An exemption recently issued by the Federal Maritime Commission (FMC), allows non-vessel-operating common carriers (NVOCCs) to now enter into service arrangements with their shipper/customers called NSAs (non-vessel-operating common carrier service arrangements). 46 CFR Part 531.

Under the Commission's rules, an NSA means a written contract, other than a bill of lading or receipt, between one or more NSA shippers and an individual NVOCC or two or more affiliated NVOCCs, in which the NSA shipper makes a commitment to provide a certain minimum quantity or portion of its cargo or freight revenue over a fixed time period, and the NVOCC commits to a certain rate or rate schedule and a defined service level. 46 CFR 531.3(p).

An NSA shipper is 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 a non-vessel-operating common carrier. 46 CFR 531.3(o).

What activities led to the creation of NSAs?

This FMC action was prompted by petitions that were filed between July 25, 2003 and March 12, 2004 by seven individual NVOCCs and by the National Customs Brokers and Forwarders Association of America, Inc. Although these petitions varied to some extent, they all sought to achieve the result made possible by the FMC's exemption by rulemaking, namely that NVOCCs can contract with their shipper/customers on a confidential basis in much the same manner as can be done by vessel-operating common carriers through service contracts.

In August, 2004, several of those petitioners, together with the Transportation Intermediaries Association and the National Industrial Transportation League, urged the FMC to act as quickly as possible to exempt filed NSAs from the tariff publication and adherence requirements of the Shipping Act. This proposal was supported by many individual NVOCCs and NVOCC organizations, as well as associations of vessel-operating common carriers. The FMC issued its Notice of Proposed Rulemaking in late October, 2004 (69 Fed. Reg. 63981) (November 3, 2004), and received numerous comments in response from several individual NVOCCs and associations of NVOCCs, shippers associations, and the U.S. Department of Justice. The Final Rule became effective on January 19, 2005. 69 Fed. Reg. 75850 (December 20, 2004).

Is an NVOCC required to negotiate an NSA with its customers?

No. NSAs have been established as a possible alternative for NVOCCs to negotiate confidential shipping arrangements with their shipper customers.

How does the NSA option affect NVOCC/shipper business relationships?

Specifically, the exemption allows individual NVOCCs (including corporately affiliated NVOCCs), who are compliant with the other requirements of the Shipping Act and the FMC's regulations at 46 CFR Part 515 and 46 CFR Part 520, to enter into an NSA with one or more NSA shippers. 46 CFR 531.2. The FMC's rule allows NVOCCs to enter into service arrangements with their customers in lieu of publishing those arrangements in a publicly-available tariff, as otherwise would be required by sections 8(a) and 10 of the Shipping Act.

Is the use of NSAs restricted in any way?

The FMC limited NVOCC actions through NSAs to ensure shippers and ports are protected in a similar manner to section 10 of the Shipping Act: service rendered under an NSA must be according to rates and charges appearing in a properly filed NSA. 46 CFR 531.6(d)(1); and no NVOCC may employ an NSA to unfairly or unjustly discriminate (with respect to rates or charges), or grant any unreasonable preference or impose any unreasonable prejudice with respect to any port. 46 CFR 531.6(d)(2), (3).

Where can a copy of the Commission's rules regarding NSAs be found?

The Commission rules can be found here.  See also the Notice of Proposed Rulemaking issued August 8, 2005.

How does an NVOCC become eligible to file NSAs?

To take advantage of the exemption provided for in 46 CFR Part 531, an NVOCC must be in compliance with the Commission's rules located at 46 CFR Part 515, Licensing, Financial Responsibility Requirements and General Duties for Ocean Transportation Intermediaries, and Part 520, Carrier Automated Tariffs, regarding requirements to publish a tariff and file electronic Form FMC-1. An NVOCC in compliance needs to complete Form FMC-78, NVOCC Service Arrangement Registration, with the Commission.

How is a copy of Form FMC-78 obtained and submitted to the Commission?

A printable copy of Form FMC-78 in PDF format can be obtained here. Fill the form out completely, and submit to the Office of Service Contracts ("OSCT") by facsimile at (202) 523-5856.

If an agent has been designated to file NSAs with the Commission on the NVOCCs behalf, a delegation of authority must accompany the form. A direct link to the pdf version of Form FMC-78 can be found here. It is not an "auto-fill" form, but must be printed, completed, and faxed as mentioned above to the OSCT, or mailed to OSCT, Bureau of Trade Analysis (BTA), Federal Maritime Commission, 800 North Capitol Street, NW, Washington, DC 20573.

