11 NY/NJ Foreign Freight Forwarders & Brokers Association MEMBERSHIP MEETING DECEMBER 15, 2010 LEGAL CHANGES ON THE HORIZON: TARIFF REFORM FOR NVOCCs Carlos Rodriguez, Esq. Rodriguez ODonnell Gonzalez & Williams, P. C Connecticut Ave., N.W. Washington, D.C Direct Dial:

22 OVERVIEW PROPOSED LEGAL CHANGES - TARIFF REFORM KEY ITEMS : SUBJECT FOR COMMENTS *RATES ONLY: WHAT ABOUT CHARGES? KEY ITEMS : SUBJECT FOR COMMENTS *RATES ONLY: WHAT ABOUT CHARGES? *RATE INCREASES *AMENDMENTS *REGISTERED V. LICENSED *EXEMPTION OPTION IS OPTIONAL BUT EXCLUSIVE *WHAT ABOUT NSAs? *FAST TRACK---NOT REALLY THE RECORDKEEPING DILEMMA THE RECORDKEEPING DILEMMA NEW NVOCC BIBLE: RULES TARIFFS---WHAT TO PUT IN THEM? NEW NVOCC BIBLE: RULES TARIFFS---WHAT TO PUT IN THEM?

NET EFFECT OF PROPOSED EXEMPTION: NVOCCs EXEMPT FROM PUBLISHING ITS RATES NVOCCs EXEMPT FROM PUBLISHING ITS RATES SAME EXEMPTION FROM TIME VOLUME RATES SAME EXEMPTION FROM TIME VOLUME RATES EXEMPTION FROM 30 DAY NOTICE FOR RATE INCREASES EXEMPTION FROM 30 DAY NOTICE FOR RATE INCREASES EXEMPTION FROM ADHERING TO PUBLISHED RATE EXEMPTION FROM ADHERING TO PUBLISHED RATE EXEMPTION FROM APPLYING TO FMC FOR REFUNDS TO SHIPPER--- EXEMPTION FROM APPLYING TO FMC FOR REFUNDS TO SHIPPER--- 3

PROPOSED RULES: SUMMARY A SHIFT IN REGULATORY REGIMEN 4 F IRST : A N NVOCC MUST GIVE NOTICE THAT IT WISHES TO INVOKE THE TARIFF EXEMPTION BY : F IRST : A N NVOCC MUST GIVE NOTICE THAT IT WISHES TO INVOKE THE TARIFF EXEMPTION BY : (1) A PROMINENT NOTICE ON ITS RULES TARIFF ; OR (1) A PROMINENT NOTICE ON ITS RULES TARIFF ; OR (2) B Y FILING NOTICE ON THE FMC NVOCC F ORM FMC-1. (2) B Y FILING NOTICE ON THE FMC NVOCC F ORM FMC-1. ALL OR NOTHING? NO MIDDLE GROUND---THE NVOCC HAS NOW MOVED INTO THE WORLD OF NRAS. WHAT IF SHIPPER WANTS AN NSA?---IS THAT POSSIBLE FOR AN NVOCC THAT HAS GIVEN EXEMPTION NOTICE? ALL OR NOTHING? NO MIDDLE GROUND---THE NVOCC HAS NOW MOVED INTO THE WORLD OF NRAS. WHAT IF SHIPPER WANTS AN NSA?---IS THAT POSSIBLE FOR AN NVOCC THAT HAS GIVEN EXEMPTION NOTICE?

WHAT IS AN NRA? Negotiated Rate Arrangements WHAT IS AN NRA? Negotiated Rate Arrangements FMC DEFINITION: NVOCC Negotiated Rate Arrangement means a written and binding arrangement between a shipper and an eligible NVOCC to provide specific transportation service for a stated cargo quantity, from origin to destination. FMC DEFINITION: NVOCC Negotiated Rate Arrangement means a written and binding arrangement between a shipper and an eligible NVOCC to provide specific transportation service for a stated cargo quantity, from origin to destination. WHAT IS A WRITING? S? SIGNATURES REQUIRED? BEST PRACTICES? WHAT IS A WRITING? S? SIGNATURES REQUIRED? BEST PRACTICES? WHAT IS A BINDING ARRRANGEMENT? WHAT IS A BINDING ARRRANGEMENT? ELIGIBLE NVOCC? ONLY LICENSED NVOS? WHAT ABOUT REGISTERED NVOS? ELIGIBLE NVOCC? ONLY LICENSED NVOS? WHAT ABOUT REGISTERED NVOS? STATED CARGO QUANTITIES---MQCS? OR RATE BASIS---I.E., PER TEU, PER KILO, ETC. STATED CARGO QUANTITIES---MQCS? OR RATE BASIS---I.E., PER TEU, PER KILO, ETC. 5

