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FMC Tariff Rates

What is an FMC Tariff Rate?

An FMC Tariff Rate is:

 - the price for ocean freight transportation
 - for a specific commodity or commodity type
 - to / from specific locations
 - for a specified container size or weight / measure 
 - and service, e.g., Port-to-Port (CY/CY)

that is offered to the shipping public via publication in an FMC Tariff. Tariff Rates must also include an effective date and may include an expiration date.

The U.S. Federal Maritime Commission's regulations define individual Tariff Rates as tariff rate items (TRIs). 

Non-Vessel-Operating Common Carriers (NVOCCs) and Vessel-Operating Common Carriers (VOCCs) may use Tariff Rates to comply with U.S. Federal Maritime Commission (FMC) regulations. 

Read on to learn more about Tariff Rates' Key Points and Limitations. 
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 Quick Law Links
U.S. Shipping Act: 46 U.S.C. §§ 40501-03 
FMC Regulations 46 C.F.R. § 520.4(f)

  Tariff Rate
       Key Points

NVOCCs and VOCCs wishing to use Tariff Rates should be aware of the following key points.: 

Tariff Rates must specify the commodity or commodities for which the rate is offered. This may be a general commodity type, e.g., Freight All Kinds (FAK), or a specific commodity, e.g., Electrical Goods and Parts, viz: Camera.

   Rate Differentiation
Differentiating Tariff Rates by commodity and service level allows for multiple rates for the same origin / destination pair and shipment size. 

   Tariff Rule Link
Tariff Rates are linked to Tariff Rules and do not have to be amended when surcharges contained in Tariff Rules change.

    No Agreement Required
Unlike Negotiated Rate Arrangements (NRAs), NVOCC Service Arrangements (NSAs), and Service Contracts (SCs), shipper agreement is not required for Tariff Rates to apply to shipments.  

  Tariff Rate

Tariff Rates do have some limitations to consider especially with regard to timing and rate increases.
   30 Days' Notice
Tariff Rates may be reduced at any time, but rate increases generally require 30 days' notice.

   Rate Override
If shipments move under an NVOCC's NRA or NSA, or a VOCC's SC, Tariff Rates will not apply. 
 All surcharge or assessorial amounts applicable to an NRA are fixed once the first shipment is received by the NVOCC for transportation.

 An amendment and new shipper customer agreement to the amended NRA is required before applying updates to surcharges and assessorial.

Tariff Rates must not be published later than the date of cargo receipt at the origin listed on the applicable Bill of Lading. 

  No Names
Commodity names may not include brand names or shipper names.  

  Why use Tariff Rates?  

Tariff Rates are a great option to consider for: 

 - rates that will fluctuate with the market, and 
 - NVOCCs and VOCCs with centralized pricing strategies where standardized rates and surcharges are offered to most shippers.

Tariff Rates are generally considered best for rates that will fluctuate with the market because surcharges can float with Tariff Rules. This means that surcharges in effect in Tariff Rules at the time each shipment is received will apply.

For organizations that offer standardized rates and surcharges to most shippers, Tariff Rates are generally the most efficient FMC compliance method because of the minimal record keeping required.

For NVOCCs, a key advantage of Tariff Rates when compared to NVOCC Service Arrangements (NSAs) and Negotiated Rate Arrangements (NRAs) is the minimal record keeping required. Whereas NVOCCs must issue NRAs and NSAs directly to shippers and maintain proof of shipper acceptance or booking, there are no such requirements for Tariff Rates.  

Similarly for VOCCs, a key advantage of Tariff Rates when compared to Service Contracts (SCs) is the minimal record keeping required. Whereas VOCCs must obtain shipper agreement to SCs and file SCs directly with the FMC, there are no such requirements for Tariff Rates. 

Before using Tariff Rates give thought to the following considerations.: 

A disadvantage of Tariff Rates that NVOCCs and VOCCs should carefully consider is the requirement that rates remain on file in their FMC Tariff for no less than 30 days. During this time the Tariff Rate may be reduced, but it may not be increased until the day after the filed rate expires or 30 days after the increased rate is filed, whichever date comes first.

There are tariff filing strategies that will allow for increases to Tariff Rates on less than 30 days' notice. One strategy is to file General Rate Increases (GRI) or Peak Season Surcharges (PSS) as Tariff Rules that take effect every 15 days. Another popular strategy is to file rates at high levels and then reduce them, as needed, for temporary time periods.

One of the most effective tariff filing strategy is to include expiration dates with each Tariff Rate. Expiration dates are recommended for two reasons. First, once a Tariff Rate expires, it may be re-filed in the FMC Tariff at a higher level without waiting 30 days. This gives organizations flexibility to react to changes in market rates. Second, once a Tariff Rate expires, it is automatically removed from the FMC Tariff. This helps to keep the FMC Tariff accurate, compact, and easy to read and use.

Tariff Rates must be publicly published in an FMC Tariff. While this is often cited as one of the disadvantage of Tariff Rates, keep in mind that NRAs, NSAs, and SCs remain subject to FMC review. NRAs, NSAs, and SCs are allowed to include confidentiality terms that instruct your shipper customer not to share the rates. Confidentiality is only achieved however when this term is respected. 
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   How can DPI help? 

Since 1975, DPI has helped organizations comply with U.S. Federal Maritime Commission (FMC) regulations.

Our expert staff is ready to assist NVOCCs and VOCCs use Tariff Rates. We offer members the following services:

- FMC Tariff Rate Publication and Compliance Review,
- FMC Tariff Rule Filing and Compliance Review, and
- FMC Regulation Consultation.  

Speak with your account representative or request a consultation by clicking on the button below. 
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