FMC to Penalize Carriers that Refuse to Deal With Shippers

FMC Press Release Posted September 13, 2022 -- The Federal Maritime Commission is seeking public comments in response to a Notice of Proposed Rulemaking (NPRM) issued today implementing a requirement of the Ocean Shipping Reform Act of 2022 (OSRA) to define unreasonable refusal to deal or negotiate with respect to vessel space accommodation provided by an ocean common carrier.

One provision of OSRA requires that an ocean common carrier shall not unreasonably refuse to deal or negotiate with respect to vessel space accommodation. The NPRM outlines the elements which would be necessary to establish a violation and the criteria the Commission would consider in assessing reasonableness if the NPRM is finalized. It would also shift the burden of proving the refusal to deal was reasonable from shippers to ocean common carriers.

The NPRM would apply to both import and export shipments.

Interested parties will have 30 days to submit comments to the Commission once the NPRM is published in the Federal Register. Because the law requires the Commission to publish a Final Rule within six months of OSRA’s enactment, comments should be submitted by the deadline.

In the NPRM, the Commission proposes that complainants alleging an unreasonable refusal to deal with respect to vessel space accommodation would be required to meet three elements:

1. That the respondent is an ocean common carrier;

2. That the respondent refuses to deal or negotiate with respect to vessel space; and

3. That the refusal is unreasonable.

The NPRM proposes a burden-shifting regime that would allow ocean common carriers to establish why it was not unreasonable to refuse vessel space to a particular complainant. The Commission proposes a non-exhaustive list of factors it will consider when deciding whether a refusal to deal was unreasonable. Some factors the NPRM proposes the Commission consider include whether the ocean common carrier followed a documented export strategy, engaged in good faith negotiations, and articulated legitimate transportation factors. This burden-shifting would happen after the complainant or the Commission’s Bureau of Enforcement, Investigations, and Compliance has established a prima facie case that the three elements listed above have been met.

As the phrase “vessel space accommodations” has never been defined in legislation, or interpreted by the Commission, the NPRM proposes to define this term.

As the circumstances of each shipment are unique, the Commission acknowledges it is impossible to regulate for every possible scenario, and accordingly, cases alleging a violation will be factually driven and considered on a case-by-case basis.

The Commission consulted with the U.S. Coast Guard on this NPRM as required by the law.This NPRM is the latest initiative taken by the FMC to implement OSRA, signed into law by President Joseph R. Biden on June 16, 2022. Commission progress in meeting the requirements established by the law can be found on the dedicated “OSRA Implementation” landing page established on the Commission’s website.

FMC Releases Interim Protocol for Submitting “Charge Complaints”

FMC Press Release Posted July 14, 2022 -- The Federal Maritime Commission gives the following guidance for parties wishing to dispute charges assessed by common carriers that they believe may not comply with the Ocean Shipping Reform Act of 2022, which became Public Law 117-146 on June 16, 2022.

Parties interested in filing such “Charge Complaints” at the Commission may do so by following the below steps:

• Identifying the common carrier

• Identifying the specific alleged violations of 46 U.S.C. §§ 41102 and/or 41104(a)

• Gathering and submitting supporting documentation, as appropriate, including:

  • Invoices

  • Bill of Lading Numbers

  • Evidence of whether the charge(s) have been paid

• Confirming that the disputed charge was incurred on or after the enactment of P.L. 117-146

• Submitting all relevant materials in one email (if possible) to chargecomplaints@fmc.gov

When the Commission receives sufficient information, it will promptly initiate an investigation, which could ultimately result in a civil penalty and order for a refund of charges paid.

Investigations by the Commission are for law enforcement purposes and do not constitute representation as attorney for the complainant or a guarantee of refunds. If the filer chooses to pursue and control their own legal case, including with the assistance of their own attorney if desired, they may do so under 46 U.S.C. § 41301(a) and Part 502 of the Commission’s regulations.

To do so, filers must submit a formal or informal complaint. Persons may also seek alternative dispute resolution services by contacting the Office of Consumer Affairs and Dispute Resolution.

This guidance communicates the timely implementation of a self-executing provision of PL 117-146. The Commission reserves the right to amend processes related to “Charge Complaints” at any time.

