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NY/NJ Foreign Freight Forwarders & Brokers AssociationNY/NJ Foreign Freight Forwarders & Brokers Association

MEMBERSHIP MEETINGMEMBERSHIP MEETING

DECEMBER 15, 2010 DECEMBER 15, 2010

““LEGAL CHANGES ON THE HORIZON:LEGAL CHANGES ON THE HORIZON:TARIFF REFORM TARIFF REFORM FOR NVOCCs””

Carlos Rodriguez, Esq.Rodriguez O’Donnell

Gonzalez & Williams, P. C.1250 Connecticut Ave., N.W.

Washington, D.C. 20036

Direct Dial: 202-973-2999E-mail: rodriguez@rorlaw.com

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OVERVIEWOVERVIEWPROPOSED PROPOSED LEGAL CHANGES - TARIFF REFORMLEGAL CHANGES - TARIFF REFORM

• KEY ITEMS : SUBJECT FOR COMMENTSKEY ITEMS : SUBJECT FOR COMMENTS*RATES ONLY: WHAT ABOUT CHARGES?*RATES ONLY: WHAT ABOUT CHARGES?

*RATE INCREASES *RATE INCREASES

*AMENDMENTS*AMENDMENTS

*REGISTERED V. LICENSED*REGISTERED V. LICENSED

*EXEMPTION OPTION IS OPTIONAL BUT *EXEMPTION OPTION IS OPTIONAL BUT EXCLUSIVEEXCLUSIVE

*WHAT ABOUT NSAs?*WHAT ABOUT NSAs?

*FAST TRACK---NOT REALLY*FAST TRACK---NOT REALLY

• THE RECORDKEEPING DILEMMATHE RECORDKEEPING DILEMMA

• NEW NVOCC BIBLE: RULES TARIFFS---WHAT TO PUT IN NEW NVOCC BIBLE: RULES TARIFFS---WHAT TO PUT IN THEM?THEM?

NET EFFECT OF PROPOSED NET EFFECT OF PROPOSED EXEMPTION:EXEMPTION:

• NVOCCs EXEMPT FROM NVOCCs EXEMPT FROM PUBLISHINGPUBLISHING ITS RATES ITS RATES

• SAME EXEMPTION FROM SAME EXEMPTION FROM TIME VOLUME RATESTIME VOLUME RATES

• EXEMPTION EXEMPTION FROM 30 DAY NOTICE FOR RATE FROM 30 DAY NOTICE FOR RATE INCREASESINCREASES

• EXEMPTION EXEMPTION FROM ADHERING TO PUBLISHED RATEFROM ADHERING TO PUBLISHED RATE

• EXEMPTION FROM EXEMPTION FROM APPLYING TO FMC FOR REFUNDS APPLYING TO FMC FOR REFUNDS TO SHIPPER---TO SHIPPER---

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PROPOSED RULES: SUMMARYPROPOSED RULES: SUMMARY “A SHIFT IN REGULATORY REGIMEN”“A SHIFT IN REGULATORY REGIMEN”

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• FIRSTFIRST: AN NVOCC MUST GIVE : AN NVOCC MUST GIVE NOTICENOTICE THAT IT THAT IT WISHES TO INVOKE THE TARIFF EXEMPTION WISHES TO INVOKE THE TARIFF EXEMPTION BY:  BY:  

(1) A PROMINENT (1) A PROMINENT NOTICENOTICE ON ITS RULES ON ITS RULES TARIFF; TARIFF; OR OR

(2) BY FILING (2) BY FILING NOTICENOTICE ON THE FMC ON THE FMC NVOCC FORM FMC-1. NVOCC FORM FMC-1.

•   ALL OR NOTHING? NO MIDDLE GROUND---THE ALL OR NOTHING? NO MIDDLE GROUND---THE NVOCC HAS NOW MOVED INTO THE WORLD NVOCC HAS NOW MOVED INTO THE WORLD OF NRA’S. WHAT IF SHIPPER WANTS AN OF NRA’S. WHAT IF SHIPPER WANTS AN NSA?---NSA?---IS THAT POSSIBLE FOR AN NVOCC IS THAT POSSIBLE FOR AN NVOCC THAT HAS GIVEN EXEMPTION NOTICE?THAT HAS GIVEN EXEMPTION NOTICE?

