U.S. Federal Maritime Commission (FMC) Chairman Michael A. Khouri has announced the selection of Steve Andersen as FMC General Counsel. Prior to joining the FMC, Andersen served as the General Counsel and Judge Advocate General of the United States Coast Guard where he held the rank of Rear Admiral. In that role, Andersen provided legal advice to the senior Coast Guard leadership, led the legal efforts of the Coast Guard, and chaired the Marine Safety and Security Council.

In his capacity as General Counsel to the Commission, Andersen will provide advice and recommendations to the Chairman and Commissioners on legal, regulatory, and policy matters. He will also be responsible for supervising the work of attorneys assigned to the Office of General Counsel and will serve as a member of the FMC’s Senior Management Team.

Andersen graduated from the U.S. Coast Guard Academy in 1985 and George Mason University School of Law in 1997. He is a member of the Virginia State Bar. Over the course of his career as a Coast Guard officer, Anderson held a number of key legal and operational positions including Director of Intelligence, Commanding Officer Legal Service Command, Commanding Officer Coast Guard Base Portsmouth, and Commanding Officer of two different Coast Guard cutters. Among other recognitions, he was awarded the ABA Outstanding Career Judge Advocate Award and the Bronze Star Medal.

Spot rates for full container loads shipped from Asia to the USA are at their highest levels in over ten years. The Shanghai Containerized Freight Index (SCFI) reports the spot rate for shipments from Shanghai, China to US West Coast ports on 31Jul2020 was USD 3,167 per FEU, and the spot rate from Shanghai to US East Coast ports was $3,495 per FEU. Spot rates are at these lofty levels because ocean carriers are demanding them and shippers who rely on the spot market are paying them. Meanwhile, many container carriers continue to cancel (blank) scheduled voyages and reduce capacity. This includes carriers who operate under alliance agreements authorized under the U.S. Shipping Act and filed with the Federal Maritime Commission (FMC) that allow them share vessels and coordinate vessel scheduling, but are these carriers now violating the Shipping Act by reducing competition in a manner that produces an unreasonable increase in transportation costs?

That is a question that prompted (FMC) Chairman Michael A. Khouri to issue a statement on 23Jul2020 to explain how the Commission monitors ocean carrier alliance agreements. The FMC’s Bureau of Trade Analysis (BTA) receives reports and data from all ocean carriers and marine terminal operators who participate in agreements. That information is carefully analyzed continuously along with other information that permits FMC staff to determine trends in the marketplace and the potential for illegal behavior. The FMC prioritizes the monitoring of global carrier alliances and acknowledges these agreements have the highest potential to cause or facilitate adverse market effects. On an ongoing basis, the FMC monitors key economic indicators and changes to underlying market conditions for all global alliance agreements to detect any joint activity by agreement members that might raise and maintain freight rates above competitive levels.

According to Chairman Khouri’s statement, the FMC conducts a four-tiered analytical approach. The first tier is an immediate review of advance notifications of cancelled alliance sailings or other changes in vessel capacity that affect the supply of vessels of any individual alliance service by more than five percent of average prior weekly vessel capacity. The second tier consists of a careful review, for each global alliance, of submitted minutes from the most senior executive management committee meetings that make vessel deployment decisions. FMC staff utilizes this information to assess the medium- to long-term outlook for capacity levels and how that could impact freight rates. Under the third tier, changes in individual alliance members’ vessel capacity, capacity projections, and how that relates to changes in freight rates are analyzed. The final tier consists of reviewing and analyzing confidentially filed carrier data submitted by the alliances for completeness and accuracy to determine if this data reveals any potential red flags.

The FMC’s review and oversight responsibility for filed agreements is ongoing and continues after a filed agreement has gone into effect. The unusual circumstances and challenges created by the COVID-19 pandemic together with trade agreement changes have heightened the FMC’s scrutiny of capacity reductions by global alliances. FMC staff are actively monitoring these changes for any potential effect on freight rates and transportation service levels. To ensure timely information, the FMC generally requires notice to be submitted before “blanked sailings” are implemented and no later than fifteen (15) days after any such change is agreed upon. If a global alliance cannot file a notice within the required timeframe, they are required to request a waiver stating why they are unable to file timely and why the blank sailing occurred. FMC also receives notice of the reinstatement of future blanked sailings. FMC is currently receiving notices of the reinstatement of some blanked sailings in both the transpacific and transatlantic trade lanes.

If the FMC detects any indication of carrier behavior that may violate the Shipping Act it will immediately seek to address these concerns with the carriers and, if necessary, go to federal court to seek an injunction to enjoin further operation of the alliance agreement.

Several leading carriers serving the Trans Pacific container trades have recently updated their respective tariffs to include new General Rate Increases (GRIs) effective August 15, 2020, including American President Lines (APL), CMA CGM, COSCO, Evergreen, Hapag Lloyd, Hyundai Merchant Marine, Ocean Network Express (ONE), and Yang Ming. See table below for GRI amounts per 40ft container; GRI amounts for all other container sizes are as per formula. The August 15th GRIs will be the sixteenth GRI of 2020 for the East Asia/USA trade lane.

NOTE 1: COSCO GRIs apply on all cargo moving under service contracts only.

Some carriers updated their tariffs to include new General Rate Increases (GRIs) effective September 1, 2020, including American President Lines (APL), CMA CGM, COSCO, Evergreen, Hapag Lloyd, Ocean Network Express (ONE), and Yang Ming. See table below for GRI amounts per 40ft container; GRI amounts for all other container sizes are as per formula. The September 1st GRIs will be the seventeenth GRI of 2020 for the East Asia/USA trade lane.

NOTE 1: COSCO GRIs apply on all cargo moving under service contracts only.