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The Federal Maritime Commission's recent decision to allow Non-Vessel Ocean Common Carriers (NVOCCs) to enter into confidential NVOCC service arrangements (NSAs) with their shipper clients will is an exciting development for all NVOCCs serving the USA.
Under FMC rules, NVOCCs are permitted to provide their shipper clients with individually-negotiated contracts for ocean and intermodal transportation to/from the USA. For the first time, NVOCCs serving the US trades will be able to price their services contractually and confidentially, outside of common carrier tariffs, in NVOCCs service arrangements (NSAs).
An NSA is written contract between an NVOCC and its shipper clients for ocean and intermodal transportation services; contracts which provide shippers with customized pricing and defined service levels, and provide NVOCCs with a minimum quantity or portion of the shipper's cargo over a fixed period of time. NSAs may also provide for non-performance penalties if the shipper fails to meet the volume commitment, or if the NVOCC fails to provide the service level.
NSA regulations were issued by the Commission pursuant to FMC Docket 04-12 and became Section 531 of the US Code of Federal Regulations, No. 46 (46-CFR-Part 531). We have highlighted the key points of these regulations, and review these in this memo.
| 1. FMC Requirements for NVOCCs Serving the USA |
Before an NVOCC can enter into an NSA with a shipper for service to or from the USA, it must satisfy all applicable FMC regulation. An NVOCC in the USA must hold a valid license to operate as an Ocean Transportation Intermediary (OTI), submit the required surety bond to FMC, and publish a tariff in compliance with FMC regulations. NVOCCs operating outside the USA who are subject to FMC jurisdiction are not required to hold the OTI license, but must register with FMC, submit a surety bond, and publish a tariff. Once these requirements are satisfied the NVOCC must register to file NSAs with the Commission.
The NSA registration procedure is not difficult, but it must be completed before NSA filing begins. No cargo may move under an NSA until the NVOCC has registered and filed its NSA electronically with the Commission, and published its essential terms in an electronic tariff system approved by the Commission's Office of Tariffs and Service Contracts.
| 2. NSA Registration Procedure |
The FMC has implemented an NSA registration procedure which must be satisfied before NSA filing begins. The procedure is very similar to the one used to register ocean carriers who file service contracts with the Commission. As tariff publisher and consultant on FMC regulations, DPI prepares the NSA Registration Documents for each of its NVOCC clients, viz:
The Form FMC-78 authorizes the NVOCC, or a tariff publisher acting on its behalf, to file NSA's with the FMC's via its SERVCON web-based filing system. The Letter of Authorization is required if the NVOCC is delegating filing authority to a tariff publisher or other third party. There are several benefits to delegating NSA filing to a tariff publisher. DPI provides a compliance review for every NSA filed, record-keeping services, and it handles the publication of essential terms of NSAs.
These two documents must be signed and dated by a company officer, whose name and title must be printed on the forms. The FMC-78 sample attached shows the name of our Vice President here at DPI, Mr. John Sullivan, because John already has a Log-on and password for service contract and NSA filing.
NVOCCs who not wish to use NSAs are NOT required to submit Form FMC-78, but must continue filing all their selling rates and rules in public tariff published in compliance with FMC regulations.
There are no filing fees or handling fees for the NSA initial registration and there is no deadline. NSA filing is optional, but by registering earlier an NVOCCC can avoid delays of up to 10 days or more at a later date, when NSA filing might be an urgent matter.
| 3. NSA Filing Procedure |
The filing procedure for NSAs is very similar to procedure required by the FMC for service contract filing since May 1999. These regulations require the filing of all service contracts through the FMC's SERVCON filing system and the publication of five essential contract terms in public tariffs. We have highlighted the key points of the NSA filing requirements, which are found in Subpart B - Filing Requirements (page 5) of the regulations. .
The effective date of the NSA cannot be prior to the filing date, and cargo may not move under NSA rates prior to FMC filing. This applies for amendments to NSAs as well.
NSA Template - Amendment Sample
The proposed new rules provide for the amendment, correction or cancellation of an NSA. The amendment procedure is by far the most efficient, and we recommend it over the other procedures.
Amendments to NSAs may include the complete NSA, with highlighting for amended terms, or just the amended terms; for example, just the origins or just the rates. Amendments may also be used to change the expiration date of an NSA, or to adjust the minimum volume requirement. Amendments must be approved by both the NVOCC and the Shipper. Amendments can never be effective prior to their filing date with FMC. The filing must include the NSA number, the sequential amendment number, and dates.
The filing procedure for amended NSAs is simple - the amended NSA must be filed with the FMC's SERVCON system, and the essential terms publication must be updated accordingly. Amendments can never be effective after an NSA has expired.
Corrections to NSAs: Under the FMC regulations a correction to an NSA means any change to a filed NSA that has retroactive effect. In order words, a date prior to the NSA's filing date. Corrections are only allowed for clerical errors that are very clearly documented. The procedure for corrections is not easily satisfied. Section 531.8(b) of the proposed new regulations gives the full requirements. These include a filing fee of $276, a printed copy of the proposed correct terms, and an affidavit explaining the circumstances of the error that requires correction, along with copies of documents supporting the clerical or administrative error. In addition to all this, the request must also include a written request from the Shipper concurring in the request for correction, and it must be filed no later than 45 days after the filing of the initial or amended NSA.
Transmission Error Correction: the FMC also has a far easier procedure for the quick correction of electronic transmission errors in NSAs. Purely technical data transmission errors in NSA filings may be corrected within 48 hours of the date and time of receipt by the FMC's Servcon filing system. This time-limited permission may not to be used to make changes in the original NSA rates, terms or conditions, and is largely intended to allow for correction to NSA numbers and file names.
| 4. NSA Record Keeping and Audit |
The record keeping requirements for NSAs are substantial. According to Section 531.12 of the proposed regulations NSA records must be maintained by the NVOCC, or agents acting on its behalf, for five (5) years after the termination dates of each NSA.
NSA records include original signed NSAs, amendments, and "associated records," and these must be produced within thirty (30) days if requested by the FMC. "Associated records" generally means copies of bills of lading, and copies of written communications between the Carrier and Shipper regarding the NSA. The b/ls would be required to provide proof that the Shipper satisfied the minimum volume requirement of the NSA.
Failure to comply with the NSA record keeping requirements can make any FMC audit or investigation much more difficult and costly, and it can result in FMC penalties.
| 5. NSA Filing & Maintenance - Services & Fees |
The FMC does not impose any fees for filing new or amended NSAs; fees apply only for NSA correction procedure. Third parties, including DPI, assess fees for services provided. DPI's service for NSA filing & essential terms publication enables our clients to understand and comply with FMC's regulations efficiently and at reasonable cost. Outstanding customer service is always our goal here at DPI; NSAs received by DPI via email that comply with FMC regulations and conform to DPI system standards are filed and confirmed timely. ETs will be published in compliance with FMC regulations on the same day the NSA is filed, and posted on www.dpiusa.com On the other hand, when we receive an NSA from a client that does not comply with FMC regulations or our DPI system standards, we promptly advise exactly how to correct it to satisfy FMC -this is our standard service. Distribution-Publications, Inc. (DPI) - NSA Filing & Maintenance Fees