FMC issues rulemaking notice regarding negotiated service agreements and rate agreements

By: AJOT | Dec 05 2017

On November 29, the Federal Maritime Commission (FMC) released its Notice of Proposed Rulemaking regarding Negotiated Service Agreements (NSAs) and Negotiated Rate Agreements (NRAs). The FMC issued the proposed rule after receiving a petition for rulemaking and public comments from industry stakeholders, and holding an open hearing on November 9.

Commenters advocated for several changes to the existing regulatory burdens. With respect to NSAs, some commenters argued for eliminating the NSA filing and publication rules, while others argued for eliminating NSAs entirely. With respect to NRAs, commenters argued for expanding the methods of acceptance and authorizing the inclusion of non-rate economic terms.

The FMC proposed the following changes to the existing regulations.

NSA Filing and Publication Rules: 46 C.F.R. Part 531 requires non-vessel-operating common carriers to file NSAs with the FMC and to publish the essential terms of NSAs in tariffs. The FMC concluded that these rules offer little regulatory benefit, and the proposed rule eliminates the filing and publication requirements. The FMC declined to eliminate the NSA entirely, as the petition for rulemaking and several commenters requested.

NRA Acceptance Rules: 46 C.F.R. § 532.5 requires that an NRA “be in writing” and “be agreed to” prior to the carrier’s receipt of cargo from the shipper. The FMC has read these rules to require written acceptance through a formal writing or email. The proposed rule relaxes that interpretation and clarifies that the act of booking constitutes acceptance, provided that the NRA includes “prominent written notice to that effect.” This change applies to NRAs and NRA amendments. If acceptance by booking does not occur, the requirement of written acceptance remains in effect under the proposed rule. The FMC invited public comment on the desirability of permitting acceptance by booking, and whether particular wording should be required in NRAs to give notice of acceptance by booking.

NRA Amendments: 46 C.F.R. § 532.5(e) prohibits amendments to NRAs after a carrier receives an initial shipment. The proposed rule eliminates this prohibition, and permits NRAs to be amended or extended. The FMC concluded that NRA parties “should not be compelled to create a new NRA in every instance simply because the rules do not currently provide for amendment.”

Additionally, the petition for rulemaking and several commenters requested that non-rate economic terms be permitted in NRAs. Under the existing rules, “an NRA is an alternative to a published rate and does not include other economic terms.” 76 FR 11355. While the proposed rule does not expand the scope of permissible terms, the FMC invited further public comment on the issue of including non-rate economic terms in NRAs.

The FMC has requested comments on the proposed rule by January 29, 2018.