[Federal Register Volume 69, Number 243 (Monday, December 20, 2004)]
[Rules and Regulations]
[Pages 75850-75860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27803]


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FEDERAL MARITIME COMMISSION

46 CFR Part 531

[Docket No. 04-12]
RIN 3072-AC30


Non-Vessel-Operating Common Carrier Service Arrangements

AGENCY: Federal Maritime Commission.

ACTION: Final rule.

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SUMMARY: The Federal Maritime Commission is exempting non-vessel-
operating common carriers from the tariff publication requirements of 
the Shipping Act of 1984, subject to certain filing and publication 
conditions placed on these Non-Vessel-Operating Common Carrier Service 
Arrangements or ``NSAs.'' This final rule: Revises the rule as proposed 
to allow affiliates of NSA signatories to have access to service, and 
to provide service under an NSA; corrects typographical errors and an 
internal reference; and deletes a portion of Form FMC-78 that affects 
only internal agency use.

DATES: Effective January 19, 2005.

FOR FURTHER INFORMATION CONTACT:
Amy W. Larson, General Counsel, Federal Maritime Commission, 800 N. 
Capitol St., NW., Washington, DC 20573-0001, (202) 523-5740, 
<a href="/cdn-cgi/l/email-protection#96f1f3f8f3e4f7faf5f9e3f8e5f3fad6f0fbf5b8f1f9e0"><span class="__cf_email__" data-cfemail="f196949f9483909d929e849f82949db1979c92df969e87">[email protected]</span></a>;
Austin L. Schmitt, Director of Operations, Federal Maritime Commission, 
800 N. Capitol St., NW., Washington, DC 20573-0001, (202) 523-0988.

SUPPLEMENTARY INFORMATION: On October 28, 2004, the Federal Maritime 
Commission (``FMC'' or ``Commission'') issued a notice of proposed 
rulemaking (``NPR'') pursuant to its authority under section 16 of the 
Shipping Act of 1984 (``Shipping Act''), 46 U.S.C. app. Sec.  1715, to 
exempt non-vessel-operating common carriers (``NVOCCs'') from the 
tariff publication requirements of the Shipping Act, subject to certain 
conditions. 69 FR 63981 (Nov. 3, 2004). Interested persons were given 
until November 19, 2004, to comment on the NPR. This deadline was later 
extended to November 30, 2004 in response to a request from the U.S. 
Department of Justice (``DOJ'').
    The Commission received comments on the NPR from: Transoceanic 
Shipping Co., Inc. and Jagremar Marine, Inc. (``Transoceanic''); NVOCC 
Committee of China Association of Shipping Agency (``CASA''); the 
American Institute for Shippers' Associations, Inc. (``AISA''); the 
National Customs Brokers and Forwarders Association of America, Inc. 
(``NCBFAA''); the North Atlantic Alliance Association, Inc. (``NAAA''); 
the Fashion Accessories Shippers Association, Inc. (``FASA''); the 
Pacific Coast Tariff Bureau (``PCTB''); the International Shippers' 
Association (``ISA''); DOJ; \1\ and joint comments from the National 
Industrial Transportation League, United Parcel Service, Inc., BAX 
Global, Inc., Transportation Intermediaries Association, Fedex Trade 
Networks Transport and Brokerage, Inc., C.H. Robinson Worldwide, Inc., 
and BDP International, Inc. (``Joint Commenters'').
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    \1\ DOJ filed its comments on December 3, 2004, along with a 
motion requesting leave to submit its comments past the deadline. We 
agree with DOJ's assertion that the public interest will be served 
and no prejudice will result, and have accepted the late filing.
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    The exemption as proposed would allow individual NVOCCs to offer 
NVOCC Service Arrangements (``NSAs'') to NSA shippers, provided that 
such NSAs are filed with the Commission and their essential terms are 
published in the NVOCC's tariff. The proposed rule defined an NSA as 
``a written contract, other than a bill of lading or receipt, between 
one or more NSA shippers and an individual NVOCC in which the NSA 
shipper makes a commitment to provide a certain minimum quantity or 
portion of its cargo or freight revenue over a fixed time period, and 
the NVOCC commits to a certain rate or rate schedule and a defined 
service level.'' 69 FR at 63990. The proposed rule defined an ``NSA 
shipper'' as a cargo owner, the person for whose account the ocean 
transportation is provided, the person to whom delivery is to be made, 
or a shippers' association. Id. This proposed definition, however, 
specifically did not include NVOCCs or shippers' associations with 
NVOCC members. Id.

[[Page 75851]]

    Commenters generally support the rule as proposed and urge the 
Commission to act expeditiously to provide the relief it represents. 
AISA at 1; NCBFAA at 1, 4; ISA at 2; DOJ at 2; Joint Commenters at 1; 
Transoceanic at 1. But see FASA at 2 (rule is not within agency's 
authority). The Joint Commenters believe the rule as proposed 
represents ``a progressive solution which will be beneficial at all 
levels of the U.S. ocean transportation industry.'' Joint Commenters at 
3. The Joint Commenters also urge the Commission not to delay the 
implementation of the exemption now to further consider how conditions 
other than those already proposed might ensure that competition is not 
substantially harmed. They assert that if the conditions imposed on the 
exemption as proposed later prove to be ``unnecessarily burdensome, or 
[that a] less onerous means of achieving the same end can be fashioned, 
the Commission could consider subsequent adjustments.'' Id. at 2. DOJ 
states that the ``proposal would promote competition in ocean 
transportation.'' DOJ at 2.

