Abstract
Beginning in the early 1900s, the United States instituted a regulatory scheme similar to the British ‘conference system’, which handled oversight of the international ocean shipping industry. This design was initially embodied in the Shipping Act of 1916. Various incarnations of the Shipping Act occurred throughout the 20th century, the most significant action resulting from passage of the Shipping Act of 1984 and the Ocean Shipping Reform Act of 1998. Sparked by these regulatory changes, the US Federal Maritime Commission (FMC) – the governmental body overseeing implementation of the maritime regulatory laws – took on a more interventionist role. Until recently, European nations (and later the European Union) had chosen a more laissez-faire approach to regulating their ocean carriers and shippers. The US and European regulatory regimes vary in their approach to, jurisdiction of, and enforcement of regulations governing conduct of shippers, carriers, and intermediaries involved in ocean shipping. In part, these contrasting regulatory perspectives have led to sometimes significantly different economic consequences. For example, as the Shipping Act stands today, non-vessel-operating common carriers (NVOCCs), commonly referred to as ‘freight forwarders’ in Europe, are not permitted to enter into contract rates with their shipper-customers but instead must publish a tariff rate covering every shipment they handle. Several of the larger, diversified NVOCCs that offer a variety of logistical services, filed petitions with the FMC requesting that they be granted the authority to offer confidential contract rates. By many accounts, the FMC's new NVOCC ‘service arrangement’ rulemaking has halted yet another round of comprehensive changes to the US regulatory approach to liner shipping for the time being.
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Notes
Trans-Atlantic westbound volume is expected to grow by 2.8% in 2004 and 3.0% in 2005; Trans-Atlantic eastbound volume is expected to grow by 5.4% in 2004 and 2.7% in 2005. See PIERS/J. Com., (March 2004); see also, Fed. Mar. Comm'n (31 March 2004) (last visited on 16 April, 2004), ‘In the transatlantic, the volume of liner imports and exports showed slight to modest growth from the preceding fiscal year … [i]mport cargo from Northern Europe rose .8 percent in 2003, and outbound trade grew by 3.3 percent during the same time period.’
See Port Import Reporting Service/J. Com. statistics (April 2004).
United Parcel Service, Inc., F.M.C. Dkt No. P3-03 (petition filed July 25, 2003); BAX Global Inc., F.M.C. Dkt No. P8-03 (petition filed 11 September, 2003; Nat'l Customs Brokers & Freight Forwarders Ass'n of Am., F.M.C. Dkt No. P5-03 (petition filed 8 August, 2003); Ocean World Lines, Inc., F.M.C. Dkt No. P7-03 (petition filed 8 September, 2003); C.H. Robinson Worldwide, Inc., F.M.C. Dkt No. P9-03 (petition filed 12 September, 2003); BDP International, Inc. and Danzas Corporation d/b/a Danmar Lines Ltd.; Danzas AEI Ocean Services and DHL-Danzas Air and Ocean, F.M.C. Dkt Nos. P1-04 and P2-04 (petitions filed 22 January, 2004); FedEx Trade Networks & Brokerage, Inc., F.M.C. Dkt No. P4-04 (petition filed 12 March, 2004).
46 App. U.S.C. § 801 et seq.
Pub. L. No. 105–254 (14 October, 1998), 46 U.S.C. app. §§ 1701 et seq.
See EC Regulation No. 4056/86, adopted by the Council of Ministers in 1986. As part of the EC's review of the carriers' block exemption, in March 2003, the EC issued a consultation paper on Regulation No. 4056/86 seeking comments from the shipping industry and public (as well as supporting data and material). In response, several European-based shipper and carrier groups submitted comments. The shipper groups argued in favour of eliminating the exemption for ocean carriers. The carriers continued to argue that the exemption is a necessary component for the liner industry. The EC continues to review this issue and will issue either one preferred policy recommendation, or several policy options for consideration. The EU's Council of Ministers will ultimately decide on whether reform of the carriers' block exemption is required.
See Council Regulation 4053/86, art. 5.
Freudmann, A. 1999: Plans for Atlantic line cartel on hold. Journal of Commerce A1; Sansbury, T and Freudmann, A. 1999: FMC delays approval of Atlantic carrier plan. Journal of Commerce; Tirschwell, P. 1999: Focus shifts to discussion. Journal of Commerce.
The White Paper may be viewed at http://europa.eu.int/comm/competition/index_en.html.
See EC Press Release Commission adopts White Paper on liner shipping conferences (13 October 2004) available at http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP/04/1213&format=HTML&aged=0&language=EN&guiLanguage=en. The Press Release noted that ‘[t]he [carriers’ block exemption] review process was launched in March 2003 with the publication of a Consultation Paper (see IP/03/445) … [t]he Commission has already held extensive discussions with the Member States, which are the ones that can ultimately revoke or modify the existing regulation.', Ibid.
Leach, P. 2004: EU panel: Abolish liner conferences. Journal of Commerce.
Ibid.
van der Jagt, N. 2005: European shippers council. Journal of Commerce.
Ibid.
The Shipping Act defines NVOCC as ‘a common carrier that does not operate the vessels by which the ocean transportation is provided, and is a shipper in its relationship with an ocean common carrier.’ See 46 U.S.C. app. § 1702(17)(B); see also 46 C.F.R. § 515.2(o)(2).