FMC Mulls Issuing Emergency Order on Information Sharing

FMC Press Release Posted August 11, 2022 -- The Federal Maritime Commission is seeking public comment on whether supply chain congestion has created conditions warranting the issuance of an emergency order requiring common carriers and marine terminal operators (MTOs) to share key information with shippers, truckers, and railroads.

The Ocean Shipping Reform Act of 2022 (OSRA), enacted as Public Law 117-146, authorizes the Federal Maritime Commission to issue such an emergency order after seeking comments from the trade on three questions. First, has congestion created an emergency situation of a magnitude such that there exists a substantial, adverse effect on the competitiveness and reliability of the international ocean transportation supply system. Second, would an emergency order issued by the Commission alleviate the emergency situation. and third, what would be the appropriate scope of an emergency order issued by the Commission.

If the Commission issues an emergency order, common carriers and MTOs would be required to share directly with relevant shippers, rail carriers, or motor carriers information relating to cargo throughput and availability. An emergency order would remain in effect for not longer than 60 days, though the Commission could renew the order. Issuing both an emergency order and a renewal of an emergency requires a unanimous vote by the Commission. The Commission’s authority to issue emergency orders terminates 18-months after the June 16, 2022 enactment of OSRA.

Interested parties will have 30 days from when the Request for Public Comment is published in the Federal Register to submit their views to the Commission. Commenters should limit their observations to the need and benefits of the emergency order.

This call for public comment is the latest action the Commission has taken to meet the requirements and deadlines established by OSRA. To date, the Commission has:

• Issued a Request for Public Comment on a proposed plan for gathering import and export information from VOCCs calling the United States;

• Initiated development of a Notice of Proposed Rulemaking on Unreasonable Refusal to Deal or Negotiate on Vessel Space Accommodations;

• Established an interim process for submitting Charge Complaints;

• Prioritized enforcement activity through the establishment of the Bureau of Enforcement, Investigations, and Compliance;

• Placed the trade on notice that self-executing provisions of OSRA are in immediate effect;

• Placed the trade on notice that common carriers are required to immediately comply with detention and demurrage billing practices;

• Published the Fact Finding 29 Final Report; and

• Enhanced the resources and capabilities of the Office of Consumer Affairs and Dispute Resolution Services.

Early this month, the FMC also sought public comments on a proposed plan for gathering import and export information from vessel-operating common carriers that is responsive to a requirement established as part of Public Law 116-146, the Ocean Shipping Reform Act of 2022 (OSRA).

The law mandates the Commission collect and publish total import and export tonnage and the total loaded and empty 20-foot equivalent units (TEU) per vessel of vessels calling the United States. The law further states that ocean common carriers shall provide all necessary information to the Commission. The Commission is required to publicly report this information on a quarterly basis.

The Commission proposes collecting information on tonnage and TEUs from each identified common carrier on a monthly basis. The Commission proposes to collect information from ocean common carriers that transport 1,500 or more TEUs per month (laden and/or empty) in or out of U.S. ports in international common carriage.

Approximately 70 of the 154 currently registered vessel-operating common carriers transport 1,500 or more TEUs per month. Implementing the proposed approach will result in capturing in excess of 99% of imported and exported containerized cargo. The Commission possesses the ability to access additional information for the less than one percent of remaining data if circumstances deem it necessary to do so.

Once the Request for Public Comment is published in the Federal Register, interested parties will have 60 days to share their views with the Commission.

Last month, the FMC emphasized that Vessel-Operating Common Carriers (VOCCs) are required to comply with demurrage or detention billing practices established by the Ocean Shipping Reform Act of 2022 (PL 117-146).

As previously advised to the trade, there is no phase-in period for this provision of law. The law, and its requirements, related to demurrage and detention charges, became effective June 16, 2022.

VOCCs must come into compliance with all self-executing provisions in the Ocean Shipping Reform Act of 2022, specifically the requirements for demurrage and detention billing (46 U.S.C. 41104(d)). The Federal Maritime Commission will pursue enforcement action against any conduct perceived to establish open-ended obligations or include coercive tactics circumventing the clear direction of Congress.