Negotiated Rate Arrangement The Ultimate FAQ Guide

Negotiated Rate Arrangement: The Ultimate FAQ Guide

If you’re wondering what negotiated rate arrangement is, you will find the answer right here.

So, keep reading to learn more.

What Is A Negotiated Rate Arrangement?

Shipping

Shipping

A Negotiated Rate Arrangement is a written and binding arrangement between a licensed Non-Vessel-Operating Common Carrier (NVOCCs) and a shipper. The arrangement offers shipping services for stated cargo quantity from its origin to destination.

The NRA covers the cargo within a specific duration and on and after a stated date.

What Is FMC, And Why Is It Important In Negotiated Rate Arrangements?

FMC stands for the Federal Maritime Commission.

It is a regulatory body that ensures a reliable and competitive international ocean transportation supply system supporting the U.S economy.

The FMC also protects the public from deceptive and unfair practices from shipping services.

For all shipments made to the U.S., the FMC’s only bill of lading approves are allowed in the country. A bill of lading list has all the ship’s cargo in receipt form.

Concerning freight rates, the federal maritime commission regulates negotiated rate arrangements in shipping. The body ensures that NVOCCs use acceptable freight rates and, where necessary, documents them before cargo is loaded onto the shipping vessel.

What Does A Negotiated Rate Arrangement Document Entail?

Prominent NRA Notice

Prominent NRA Notice

The Negotiated Rate Document Arrangement has the following basics for your shipment:

  • Where: Origin of the shipment, POL, POD, and Destination
  • Dates:  Negotiated rate Arrangement offer date, Effective Date and Expiration Date
  • Who: Client information and NVOCC
  • Rate:  The service type, cargo quantity. Rate amount and rate basis

What Is Negotiated Rate Arrangement Authorization Letter?

A Negotiated Rate Arrangement Authorization letter is offered when you frequently use shipping services. It aims to reduce the workload of accepting different NRAs every time.

The Negotiated Rate Arrangement authorization letter helps relieve you of the repetitive work of approving NRAs. It also helps the workers at the shipping service expedite shipment on your behalf.

It is essential, especially when the shipment is ready at the origin, but the NRA has not been approved.

An NRA authorization letter helps save time that can easily be lost when dealing with the red tape surrounding shipping your cargo. It allows the shipping service to move your cargo while waiting for the NRA to get approved.

The shipping service will only book a shipment upon authorization by the client. In most cases, it is done through a phone call or an email.

What Is A Negotiated Rate Arrangement Shipper?

A negotiated Rate Arrangement Shipper is the person who owns the cargo. It is the person who has opened an account with the ocean transportation services.

The NRA shipper is the person the delivery is being made to. They accept all the payment charges applicable under the NRA.

Why Do NVOCCs Issue Multiple Negotiated Rate Arrangements For The Same Shipment?

Ocean transportation companies may change the NRA from time to time if any changes are made to your shipment.

You will be issued with a new NRA amended from the first NRA in case of any change. The amended NRA will also be sent to you (Shipper) for approval.

The NVOCCs put this rule to help protect the public from unfair service providers but not create more paperwork.

Here are some of the most common scenarios in which a shipping company will be required to cancel the initial NRA and issue a new one:

  • Suppose your vendor wants to ship from another port that is not on the initial NRA. This is most common when the vendor factory is located in a different area than their main offices.
  • Change in the rates from the time of quote to the actual movement of cargo. There are cases where there are the market has volatile freight charges.
  • If your shipment arrives after the NRA expiration date. The NRA date has to be valid when your shipment is arriving at its destination.

If this happens, you will be issued with a new NRA.

However, if you have signed an NRA authorization letter, your NVOCC will make the desired changes as fast as possible. It will help avoid clearance and shipping delays.

What Is The Advantage Of NVOCCs Using A Negotiated Rate Arrangement Instead Of The Public Tariff Database?

The Negotiated Rate Arrangements are private between the NRA shipper and the company offering shipping services.

Without the Negotiated Rate Arrangement, NVOCCs will be required to file their client’s rates on the Public Tariff Database. Here, their competitors may gain insight into their business practices.

How Do NVOCCs Issue Negotiated Rate Arrangements?

Many NVOCCs issue auto-generated NRAs when you book a shipment via their website or app. You will be required to confirm your booking once on the app or website.

Once you are done with the booking, you will receive and sign the NRA electronically. You can download the NRA as a PDF.

A PDF copy of the NRA is always sent to you electronically every time you book a shipment.

Most NVOCCs will always have the NRA available on the app or website, so you will not need to keep printing it.

What Conditions Must NVOCCs Meet To Use Negotiated Rate Arrangements?

Here are the five steps to follow to ensure that the NRAs comply with the FMC rules:

  • The Negotiated Rate Arrangements only applies to NVOCCs only
  • When an NVOCC wants to use Negotiate Rate Arrangement, they must post a prominent notice on its tariff.
  • If an NVOCC wishes to use NRAs, it must provide the public with free electronic access to its tariff. These tariffs should feature the rules governing shipments.
    All commission rules for tariffs, including historical data, current tariff location, and access date capability, must apply unless specifically exempted.
  • Agree to an NRA before receiving the shipment. The NVOCC and their shipper have to agree on an NRA and have it in writing before the NVOCC.
    The arrangement should also include the agent that receives the cargo.
    This arrangement is acceptable in either email or any other electronic form of communication. It is acceptable if it shows assent between the shipper and the NVOCC.
  • Keep the NRA documentation for five years. An NVOCC has to keep the NRA documentation files for five years and present the documentation to the commission upon request.
    If an NVOCC fails to keep time producing NRAs and some associated records, they might violate the Shipping Act.

