FMC Regulations and NRA’s ver. 20130619

FMC (Federal Maritime Commission) The Federal Maritime Commission (FMC) is the independent federal agency responsible for regulating the U.S. international ocean transportation system for the benefit of U.S. exporters, importers, and the U.S. consumer. Who are they? Rev. 06/19/13 Rev. 06/19/13

FMC (Federal Maritime Commission) Tariff is what a licensee (VOCC, NVOCC) files with FMC There are two parts to a tariff: Rates – ocean selling rates quoted and billed to customers Rules – rules/conditions that FMC licensee must conducts business in accordance to, including but not limited to: Application of rates including currency Definition of heavy lift Definition of extra length Min. BL charges Payment of freight charges - prepaid, collect allowed for listed countries Bill of Lading conditions (consistent with terms on back of HBL) Hazardous cargo How overcharge claim should be filed and handled Definitions and Symbols GRI's FMC (Federal Maritime Commission) What is a tariff?

FMC (Federal Maritime Commission) Tariff rates are the ocean selling rates we bill to customers Rates for both U.S. import and export shipments need to be filed Minimum rate validity is 30 days; validity can be longer depending on how steady/regular the business is Rates filed must be in effect based on the service type. eg: DOOR rate: prior to loading at shipper’s facility CY rate: prior to cargo delivered to container yard RAIL rate: prior to cargo delivered to rail/ramp PIER rate: prior to cargo delivered to pier What is a DOOR rate? Pick up or inland cartage charge is included in the Ocean Freight Rate eg. Pickup rate $500/40’, port-to-port rate $1500/40’, then a DOOR rate would have Ocean Freight Rate quoted, filed and billed as $2000/40’ FMC (Federal Maritime Commission) What is tariff rates?

FMC (Federal Maritime Commission) Effective dates: FMC (Federal Maritime Commission) New Rate filing – activated on the same day of filing Rate change filing – that results in lower or no change in cost to shipper – same day that result in higher cost to shippers – 30 days Rate expiration filing – rates will effectively be expired either on the expiration date specified at time of filing or 30 days from the date expiration request is submitted to FMC, whichever comes first When will new rates and amendments go into effect?

FMC (Federal Maritime Commission) Commodity Origin Port of Loading Port of Discharge Destination Service Type Rate Basis Currency Container Size Container Type Minimum BOF (if applicable) Rate Notes Effective Date Expiration Date FMC (Federal Maritime Commission) What is required information to file rate?

Case #1: FMC FINES HONG KONG NVOCC US$7.9 MILLION On 10 July the Federal Maritime Commission (FMC) issued a cease and desist order and imposed a civil penalty of US$7.9 million on Hudson Express Lines, the operating name for Hudson Shipping (Hong Kong) Ltd, a Hong Kong-based non-vessel-operating carrier (NVOCC).

Case #1: FMC FINES HONG KONG NVOCC US$7.9 MILLION The fine was imposed for violations of Section 10(a)(1) of the Shipping Act of 1984 on 120 occasions in 1998 and 1999 by knowingly and willfully providing two other NVOCCs with access to Hudson’s service contract, thereby enabling two other NVOCCs to obtain ocean transportation at less than applicable rates. The other NVOCCs were fined as well.

Other cases: FMC FINES NVOCC’s $477,500 On investigating, the NVOCC’s were found to have: undercharged on tariffs provided incorrect cargo description inflated cubic measurements of certain cargo to obtain discounted rates from ocean carriers engaged in unlawful access to service contract rates.

Other cases: FMC FINES NVOCC’s $477,500 AE Eagle America – Jamaica, NY - $87,500.00 Ba-Shi Yuexin Development dba Bus Logistics – Alhambra, CA - $85,000.00 Ocean Marine Shipping – Cummings, GA - $70,000.00 SES Intl Express – Inglewood, CA - $62,500.00 MB Logistics Intl – Jamaica, NY - $50,000.00 Sinotrans Logistics – Alhambra, CA - $50,000.00 Cargo Alliance – Monterrey Park, CA - $40,000.00 Orion Cargo Services – Newark, NJ - $32,500.00