I. Antitrust Immunity for NSA Activity and Substantial Reduction in 
Competition

    The NPR explained the Commission's rationale for limiting the 
exemption to NSAs offered by an individual NVOCC acting as carrier and 
a non-NVOCC shipper as follows. Courts may interpret the coordinated 
activity of multiple NVOCCs offering NSAs, and of NSAs between one 
NVOCC acting as a carrier and one NVOCC acting as a shipper, as immune 
from the antitrust laws under section 7(a)(2) of the Shipping Act, 46 
U.S.C. app. 1706(a)(2). 69 FR 63986-63987. Section 16 of the Shipping 
Act, 46 U.S.C. app. 1715, gives the Commission the authority to make 
rules exempting regulated entities from the requirements of the 
Shipping Act only if it finds the exemption will not result in 
substantial reduction in competition or detriment to commerce. Id. The 
Commission determined that, in order to ensure that the exemption as 
proposed will not result in a substantial reduction in competition, it 
must limit the exemption to individual NVOCCs acting in their capacity 
as carriers. This is the case because antitrust immunity under section 
7(a)(2), along with a lack of regulatory oversight, could substantially 
reduce competition.
    Several commenters disagree with this finding. They argue that no 
such reduction in competition will occur because, unlike those of 
vessel-operating common carriers (``VOCCs'') or marine terminal 
operators (``MTOs''), the concerted activities of NVOCCs are not 
entitled to immunity from the antitrust laws by any provision of the 
Shipping Act. They regard the Commission's concern that the holding of 
United States v. Tucor, 189 F.2d 834 (9th Cir. 1999) may have this 
effect as misplaced because Tucor is either incorrect or inapposite to 
the analysis of immunity granted by section 7(a)(2), 46 U.S.C. app. 
1706(a)(2). AISA at 13-14; NCBFAA at 5; ISA at 6-9; DOJ at 2-3; 
compare, FASA at 4-5. Furthermore, commenters assert that not only 
would such activity be subject to the regulatory oversight of DOJ under 
the antitrust laws, it would also be subject to Commission oversight 
under section 10(c) of the Shipping Act (e.g., 46 U.S.C. app. 
1709(c)(1)-(5)). Joint Commenters at n.1; FASA at 3.
    Three commenters argue that the Commission should allow groups of 
NVOCCs to offer NSAs as carriers and to enter into NSAs as shippers 
because there is no way that such action could result in substantial 
harm to competition. NCBFAA at 5; NAAA at 8; ISA at 8, 9, 11. 
Similarly, three commenters specifically argue that shippers' 
associations with NVOCC members should be able to enter into NSAs as 
shippers. ISA at 8-12; NAAA at 8; AISA at 15-16. AISA makes several 
arguments to support this position: the Commission does not have the 
authority to regulate the membership of shippers' associations; DOJ's 
safe harbor guidelines for shippers' associations are sufficient; 
restricting shippers' associations' uses of NSAs would be an 
``arbitrary and capricious'' policy; and such a limitation would reduce 
competition. AISA at 1, 5-10, 11, 15-16. ISA requests that, if the 
Commission finds it cannot allow NVOCCs to act as shippers, it should 
make an exception limited to household goods NVOCC shippers' 
associations. ISA at 14. FASA, on the other hand, believes the 
Commission is correct to be concerned about the competitive impact of 
NVOCC collusion because there are NVOCCs that hold enormous market 
power and could ``easily engage in discriminatory tactics against 
target [beneficial cargo owner shippers'] associations.'' FASA at 4.
    The Commission agrees with the commenters that the rationale of 
Tucor is incorrect and that its direct precedential value is limited to 
section 7(a)(4) of the Shipping Act, 46 U.S.C. 1706(a)(4).\2\ However, 
other tribunals may find Tucor's analysis of section 7(a)(4), which the 
court read in isolation from the balance of the statute, analogous to 
section 7(a)(2), 46 U.S.C. app. 1706(a)(2). This is true because a 
court could regard an NSA-related activity as an activity within the 
scope of the Shipping Act undertaken with a reasonable basis to 
conclude that it is ``exempt from any publication * * * requirement of 
this Act.'' 46 U.S.C. app. 1706(a)(2)(B)(emphasis added). Such a 
judicial interpretation would result in a vacuum of regulatory 
oversight over anti-competitive arrangements undertaken under the cloak 
of an NSA. While we would disagree with it, we must consider the 
likelihood of such an outcome in light of Tucor.
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    \2\ The Commission's views on the inapplicability of Shipping 
Act antitrust immunity to service contracts between VOCCs and NVOCCs 
is reflected in the committee report on the bill that became the 
Ocean Shipping Reform Act of 1998. See, Report of the Committee on 
Commerce, Science and Transportation on S.414, S.Rep. No. 105-61 at 
20 (July 31, 1997). See also, FASA at 5.
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    We agree with FASA that competing NVOCCs acting together clearly 
have the ability to affect competition.\3\ By agreeing to jointly offer 
an NSA to a shipper, they would collectively fix a price for their 
services, i.e., a horizontal price-fixing agreement. The Commission's 
concern with NVOCCs acting as shippers in NSAs, either individually or 
collectively through shippers' associations, may be price fixing by 
NVOCCs who resell the service they are jointly purchasing to end-users 
(beneficial cargo interest shippers).\4\ The under-20% market share 
threshold of the DOJ ``safe harbor'' provisions for joint purchasing 
agreements by itself does not appear to completely cover NVOCC 
shippers' associations as it may beneficial cargo interest shippers' 
associations. See, Antitrust Division Response to Request for Business 
Review Letter--Household Goods Forwarders Association of America, Inc. 
September 19, 1985, B.R.L. 85-21, 1985 WL 71889 (DOJ) (unopposed 
because there was no collective rate making or discussions and because 
the negotiation of rates for services in a market substantially 
controlled by the group expressly was not authorized). In any case, if 
activity under an NSA is immunized from the antitrust laws, DOJ's 
policy guidance on shippers' associations would become inapplicable.
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    \3\ In order to do the same, VOCCs must file agreements with the 
Commission, which are available for public review and comment.
    \4\ Horizontal price fixing might also be accomplished in an NSA 
where the carrier NVOCC and the shipper NVOCC are also competitors.
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    There is nothing in the text of the Shipping Act to prevent the 
concurrent jurisdiction of the Commission under section 10(c) of the 
Shipping Act and

