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Commission Moves Forward with Regulatory Reform Efforts as Part of November Meeting

November 9, 2017

The Federal Maritime Commission (FMC) Wednesday took an important step in its regulatory reform efforts when it voted to advance a Notice of Proposed Rulemaking (NPRM) that simplifies and streamlines its Non-Vessel-Operating Common Carrier (NVOCC) Service Arrangements (NSA) and Negotiated Rate Arrangements (NRA) rules and procedures.

Through the NPRM, the Commission seeks feedback on three key proposals: ending the requirement for NSAs to be filed with the Commission; expanding the ability of NVOCCs and shippers to amend NRAs; and, finally, allowing the act of tendering cargo to be considered acceptance of a rate under the terms of an NRA. The NPRM will include a specific request for public comments addressing whether the Commission should expand the NRA rules to allow inclusion of non-rate economic terms.

The NPRM will be published in the Federal Register in the coming weeks and will include instructions on how interested parties can file comments.

Acting Chairman Michael A. Khouri said, "I am pleased that the Commission has taken this step to move forward on a petition to reduce unnecessary regulatory burdens that increase complexity and costs in America’s ocean supply chain. Ultimate adoption of these rules will makes NSAs and NRAs more useful for consumers in the marketplace. Additionally, I hope to receive more comments on whether the rule could go further, as requested by NCBFAA in their petition, to expand the NRA to utilize non-rate commercial terms."

Elements of the changes being proposed were originally brought to the Commission via Petition P2-15, filed by the National Customs Brokers & Forwarders Association of America (NCBFAA) in 2015 and an Order Granting Petition was served in August 2016. Shortly after its establishment in March 2017, in voluntary response to two Executive Orders, the FMC Regulatory Reform Taskforce identified P2-15 as an immediate objective to rapidly and successfully address burdensome, unnecessary and outdated directives.

Also anticipated before the end of the year will be a report issued by Commissioner Rebecca Dye summarizing the work of the six different Federal Maritime Commission Innovation Teams she has led over the past 18 months.

During today’s meeting Commissioner Dye foreshadowed some of the themes that will be communicated in her report. She noted that her three import and three export FMC Innovation Teams have been very productive in their efforts, identifying numerous topics and issues worthy of further exploration. She also noted that the model of small teams focused on the goal of improving our American freight delivery system would work well for future efforts to study supply chain issues.

Commissioner Dye stated that there is not a singular solution to address gateway and supply chain issues. She said that the challenge is not in finding a single solution, but rather in accepting that the supply chain is a complex system, a network of systems more accurately, that requires collaborative commitments from those who use it. There must be an emphasis on managing complexity, not looking for easy fixes.

Noting that Information Technology is the new infrastructure, Commission Dye reiterated the importance of identifying and sharing critical information in order for the supply chain to function most efficiently and continue to be one of the drivers of the Nation’s economy.

Finally, through a presentation led by Drs. Roy Pearson and Anthony Homan, both economists in the Bureau of Trade Analysis, the Commission continued its efforts to educate the public on its agreement review process. More specifically, they explained in interesting detail how the Commission reviews filed agreements that meet the threshold for analysis in order to assess an agreement’s potential for creating anticompetitive effects on the marketplace.

Drs. Pearson and Homan reported that during the analysis conducted by the Bureau of Trade Analysis, the key questions being answered are would the agreement reduce competition and would that reduction in competition likely result in an unreasonable increase in transportation cost or an unreasonable decrease in transportation service. This is commonly referred to as the "6(g) standard", for the section of the Shipping Act containing this provision. If the conclusion is that an agreement would likely violate the 6(g) standard, discussions invariably occur between Commission staff and filing parties aimed at eliminating, or modifying, those provisions in order to mitigate the Commission’s concerns.

It was noted that a crucial element of the agreement review and analysis process is the ability to access the data collected by the Commission through its ongoing monitoring activities. How the Commission carries out this function will be the topic of a future briefing.

Today’s meeting of the Federal Maritime Commission will be the last regularly scheduled session for 2017.