The Federal Maritime Commission (FMC) announced that it will hold an informal hearing to examine how conditions in the Red Sea and Gulf of Aden regions are impacting commercial shipping and global supply chains. The hearing will allow stakeholders in the supply chain to communicate with the Commission how operations have been disrupted by attacks on commercial shipping emanating from Yemen, steps taken in response to these events, and the resulting effects. In addition, the hearing will allow the Commission to gather information and identify any new issues related to these disruptions subject to Commission statutes, including new contingency fees and surcharges implemented by ocean carriers and non-vessel-operating common carriers (NVOCCs).

The hearing, scheduled for Wednesday, February 7, 2024, will be held in person and live streamed on the Commission’s YouTube channel. See below for the hearing agenda.

10:00 AM-10:30 AM — Opening Remarks by Chairman and Commissioners

10:30 AM-12:10 PM — Shipper Panel One

• Sarah Gilmore, Director, Supply Chain Policy, Retail Industry Leaders Association
• Jonathan Gold, Vice President, Supply Chain and Customs Policy, National Retail Federation
• Peter Friedman, Executive Director, Agriculture Transportation Coalition
• Lori Fellmer, Vice President Logistics and Carrier Management, BassTech International, representing National Industrial Transportation League

12:10 PM-1:00 PM — Carriers & Ports Panel

• Mario Cordero, Chief Executive Officer, Port of Long Beach
• Joe Kramek, Director of US Government Relations, World Shipping Council

2:00 PM-3:40 PM — Shipper Panel Two and Maritime Security

• Tim Avanzato, Vice President of International Operations, Lanca Sales, Inc.
• Eric Bartsch, Secretary, USA Dry Pea & Lentil Council and the American Pulse Association
• Eric Byer, President and Chief Executive Officer, Alliance for Chemical Distribution
• Ian Ralby, Chief Executive Officer, I.R. Consilium

3:40 PM-4:30 PM — Closing Remarks by Chairman & Commissioners

The U.S. Federal Maritime Commission (FMC) received two new formal complaints in January 2024 alleging violations of the U.S. Shipping Act and FMC regulations. The FMC also received two Special Permission Applications (SPAs) for emergency Red Sea surcharges.

Unreasonable Cargo Practices and Unlawful D&D – FMC Docket No. 24-04:  Visual Comfort & Co. (VCC), a Texas-based lighting importer, filed a formal complaint against COSCO Shipping Lines (North America) Inc. VCC alleges that COSCO violated the U.S. Shipping Act by unjustly and unreasonably exploiting customers during and following the COVID-19 pandemic. VCC further alleges that COSCO assessed detention and demurrage charges that were not in line with the incentive principal.

Specifically, VCC alleges that during 2021 and 2022 COSCO assessed $1.2 million in detention, demurrage, and related fees on VCC’s shipments. VCC claims the majority of the fees were assessed in violation of the incentive principal. Under the incentive principal, detention and demurrage fees are intended to incentivize the fluid movement of cargo. When a shipper cannot move cargo due to circumstances outside of their control, such as container unavailability or lack of empty container return appointments, the Commission may deem detention and demurrage charges unreasonable. Due to COSCO’s actions, VCC reports that it suffered nearly $2 million in damages.

VCC requests the Commission to order COSCO to compensate VCC for these unlawful actions along with interest and attorney’s fees, as well as provide any other further relief that the Commission deems appropriate.

Unlawful D&D Practices – FMC Docket No. 24-04:  ICL USA, Inc. (ICL), a New York-based destination agent, filed a formal complaint against Dependable Highway Express, Inc. (DHE), a California-based drayage provider, and Mediterranean Shipping Company, S.A. ICL alleges that DHE and MSC violated the U.S. Shipping Act by unlawfully charging detention and related fees.

Specifically, ICL alleges that in September 2021 and March 2022 MSC billed DHE various detention fees for cargo ICL shipped via MSC from Asia to the Ports of Long Beach and Los Angeles. DHE in turn charged ICL these fees plus a 10 percent advance fee. ICL alleges that MSC should have charged ICL pursuant to MSC’s Master Bill of Lading terms and conditions, not DHE.  Moreover, ICL claims that DHE was not authorized to pay the fees to MSC and never in fact advanced payments. ICL alleges that MSC eventually waived most all of detention fees DHE claimed due. Due to ICL’s dispute of the charges DHE filed suit to collect the fees totaling over $195,000 in the United States District Court for the Central District of California.