[[Page 75852]]

the agencies responsible for enforcement of the general antitrust laws 
over NSAs. However, if NSA activities are judged immune from the 
antitrust laws under section 7(a)(2) of the Shipping Act, there appears 
to be no prohibition in section 10(c) specifically applicable to NSAs 
to address price-fixing or market division, activities which are almost 
universally accepted as the most egregious types of anticompetitive 
behavior. Therefore, even if the Commission were to find that the 
provisions of section 10(c) applied generally to NVOCC collective 
activity, because a court might find NVOCCs immune from the antitrust 
statutes, there may be no regulation of such patently anticompetitive 
arrangements if they are undertaken through an NSA.
    Accordingly, the Commission has determined at this time not to 
extend the definition of NSAs to include arrangements between two 
NVOCCs, whether individually or acting in concert through a shippers' 
association, due to the potential that they may include activities 
considered per se anti-competitive under the Sherman Act, 15 U.S.C. 
Sec.  1. The lack of oversight over the competitive impacts of 
activities undertaken through NSAs may lead to the substantial 
reduction in competition that section 16 prohibits. As such, the 
Commission finds that at this time it must limit the exemption as set 
forth in the proposed rule. However, in accordance with the 
recommendations of the Joint Commenters, as we gain further experience 
regarding the practical effects of the exemption, and as the courts 
assess the scope of the antitrust immunity the Shipping Act grants, the 
Commission will continue to consider whether there are other means to 
ensure NSAs meet the criteria of section 16.

II. Affiliates' Access to NSAs

    The Joint Commenters and CASA believe the Commission should allow 
affiliated NVOCCs to jointly offer NSAs. Joint Commenters at 3; CASA at 
1-2. PCTB and CASA similarly argues that shippers' affiliates should be 
able to have access to NSAs negotiated by a related entity. PCTB at 3-
4; CASA at 1-2. The Joint Commenters point out that the Supreme Court 
has held that the coordinated activities of a parent and its wholly-
owned subsidiary must be viewed as a single entity for purposes of 
restraint of trade analysis under section 1 of the Sherman Act. 
Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984).
    We agree that the analysis of Copperweld with respect to 
competition under the antitrust laws and the Commission's service 
contract rules with respect to competitive analysis under the Shipping 
Act are appropriately applied to the Commission's approach to NSAs, and 
therefore have decided to allow the participation of affiliates to the 
NSA signatory parties. The Commission accordingly: (1) Revises the 
proposed rule's requirements for NSAs at section 531.6(b)(9); (2) 
revises the definition of ``NSA'' (Final Rule at section 531.3(p)); and 
(3) adds a definition of ``affiliate'' (Final Rule at section 
531.3(b)), based on the language proposed by the Joint Commenters. 
Joint Commenters at 3-4.
    Proposed section 531.6(b)(9) is revised as follows:

    The legal names and business addresses of the NSA parties; the 
legal names of all affiliates of the NSA shipper entitled to access 
the NSA; the names, titles and addresses of the representatives 
signing the NSA for the parties, except that in the case of an NSA 
entered into by a shippers' association, individual members need not 
be named unless the contract includes or excludes specific members; 
and the date upon which the NSA was signed. Subsequent references in 
the NSA to the signatory parties shall be consistent with the first 
reference. An NVOCC party which enters into an NSA that includes 
affiliates must either:
    (i) list the affiliates' business addresses; or
    (ii) certify that this information will be provided to the 
Commission upon request within ten (10) business days of such 
request.

    Similarly, the Commission adds the following definition of 
``affiliate'' in section 531.3(b): ``Affiliate'' means two or more 
entities which are under common ownership or control by reason of being 
parent and subsidiary or entities associated with, under common control 
with, or otherwise related to each other through common stock ownership 
or common directors or officers.
    The Final Rule revises the definition of NSA (section 531.3(o) as 
proposed; section 531.3(p) in the Final Rule), as follows:

    NVOCC Service Arrangement (``NSA'') means a written contract, 
other than a bill of lading or receipt, between one or more NSA 
shippers and an individual NVOCC or two or more affiliated NVOCCs, 
in which the NSA shipper makes a commitment to provide a certain 
minimum quantity or portion of its cargo or freight revenue over a 
fixed time period, and the NVOCC commits to a certain rate or rate 
schedule and a defined service level. The NSA may also specify 
provisions in the event of nonperformance on the part of any party.

