On October 1, 2010, the PRC’s MOT implemented new NVOCC Freight Filing Rules referred to as Circular No. 40.  These new requirements will be enforced by the SSE.  Huh? Sounded like Greek to me when I first read it.  Let’s try this again . . .

On October 1, 2010, the Peoples Republic of China’s (PRC’s) Ministry of Transport (MOT) implemented Non-Vessel Operating Common Carrier (NVOCC) Freight Filing Rules referred to as Circular No. 40.  These new requirements will be enforced by the Shanghai Shipping Exchange (SSE). Let’s clarify even further  . . .

What is an NVOCC? We know it stands for Non-Vessel Operating Common Carrier.  A NVOCC will take small shipments and consolidate them into a single, larger shipment.  How do they do it? A NVOCC will reserve large quantities of space on ships and then sell it to shippers in small increments.  They are able to consolidate the smaller shipments into a container load and get lower rates, which they pass on to the shipper. The NVOCC operates as a carrier (same as freightliner operator) and, if shipping to or from the U.S., must be approved by the Federal Maritime Commission (FMC), which is the regulatory agency for ocean-bound/maritime transportation operating in the U.S. foreign commerce.

In 2009, the PRC’s Ministry of Transport issued a “Public Notice or Circular” also referred to as the International Maritime Transport Regulations.  The intent was to try and maintain a sense of order in China’s international container market, protect and promote fair competition, safeguard the rights and interests of all parties in international maritime transportation, and encourage the healthy development of the shipping industry. In essence, the Circular proposed establishing freight rate filing rules for international container liner services. The rules outlined that all freightliner operators registered with the Ministry of Transport are required to file freight rates (published and negotiated). At the same time, the Ministry of Transport also designated that the Shanghai Shipping Exchange would be the agency of record to develop the guidelines, receive, store and enforce the freight rate filings.

Freightliner operators failing to follow the rules set forth in the International Maritime Transportation Regulations will be asked to take corrective action by a specific date and assessed a monetary penalty (between $3,000-$15,000/container). Freightliner operators failing to comply will be subject to restrictions such as limiting the frequency of their filings or actual suspension of any new freight rate filings.

In early 2010, the Federal Maritime Commission began pursuing clarification of the Chinese regulations for the filing of freight rates. And, finally, in July 2010, the Ministry of Transport officially issued the Circular with the proposed rule that would require NVOCCs to file their freight rates with the Shanghai Shipping Exchange. The Chinese Ministry of Transport further stated that it would accept “public comments” on the proposed rule through August 20, 2010. According to the Federal Maritime Commission, “On September 19, 2010, the Ministry of Transport issued a finalized version of its Circular (No. 40), which stated that the NVOCC filing rule takes effect on October 1, 2010, ‘with sixty days as the transitional period’.” The freight filing rules were effective as of December 1, 2010.

So, to file or not to file, that is the question?  If you are an NVOCC registered with the Chinese Ministry of Transport you will need to file your freight rates with the Shanghai Shipping Exchange.  If you need assistance completing any of the documentation, please contact Descartes Systems Group Director of Ocean Compliance, Chuck Yang at cyang@descartes.com. If you are interested in automating your freight rate filing process by using the Descartes Rate Builder (DRB), please feel free to contact me at eberkhouse@descartes.com .

Written by Ed Berkhouse

Vice President, Data Management Services at Descartes