The Federal Maritime Commission will be auditing Maersk, MSC, CMA CGM, COSCO Group, Hapag-Lloyd, ONE, Evergreen, HMM and Yang Ming, according to Freight Waves. The FMC intends to find out if these nine container carriers are using their market power to overcharge shippers on detention and demurrage fees. The FMC has established on July 19 a new audit program and dedicated audit team to assess carrier compliance with the Agency’s rule on detention and demurrage as well as to provide additional information beneficial to the regular monitoring of the marketplace for ocean cargo services. Chairman Daniel B. Maffei ordered the establishment of the “Vessel-Operating Common Carrier Audit Program”. The Audit Program will analyze the top nine carriers by market share for compliance with the Commission rule interpreting 46 USC 41102(c) as it applies to detention and demurrage practices in the United States. The Commission will work with companies to address their application of the rule and clarify any questions or ambiguities. Information supplied by carriers may be used to establish industry best practices. Other focus areas of the audit process may include practices of companies related to billing, appeals procedures, penalties assessed by the lines, and any other restrictive practices. “The Federal Maritime Commission is committed to making certain the law is followed and that shippers do not suffer from unfair disadvantages. The work of the audit team will enable the Commission to monitor trends in demurrage and detention practices and revenue, as well as to establish ongoing dialog between staff and carriers on challenges facing the supply chain. Of course, if the audit team uncovers prohibited activities, the Commission will take appropriate action. Furthermore, the information gathered by the audit process might lead to changes in FMC regulations and industry guidance if warranted,” said Chairman Maffei. The Audit Program will begin with an information request establishing a database of quarterly reports allowing the Commission to assess how detention and demurrage is administered. Responses will be followed by individual interviews with the carriers. Each of the nine largest carriers by market share will be audited irrespective of whether a formal or informal complaint has been filed at the Commission. Lucille Marvin, the Commission’s Managing Director, will lead both the audit program and the audit team, which will initially be comprised of existing Commission employees. The audit program was launched at the heels of the FMC signing an interagency Memorandum of Understanding (“MOU”) with the Department of Justice Antitrust Division to foster increased cooperation and communication in their respective oversight and enforcement responsibilities of the ocean liner shipping industry, as well as an Executive Order from President Biden encouraging the FMC to enforce the prohibition of unjust practices.
President Joe Biden, in an executive order, encouraged the Chair of the Federal Maritime Commission to work with the rest of the Commission to "vigorously enforce the prohibition of unjust and unreasonable practices in the context of detention and demurrage pursuant to the Shipping Act."
President Biden issued Executive Order 14036 of July 9, 2021, to promote competition in the American economy.
President Biden noted that the global container shipping industry has consolidated into a small number of dominant foreign-owned lines and alliances, which can disadvantage American exporters.
He also encouraged the FMC to request from the National Shipper Advisory Committee recommendations for improving detention and demurrage practices and enforcement of related Shipping Act prohibitions.
He added that the FMC should consider further rulemaking to improve detention and demurrage practices and enforcement of related Shipping Act prohibitions.
A draft bill, dubbed the Ocean Shipping Reform Act of 2021, proposes to prohibit carriers from collecting detention and demurrage fees in cases when “obstacles to cargo retrieval or return of equipment are ... beyond the control of the invoiced or contracting party,” according to Peter Tirschwell of The Journal of Commerce online.
The draft bill will also strengthen the oversight role of the Federal Maritime Commission (FMC) and put a heavy regulatory burden on ocean carriers, Mr. Tirschwell writes.
The draft bill by Rep. John Garamendi, D-Ca, is likely to be introduced before the August recess begins, sources told Mr. Tirschwell, and will overhaul the existing US shipping law.
JOC.com reports that under the draft bill, it would be much more difficult for container lines to refuse to carry export cargo or prioritize repositioning of empties at the expense of ports.
In addition, Mr. Tirschwell continues, it would go further than current law in barring unreasonable denial of service by a carrier, saying a carrier “may not ... fail to furnish or cause a contractor to fail to furnish the facilities and instrumentalities needed to perform the transportation services, including containers.”