    Finally, the definition of ``NSA shipper'' as it appeared in the 
proposed rule contained a typographical error. The Final Rule corrects 
this error and eliminates the article ``a'' appearing before 
``shippers' associations.'' The definition section in 531.3(o) as final 
reads, ``NSA shipper means a cargo owner, the person for whose account 
the ocean transportation is provided, the person to whom delivery is to 
be made, or a shippers' association. The term does not include NVOCCs 
or shippers' associations whose membership includes NVOCCs.''

III. Other Matters

    NCBFAA and DOJ argue that the exemption should be broadened to 
exempt all NVOCCs from all tariff publication requirements without 
condition because such requirements are unnecessary. NCBFAA at 2,6; DOJ 
at 2. The Commission, NCBFAA argues, has never explained how these 
conditions will protect competition and improperly relies on the 
eliminated ``ability to regulate'' criterion. NCBFAA at 6. NCBFAA 
argues that the proposed rule's view that the filed rate doctrine is no 
longer ``sacrosanct'' is correct; NSA rates would be ``applicable'' or 
``legal'' even if not filed with the Commission. NCBFAA at 8-10.
    Either eliminating the tariff publication requirement completely 
and/or eliminating the condition of the exemption that all NSAs be 
filed with the Commission and their essential terms be published could 
substantially impact the competition between large NVOCCs and VOCCs 
(who continue to be required to publish their tariffs, file service 
contracts and publish service contract essential terms) by continuing 
to impose costs on one while relieving costs for the other. We 
anticipate NVOCCs who offer NSAs may wish to use their tariffs in much 
the same way as VOCCs do for service contracts, as a convenient place 
to house generally-applicable provisions.
    PCTB questions whether the Commission intended to allow NSAs to 
make reference to tariff publications of NVOCCs other than that 
offering the NSA. PCTB at 4-5. We agree with PCTB that doing so would 
likely be confusing to shippers and we revise section 531.6(c)(2) of 
the Final Rule accordingly. The Commission will endeavor, as PCTB has 
requested, to post ``frequently asked questions'' regarding NSAs on its 
Web site.
    Finally, the Final Rule makes several typographical corrections. It 
corrects the facsimile number to which registrants may file Forms FMC-
78 in section 531.5(d)(1) and the Instructions for Form FMC-78. It 
corrects the internal reference to cancellations in section 
531.8(d)(2). The line for indicating the initially assigned password 
appearing in

[[Page 75853]]

the ``FMC use only'' portion of Form FMC-78 has been eliminated.

IV. Statutory Reviews

    In accordance with the Paperwork Reduction Act, 44 U.S.C. 3507, the 
Commission has submitted estimated burdens of collection of information 
authorized by this Final Rule to the Office of Management and Budget 
(``OMB''). The estimated total annual burden for the estimated 110 
annual respondents is 165,932 manhours. No comments were received on 
this estimate.
    In accordance with the Regulatory Flexibility Act, 5 U.S.C. 605, 
the Chairman of the Federal Maritime Commission has certified to the 
Chief Counsel for Advocacy, Small Business Administration, that the 
Final Rule will not have a significant impact on a substantial number 
of small entities. Although NVOCCs as an industry include small 
entities, the Final Rule provides, but does not require, an alternative 
for NVOCCs, from the otherwise applicable tariff publication 
requirements of the Shipping Act and the Commission's regulations. It 
potentially relieves a burden. Therefore, the Commission has found that 
the Final Rule will have no significant economic impact on a 
substantial number of small entities.

List of Subjects in 46 CFR Part 531

    Exports, Non-vessel-operating common carriers, Ocean transportation 
intermediaries.


0
Accordingly, the Federal Maritime Commission adds 46 CFR part 531 as 
follows:

PART 531--NVOCC SERVICE ARRANGEMENTS

Subpart A--General Provisions
Sec.
531.1 Purpose.
531.2 Scope and applicability.
531.3 Definitions.
531.4 Confidentiality.
531.5 Duty to file.
Subpart B--Filing Requirements
531.6 NVOCC Service Arrangements.
531.7 Notices.
531.8 Amendment, correction, cancellation, and electronic 
transmission errors.
Subpart C--Publication of Essential Terms
531.9 Publication.
Subpart D--Exceptions and Implementation
531.10 Excepted and exempted commodities.
531.11 Implementation.
Subpart E--Recordkeeping and Audit
531.12 Recordkeeping and audit.
531.13-531.98 [Reserved]
531.99 OMB control numbers assigned pursuant to the Paperwork 
Reduction Act.
Appendix A to Part 531--Instructions for the Filing of NVOCC Service 
Arrangements
Exhibit 1 to Part 531--NVOCC Service Arrangement Registration [FORM 
FMC-78]

    Authority: 46 U.S.C. app. 1715.

Subpart A--General Provisions


Sec.  531.1  Purpose.

