3 August 2004

Major NVOs, NIT League seek swift FMC action on contracting freedom

The following article is excerpted from the 3 August 2004 edition of “American Shipper”.

UPS, FedEx, other major non-vessel-operating common carriers and the National Industrial Transportation League late Monday [2 August] presented the Federal Maritime Commission with a unified position on NVO contracting freedom and called on the agency to implement reforms without further deliberations.

The political clout and industry coverage represented by the unified group, combined with the core changes it proposes, constitute the most significant challenge to U.S. shipping law since the enactment of the 1998 Ocean Shipping Reform Act.

Other members of the group supporting a single, consensus plan that was delivered in a joint submission to the FMC are the Transportation Intermediaries Association, BAX Global, BDP International and C.H. Robinson Worldwide.

Specifically, the unified group has called on the FMC to swiftly adapt regulations to allow NVOs to enter confidential rate and service agreements with shippers, a private business arrangement that OSRA reserved exclusively for vessel operators. The confidential ocean transportation agreements between NVOs and shippers would have to be filed with the FMC, just as vessel operators file service contracts with the agency.

The joint submission calls for the agency to grant all NVOs a conditional exemption from tariff publication for cargo that an NVO moves under a customized written agreement with a shipper.

Petitions seeking NVO contracting liberalization and relief from tariff filing requirements have been filed individually at the FMC in 2003 and 2004 by UPS, FedEx Trade Networks Transport & Brokerage, C.H. Robinson, Danzas, BDP, Ocean World Lines and the National Customs Brokers and Forwarders Association of America.

Monday’s joint submission calls attention to the fact that over a year has passed since the first NVO petition was filed with the FMC. It says the record is extensive and complete and that “it is unnecessary for the FMC to engage in time-consuming further inquiry, fact-finding or study of the issues.”…

The filing tells the FMC that “time is of the essence,” that the joint submission provides a single, straightforward approach to resolving contracting issues, and that it is intended to streamline rather than complicate agency deliberations.

Vessel operators have opposed changes that would authorize NVOs to enter service contract-type arrangements with shippers. All NVOs need to do is charter container ships to acquire vessel-operating status, they say. NVOs haven’t demonstrated that they are harmed by tariff requirements, the carriers also say.

The World Shipping Council, representing 40 international ocean carriers, said it would not oppose, under certain conditions, a rulemaking proceeding addressing NVO tariff obligations. The timetable for such a proceeding would be months, possibly years.

There also is opposition from maritime labor. The International Longshore & Warehouse Union said that an authorization for NVO service contacting would be a disincentive to own and operate ships, contrary to the U.S. policy to foster a healthy U.S.-flag ocean common carrier industry.

Vessel operators and maritime labor say the FMC doesn’t have the authority to allow NVOs to enter confidential agreements with shippers because Congress specifically prohibited such arrangements in OSRA.

The U.S. Transportation Department said it strongly supports deregulatory relief that would allow NVOs to enter confidential contracts to the same extent that vessel operating common carriers offer such contracts to their shipper customers.

Supporters of the Monday joint submission described themselves in a press release as the nation’s leading logistics providers and users. Since the passage of OSRA, when confidential service contracts were first permitted, such contracts have become the leading pricing tool in ocean transportation, they said. But NVOs are barred from