The new Federal Maritime Commission rules on NVOCC Negotiated Rate Agreements will impact Shippers. Here are 10 issues shippers need to consider when negotiating and shipping with non-vessel-operating common carriers under NRAs.
1. What’s in it for the shippers? These new rules permit NVOCCs and shippers to enter into NRAs that don’t have to be filed in tariffs, providing fewer steps in the process and more confidentiality for rates and terms. NVOCCs could find cost savings by using NRAs. Can shippers receive some of the cost savings from their NVOCC of choice?
2. What changes for the shippers? The process of negotiating shipments with NVOCCs now can involve NRAs or continued tariff filings. The NRAs must be very specific, and include information on cargo quantity, origin and destination, duration, and all terms including application of additional charges. NRAs cannot be amended or modified.
3. Be knowledgeable. Shippers must know all the details of each specific move and ensure they can comply fully with the terms of the NRA to meet the terms and conditions. The NRA must be agreed before the shipment moves, and it’s locked in once the cargo moves.
4. Shippers must agree to the NRA, and all agreements must be memorialized in writing and retained with all shipment details and documents for five years from the date of the shipment. The FMC has always had jurisdiction over the shipments whether under tariffs or NRAs, but this new rule clearly advises and makes the shipper equally responsible and liable for adhering to the regulations.
5. Shippers must manage the process. Shippers often have numerous parties involved in the negotiation, booking and contract process for the actual shipment of their cargo. When using tariff NVOCC rates, the liability currently falls more clearly on the NVOCC. Under these new rules, the shipper is equally liable for ensuring the NRA is correct and that the actual shipments match the NRA terms.
6. Make informed selections of NRA vs. tariff rates. Although the NRAs are confidential and filed — as opposed to tariff rates that are publicly available — don’t assume that a reasonable sense of confidentiality isn’t available for tariff filings. There are more than 3,300 NVOCCs licensed with the FMC and it is difficult, if not impossible, to search multiple NVOCC independent tariffs and filings to locate specific tariff rates. It’s also impossible to know what additional charges and surcharges may have been applicable to a specific shipment by an NVOCC solely based on its tariff filings. Shippers may want to continue to use the NVOCC tariff rate process to avoid the limitations of NRAs, regardless of the lack of potential confidentiality.
7. Be a wise shipper. If you select an NRA, ensure you select an NVOCC who fully complies with the new rules and review the NRA to make certain you can and will comply with the terms and conditions. Also remember that the NRA records must be maintained for five years after the shipments transpired. Although the NVOCC is responsible for maintaining these records, you as the shipper are on record memorializing the NRA and can be held responsible for any failure to comply with the rules. Be aware of your liability if the NVOCC ceases to do business, merges with another firm or misplaces or loses its records a few years from now.
8. Manage expectations. Don’t expect major changes in pricing or process because of these new rules. In fact, NRAs may make normal business with your NVOCCs more complex and potentially more costly because of the recordkeeping requirements.
9. Know that the FMC reviews NVOCC activities and enforces its regulations. Under the new rules, the FMC has full authority to investigate and receive all necessary documents and files regarding NRAs for five years after the shipment. Shippers need to ensure they maintain the necessary records for all NRA shipments for this period in case the FMC takes action regarding any of their shipments. Under current FMC tariff rules, although the five-year rule applies, the burden of proof of proper tariff application to shipments rests on the NVOCC; the shipper isn’t liable unless it has misstated the shipment details.
10. Manage the opportunity. Watch the process after April 18 with your NVOCCs. Discuss their concepts and process to understand their position on these new rules. Change provides an opportunity, and you may find that these new NRA rules will provide significant benefits to you as a shipper.
JOC TENs essayist John Morris is an FMC practitioner who has more than 30 years of global logistics expertise with the military, shippers and carriers. As head of International Transportation Solutions, he consults on contract negotiations, e-commerce, government and regulatory affairs and education for the industry. Contact him at intransco@earthlink.net