WHAT IS AN NRA? WHAT IS AN NRA? “Negotiated Rate Arrangements ““Negotiated Rate Arrangements “

• FMC DEFINITION: “NVOCC Negotiated Rate FMC DEFINITION: “NVOCC Negotiated Rate Arrangement means a Arrangement means a writtenwritten and and bindingbinding arrangement between a shipper and an arrangement between a shipper and an eligible NVOCC eligible NVOCC to provide specific to provide specific transportation service for a transportation service for a stated cargo stated cargo quantityquantity, from origin to destination, from origin to destination.”.”

WHAT IS A WRITING? WHAT IS A WRITING? E-MAILS? SIGNATURES E-MAILS? SIGNATURES REQUIRED? BEST PRACTICES?REQUIRED? BEST PRACTICES?

WHAT IS A WHAT IS A “BINDING “ “BINDING “ ARRRANGEMENT?ARRRANGEMENT? ELIGIBLE NVOCC? ELIGIBLE NVOCC? ONLY LICENSED NVOS? ONLY LICENSED NVOS?

WHAT ABOUT REGISTERED NVOS?WHAT ABOUT REGISTERED NVOS? ““STATED CARGO QUANTITIES”---STATED CARGO QUANTITIES”---MQCS? OR MQCS? OR

RATE BASIS---I.E., PER TEU, PER KILO, ETC.RATE BASIS---I.E., PER TEU, PER KILO, ETC.55

WHAT IS A WRITING?WHAT IS A WRITING?

• UCC-§1-201 (46)---”Written” or UCC-§1-201 (46)---”Written” or “writing” “writing” includes printing, typewriting or any other includes printing, typewriting or any other intentional reduction to tangible form. intentional reduction to tangible form.

• Black’s Law Dictionary---”Black’s Law Dictionary---”WritingWriting consists of consists of letter, words, or numbers, or their equivalent letter, words, or numbers, or their equivalent set down by handwriting, typewriting, . . . set down by handwriting, typewriting, . . . Electronic recording . . . or other form of data Electronic recording . . . or other form of data compilation.”compilation.”

• A collection of e-mails would qualify if they A collection of e-mails would qualify if they contained all the rates and terms. contained all the rates and terms. No signatures No signatures required, but the e-mails should be clearly required, but the e-mails should be clearly to/from the shipper to/from the shipper and bind the partiesand bind the parties.. 66

WHAT IS A BINDING WHAT IS A BINDING ARRANGEMENT?ARRANGEMENT?

• THE ELELMENTS OF A CONTRACT:THE ELELMENTS OF A CONTRACT:**AN OFFER-AN OFFER---THE WRITTEN EXCHANGES --THE WRITTEN EXCHANGES FROM FROM

THE THE NVOCC NEED TO BE CLEAR WHAT NVOCC NEED TO BE CLEAR WHAT SERVICE SERVICE AND AND RATES IT IS OFFERING TO ITS CUSTOMERRATES IT IS OFFERING TO ITS CUSTOMER

* * ACCEPTANCEACCEPTANCE---THE RESPONSE FROM THE ---THE RESPONSE FROM THE SHIPPER SHIPPER MUST BE CLEAR THAT IT ACCEPTS MUST BE CLEAR THAT IT ACCEPTS THE THE OFFEROFFER

* * CONSIDERATONCONSIDERATON---USUALLY THE PROMISE OF ---USUALLY THE PROMISE OF RATES RATES AND CHARGES BY THE NVOCC AND THE AND CHARGES BY THE NVOCC AND THE PROMISE TO PROMISE TO PAY BY THE SHIPPER ARE PAY BY THE SHIPPER ARE SUFFICIENT SUFFICIENT CONSIDERATIONCONSIDERATION