The Shipping Act defines a ‘service contract’ as ‘a written contract, other than a bill of lading or a receipt, between one or more shippers and an individual ocean common carrier or an agreement between or among ocean common carriers in which the shipper or shippers makes a commitment to provide a certain volume or portion of cargo over a fixed time period, and the ocean common carrier or the agreement commits to a certain rate or rate schedule and a defined service level, such as assured space, transit time, port rotation, or similar service features. The contract may also specify provisions in the event of nonperformance on the part of any party.’ See 46 U.S.C. app. § 1702(18).
The FMC has found that it is ‘[g]iven that service contracts have become the overwhelmingly predominant rate-setting vehicle.’ See OSRA Rep. at 7.
Certain of the major container operators have themselves created NVOCC affiliates, including Maersk-Sealand and APL.
It is worth noting that the vote on the NSA Rule was 4 to 1 in favor of adoption. Only FMC Commissioner Charles Brennan voted against the rule, arguing that it did not go far enough in providing regulatory relief to NVOCCs and shippers. Commissioner Brennan issued the following statement on his vote: ‘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.’
See 69 Fed. Reg. 75,850 (20 December 2004).
The NSA Rule in its entirety may be found at 46 C.F.R. § 531 et seq.
As an aside, even before the final NSA Rule became effective, additional issues surfaced regarding shippers' associations and certain NVOCC conduct under the NSA Rule. It remains unknown at this time how these issues may ultimately be resolved. In the interim, the NSA Rule is effective and available for use by shippers and NVOCCs.
46 C.F.R. § 531.5(a).
See Appendix A to Part 531, Instructions for the Filing of NSAs.
A Form FMC-78 must be properly completed and filed with the FMC to register with the ServCon system. A copy of the Form-78 may be downloaded from the FMC's website at http://www.fmc.gov.
Ibid., supra note 25.
See 46 C.F.R. § 531.6(b).
Under the NSA Rule, an ‘NSA shipper’ is defined 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 … [t]he term does not include NVOCCs or shippers' associations whose membership includes NVOCCs.’ See 46 C.F.R. § 531.3(o).
See generally Fed. Mar. Comm’n Dkt. No. 04–12, Notice of Proposed Rulemaking, NVOCC Service Arrangements (28 October 2004) for a full discussion of the FMC's rationale for imposing the restrictions, available at http://www.fmc.gov/Dockets/04-12%20Proposed%20Rule.htm.
See 46 C.F.R. § 531.9 et seq.
Ibid.
46 C.F.R. § 531.5(c).
46 C.F.R. § 531.12.
Ibid.
Ibid.
See 46 C.F.R. § 520 et seq.
On 9 February 2005, the FMC denied Petitions for Reconsideration and Stay filed by the International Shippers’ Association and the American Institute for Shippers’ Associations. See http://www.fmc.gov/Dockets/04-12%20reconsideration%20order%202-8-05.htm. Additionally, on that same date the FMC formally closed-out the eight individual NVOCC petitions filed in 2003 and 2004 seeking service contract authority (e.g., UPS, BAX, FedEx). See http://www.fmc.gov/.
Civil Aeronautics Board Sunset Act of 1984, 98 Stat. 1703 (1984). See also, Title XVI of the Federal Aviation Act of 1958, noted in Airline Deregulation Act of 1978, 92 Stat. 1744 (1978).
‘During fiscal year 2003, the [FMC's] Bureau of Enforcement investigated and prosecuted malpractices in many trades lanes, including the transpacific, North Atlantic, Central and South American and Caribbean trades. This included market-distorting activities such as various forms of secret rebates and absorptions, misdescription of commodities and misdeclaration of measurements, illegal equipment substitution, unlawful use of service contracts, as well as carriage of cargo by and for untariffed and unbonded NVOCCs.’ See Fed. Mar. Comm’n. (31 March 2004).
See Fed. Mar. Comm’n Dkt. Nos. P6-03; P4-03; and P3-99. See also, The Agreement and Memorandum of Consultations at www.marad.dot.gov/Headlines/announcements/China/China.htm.
See Fed. Mar. Comm’n News Release (19 August 2004) at http://www.fmc.gov/Dockets/NR%2004-12%20FMC%20Announces%20Organizational%20Realignment.htm.
See Fed. Mar. Comm’n News Release (15 December 2004) at http://www.fmc.gov/Pressreleases/NR%2004-17%20Final%20Rule%20Docket%20No%2004-12.htm.
References
Fed. Mar. Comm’n. The Impact of the Ocean Shipping Reform Act of 1998 September 2001 (‘OSRA Rep’) at 8, 16, and 17.
Fed. Mar. Comm’n. 42nd Annual Report for Fiscal Year 2003 March 31, 2004. Available at http://fmc.gov/dockets/fy03%20annual%20report%20homepage.htm.
PIERS/J. Com. US Containerized Imports Forecast (2004–2005). March 2004.
Rep. to the President and the Congress of the Advisory Comm’n on Conferences in Ocean Shipping 10 April, 1992.
Official J. European Union. Notice pursuant to Article 4 of Council Regulation (ECC) No. 479/92 of 25 February 1992 on the application of Article 81(3) of the EC Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia). December 23, 2004.
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Bank, R., Craig, A. & Sheppard, E. Shifting Seas: A Survey of US and European Liner Shipping Regulatory Developments Affecting the Trans-Atlantic Trades. Marit Econ Logist 7, 56–72 (2005). https://doi.org/10.1057/palgrave.mel.9100124
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DOI: https://doi.org/10.1057/palgrave.mel.9100124