WSC responds to NVO confidential contract bid
In comments filed to the U.S. Federal Maritime Commission Oct. 10, the World Shipping Council opposed allowing non-vessel-operating common carriers the same ability to enter confidential service contracts with shippers as vessel-operating common carriers.
The council is the Washington-based lobbying arm for more than 40 international ocean carriers. Its members’ carry over 90 percent of the U.S. imports and exports in the liner trades.
In the 1998 Ocean Shipping Reform Act, NVOs were excluded from negotiating confidential service contracts, while this privilege was granted to the vessel-operating common carriers.
Starting with a United Parcel Service petition filed to the FMC in late July, and shortly followed by other petitions related to the same issue from Ocean World Lines, BAX Global and C. H. Robinson, the agency was asked to use its section 16 exemption authority under OSRA to allow NVOs to craft confidential service contracts in the same manner as the vessel-operating common carriers.
The National Customs Brokers and Forwarders Association of America added fuel to the section 16 exemption debate when it filed a petition requesting the end of tariff publishing for NVOs.
The council dismissed the UPS petition for its lack of sufficient evidence to back claims that its multi-billion dollar asset investments in trucks and planes should give it the same right as vessel-operating common carriers to enter confidential service contracts with shippers.
“UPS had made a choice to operate as an NVOCC without any ocean transportation assets with respect to its ocean transportation activities,” the council said. “UPS could easily acquire the rights it seeks in the exemption petition simply by exercising a readily available commercial option — i.e., to charter ocean transportation assets.”
The council said that while it was true that many liner carriers operate their own NVOs today, these operations must abide by the same OSRA rules as other NVOs.
The council believes the UPS, in addition to C.H. Robinson and BAX Global, extends the argument for the FMC to use its section 16 exemption authority in OSRA beyond congressional intent for the law.
“The commission, like other regulatory agencies, is a creature of statute and delegated authority,” the council explained. “Congress to a degree conferred power upon the Commission through section 16 to relieve regulated entities from ‘any requirement’ of the Act. Congress did not, however, authorize the commission to use section 16 to bestow affirmative rights beyond those that Congress chose to include. As a simple matter of statutory authority, therefore, the commission is without power to grant the requested relief.”
OWL’s petition asked the FMC to expand the definition and scope of the term “special contracts.” The council acknowledged it’s a “unique suggestion,” but called it “unworkable and clearly inconsistent with the regulatory structure of the Shipping Act.” A special contract is defined as “a contract for ‘freight forwarding services’ that provides for a periodic lump sum fee.” The council pointed out that Congress did not intend to regulate all ocean transportation intermediaries the same way.
“There are freight forwarders, and there are NVOCCs. They are not the same,” the council said. “The fundamental distinction is that one is an agent for a shipper or consignee and the other acts as a regulated carrier.”
The council opposed the NCBFAA’s arguments to eliminate tariff-publishing requirements for NVOs, again claiming a lack of sufficient evidence that the industry is harmed in the marketplace.
“Tariffs are quite clearly not, as NCBFAA alleges in its petition, instruments that are required or regulated because of VOCCs’ membership in carrier agreements that have limited, regulated antitrust immunity,” the council said. “If that were the purpose, the Shipping Act would never have required NVOCCs to operate pursuant to tariffs in the first place, nor would VOCCs that are not members of carrier agreements have to publish tariffs.”
According to the number of NVOs operating in the U.S. trades today, the council said, “the profitability of these enterprises appears relatively healthy.” FMC data shows there are about 3,000 licensed and bonded NVOs on record with the agency.
The council also said that such an exemption might significantly reduce the FMC’s regulatory oversight of the ocean shipping industry by ultimately exempting NVOs from bonding requirements. “There is no evidence that Congress intended section 16 to authorize that sort of sweeping re-write of the Act,” the council said.
However, the council did say it’s open to the FMC using the proposed rulemaking process to probe the issues of NVO service contracting and the elimination of tariff publishing requirements for NVOs. (The council pointed out its interest in the NCBFAA’s proposal for NVOs to publish “rate ranges” as opposed to tariffs.)
“If the commission were to consider such an effort in this context, we submit that there should be further information and explanation of the factual issues that it would want considered, as well some specificity about the approaches and the statutory basis for the possible approaches to be considered,” the council said.