    This part exempts NVOCCs from certain provisions of the Shipping 
Act. The purpose of this part is to facilitate the filing of NVOCC 
Service Arrangements (``NSAs'') and the publication of certain 
essential terms of those NSAs as they are exempt from the otherwise 
applicable provisions of the Shipping Act of 1984 (``Act''). This part 
enables the Commission to review NSAs to ensure that they and the 
parties to them comport with the conditions of the exemption as set 
forth below.


Sec.  531.2  Scope and applicability.

    Only individual NVOCCs compliant with the requirements of section 
19 of the Act and the Commission's regulations at 46 CFR part 515 may 
enter into an NSA with one or more NSA shippers subject to the 
requirements of these rules. Any NVOCC who has failed to maintain its 
bond or license or had its tariff suspended or cancelled by the 
Commission is ineligible to offer and file NSAs.


Sec.  531.3  Definitions.

    When used in this part:
    (a) Act means the Shipping Act of 1984 as amended by the Ocean 
Shipping Reform Act of 1998;
    (b) Affiliate means two or more entities which are under common 
ownership or control by reason of being parent and subsidiary or 
entities associated with, under common control with, or otherwise 
related to each other through common stock ownership or common 
directors or officers.
    (c) Amendment means any change to a filed NSA which has prospective 
effect and which is mutually agreed upon by all parties to the NSA.
    (d) Authorized person means an NVOCC or duly appointed agent who is 
authorized to file NSAs on behalf of the NVOCC and to publish the 
corresponding statement of essential terms and is registered by the 
Commission to file under Sec.  531.5 and Appendix A to this part.
    (e) BTA means the Commission's Bureau of Trade Analysis, or its 
successor bureau.
    (f) BCL means the Commission's Bureau of Certification and 
Licensing, or its successor bureau.
    (g) Cancellation means an event which is unanticipated by the NSA, 
in liquidated damages or otherwise, and is due to the failure of the 
NSA shipper to tender minimum cargo as set forth in the contract, 
unless such tender was made impossible by an action of the NVOCC.
    (h) Commission or FMC means the Federal Maritime Commission.
    (i) Common carrier means a person holding itself out to the general 
public to provide transportation by water of passengers or cargo 
between the United States and a foreign country for compensation that:
    (1) Assumes responsibility for the transportation from the port or 
point of receipt to the port or point of destination; and
    (2) Utilizes, for all or part of that transportation, a vessel 
operating on the high seas or the Great Lakes between a port in the 
United States and a port in a foreign country, except that the term 
does not include a common carrier engaged in ocean transportation by 
ferry boat, ocean tramp, or chemical parcel tanker, or by a vessel when 
primarily engaged in the carriage of perishable agricultural 
commodities:
    (i) If the common carrier and the owner of those commodities are 
wholly owned, directly or indirectly, by a person primarily engaged in 
the marketing and distribution of those commodities and
    (ii) Only with respect to those commodities.
    (j) Correction means any change to a filed NSA that has retroactive 
effect.
    (k) Effective date means the date upon which an NSA or amendment is 
scheduled to go into effect by the parties to the NSA. An NSA or 
amendment becomes effective at 12:01 a.m. Eastern Standard Time on the 
beginning of the effective date. The effective date cannot be prior to 
the filing date of the NSA or amendment with the Commission.
    (l) Expiration date means the last day after which the entire NSA 
is no longer in effect.
    (m) File or filing (of NSAs or amendments thereto) means the use of 
the Commission's electronic filing system for receipt of an NSA or an 
amendment thereto by the Commission, consistent with the method set 
forth in Appendix A of this part, and the recording of its receipt by 
the Commission.
    (n) OIT means the Commission's Office of Information Technology, or 
its successor office.

[[Page 75854]]

    (o) NSA shipper means a cargo owner, the person for whose account 
the ocean transportation is provided, the person to whom delivery is to 
be made, or a shippers' association. The term does not include NVOCCs 
or shippers' associations whose membership includes NVOCCs.
    (p) NVOCC Service Arrangement (``NSA'') means a written contract, 
other than a bill of lading or receipt, between one or more NSA 
shippers and an individual NVOCC or two or more affiliated NVOCCs, in 
which the NSA shipper makes a commitment to provide a certain minimum 
quantity or portion of its cargo or freight revenue over a fixed time 
period, and the NVOCC commits to a certain rate or rate schedule and a 
defined service level. The NSA may also specify provisions in the event 
of nonperformance on the part of any party.
    (q) Statement of essential terms means a concise statement of the 
essential terms of an NSA required to be published under this part.


Sec.  531.4  Confidentiality.

    (a) All NSAs and amendments to NSAs filed with the Commission 
shall, to the fullest extent permitted by law, be held in confidence by 
the Commission.
    (b) Nothing contained in this part shall preclude the Commission 
from providing certain information from or access to NSAs to another 
agency of the Federal government of the United States.
    (c) Parties to a filed NSA may agree to disclose information 
contained in it. Breach of any confidentiality agreement contained in 
an NSA by either party will not, on its own, be considered a violation 
of these rules.


Sec.  531.5  Duty to file.

