shippers at different rates and will be discriminating, it 
needs to be exempt from Sections 10(b)(4) and 10(b)(8). Section 
10(b)(4) does not prohibit an NVOCC from discriminating by entering 
into or offering an NRA with different rates to different shippers, but 
rather prohibits any unfair or unjustly discriminatory practice by a 
common carrier in the matter of rate or charges; cargo classifications; 
cargo space accommodations or other facilities, loading and landing of 
freight; or adjustment and settlement of claims. (emphasis added). The 
Commission Staff is concerned that these provisions apply to more 
matters than just rate level whereas only the requirement to publish 
the rate is relieved by this exemption. Similarly, Section 10(b)(8) 
does not prohibit all preferences or advantages but rather prohibits 
giving any undue or unreasonable preference or advantage or imposing 
any undue or unreasonable prejudice or disadvantage. (emphasis added). 
Neither of these prohibitions prevents an NVOCC from entering into an 
NRA with different shippers at different rates. The Commission Staff is 
concerned that, despite entering into an NRA, a shipper may still need 
the protections offered by the prohibitions contained in these two 
sections and, therefore, as common

[[Page 11360]]

carriers, NVOCCs will still be subject to the prohibitions contained in 
them. At this time, Commissioners hold differing views on the concerns 
the Staff raised, and on the relevance and weight those concerns should 
be given in the Commission's decision. Accordingly, the Commission will 
move forward with the current rule as proposed, which will not exempt 
NVOCCs entering into NRAs from the prohibitions contained in section 
10(b)(4) and 10(b)(8). However, as noted above, the Commission will 
commence proceedings to obtain and consider additional comments on 
potential modifications to the final rule, including whether to exempt 
NVOCCs entering into NRAs from the prohibitions contained in section 
10(b)(4) and 10(b)(8). The record in this proceeding will be 
incorporated into the new Commission proceeding.

X. Regulatory Flexibility Act

    One commenter complained, with regard to the Regulatory Flexibility 
Act, 5 U.S.C. 601 et seq, that the Commission's explanation in the NPR 
was unclear as to whether small business entities meant importers and 
exporters, the companies who use NVOCCs or the NVOCCs themselves. The 
commenter further argued that the NPR's statement that the economic 
impact will be small, seems to contradict the NCBFAA's petition, which 
claimed that the regulatory cost is huge. The Regulatory Flexibility 
Act directs agencies to give particular attention to the potential 
impact of regulation on small businesses and other small entities and 
requires consideration of regulatory alternatives that are less 
burdensome to small entities. The Commission's comments on the 
Regulatory Flexibility Act in its NPR were directed to NVOCCs as the 
regulated entities affected by the rule. NVOCCs are free to choose 
whether or not to take advantage of this rulemaking. Therefore, the 
Commission concludes the economic impact of the rule will be minor and 
it will not have a significant economic impact on a substantial number 
of small entities (i.e. NVOCCs). To the extent there is substantial 
economic impact, it would improve the economic condition of NVOCCs.

VI. Statutory Reviews

    In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et 
seq., 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 economic impact on a substantial 
number of small entities. Although NVOCCs as an industry include small 
entities, the Final Rule establishes 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 and 
will have a positive impact.
    This regulatory action is not a ``major rule'' under 5 U.S.C. 
804(2).
    In accordance with the Paperwork Reduction Act, 44 U.S.C. 3507, the 
Commission has submitted estimated burdens of collection of information 
authorized by this Final Rule to the Office of Management and Budget. 
The estimated annual burden for the estimated 3,242 annual respondents 
is $865,343.00. No comments were received on this estimate. 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 3072-0071.

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 amends 46 CFR part 520 
and adds 46 CFR Part 532 as follows:

PART 520--CARRIER AUTOMATED TARIFFS

0
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.


0
2. In 520.13, add a new section (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.

0
3. Add part 532 to read as follows:

PART 532--NVOCC NEGOTIATED RATE ARRANGEMENTS

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

    Authority:  46 U.S.C. 40103.

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 conditions 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);
    (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; and
    (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,

[[Page 11361]]

    (a) ``NVOCC Negotiated Rate Arrangement'' or ``NRA'' means a 
written and binding arrangement between an NRA 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 a tariff or 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.
    (d) ``NRA 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 
(46 U.S.C. 40102(16)), that accepts responsibility for payment of all 
applicable charges under the NRA.
    (e) ``Affiliate'' means two or more entities which are under common 
ownership or control by reason of being parent and subsidiary or 
entities associated with, under common control with or otherwise 
related to each other through common stock ownership or common 
directors or officers.

Subpart B--Procedures Related to NVOCC Negotiated Rate Arrangements


Sec.  532.4  NVOCC rules tariff.

    Before entering into NRAs under this Part, an NVOCC must 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) contain the legal name and address of the parties and any 
affiliates; and contain the names, title and addresses of the 
representatives of the parties agreeing to the NRA;
    (c) be agreed to by both NRA 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);
    (d) clearly specify the rate and the shipment or shipments to which 
such rate will apply; and
    (e) may not be modified after the time the initial 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:
    (1) A prominent notice in its rules tariff and bills of lading or 
equivalent shipping documents; and
    (2) By so indicating on its Form FMC-1 on file with the Commission.

Subpart C--Recordkeeping


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, in an organized, readily accessible or retrievable 
manner for 5 years from the completion date of performance of the NRA 
by an NVOCC, in a format easily produced to the 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. All records produced must be in 
English or be accompanied by a certified English translation.
    (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 3072-0071.

    By the Commission.
Karen V. Gregory,
Secretary.
[FR Doc. 2011-4599 Filed 3-1-11; 8:45 am]
BILLING CODE 6730-01-P