ICL requests the Commission to:

• order MSC to refund DHE for $45,565 in detention fees that were subsequently waived;
• compel DHE to cease and desist from continuing to request ICL pay this $45,565;
• compel DHE to cease and desist from requesting payment for advancing funds which it was not authorized to advance, and which had been waived by MSC;
• compel DHE to cease and desist from claiming sums are owed to it for detention charges issued to it by MSC totaling $142,385; and
• provide any other further relief that the FMC deems appropriate.

Special Permission Applications – Emergency Red Sea Surcharges:  Wan Hai Lines and Vanguard Logistics Service (USA), Inc. filed Special Permission Applications with the FMC in January 2024. The carriers requested permission to implement emergency surcharges in response to recent ship attacks in the Red Sea. Vanguard is the first non-vessel-operating common carrier to file an SPA for Red Sea-related costs.

As of February 1, Wan Hai Lines, Vanguard, American President Line (APL), Ocean Network Express (ONE), Maersk, Mediterranean Shipping Company (MSC), Hapag Lloyd, and CMA CGM have each filed SPAs, which were subsequently approved, for Red Sea surcharges.

Each carrier has implemented different surcharges applicable to varying geographic scopes. The surcharges filed in the SPAs range from USD 150 to USD 3000 per FEU. Vanguard, the sole NVOCC to file an SPA, filed surcharges ranging from USD 8 to USD 60 per weight or measure (W/M).

For more details visit the FMC’s online reading room. The FMC’s reading room provides access to FMC dockets, related documents, notices, and orders.

The Federal Maritime Commission increased the maximum penalties assessed for statutory violations effective January 15, 2024, as required by the Federal Civil Penalties Inflation Adjustment Act of 2015. The increases are tied to the rate of inflation. Maximum penalties for knowing and willful violations of the Shipping Act increased to $73,045 from $70,752. Maximum penalties for violations that are not knowing and willful increased to $14,608 from $14,149.

One of the largest maximum penalties that the FMC can assess increased to $2,559,636 per voyage. This penalty is authorized by the Shipping Act under 46 U.S.C. § 42106 as follows.

“If the Federal Maritime Commission finds that conditions unfavorable to shipping in foreign trade as described in section 42101 of this title exist, the Commission may —

1. limit voyages to and from United States ports or the amount or type of cargo carried;
2. suspend, in whole or in part, tariffs and service contracts for carriage to or from United States ports, including a common carrier’s right to use tariffs of conferences and service contracts of agreements in United States trades of which it is a member for any period the Commission specifies;
3. suspend, in whole or in part, an ocean common carrier’s right to operate under any agreement filed with the Commission, including any agreement authorizing preferential treatment at terminals, preferential terminal leases, space chartering, or pooling of cargo or revenue with other ocean common carriers;
4. impose a fee not to exceed $1,000,000 per voyage; or
5. take any other action the Commission finds necessary and appropriate to adjust or meet any condition unfavorable to shipping in the foreign trade of the United States.”

The penalty fee of $1,000,000 shown in (4) is the amount provided in the original Shipping Act of 1984. This amount has been increased due to inflation adjustments many times and now stands at $2,559,636.

The FMC also increased the amounts of eight other penalties specified in the Shipping Act. The complete list of increased penalties was published in the Federal Register.

Several leading carriers serving the Transpacific container trades have recently updated their respective tariffs to include new General Rate Increases (GRIs) effective February 15, 2024, including CMA CGM, COSCO, Evergreen, Hapag Lloyd, HMM Company Limited, Ocean Network Express (ONE), Yang Ming, and ZIM. See table below for GRI amounts per 40ft container. GRI amounts for all other container sizes are as per formula. The February 15th GRIs will be the fourth GRI of 2024 for the East Asia/USA trade lane.

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

NOTE 2:  Evergreen GRIs will be USD 1000 per 40ft container for dry cargo, and USD 1000 per reefer container. GRI amounts for all other container sizes are as per formula.

Some carriers also updated their tariffs to include new General Rate Increases (GRIs) effective March 1, 2024, including CMA CGM, COSCO, Evergreen, Hapag Lloyd, HMM Company Limited, Ocean Network Express (ONE), Yang Ming, and Zim. See table below for GRI amounts per 40ft container. GRI amounts for all other container sizes are as per formula. The March 1st GRIs will be the fifth GRI of 2024 for the East Asia/USA trade lane.

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

NOTE 2:  Evergreen GRIs will be USD 1000 per 40ft container for dry cargo, and USD 1000 per reefer container. GRI amounts for all other container sizes are as per formula.

Each carrier maintains its own tariffs and controls its own pricing.

The information contained herein is obtained from reliable sources. It is subject to change at any time, however, depending on changes in laws and regulations. While we continually attempt to monitor this information, we do not guarantee its accuracy and are not responsible for any damages suffered by any party in reliance on it.