    (a) The duty under this part to file NSAs, amendments and notices, 
and to publish statements of essential terms, shall be upon the NVOCC 
party to the NSA.
    (b) The Commission shall not order any person to pay the difference 
between the amount billed and agreed upon in writing with a common 
carrier or its agent and the amount set forth in an NSA by that common 
carrier for the transportation service provided.
    (c) Filing may be accomplished by any duly agreed-upon agent, as 
the parties to the NSA may designate, and subject to conditions as the 
parties may agree.
    (d) Registration--(1) Application. Authority to file or delegate 
the authority to file must be requested by a responsible official of 
the NVOCC in writing by submitting to BTA, either by mail to 800 N. 
Capitol Street, NW., Washington, DC 20573, or by facsimile to (202) 
523-5867, a completed NSA Registration Form (FMC-78)(Exhibit 1 to this 
part).
    (2) Approved registrations. OIT shall provide approved Registrants 
a log-on identification number (``I.D.'') and password for filing and 
amending NSAs, and notify Registrants of such approval via U.S. mail.

Subpart B--Filing Requirements


Sec.  531.6  NVOCC Service Arrangements.

    (a) Authorized persons shall file with BTA, in the manner set forth 
in Appendix A of this part, a true and complete copy of every NSA or 
amendment before any cargo moves pursuant to that NSA or amendment.
    (b) Every NSA filed with the Commission shall include the complete 
terms of the NSA including, but not limited to, the following:
    (1) The origin port ranges in the case of port-to-port movements 
and geographic areas in the case of through intermodal movements;
    (2) The destination port ranges in the case of port-to-port 
movements and geographic areas in the case of through intermodal 
movements;
    (3) The commodity or commodities involved;
    (4) The minimum volume or portion;
    (5) The service commitments;
    (6) The line-haul rate;
    (7) Liquidated damages for non-performance (if any);
    (8) Duration, including the
    (i) Effective date; and
    (ii) Expiration date;
    (9) The legal names and business addresses of the NSA parties; the 
legal names of all affiliates of the NSA shipper entitled to access the 
NSA; the names, titles and addresses of the representatives signing the 
NSA for the parties, except that in the case of an NSA entered into by 
a shippers' association, individual members need not be named unless 
the contract includes or excludes specific members; and the date upon 
which the NSA was signed. Subsequent references in the NSA to the 
signatory parties shall be consistent with the first reference. An 
NVOCC party which enters into an NSA that includes affiliates must 
either:
    (i) list the affiliates' business addresses; or
    (ii) certify that this information will be provided to the 
Commission upon request within ten (10) business days of such request.
    (10) A description of the shipment records which will be maintained 
to support the NSA and the address, telephone number, and title of the 
person who will respond to a request by making shipment records 
available to the Commission for inspection under Sec. 531.12 of this 
part; and
    (11) All other provisions of the NSA.
    (c) Certainty of terms. The terms described in paragraph (b) of 
this section may not:
    (1) Be uncertain, vague or ambiguous; or
    (2) Make reference to terms not explicitly contained in the NSA 
itself unless those terms are contained in a publication widely 
available to the public and well known within the industry. Reference 
may not be made to a tariff of a common carrier other than the NVOCC 
party to the NSA.
    (d) Other requirements. (1) For service pursuant to an NSA, no 
NVOCC may, either alone or in conjunction with any other person, 
directly or indirectly, provide service in the liner trade that is not 
in accordance with the rates, charges, classifications, rules and 
practices contained in a filed NSA.
    (2) For service pursuant to an NSA, no NVOCC, may, either alone or 
in conjunction with any other person, directly or indirectly, engage in 
any unfair or unjustly discriminatory practice in the matter of rates 
or charges with respect to any port; and
    (3) For service under an NSA, no NVOCC may, either alone or in 
conjunction with any other person, directly or indirectly, give any 
undue or unreasonable preference or advantage or impose any undue or 
unreasonable prejudice or disadvantage with respect to any port.
    (e) Format requirements. Every NSA filed with BTA shall include, as 
set forth in Appendix A to this part:
    (1) A unique NSA number of more than one (1) but less than ten (10) 
alphanumeric characters in length (``NSA Number''); and
    (2) A consecutively numbered amendment number no more than three 
digits in length, with initial NSAs using ``0'' (``Amendment number''); 
and
    (3) An indication of the method by which the statement of essential 
terms will be published.
    (f) Exception in case of malfunction of Commission electronic 
filing system.
    (1) In the event that the Commission's electronic filing system is 
not functioning and cannot receive NSAs filings for twenty-four (24) 
continuous hours or more, affected parties will not be subject to the 
requirements of paragraph (a) of this section and Sec. 531.11 that an 
NSA be filed before cargo is shipped under it.
    (2) However, NSAs which go into effect before they are filed due to 
a

[[Page 75855]]

malfunction of the Commission's electronic filing system pursuant to 
paragraph (f)(1) of this section, must be filed within twenty-four (24) 
hours of the Commission's electronic filing system's return to service.
    (3) For an NSA that is effective without filing due to a 
malfunction of the Commission's filing system, failure to file that NSA 
within twenty-four (24) hours of the Commission's electronic filing 
system's return to service will be considered a violation of these 
regulations.
    (g) Failure to comply with the provisions of this section shall 
result in the application of the terms of the otherwise applicable 
tariff.


Sec.  531.7  Notices.

    Within thirty (30) days of the occurrence of any event listed 
below, there shall be filed with the Commission, pursuant to the same 
procedures as those followed for the filing of an amendment pursuant to 
Sec. 531.5 and Appendix A to this part, a detailed notice of:
    (a) Correction;
    (b) Cancellation;
    (c) Adjustment of accounts, by re-rating, liquidated damages, or 
otherwise;
    (d) Final settlement of any account adjusted as described in 
paragraph (c) of this section; and
    (e) Any change to the name, legal name and/or business address of 
any NSA party.


