FMC Issues Interim Report Examining Impacts to Eastern Seaboard

Commissioner Louis E. Sola, in a report, noted that the challenges being posed by the current pandemic on the cruise activity along the U.S. eastern seaboard are fluid and not easily met "Although the lower spring COVID-19 cases in the U.S. and increasing vaccination rate are encouraging, the appearance of new variants continues to cast uncertainty," the report noted. Commissioner Sola released early August the Economic Impact of COVID-19 on the Cruise Industry on the East Coast, the last in a series of interim reports issued as part of the ongoing Fact Finding 30 investigation he is conducting.

The report examines direct and indirect economic impacts to ports and cities of Baltimore, Boston, Charleston, New York, Norfolk, Bar Harbor and Portland, Maine. Though none of these cities’ economies relies exclusively on pleasure cruising, collectively, the industry generates more than $1 billion annually to the region.

Progress in achieving high vaccination rates of Americans has allowed the resumption of some cruise operations, continued restrictions on cruise ships calling on Canada from the United States will impact ports in New York/New Jersey, Maine, and Massachusetts, all which serve cruise vessels making northern voyages. Given the short duration of the U.S.-Canada cruise season, it is unlikely these ports will see any voyages between the countries in 2021.

This is the fifth and final in a series of Interim Reports issued by Commissioner Sola examining economic impacts to cities and states resulting from COVID-19 related impacts. Previous reports have focused on Florida, Alaska/Pacific Northwest, Texas/Gulf of Mexico, and U.S. Territories in the Caribbean.

“From region to region and from report to report, we found that the cruise industry is an important part of economies across the United States and confirmed the necessity of restarting this important driver for jobs and revenues,” said Commissioner Sola.

In April 2020, the Federal Maritime Commission voted to authorize Commissioner Sola to conduct Fact Finding 30, an investigation of the economic impact on cruise lines, the ports on which cruise ships call, and the industries that serve these ship.

FMC to Audit 9 Ocean Carriers to Check Detention & Demurrage Fees

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.

Biden's E.O. Encourages FMC to Enforce 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.