News
The U.S. Federal Maritime Commission has unveiled its proposal to amend rules regarding certainty of terms of service contracts and non-vessel-operating common carrier service arrangements. The proposed rule is intended to provide common carriers and their customers with certainty and flexibility if they decide to use long-term contracts that adjust based on a freight rate index that reflects changes in market conditions.
The FMC has found that an increasing number of service contracts filed with the commission reference freight rate indices. These indices include, for example, the China Containerized Freight Index （CCFI）, the Shanghai Containerized Freight Index （SCFI）, the Drewry Freight Insight Index, and the Transpacific Stabilization Agreement （TSA） Index.
The ocean freight rates in these negotiated service contracts adjust in increments based upon the changes in the referenced index levels or their annual or quarterly averages.
''It appears that some carriers and shippers in the ocean transportation industry are seeking stability through long-term contracts, while trying to preserve flexibility to adjust contract rates reflecting changes in market conditions,'' the FMC said in the announcement.
Questions have arisen, however, whether references to these indices in service contracts are consistent with the commission's current regulations. The FMC regulations with respect to terms of service contracts and non-vessel-operating common carrier （NVOCC） service arrangements （NSAs） state that the terms, if they are not explicitly contained in the contracts, must be ''contained in a publication widely available to the public and well known within the industry.''
The FMC seeks to revise its regulations so that they are not unnecessarily burdensome and do not impede innovation and flexibility in commercial arrangements, while ensuring continued compliance with the Shipping Act's requirements.
''The proposed change would facilitate references to indices in service contracts and NSAs so that contracting parties can pursue long-term contracts with rates that adjust through an agreed and ascertainable manner. The change will also ensure compliance with two important Shipping Act requirements,'' the FMC said.
Comments or suggestions are due to the FMC on or before November 28, 2011.