NVOCC BEST PRACTICESNVOCC BEST PRACTICES: DEVELOP : DEVELOP STANDARDIZED STANDARDIZED CLEAR LANGUAGE FOR E-MAIL OR CLEAR LANGUAGE FOR E-MAIL OR OTHER OTHER TRANSMISSION OF AN OFFER; TRANSMISSION OF AN OFFER; BINDINGBINDING DOES NOT DOES NOT REQUIRE SIGNATURESREQUIRE SIGNATURES 77

WHAT IS AN “ELIGIBLE NVOCC”? WHAT IS AN “ELIGIBLE NVOCC”?

• NCBFAA’sNCBFAA’s PROPOSAL: EXEMPTION INCLUDES PROPOSAL: EXEMPTION INCLUDES BOTH BOTH LICENSED AND REGISTEREDLICENSED AND REGISTERED

• FMCFMC PROPOSED REGULATION: APPLIES PROPOSED REGULATION: APPLIES ONLYONLY TO TO LICENSEDLICENSED NVOCCs BUT INVITED NVOCCs BUT INVITED COMMENTS TO INCLUDE REGISTERED COMMENTS TO INCLUDE REGISTERED NVOCCs. NVOCCs.

• LICENSED V. REGISTERED ISSUE:LICENSED V. REGISTERED ISSUE:

** REGISTEREDREGISTERED NVOCCs (EX. NVOCCs (EX. LARGE NVOsLARGE NVOs, , KUHNE KUHNE & NAGEL, Etc. BUT ALSO YOUR & NAGEL, Etc. BUT ALSO YOUR SMALLER SMALLER OVERSEAS AGENTSOVERSEAS AGENTS)---)---LARGER NVOCCs HAVE LARGER NVOCCs HAVE EASE OF CHANGING EASE OF CHANGING TO LICENSED NVOCCTO LICENSED NVOCC

** OR IS OR IS LESS REGULATiON LESS REGULATiON BETTER IN THE BETTER IN THE CURRENT ENVIRONMENT?CURRENT ENVIRONMENT?

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““Negotiated Rate Arrangements Negotiated Rate Arrangements Miscellaneous RequirementsMiscellaneous Requirements

• NRA MUST BE IN PLACE NRA MUST BE IN PLACE PRIOR TO CARGO PRIOR TO CARGO BEING RECEIVEDBEING RECEIVED BY OCEAN CARRIER OR BY OCEAN CARRIER OR MOTOR CARRIER IF THROUGH BILL IS MOTOR CARRIER IF THROUGH BILL IS ISSUED BY NVOCCISSUED BY NVOCC

• PRIOR TO NVOCC ENTERING NRA: A) MUST PRIOR TO NVOCC ENTERING NRA: A) MUST PROVIDE SHIPPER PROVIDE SHIPPER WITH TERMS IN RULES WITH TERMS IN RULES TARIFF TARIFF OROR B) PROVIDE B) PROVIDE ELECTRONIC ACCESS ELECTRONIC ACCESS TO RULES TARIFF (FREE OF CHARGE)TO RULES TARIFF (FREE OF CHARGE)

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““Negotiated Rate Arrangements Negotiated Rate Arrangements Miscellaneous RequirementsMiscellaneous Requirements

• RATES RATES SHALL NOT BE MODIFIED SHALL NOT BE MODIFIED AFTER AFTER THE TIME THE SHIPMENT IS RECEIVED BY THE TIME THE SHIPMENT IS RECEIVED BY THE CARRIER OR ITS AGENT THE CARRIER OR ITS AGENT ((INCLUDING INCLUDING ORIGINATING CARRIERS IN THE CASE OF ORIGINATING CARRIERS IN THE CASE OF THROUGH TRANSPORTATION).THROUGH TRANSPORTATION).

• DO THE PROPOSED RULES REALLY MEAN THIS?DO THE PROPOSED RULES REALLY MEAN THIS?

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NEW NVOCC BIBLE: RULES NEW NVOCC BIBLE: RULES TARIFFS---WHAT TO PUT IN THEM?TARIFFS---WHAT TO PUT IN THEM?

