Federal Maritime Commission
Washington, D.C. 20573  

NR 04-14

 COMMISSION SEEKS COMMENTS ON A PROPOSAL FOR NVOCC SERVICE ARRANGEMENTS

CONTACT Bryant L. VanBrakle, Secretary (202)523-5725
                    E-mail: Secretary@fmc.gov

FOR RELEASE - October 27, 2004

The Commission today voted to issue a Notice of Proposed Rulemaking which would allow non-vessel-operating common carriers (“NVOCCs”) to offer NVOCC Service Arrangements (“NSAs”), individually-negotiated contracts between NVOCCs and their shipper-customers. NVOCCs that utilize these arrangements would be exempt from the tariff publication requirements of the Shipping Act of 1984. NVOCCs that do not wish to take advantage of this exemption would continue to be able to offer their services under published tariffs.

The proposed rule was developed in response to numerous petitions that have been filed with the Commission over the past year. In particular, the Commission was assisted in this process by the filing of a Joint Proposal drafted by many of the petitioners, which presented a unified approach acceptable to much of the shipping industry. The petitions and the Joint Proposal asked the Commission to grant to NVOCCs the authority to offer service contracts or similar individualized arrangements to their customers. Currently, only vessel-operating common carriers are permitted to offer service contracts. The petitioners and their supporters maintain that dramatic changes in the ocean transportation industry since Congress originally considered this matter in the Ocean Shipping Reform Act of 1998 warrant such action.

The proposed rule would exempt NVOCCs from various provisions of sections 8 and 10 of the Shipping Act applicable to cargo handled under tariff. In taking this action, the Commission relied upon section 16 of the Shipping Act, which permits the agency to exempt any activity from the requirements of the Act if the exemption will not result in substantial reduction in competition or be detrimental to commerce.

The Commission found that conditioning the proposed exemption upon the requirement that NVOCCs file NSAs with the Commission would ensure that the agency retains adequate regulatory authority to ensure that competition and commerce are protected from market distortion and unreasonable discrimination.

Currently, vessel-operating common carriers use the Commission’s internet-based SERVCON system to file their service contracts. To do this, they are first required to obtain a password and user identification number. NVOCCs who avail themselves of the opportunity to enter into NSAs will face a similar requirement. In order to effectuate this requirement as soon as possible, the Chairman intends to request expedited approval from the Office of Management and Budget to collect the information necessary to allow the Commission to issue passwords and user identification numbers to interested NVOCCs.

Chairman Blust said that he was pleased that the Commission received the benefit of comments and suggestions from all sectors of the shipping industry in formulating the proposed rule. “I am very optimistic that this proposal will give NVOCCs the kind of commercial flexibility they deserve, and will lead to greater competition and efficiency in the shipping industry.”

In other action today, the Commission voted to issue a Final Rule in Docket No. 03-15 Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984. Chairman Blust expressed confidence that the new rules will provide the regulatory certainty, flexibility and confidentiality that parties to agreements under the Shipping Act need for efficient operations.

Additionally, in the closed portion of the meeting, the Commission voted to grant Petition No. P5-04, Petition of American President Lines, Ltd. and APL Co. Pte. Ltd. For a Full Exemption from the First Sentence of section 9(c) of the Shipping Act of 1984, as amended. In exercising its exemption authority under section 16 of the Shipping Act, the Commission found that permitting APL to lower tariff rates on less than 30 days’ notice would not result in a substantial reduction in competition or be detrimental to commerce.