Sec.  531.8  Amendment, correction, cancellation, and electronic 
transmission errors.

    (a) Amendment.
    (1) NSAs may be amended by mutual agreement of the parties. 
Amendments shall be filed electronically with the Commission in the 
manner set forth in Sec. 531.5 and Appendix A to this part.
    (i) Where feasible, NSAs should be amended by amending only the 
affected specific term(s) or subterms.
    (ii) Each time any part of an NSA is amended, the filer shall 
assign a consecutive amendment number (up to three digits), beginning 
with the number ``1.''
    (iii) Each time any part of a filed NSA is amended, the ``Filing 
Date'' will be the date of filing of the amendment.
    (2) [Reserved]
    (b) Correction.
    (1) Requests shall be filed, in duplicate, with the Commission's 
Office of the Secretary within forty-five (45) days of the NSA's filing 
with the Commission, accompanied by remittance of a $276 service fee.
    (2) Requests shall include:
    (i) A letter of transmittal explaining the purpose of the 
submission, and providing specific information to identify the initial 
or amended NSA to be corrected;
    (ii) A paper copy of the proposed correct terms. Matter to be 
deleted shall be struck through and matter to be added shall 
immediately follow the language being deleted and underscored;
    (iii) An affidavit from the filing party attesting with specificity 
to the factual circumstances surrounding the clerical or administrative 
error, with reference to any supporting documentation;
    (iv) Documents supporting the clerical or administrative error; and
    (v) A brief statement from the other party to the NSA concurring in 
the request for correction.
    (3) If the request for correction is granted, the carrier party 
shall file the corrected provisions using a special case number as 
described in Appendix A to this part.
    (c) Electronic transmission errors.
    (1) An authorized person who experiences a purely technical 
electronic transmission error or a data conversion error in 
transmitting an NSA filing or an amendment thereto is permitted to file 
a Corrected Transmission (``CT'') of that filing within 48 hours of the 
date and time of receipt recorded in the Commission's electronic filing 
system (excluding Saturdays, Sundays and legal public holidays). This 
time-limited permission to correct an initial defective NSA filing is 
not to be used to make changes in the original NSA rates, terms or 
conditions that are otherwise provided for in Sec. 531.6(b). The CT tab 
box in the Commission's electronic filing system must be checked at the 
time of resubmitting a previously filed NSA, and a description of the 
corrections made must be stated at the beginning of the corrected NSA 
in a comment box. Failure to check the CT box and enter a description 
of the correction will result in the rejection of a file with the same 
name, as documents with duplicate file names or NSA and amendment 
numbers are not accepted by the FMC's electronic filing system.
    (2) [Reserved]
    (d) Cancellation. (1) An account may be adjusted for events and 
damages covered by the NSA. This shall include adjustment necessitated 
by either liability for liquidated damages appearing in the NSA as 
filed with the Commission under Sec. 531.6(b)(7), or the occurrence of 
an event described below in paragraph (d)(2) of this section.
    (2) In the event of cancellation as defined in Sec. 531.3(g):
    (i) Further or continued implementation of the NSA is prohibited; 
and
    (ii) The cargo previously carried under the NSA shall be re-rated 
according to the otherwise applicable tariff provisions.
    (e) If the amendment, correction or cancellation affects an 
essential term required to be published under Sec. 531.9, the statement 
of essential terms shall be changed as soon as possible after the 
filing of the amendment to accurately reflect the change to the NSA 
terms.

Subpart C--Publication of Essential Terms


Sec.  531.9  Publication.

    (a) Contents. All authorized persons who choose to file NSAs under 
this part are also required to make available to the public, 
contemporaneously with the filing of each NSA with the Commission, and 
in tariff format, a concise statement of the following essential terms:
    (1) The port ranges:
    (i) origin; and
    (ii) destination;
    (2) The commodity or commodities involved;
    (3) The minimum volume or portion; and
    (4) The duration.
    (b) Certainty of terms. The terms described in paragraph (a) of 
this section may not:
    (1) Be uncertain, vague or ambiguous; or
    (2) Make reference to terms not explicitly detailed in the 
statement of essential terms, unless those terms are contained in a 
publication widely available to the public and well known within the 
industry. Reference may not be made to a tariff of a common carrier 
other than the NVOCC party to the NSA.
    (c) Location. The statement of essential terms shall be published 
as a separate part of the individual NVOCC's automated tariff system.
    (d) References. The statement of essential terms shall contain a 
reference to the ``NSA Number'' as described in Sec. 531.6(e)(1).
    (e) Terms. (1) The publication of the statement of essential terms 
shall accurately reflect the terms as filed with the Commission.
    (2) If any of the published essential terms include information not 
required to be filed with the Commission but filed voluntarily, the 
statement of essential terms shall so note.
    (f) Commission listing. The Commission will publish on its website, 
www.fmc.gov, a listing of the locations of all NSA essential terms 
publications.

[[Page 75856]]

    (g) Updating statements of essential terms. To ensure that the 
information contained in a published statement of essential terms is 
current and accurate, the statement of essential terms publication 
shall include a prominent notice indicating the date of its most recent 
publication or revision. When the published statement of essential 
terms is affected by filed amendments, corrections, or cancellations, 
the current terms shall be changed and published as soon as possible in 
the relevant statement of essential terms.

