The public has until October 25, 2021, to comment on the Federal Maritime Commission's proposal to amend its regulations governing non-performance by Passenger Vessel Operators (PVO/cruise lines) and establishing new requirements for when cruise passengers should be provided refunds for cancelled or delayed voyages.

The proposed changes are outlined in a Notice of Proposed Rulemaking (NPRM) issued by the Commission. Specifically, the Commission proposes that non-performance be defined as cancelling a voyage or delaying a voyage by three or more calendar days if a passenger elects not to embark on delayed or substituted voyage offered by a PVO. The Commission also proposes to change its regulations to allow passengers of delayed or cancelled voyages to make direct claims against financial responsibility instruments, such as bonds, maintained by PVOs, subsequent to the passenger’s unsuccessful attempt to receive a refund directly from the PVOs. Finally, the Commission is proposing that all fees, including ancillary fees, paid by a passenger to a PVO be eligible for a refund.

Parties with comments relevant to the proposed changes have until October 25, 2021, to submit their comments to the Commission. The Commission will review and consider the comments it receives. The Commission will vote again to issue a Final Rule before any changes to its regulations take effect.

The NPRM is the product of recommendations made to the Commission in April 2020 by Commissioner Louis E. Sola resulting from his work as a Fact Finding Officer for Fact Finding 30 Investigation, “COVID-19 Impact on Cruise Industry.” In response, the Commission issued an Advanced Notice of Proposed Rulemaking in October 2020 to obtain comments on Commissioner Sola’s proposed changes. The NPRM incorporates some of the feedback the Commission received.

COSCO Shipping Lines Co., Ltd., and MSC Mediterranean Shipping Company S.A. denied allegations that they colluded with other carriers to drive up freight rates.

Last month, MCS Industries, Inc., a furniture and home furnishing company based in Pennsylvania, filed a complaint with the Federal Maritime Commission (FMC) alleging that since the beginning of the COVID-19 pandemic, global ocean carriers have unjustly and unreasonably exploited customers, vastly increasing their profitability at the expense of shippers and the U.S. public generally, which bears increased freight cost in the form of inflation.

MCS said COSCO and MSC flouted their contractual service commitments, providing MCS with only fractions of the agreed allotments of space on their respective ocean vessels, and instead forcing MCS to make alternate transportation arrangements at substantially—often outrageously—higher spot market prices.

"As a result of the collective conduct and profiteering by COSCO and MSC and their fellow global ocean carriers, ocean carriage costs on the spot market have risen to crisis levels, threatening shippers’ businesses and generating price inflation to support massive windfalls for the carriers at the expense of the public. This conduct is unjust, unreasonable, and unlawful," the furniture company said.

MCS Industries wants the FMC to investigate COSCO and MSC and order them to cease and desist from further violations as well as pay MCS reparations for their unlawful conduct.

In its Answer, COSCO said it has done its level best to provide as much cargo-carrying capacity as it possesses to meet the extraordinary demand created by the U.S. import market. COSCO insists it id not deprive shippers of capacity or create any artificial scarcity. Moreover, COSCO said it did not refuse to negotiate with MCS. The allegations are false, COSCO pointed out that MCS also did not provide any evidence to support its allegations.

MSC, for its part, expressly denied that it has exploited customers. Rather, MSC said, it has dealt reasonably with unprecedented dislocations in international ocean shipping caused by substantial increases in demand at the same time that unprecedented port congestion has effectively limited available vessel capacity and created substantial operational difficulties for carriers, and has endeavored to comply at all times, and believes it has complied, with its contractual obligations to its customers, including MCS.

MSC objected to MCS’s mischaracterization of ocean carrier alliances such as the “2M Alliance” as “collusive”. MSC noted that such alliances are authorized by the FMC so that carriers can engage in related cooperative operating activities in various trades that create efficiencies that benefit exporters, importers, and consumers.

Both COSCO and MSC asked the FMC to dismiss the MCS Complaint.

Documents related to the proceeding -- 21-05 - MCS Industries, Inc. v. COSCO Shipping Lines Co., Ltd. and MSC Mediterranean Shipping Company SA -- can be viewed here.

The Federal Maritime Commission's Bureau of Enforcement (BoE) is giving eight ocean carriers until August 13, 2021, to provide details that confirm any surcharges were instituted properly and in accordance with legal and regulatory obligations.

The companies contacted are CMA CGM, Hapag-Lloyd, HMM, Matson, MSC, OOCL, SM Line; and Zim. Each ocean carrier was identified as having recently implemented or announced congestion or related surcharges.

The FMC has launched an expedited inquiry into the timing and legal sufficiency of ocean carrier practices with respect to certain surcharges. The BoE wants the ocean carriers to provide details about congestion or related surcharges they have implemented or announced.

This action was taken in response to communications received by the Commission from multiple parties reporting that ocean carriers are improperly implementing surcharges.

Ocean carriers are subject to specific requirements related to tariff changes or rate increases, including providing a 30-day notice to shippers and ensuring that published tariffs are clear and definite.

In reviewing ocean carrier responses, the Commission will determine if surcharges were implemented following proper notice; if the purpose of the surcharge was clearly defined; if it is clear what event or condition triggers the surcharge; and is it clear what event or condition has been identified that would terminate the surcharge. The Commission can initiate enforcement actions for improperly established tariffs.

“The COVID-related spike in demand for imports has pushed cargo rates to record highs,” said Chairman Maffei. “Now, we hear increasing reports of ocean carriers assessing new additional fees, such as ‘congestion surcharges,’ with little notice or explanation.”

“The congestion is due mostly to the tremendous volume of traffic coming from ocean carriers and through ports to satisfy the record demand for imports. Far from being a sudden occurrence or isolated to a port or geographical area, congestion of the freight transportation system is everywhere and has been going on for many months. It seems to me that these factors would already have been included into the record high rates charged by the carriers. As Chairman, I want to know the carriers’ justifications for additional fees and I strongly support close scrutiny by the FMC’s Bureau of Enforcement aimed at stopping any instance where these add-on fees may not fully comply with the law or regulation,” concluded Chairman Maffei.