This simple form, requesting name & address information, license number and individual to be registered and receive log-on and password user identification ("User ID") for access to the SERVCON electronic filing system, is usually processed in approximately five days. Registrants will be notified by certified mail of their User ID. There are no Commission fees associated either with registering to file or with filing NSA's.

How is an NSA filed with the Commission?

Once an FMC-issued User ID is received, an NVOCC (or its designated publisher or agent) can go to the FMC's website, www.fmc.gov, use the User ID to access electronic SERVCON system, enter minimal information regarding the NSA filing (e.g., organization number, NSA number, amendment number, and effective date), and upload NSAs into the Commission's automated SERVCON system via the internet. Detailed instructions can be found at the FMC's website (https://www.servcon.fmc.gov) or by contacting OSCT.

Which document formats for NSA texts will the Commission's SERVCON filing system accept?

The internet-based SERVCON filing system will accept original and amendment NSA documents in over 100 off-the-shelf computer software formats, e.g., WordPerfect, Microsoft Word, WordStar, Excel, PDF, ASCII, and many others.

What are confidentiality and content requirements regarding an NSA filing?

The terms of NSAs by the parties are to be kept confidential to the fullest extent permitted by law, and required to be filed with the FMC. Every NSA filed with the Commission is required to include the complete terms of the NSA including, but not limited to, the following: (1) the origin and destination port ranges in the case of port-to-port movements and geographic areas in the case of through intermodal movements; (2) the commodity or commodities involved; (3) minimum volume or portion; (4) service commitments; (5) line haul rate; (6) liquidated damages for non-performance (if any); (7) duration, including the effective date and expiration date; (8) legal names and business addresses of the NSA parties; the legal names of all affiliates of the NSA shipper entitled to access the NSA; the names, titles and addresses of the representatives signing the NSA for the parties; (9) a description of the shipment records which will be maintained to support the NSA and the address, telephone number, and title of the person who will respond to a request by making shipment records available to the Commission; and various other provisions of the NSA. 46 CFR 531.6. Contemporaneously with the filing of each NSA with the Commission, all authorized persons who choose to file NSAs are also required to make available to the public, in tariff format in the NVOCCs automated tariff system, a concise statement of certain “essential terms” (“ETs”).

What are the certain essential terms required to be made public?

All authorized persons who choose to file NSAs are also required to make available to the public, contemporaneously with the filing of each NSA with the FMC, in tariff format in the NVOCCs automated tariff system, a concise statement of certain essential terms as follows: (1) origin/destination port ranges; (2) commodity or commodities involved; (3) minimum volume or portion; and (4) the duration of the arrangement. 46 CFR 531.9(a).

Which FMC office should I call with questions about NSAs?

Bureau of Trade Analysis, Office of Service Contracts and Tariffs 800 N. Capitol Street, NW Washington, DC 20573 Phone: (202) 523-5856 Fax: (202) 523-5867 Email: NSAInquiries@fmc.gov Information related to NSAs is also available on the FMC's website, www.fmc.gov.

Is there any required or preferred standard form for an NSA?

No, the new regulations only require that the "complete terms" of an NSA be reflected in the text filed in SERVCON with the Commission and contain a list at 46 CFR 531.6 of the minimum terms that must be included in an NSA. NSA parties may include additional terms and conditions of the services to be performed by the NVOCC under the agreement and/or additional obligations undertaken by the shipper.

What terms of a service arrangement may cross reference other material? What may that referenced material be, specifically, can it include a published tariff?

The parties may agree to make their NSAs refer to any widely available published material which is well known in the industry. An example of such cross-referencing would be to the currency exchange rates as published in the Wall Street Journal. Such cross-referencing may also include reference to an NVOCC's general rules tariff. Filers should particularly note that the terms of NSAs may not be "uncertain, vague or ambiguous." 46 CFR 531.9(b)(1). Reference may not be made to a tariff of a common carrier other than that of the NVOCC offering the NSA.

Where must service arrangement "boiler plate" be filed?

"Boiler plate" may either be published as a general rules tariff and cross-referenced in the NSA or kept confidential by filing the terms in the text of each NSA filed in SERVCON.

Must the public ETs appear in any particular format?

The regulations require ETs to be in "tariff format". 46 CFR 531.9. The Commission regulation allow ETs to be published in a separate part of an NVOCC's existing tariff publication. ETs may be organized in any manner the publisher or NVOCC sees fit: organized by trade, as a separate tariff type, etc..