WHAT IS A WRITING? UCC-§1-201 (46)---Written or writing includes printing, typewriting or any other intentional reduction to tangible form. UCC-§1-201 (46)---Written or writing includes printing, typewriting or any other intentional reduction to tangible form. Blacks Law Dictionary---Writing consists of letter, words, or numbers, or their equivalent set down by handwriting, typewriting,... Electronic recording... or other form of data compilation. Blacks Law Dictionary---Writing consists of letter, words, or numbers, or their equivalent set down by handwriting, typewriting,... Electronic recording... or other form of data compilation. A collection of s would qualify if they contained all the rates and terms. No signatures required, but the s should be clearly to/from the shipper and bind the parties. A collection of s would qualify if they contained all the rates and terms. No signatures required, but the s should be clearly to/from the shipper and bind the parties. 6

WHAT IS A BINDING ARRANGEMENT? THE ELELMENTS OF A CONTRACT: THE ELELMENTS OF A CONTRACT: *AN OFFER---THE WRITTEN EXCHANGES FROM THE NVOCC NEED TO BE CLEAR WHAT SERVICE AND RATES IT IS OFFERING TO ITS CUSTOMER * ACCEPTANCE---THE RESPONSE FROM THE SHIPPER MUST BE CLEAR THAT IT ACCEPTS THE OFFER * CONSIDERATON---USUALLY THE PROMISE OF RATES AND CHARGES BY THE NVOCC AND THE PROMISE TO PAY BY THE SHIPPER ARE SUFFICIENT CONSIDERATION NVOCC BEST PRACTICES: DEVELOP STANDARDIZED CLEAR LANGUAGE FOR OR OTHER TRANSMISSION OF AN OFFER; BINDING DOES NOT REQUIRE SIGNATURES 7

WHAT IS AN ELIGIBLE NVOCC? NCBFAAs PROPOSAL: EXEMPTION INCLUDES BOTH LICENSED AND REGISTERED NCBFAAs PROPOSAL: EXEMPTION INCLUDES BOTH LICENSED AND REGISTERED FMC PROPOSED REGULATION: APPLIES ONLY TO LICENSED NVOCCs BUT INVITED COMMENTS TO INCLUDE REGISTERED NVOCCs. FMC PROPOSED REGULATION: APPLIES ONLY TO LICENSED NVOCCs BUT INVITED COMMENTS TO INCLUDE REGISTERED NVOCCs. LICENSED V. REGISTERED ISSUE: LICENSED V. REGISTERED ISSUE: *REGISTERED NVOCCs (EX. LARGE NVOs, KUHNE & NAGEL, Etc. BUT ALSO YOUR SMALLER OVERSEAS AGENTS)---LARGER NVOCCs HAVE EASE OF CHANGING TO LICENSED NVOCC *OR IS LESS REGULATiON BETTER IN THE CURRENT ENVIRONMENT? 8

Negotiated Rate Arrangements Miscellaneous Requirements NRA MUST BE IN PLACE PRIOR TO CARGO BEING RECEIVED BY OCEAN CARRIER OR MOTOR CARRIER IF THROUGH BILL IS ISSUED BY NVOCC NRA MUST BE IN PLACE PRIOR TO CARGO BEING RECEIVED BY OCEAN CARRIER OR MOTOR CARRIER IF THROUGH BILL IS ISSUED BY NVOCC PRIOR TO NVOCC ENTERING NRA: A) MUST PROVIDE SHIPPER WITH TERMS IN RULES TARIFF OR B) PROVIDE ELECTRONIC ACCESS TO RULES TARIFF (FREE OF CHARGE) PRIOR TO NVOCC ENTERING NRA: A) MUST PROVIDE SHIPPER WITH TERMS IN RULES TARIFF OR B) PROVIDE ELECTRONIC ACCESS TO RULES TARIFF (FREE OF CHARGE) 9

