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The public has until November 6, 2020, to comment on the allegations that Vessel Operating Common Carriers (VOCCs) may be attempting to hold companies financially responsible for transportation services that they did not contract for and may not legally be required to pay.


The Federal Maritime Commission issued a Notice of Inquiry (NOI) on October 7 related to the concerns raised about the billing practices of ocean carriers in the comments filed in Docket No. 19-05, Interpretative Rule on Detention and Demurrage Under the Shipping Act. A number of companies alleged that VOCCs have expansively defined “merchant” in their respective bills of lading to include persons or entities with no beneficial interest in the cargo and who had not consented to be bound by the terms of the underlying bill of lading.


The NOI seeks information related to how VOCCs apply the term “Merchant” in their bills of lading. For example, does the VOCC apply the term “Merchant” in a manner that subjects third parties that are not in a direct mutually agreed business relationship with the VOCC to liability?  The NOI also asks whether ocean carriers have sought to enforce the definition of “Merchant” against third parties that have not consented to be bound by, or otherwise accepted, the terms of the bill of lading.


At the same time, the FMC's Bureau of Enforcement will seek specific information from certain container shipping lines serving the United States foreign trades.


FMC Chairman Michael Khouri said, “We encourage ocean container stakeholders to share their experiences with bills of lading that contain these described “Merchant” clauses. Without public comment and involvement, it is difficult for the Commission to address alleged commercial abuse in this area.”


The Federal Maritime Commission ordered American Freight Logistics, Inc., to pay $85,000 in compromise of all civil penalties for knowingly and willfully obtaining ocean transportation for property at less than the rates and charges that would otherwise be applicable by the device or means of improperly utilizing rates limited to certain "named accounts" in MSC service contracts nos. 16-286TPC, 17-237TPC, and 18-399TPC. AFL, a licensed OTI based in City of Industry, Calif., entered into a compromise agreement with the FMC in April 2019.

The Federal Maritime Commission has set up a cross-bureau working group to review and refine co-loading rules.


FMC Chairman Michael Khouri said this is a ‘must-do’ project and part of the agency’s regulatory reform initiative. While he cannot predict the final result, he looks forward to its completion and to discuss with his colleagues at FMC the co-loading regulations.


“Differences of the definition of co-loading between the commission and other [federal] agencies, such as Customs and Border Protection (CBP), and even within the commission, has created confusion among stakeholders,” Khouri said to online attendees of the National Customs Brokers and Forwarders Association of America (NCBFAA) Government Affairs Conference on Sept. 14.


The last time the FMC considered its co-loading requirements was way back in 2004 and no further action was taken regarding that matter.


“It is time for the commission to revisit the co-loading rules in light of the continuing evolution of the competitive container shipping industry and changes in commission regulations over the last 16 years, including the important effects that NRAs (negotiated rate arrangements) and NSAs (NVOCC service arrangements) have had in bringing greater rate flexibility to the NVO (non-vessel-operating common carrier) market,” Khouri told the NCBFAA.


Other enforcement policy reviews included the commission’s response to unauthorized access to service contracts.


Khouri said the FMC is looking into a concern from the NCBFAA that some ocean carriers are inserting a clause into their standard bill of lading that lumps forwarders, consolidators and customs brokers among “shippers” who are responsible for paying freight and related accessorial charges.

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