The latest on Russia sanctions from the International Trade and Supply Chain Team
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WHEN? The Federal Maritime Commission by Final Rule issued July 19, 2018 took final rules to simplify freight pricing requirements for Non-vessel Operating Common Carriers (“NVOCCs”) by establishing changes to Negotiated Rate Arrangements (NRAs) and NVOCC Service Arrangements (NSAs). These new Rules become effective August 22, 2018.

THE CHANGES TO NRAs AND NSAS. There were few surprises to the final rules. The main changes are the following:

NSAs. The main changes to the NSAs were as expected the elimination of the following two burdensome requirements: a) the filing of NSAs or amendments thereto into the Commission’s electronic filing system; and b)  the elimination of the requirement to publish the essential terms of an NSA. The NVOCCs Rules Tariff needs to reflect that the NVOCC utilizes NSAs. The FMC, still the regulator, requires that NSAs contain a unique NSA number of more than one but less than ten alphanumeric characters, and a consecutively numbered amendment number no more than three digits in length. While the definition of an NSA is “a written contract”, the Commission makes it clear that these must be signed by the NVOCC and the shipper in an explanatory chart prepared by the Commission comparing NSAs and NRAs. Obviously, it is our opinion that these can be electronically signed pursuant to legally acceptable norms.

Bottom-line: NSAs are pretty much run of the mill contracts now and have very little public aspects to them since they are no longer to be filed with a federal agency, nor do Essential Terms have to be publically published. The Rules Tariff, however, still plays a regulatory role.

NRAs. NRAs have now taken more of a semblance to NSAs in that they can now include “non-economic” terms not previously allowed such as liquidated damages, volume commitments, credit terms, pass through of accessorials without a specific reference to particular charges, and so forth. NRAs can be readily amended under the new rules. The most salient of the features distinguishing NRAs and NSAs is that the former can be entered into by a) a signature, or b) an electronic or other communication indicating assent to the NRA by the shipper; or (the best for the last) acceptance by the shipper of the NRA by booking cargo provided that the NRA quotation has a prominent notice of that fact.

Bottom-line: Despite FMC efforts to making them sound/look different NRAs and NSAs are difficult to tell apart. In reviewing the differences the Commission states in its graphic charts, the differences appear to be more in form than in substance. There is still a stark reminder that the FMC is still a regulatory body alive and well by prescribing the size and language of the Notice on the NRA to allow a booking to be an acceptance of the NRA. The Commission surprisingly in this deregulated environment requires that the NVOCC incorporate in the NRA terms “in bold font and all uppercase letters: “THE SHIPPER’S BOOKING OF CARGO AFTER RECEIVING THE TERMS OF THIS NRA OR NRA AMENDMENT CONSTITUTES ACCEPTANCE OF THE RATES AND TERMS OF THIS NRA OR NRA AMENDMENT.” Really?

Conclusion. It is definitely a welcomed change as the ocean shipping industry starts to look more and more like the airline industry which was pretty much weaned from commercial regulations in the late 70’s.

For more information, please contact Carlos Rodriguez.