Subpart D--Exceptions and Implementation


Sec.  531.10  Excepted and exempted commodities.

    (a) Statutory exceptions. NSAs for the movement of the following, 
as defined in section 3 of the Act, the Commission's rules at 46 CFR 
530.3 or 46 CFR 520.1, are not subject to the conditions of this 
exemption:
    (1) Bulk cargo;
    (2) Forest products;
    (3) Recycled metal scrap;
    (4) New assembled motor vehicles; and
    (5) Waste paper or paper waste.
    (b) Commission exemptions. The following commodities and/or 
services are not subject to the conditions of this exemption:
    (1) Mail in foreign commerce. Transportation of mail between the 
United States and foreign countries.
    (2) Department of Defense cargo. Transportation of U.S. Department 
of Defense cargo moving in foreign commerce under terms and conditions 
approved by the Military Transportation Management Command and 
published in a universal service contract. An exact copy of the 
universal service contract, including any amendments thereto, shall be 
filed with the Commission as soon as it becomes available.
    (c) Inclusion of excepted or exempted matter.
    (1) The Commission will not accept for filing NSAs which 
exclusively concern the commodities or services listed in paragraph (a) 
or (b) of this section.
    (2) NSAs filed with the Commission may include the commodities or 
services listed in paragraph (a) or (b) of this section only if:
    (i) There is a tariff of general applicability for the 
transportation, which contains a specific commodity rate for the 
commodity or service in question; or
    (ii) The NSA itself sets forth a rate or charge which will be 
applied if the NSA is canceled, as defined in Sec.  531.3(e) and Sec.  
531.8(d).
    (d) Waiver. Upon filing an NSA pursuant to paragraph (c) of this 
section, the NSA shall be subject to the same requirements as those for 
NSAs generally.


Sec.  531.11  Implementation.

    Generally. Performance under an NSA or amendment thereto may not 
begin before the day it is effective and filed with the Commission.

Subpart E--Recordkeeping and Audit


Sec.  531.12  Recordkeeping and audit.

    (a) Records retention for five years. Every NVOCC shall maintain 
original signed NSAs, amendments, and their associated records in an 
organized, readily accessible or retrievable manner for a period of 
five (5) years from the termination of each NSA. These records must be 
kept in a form that is readily available and usable to the Commission; 
electronically maintained records shall be no less accessible than if 
they were maintained in paper form.
    (b) Production for audit within 30 days of request. Every NVOCC 
shall, upon written request of the FMC's Director, Bureau of 
Enforcement, any Area Representative or the Director, Bureau of Trade 
Analysis, submit copies of requested original NSAs or their associated 
records within thirty (30) days of the date of the request.


Sec.  531.13-531.98  [Reserved]


Sec.  531.99  OMB control numbers assigned pursuant to the Paperwork 
Reduction Act.

    The Commission has received OMB approval for this collection of 
information pursuant to the Paperwork Reduction Act of 1995, as 
amended. In accordance with that Act, agencies are required to display 
a currently valid control number. The valid control number for this 
collection of information is 3072-0067. The valid control number for 
form FMC-78 is 3072-0067.

Appendix A to Part 531--Instructions for the Filing of NSAs

    NSAs shall be filed in accordance with the instructions found on 
the Commission's home page, http://www.fmc.gov.

A. Registration, Log-on I.D. and Password

    To register for filing, an NVOCC or authorized agent must submit 
the NSA Registration Form (Form FMC-78) to BTA. A separate NSA 
Registration Form is required for each individual that will file 
NSAs. BTA will direct OIT to provide approved filers with a log-on 
identification number (``I.D.'') and password. Filers who would like 
a third party (agent/publisher) to file their NSAs must so indicate 
on Form FMC-78. Authority for filing can be transferred by 
submitting an amended registration form requesting the assignment of 
a new log-on I.D. and password. The original log-on ID will be 
canceled when a replacement log-on I.D. is issued. Log-on I.D.s and 
passwords may not be shared with, loaned to or used by any 
individual other than the individual registrant. The Commission 
reserves the right to disable any log-on I.D. that is shared with, 
loaned to or used by parties other than the registrant.

B. Filing

    After receiving a log-on I.D. and a password, a filer may log-on 
to the NSA filing area on the Commission's home page and file NSAs. 
The filing screen will request such information as: filer name, 
organization number (``Registered Persons Index'' or ``RPI'' 
number); NSA and amendment number; effective date and file name. The 
filer will attach the entire NSA file and submit it into the system. 
When the NSA has been submitted for filing, the system will assign a 
filing date and an FMC control number, both of which will be 
included in the acknowledgment/confirmation message.

    By the Commission.\5\
---------------------------------------------------------------------------

    \5\ Commissioner Brennan issued the following statement: I 
strongly support the concept of allowing NVOCCs to offer 
confidential contracts. I voted against the draft final rule because 
it does not go far enough. For example, the exemption does not allow 
shippers' associations, which are often made up of small and medium-
sized shippers, to use confidential contracts unless the association 
excludes an NVO member of the association.

Bryant L. VanBrakle,
Secretary.

BILLING CODE 6730-01-P

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[FR Doc. 04-27803 Filed 12-17-04; 8:45 am]
BILLING CODE 6730-01-C


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