FMC - Penalties for Non-Compliance $6,000.00 for each unpublished tariff $30,000.00 for each willful violation Each day of continuing violation is considered a separate offense

FMC (Federal Maritime Commission) Send quotation to customer FMC (Federal Maritime Commission) Quotation accepted by customer New rates filed in FMC tariff After rates go into effect, load/move shipment High level flow of quotation, filing and billing process Invoice customer based on quotation Rates in quotation, tariff and on invoices must match, down to line item level Examples of non-compliance: Moved/loaded shipment prior to rates becoming effective Filed door-rate to customer but invoice shows a pickup charge No effective bunker filed in tariff but customer is billed for bunker

FMC (Federal Maritime Commission) Tariff rate filing is extremely rigid Rates once filed takes 30 days for amendment to take effect Cannot quote different rates to different customers for the same port pair, service and commodity Alternative to tariff rate filing: NRA NRA stands for NVOCC Negotiated Rate Arrangement NRA’s do not need to be filed with FMC An NRA structure needs to be set up properly, including: Indicating the use of NRA’s in the rules tariff Indicating on HBL and all shipping documents that shipment is moved pursuant to an NRA Submitting application to FMC Oversea agents quoting on behalf of N/VOCC are boune to the same procedure and requirements Developing internal procedure for systemic and robust recordkeeping of all NRA’s FMC (Federal Maritime Commission) Alternative to tariff rate filing?

FMC (Federal Maritime Commission) UFL/WCT benefits from NRAs by being able to offer different special/promotional rates to individual direct customers and co-loaders These rates don’t have to be filed, and quoted rates are not restricted to existing filed rates Rates can be changed any time prior to cargo arriving at port, CFS or received by contracted trucker depending on rate type, allowing UFL to be extremely responsive to sudden market changes How NVOCC’s can benefit from NRAs?

FMC (Federal Maritime Commission) Add NRA Notice to some of our business documents that relate to quote and rates HBL Invoices/Debit Notes E-mail signature Develop NRA Rules Tariff Publish NRA Rules Tariff on UFL’s website File Form No. 1 with FMC Procedure to keep good written record (such as emails) showing rates quoted and acceptance by customers Procedure to ensure billing to customers is same as accepted rates FMC (Federal Maritime Commission) What WCT needs to do to start using NRAs?

FMC (Federal Maritime Commission) General guidelines: FMC (Federal Maritime Commission) Quotation must be done by “writing” which can be electronic Quotation should be specific to Origin/Destination Quotation should be specific to commodity and quantity unit(s) involved Communication must reflect clear acceptance by shipper/consignee/co-loader/agent of rates/charges quoted NRA’s must contain actual rates/charges invoiced to customer Quotation communication must include NRA Notice Quotation should indicate duration quotation is good for Rates/charges cannot be changed once cargo is delivered to pier or yard or picked up by trucker depending on rate type Recordkeeping (for shipments moved under NRAs): NRAs and related records must be kept for 5 years NRAs are subject to FMC inspection Must be able to present record to FMC upon request. Failure to promptly provide record can result in NVOCC being disqualified to use NRAs and possible penalty Quotation process and recordkeeping for shipments moved under NRA

FMC (Federal Maritime Commission) Attached is a detail procedure for invoking NRA exemption Quotation process and recordkeeping for shipments moved under NRA When NRA regulations are applicable? When quoting for shipments that: will be moved under W.C.T.’s H/BL W.C.T will invoice for Ocean Freight not based on existing rates filed with FMC

FMC (Federal Maritime Commission) NRA rules applicable? Example…. UFL quoting for FOB shipments where UFL provides door to port service UFL quotes for EXWORK shipments where UFL provides port to port service UFL quotes for FCA shipments where UFL provide door to port service UFL quotes for FCA shipments where UFL provides port to door service Quotation process and recordkeeping for shipments moved under NRA

FMC (Federal Maritime Commission) NRA rules applicable? Example…. UFL quoting for FOB shipments where UFL provides door to port service UFL quotes for EXWORK shipments where UFL provides port to port service UFL quotes for FCA shipments where UFL provide door to port service UFL quotes for FCA shipments where UFL provides port to door service Quotation process and recordkeeping for shipments moved under NRA YES YES NO YES