How Are Negotiated Rates Determined?

Negotiated Rate arrangements are stated in terms of the local currency of U.S dollars. They apply per 1 Cubic Meter written as (M) and 1000 kilos, indicated as (W).

The word “Weight” or “W” appears next to a commodity or article’s applicable weight rates.

Weight applies without regard to the measurements of the cargo.

The word “Measurement” or “M” appears next to a commodity or article where applicable measurement rates.

Measurements apply without regard to the weight of the cargo.

Negotiated Rate Arrangements are only applicable from Inland points that are within post terminal areas.

Negotiated Rate Arrangements are inclusive of all charges on transportation of the cargo. They do not include forwarding charges and customs clearance assessments except when provided.

Do Negotiated Rate Arrangements Include Marine Insurance And Consular Fees?

No.

Negotiated Rate Arrangements include all the transportation charges of the shipper’s cargo. They do not cover consular fees or marine cargo insurance unless stated otherwise on the terms and conditions.

Do Negotiated Rate Arrangements Apply To Analogous Articles?

No.

Negotiated Rate Arrangements only apply to the specific commodity that has been named and do not apply to analogous articles.

NRA only applies when items are of lower values or on an ad valorem basis. The articles are subject to the lading limit of value.

What Is A ‘Force Majeure Clause’ Regarding Negotiated Rate Arrangements?

Natural disaster at sea

Natural disaster at sea

The Force Majeure Clause states the carrier services have the right to cancel any outstanding contract or booking. Cancellation is made in conformity with FMC’s regulation and the event of hostilities such as:

  • Wars
  • natural disasters
  • blockades
  • warlike operations
  • strikes
  • port congestions,
  • labor disturbances,
  • governmental authority interferences

What Are The Requirements For NVOCC Negotiated Rate Arrangements?

For an NVOCC to qualify for the general rate publication rate, the Negotiated Rate Arrangement must meet these rules:

  • The NRA has to be in writing
  • The NRA has to have the names of both parties and the names of their representatives.
  • Both the shipper and NVOCC have to agree to the NRA terms before the NVOCC can receive cargo for shipping.

The shipper is said to have agreed to the terms of the NRA when:

  • When the shipper has provided the NVOCC with a signed NRA
  • When the shipper sends the NVOCC a written communication either in email or any other form of electronic messaging. It should indicate that they have agreed to the shipper’s terms.
  • When the shipper books a shipment after receiving the NRA terms from the NVOCC.
  • The NRA has to have clear rates and terms, the shipment, and which specific rates apply.

It should have clear terms regarding the GRIs, Surcharges, and Assessorial charges as stated below:

  • If the stated rate is not an “all-in rate,” the NRA must state the additional assessorial charges and surcharges. It should also include the ocean common carrier GRIs (General Rate Increases) will apply.
  • The NRA must list any additional assessorial charges, including pass-through charges or specific surcharges in the NVOCCs tariff rules.
  • If a pass-through charge is not included in the NRA, the NVOCC can invoice the shipper but with no markup.
  • The NRA can be amended when the NVOCC receives the initial shipment. However, the changes only apply to shipments that the NVOCC is yet to receive.

What Is The Difference Between (NVOCC) Service Arrangements (NSA) And NVOCC Negotiated Rate Arrangements (NRA)?

COSCO Shipping Lane

COSCO shipping line

NVOCC Service Arrangement (NSA) is a written contract between one NSA shipper and NVOCC or more affiliated NVOCCs.

The NSA shipper commits to provide a certain portion or quantity of its cargo or freight revenue over a specific amount of time. In this, the NVOCC commits to a particular rate schedule with a defined service level.

It is important to note that the NSA is different from a receipt and a bill of lading.

On the other hand, an NRA is a written and binding arrangement between the eligible NVOCC and the NRA shipper. It is an arrangement to provide transportation service for a specific amount of cargo from the origin to the destination.

There is no volume commitment by the shipper on the NRA. However, it (NRA) can include a potential rate decrease when the shipment volume increases.

When Does A Negotiated Rate Arrangement Become Binding?

A negotiated rate arrangement becomes binding in any of the following scenarios:

  • When the shipper provides the NVOCC with a duly signed NRA document
  • Immediately the shipper sends the NVOCC a written communication accepting the NRA terms
  • Once a shipper books shipment after receiving prominent notice in the NRA as to its acceptance

Are There Requirements For Filing/Publishing Negotiated Rate Arrangements?

Yes, and they include:

  • The NVOCC is required to continue publishing its standard tariffs with the terms and conditions that govern the shipments. These include surcharges and assessorial charges.
  • Make the NVOCC tariff rules available to shippers free of charge
  • The NRA rates should be mutually agreed upon and written by the date that NVOCC receives the cargo
  • NVOCCs that use NRAs must retain their documents for five years and present them to the commission upon request.

Can Negotiated Rate Arrangements Be Modified?

Yes, they can.

The FMC permits the NVOCC to amend NRAs at any given time. It also allows amendments to include non-rate economic terms.

How Long Are Negotiated Rate Arrangements Valid For?

The NRA is valid till the shipper receives their cargo

Do Negotiated Rate Arrangements Apply to All Shipments?

Reefer container

Reefer container

NRAs apply to all sea freight – from dry cargo to reefer and ro-ro.

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