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As previously discussed in this post, non-vessel operating common carriers (NVOCCs) licensed by the Federal Maritime Commission (FMC) may now utilize an exemption from the requirement to publish rates in a tariff by entering a Negotiated Rate Arrangement (NRA) with shipper customers.  This option may result in significant savings in tariff publication expenses and increased confidentially assuming the NVO meets certain conditions detailed below.

As background, the FMC’s regulations implementing the Shipping Act previously required all NVO’s to publish rates in a tariff.  Many in the ocean transportation industry questioned the continued utility of tariffs in today’s modern shipping environment.  Maintaining an up-to-date tariff with all rates covering all services, cargo and ports can prove a challenging and expensive undertaking.  In addition, violations of the tariff publication rules could subject an offender to a maximum penalty of $30,000 per knowing and willful violation.

In April 2011, a final rule became effective authorizing the use of NRAs.  An NRA is a written and binding arrangement between a shipper and a licensed NVO to provide a specific transportation service between origin and destination for a stated quantity of cargo.  The transportation may occur on and after a particular date or within a specified time period.  If an NVO uses a NRA and meets the conditions described below, it is exempt from publishing its rate in a public tariff.

As a threshold issue, in order to use an NRA the NVO must first be licensed by the FMC.  Second, the NVO must post a prominent notice in its rules tariff and bill of lading that the rate is pursuant to a NRA.  Third, the NVO must provide the public with free electronic access to its rules tariff that states it will use NRAs.  A rules tariff is still required but the expense and maintenance required for this is significantly less than that for a full rates tariff.  Fourth (and a key requirement), the NVO and the shipper customer must agree to the NRA in writing before the cargo is received for shipment.  While there is no specific format required by the FMC to document the agreement (a detailed email is sufficient so long as it indicates confirmation and consent of both the NVO and the shipper), it should include all the details of the shipment.  Finally, the NVO must keep documentation of the NRA on file for 5 years and must make that documentation available promptly to the FMC if requested.

Eric Roper is a former trial attorney with the FMC’s Bureau of Enforcement and currently holds the rank of Commander in the Reserve Component of the U.S. Navy’s Judge Advocate General’s Corps.  His practice includes representing clients in the maritime transportation industry.