Update On Current Issues Impacting Transportation Intermediaries

by Husch Blackwell LLP
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The following is a short, to the point, summary of recent developments which impact transportation intermediaries, some of which can be implemented simply without fanfare, others which just bear careful monitoring.  The Federal Maritime Commission (“FMC”) recently passed new regulations relating to Negotiated Rate Arrangements (“NRAs”), and NVOCC Service Arrangements (“NSAs”) which require some simple implementation, but then little else. The Federal Motor Carrier Safety Administration (“FMCSA”) has amended Hours of Service regulations which provide for strict usage of Electronic Logging Devices (“ELDs”), and a corresponding obligation for those who select motor carriers for transport. Last but not least, where is the transport intermediary industry headed in the evolving e-commerce revolution?

  1. Implementation of New FMC NRA/NSA Regulations. The first and only FMC technical requirement for implementing NRAs and NSAs is that there be a provision in the NVOCCs Rules Tariff that indicates that they will use NRAs/NSAs exclusively or in tandem with publishing rates. On the NRA side, the only formulaic requirement is that the exact following statement (in “uppercase and bold font”) be included in the collection of communications (usually e-mails) that result in NRAs: “THE SHIPPER’S BOOKING OF CARGO AFTER RECEIVING THE TERMS OF THIS NRA OR NRA AMENDMENT CONSTITUTES ACCEPTANCE OF THE RATES AND TERMS OF THIS NRA OR NRA AMENDMENT.” This is somewhat a regulatory overreach, but this statement on the e-mails and/or other documents which result in the final NRA is easy enough to provide. As a precautionary measure, we generally counsel that this statement be included in all e-mails under the signature block of e-mails by staff that negotiates NRAs. Therefore, NRAs do not require a signature or actual assent in any manner of the NRA other than the booking of cargo. Additionally, neither NSA nor NRAs requires filing with the FMC or publishing in tariffs. A final requirement is that these records be maintained for five years.
  2. The e-commerce impact on intermediaries—opportunities. We recently published an article on the fast growing e-commerce industry and the natural increased evolution of intermediaries in that arena. We cited to the U.S. Department of Commerce statistics that U.S. purchasers buy at the pace of $1.2 billion a day online; that this number has doubled in the last five years; and, that the e-commerce industry met levels in excess of $107 billion in holiday sales for online orders this year, making 2017 the first to reach the $100 billion mark. Transportation intermediaries are uniquely positioned to participate in this disruption of business as usual, and have already become significantly involved in this paradigm shift away from just servicing the brick and mortar business model. It is not coincidental or accidental that Amazon and other significant e-commerce companies are either directly or through subsidiaries acting as FMC licensed or registered Non-vessel operating common carriers. The successful e-commerce players quickly have determined that their revenue streams are not only concentrated on the electronically marketing of products in the U.S. and other consumer markets. They have quickly focused on the other revenue streams commencing with transport from Asian supplier points to consolidation hub centers in Asia, usually in Hong Kong, or in the PRC. The Asian hub consolidation centers are significant revenue centers in and of themselves, and, of course, there is the transport stream from the consolidation hubs to the consumer markets in the U.S., Europe and other market centers. The more obvious area of interest to intermediaries should be their participation with the fulfillment service process here in the U.S., Europe and other major consumer regions.

The intermediary opportunities are quickly developing in the following areas:

  • The fulfillment service center areas. We have seen transport intermediaries immerse themselves in providing these unique services here in the U.S. and Europe. While there are different skill sets involved in the NVOCC delivery model than there is for e-commerce fulfillment centers, there is also plenty of overlap which creates natural efficiencies for transportation intermediaries. Groups of NVOCCs with strategic geographic warehouse locations are considering joint services to accomplish efficient national e-commerce delivery services. Third party IT companies are available to partner with these companies to achieve the high IT requirements for last-mile deliveries, warehouse management, and customer transparency. This is an area of activity, not waiting to happen, it is already happening.
  • The transport opportunities. The larger multi-national logistics firms may be better suited for the purchase of ocean and air transportation to offer e-commerce companies transportation efficiencies from supplier locations to consolidation hubs to marketplace delivery fulfillment centers. However, there are various large networks of existing smaller and mid-sized global NVOCCs which are already in planning stages which may bring these efficiencies into play in the not so distant future.
  • The hub consolidation functions. While these functions are best suited for larger multi-national logistics companies, we have seen a development of these functions by U.S. warehouse distribution based companies with the objective of participating and fulfilling this niche.
  1. Arranging Motor Carrier Transport—how will new Hours of Service (“HOS”) impact Property Brokers and Other Intermediaries. MAP 21clarified the requirement for intermediaries to obtain a Property Broker permit for arranging motor carrier transportation from and to port areas involving ocean transport from origin or destination inland points. These activities involve ocean and air freight forwarders, Customs brokers, NVOCCs, and other entities which act exclusively as Property Brokers. In any case, such intermediaries must become aware of the new HOS requirements and that motor carriers which they employ for surface transport in the U.S. are meeting the new HOS requirements. In an over simplification of the new HOS rules, these require that certain technical/mechanical devices be employed to measure driver activity during a fourteen hour period, which must not exceed eleven hours during that period. This is an area drawing immense enforcement focus. As a result, intermediaries arranging for motor carriage have to be alert in their vetting of truckers to insure that the motor carriers which they employ are meeting these requirements. Intermediaries, while not generally treated as carriers in court cases involving wrongful death and injury cases, do have agent duties and are responsible to act prudently in the selection of responsible motor carriers meeting the new HOS requirements.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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