Dive Brief:

• The Federal Maritime Commission (FMC) voted Monday to amend its service contract regulations and rules regarding NVOCC Service Arrangements, simplifying the process, according to a press release.
• The new rules allow for contract amendments to be filed within 30 days of the agreement's implementation, and additional time for technical and contract corrections. 
• Previously, changes to arrangements between shippers and carriers were subject to implementation delays since the agreement first had to be filed with the FMC. The changes allow for a contract's immediate entry into force, helping shippers and carriers better adjust to shifts in rates or networks, American Shipper reports.

Dive Insight:

The changes to the contract rules come at a convenient time for shippers, carriers and freight forwarders alike as new alliances and consolidated shipping lines alter maritime carriers' networks, capacity and rates.

Each freight forwarder may have dozens of contracts which may need to be updated this month in light of these changes. Under the previous rules, shippers and carriers who delayed renegotiating contracts to see the full outcome of the networks would have been unable to start transporting at newly agreed upon rates until the new contract was filed with the FMC. The burden is not too hefty, but still inconvenient.

Most importantly, however, this rule allows for sudden agreed upon changes to contracts which would later be filed with the commission. Carriers now have the ability to attempt to renegotiate contracts if, say, another shipping line entered bankruptcy, shifting immediate transport needs. While this may seem similar to the spot market, shippers who prefer contracts to the volatility of the spot market will now find it easier to renegotiate frequently. Already, 40% of shippers surveyed by Xeneta admitted to negotiating contracts on a monthly basis.

The new rule was long awaited by the industry, as the FMC announced it intended to amend its contract rules last February and the notice of proposed rulemaking was issued last August. From that time, stakeholders, including Crowley, UPS, the World Shipping Council and the National Customs Brokers and Forwarders Association of America issued comments largely in support of the rule. 

"In many instances, shippers approach carriers with potential business opportunities that involve complex arrangements, including transactions covering multiple levels of a supply chain," UPS wrote in its comments to the FMC. "It is critical to the shippers and carriers to be able to implement these arrangements rapidly, in order to assist the U.S. exporter or supply chain manager to meet competitive conditions or avoid port congestion." 

The FMC has not yet published the final version of the rule, although the document notes it changed slightly from the original version. The docket shows all comments and original version, however.