Negotiated Rate Arrangements Miscellaneous Requirements RATES SHALL NOT BE MODIFIED AFTER THE TIME THE SHIPMENT IS RECEIVED BY THE CARRIER OR ITS AGENT (INCLUDING ORIGINATING CARRIERS IN THE CASE OF THROUGH TRANSPORTATION). RATES SHALL NOT BE MODIFIED AFTER THE TIME THE SHIPMENT IS RECEIVED BY THE CARRIER OR ITS AGENT (INCLUDING ORIGINATING CARRIERS IN THE CASE OF THROUGH TRANSPORTATION). DO THE PROPOSED RULES REALLY MEAN THIS? DO THE PROPOSED RULES REALLY MEAN THIS? 10

NEW NVOCC BIBLE: RULES TARIFFS--- WHAT TO PUT IN THEM? RULES TARIFF (as defined by 46 CFR 520.2), CONTAINS TERMS AND CONDITIONS GOVERNING CHARGES, CLASSIFICAITON, RULES, REGULATIONS AND PRACTICES OF AN NVOCC (DOES NOT INCLUDE RATES). RULES TARIFF (as defined by 46 CFR 520.2), CONTAINS TERMS AND CONDITIONS GOVERNING CHARGES, CLASSIFICAITON, RULES, REGULATIONS AND PRACTICES OF AN NVOCC (DOES NOT INCLUDE RATES). REMEMBER: TARIFF RULES HAVE THE EFFECT OF LAW ON PRIVATE TRANSACTIONS. REMEMBER: TARIFF RULES HAVE THE EFFECT OF LAW ON PRIVATE TRANSACTIONS. COURTS WILL IMPUTE CONSRUCTIVE KNOWLEDGE TO SHIPPER PARTIES OF RULES IN TARIFFS COURTS WILL IMPUTE CONSRUCTIVE KNOWLEDGE TO SHIPPER PARTIES OF RULES IN TARIFFS CHOOSE TARIFF RULES LANGUAGE WISELY CHOOSE TARIFF RULES LANGUAGE WISELY 11

NEW NVOCC BIBLE: RULES TARIFFS--- WHAT ELSE TO PUT IN THEM? CHARGES? WHAT ABOUT THESE? CURRENT RULE: CHARGES? WHAT ABOUT THESE? CURRENT RULE: ALLOWS PASSING ON CHARGES ONLY WHEN agency making such changes does so without notifying the tariff owner. WHAT ABOUT CARRIER RATE INCREASES, GRIs, PSS, BAFs ETC. ? WHAT ABOUT CARRIER RATE INCREASES, GRIs, PSS, BAFs ETC. ? OTHER RULE ITEMS: OTHER RULE ITEMS: *GENERAL LIEN LANGUAGE *ABANDONEMENT *WAREHOUSEMEN LANGUAGE *DEMURRAGE, DETENTION, PER DIEM RESPONSIBILITY 12

Recordkeeping and Audit NVOCC MUST MAINTAIN ORIGINAL NRAs AND ASSOCIATED RECORDS, INCLUDING WRITTEN COMMUNICATIONS FOR 5 YEARS. NVOCC MUST MAINTAIN ORIGINAL NRAs AND ASSOCIATED RECORDS, INCLUDING WRITTEN COMMUNICATIONS FOR 5 YEARS. NRAs MUST BE KEPT IN A FORMAT WHICH CAN BE PRODUCED PROMPTLY TO FMC UPON REQUEST. NRAs MUST BE KEPT IN A FORMAT WHICH CAN BE PRODUCED PROMPTLY TO FMC UPON REQUEST. FAILURE TO KEEP OR TIMELY PRODUCE ORIGINAL NRAs WILL DISQUALIFY NVOCC FROM EXEMPTION AND MAY RESULT IN SHIPPING ACT VIOLATIONS FOR NON-PUBLISHING OF RATES AND RELATED PRACTICES. FAILURE TO KEEP OR TIMELY PRODUCE ORIGINAL NRAs WILL DISQUALIFY NVOCC FROM EXEMPTION AND MAY RESULT IN SHIPPING ACT VIOLATIONS FOR NON-PUBLISHING OF RATES AND RELATED PRACTICES. 13