• ““RULES TARIFF” RULES TARIFF” ((as defined by 46 CFR 520.2), as defined by 46 CFR 520.2), CONTAINS TERMS AND CONDITIONS CONTAINS TERMS AND CONDITIONS GOVERNING GOVERNING CHARGES,CHARGES, CLASSIFICAITON, CLASSIFICAITON, RULES, REGULATIONS AND PRACTICES OF RULES, REGULATIONS AND PRACTICES OF AN NVOCC (DOES NOT INCLUDE RATES). AN NVOCC (DOES NOT INCLUDE RATES).

• REMEMBER: TARIFF RULES REMEMBER: TARIFF RULES HAVE THE HAVE THE EFFECT OF LAWEFFECT OF LAW ON PRIVATE ON PRIVATE TRANSACTIONS.TRANSACTIONS.

• COURTS WILL IMPUTE COURTS WILL IMPUTE CONSRUCTIVE CONSRUCTIVE KNOWLEDGEKNOWLEDGE TO SHIPPER PARTIES OF RULES TO SHIPPER PARTIES OF RULES IN TARIFFSIN TARIFFS

• CHOOSE TARIFF RULES LANGUAGE WISELYCHOOSE TARIFF RULES LANGUAGE WISELY 1111

NEW NVOCC BIBLE: RULES NEW NVOCC BIBLE: RULES TARIFFS---WHAT ELSE TO PUT IN TARIFFS---WHAT ELSE TO PUT IN

THEM?THEM?• CHARGES? WHAT ABOUT THESE? CURRENT RULE:CHARGES? WHAT ABOUT THESE? CURRENT RULE:

ALLOWS PASSING ON CHARGES ONLY WHEN ALLOWS PASSING ON CHARGES ONLY WHEN “agency making such changes does so without “agency making such changes does so without notifying the tariff owner.”notifying the tariff owner.”

• WHAT ABOUT CARRIER RATE INCREASES, GRI’s, WHAT ABOUT CARRIER RATE INCREASES, GRI’s, PSS, BAF’s ETC. ?PSS, BAF’s ETC. ?

• OTHER RULE ITEMS:OTHER RULE ITEMS:

** GENERAL LIEN LANGUAGEGENERAL LIEN LANGUAGE

** ABANDONEMENT ABANDONEMENT

** WAREHOUSEMEN LANGUAGEWAREHOUSEMEN LANGUAGE

** DEMURRAGE, DETENTION, PER DEMURRAGE, DETENTION, PER DIEM RESPONSIBILITYDIEM RESPONSIBILITY

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Recordkeeping and Audit Recordkeeping and Audit

• NVOCC MUST MAINTAIN ORIGINAL NRA’s AND NVOCC MUST MAINTAIN ORIGINAL NRA’s AND ASSOCIATED RECORDS, INCLUDING WRITTEN ASSOCIATED RECORDS, INCLUDING WRITTEN COMMUNICATIONS COMMUNICATIONS FOR 5 YEARS.FOR 5 YEARS.

• NRA’s MUST BE KEPT IN A FORMAT WHICH CAN BE NRA’s MUST BE KEPT IN A FORMAT WHICH CAN BE PRODUCED PROMPTLY TO FMC PRODUCED PROMPTLY TO FMC UPON REQUEST. UPON REQUEST.

  

• FAILURE TO KEEP FAILURE TO KEEP OR OR TIMELY PRODUCE TIMELY PRODUCE ORIGINAL ORIGINAL NRA’s WILL DISQUALIFY NVOCC FROM EXEMPTION NRA’s WILL DISQUALIFY NVOCC FROM EXEMPTION AND MAY RESULT IN AND MAY RESULT IN SHIPPING ACT VIOLATIONS SHIPPING ACT VIOLATIONS FOR NON-PUBLISHING OF RATES AND RELATED FOR NON-PUBLISHING OF RATES AND RELATED PRACTICES. PRACTICES.

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