The U.S. Federal Maritime Commission (FMC) met on January 25, 2023 in open and closed session to discuss the Commission’s implementation of the Ocean Shipping Reform Act of 2022 (OSRA-2022). Commissioners also received a briefing on the economic and competition outlook from the FMC’s Bureau of Trade Analysis.

The Commissioners first addressed the delayed rulemaking for the regulations concerning unreasonable refusal of cargo space. OSRA-2022 prohibits ocean carriers from unreasonably refusing cargo space accommodations when available. To support this objective, OSRA-2022 required the Commission to initiate a rulemaking defining unreasonable refusal to deal or negotiate with respect to vessel space and mandated a final rule be issued by December 16, 2022. This final rule has not been issued.

While the FMC issued a Notice of Proposed Rulemaking (NPRM) on the matter in September 2022, the final rule has been delayed. The Commission received 25 comments in response to the NPRM including comments from the U.S. Department of Agriculture, the U.S. Department of Justice, and various members of Congress. Many commentors took issue with the lack of clarity in the proposed regulations and urged the Commission to clearly define the factors to be considered when evaluating a claim against an ocean carrier for unreasonable refusal to deal or negotiate. To address these comments the Commission announced it has delayed issuing the final rule and will issue a Supplemental Notice of Proposed Rulemaking (SNPRM). The SNPRM will provide the public with an additional comment period.

Commission staff also reported on charge complaints. Staff revealed that over 200 charge complaints have been filed since OSRA-2022 went into effect last June. Commission staff estimated that about $700,000 in detention and demurrage charges have been refunded or waived under the Commission’s charge complaint protocols.

Commission staff further reported on the FMC’s evaluation of an emergency order. OSRA-2022 required the FMC to seek public comment on whether shipping congestion had created an emergency situation by adversely affecting the competitiveness and reliability of the international ocean transportation supply system. The Commission issued a request for public comment in August 2022 and received over forty-five comments. Many commentors urged the Commission to issue an emergency order to work through cargo bottlenecks while others asked the Commission to focus on preparations for future congestion. Commission staff reported that it found no emergency order was required. The Commission issued no formal report or comment on the matter.

Lastly, the Commission’s Bureau of Trade Analysis provided statistics and reporting on the current economic outlook and carrier competition. FMC staff reported that freight rates for U.S. imports have returned to pre-pandemic levels, while freight rates for U.S. exports remain slightly elevated. Staff also reported that cargo volumes are trending away from West coast ports and are increasingly moving through East coast and Gulf ports. Additionally, staff reported on carrier competitiveness noting that market share of MSC has increased substantially in the U.S.-Asia and U.S.-Europe trades over the past two years.

The next Commission meeting has not yet been announced. Read the complete text of OSRA-22 here.

The U.S. Federal Maritime Commission (FMC) closed out a longstanding investigation into Ocean Network Express Pte. Ltd. (ONE) for overly broad application of the merchant clause in its Bills of Lading. ONE allegedly used the term merchant contained in its Bills of Lading to seek payment for charges from parties that ONE was not in contractual privity with.

After rejecting a confidential settlement agreement reached between ONE and the FMC’s Bureau of Enforcement, the Commission allowed the settlement to become final in January 2023 after it was amended to reveal the settlement’s details.

According to the terms of ONE’s settlement:

• ONE will pay a civil penalty of $131,332.00.
• ONE will also immediately limit the use of its Bill of Lading “Merchant” definition in the U.S. foreign trade to shippers, consignees, and persons with a beneficial interest in the cargo.
• ONE will add an explanatory note to its U.S. tariff explaining its “Merchant” limitation.
• ONE agrees to the issuance of a cease-and-desist order prohibiting ONE from collecting monies owed ONE under its Bill of Lading from non-Merchants or entities with whom ONE has no direct contractual relationship; and
• ONE will immediately stop invoicing non-Merchants or entities with whom ONE has no direct contractual relationship.

This concludes the BOE’s investigation into ONE’s alleged overly broad use of the term merchant that began in December 2021.

The U.S. Federal Maritime Commission (FMC) denied a petition filed by the Pacific Merchant Shipping Association (PMSA) and the World Shipping Council (WSC) challenging the environmental impact of the Commission’s newly proposed detention and demurrage invoicing rules.

The new rules proposed last October are intended as a clarification of the Commission’s current detention and demurrage rules. This clarification is mandated by the Ocean Shipping Reform Act of 2022 (OSRA-2022). Under the proposed rules VOCCs, NVOCCs, and MTOs would be required to issue bills for demurrage or detention only to parties that they have a contractual relationship with. Invoices would also have to be clear regarding the nature of the charges and invoiced no later than 30 days after the charges stop accruing. A 30-day dispute period would also be required.

Following the proposed rule’s issuance, the FMC conducted an environmental impact analysis and found the new demurrage and detention invoicing rules would cause no significant environmental impact. In December 2022 however, the PMSA and WSC filed a Petition for Review of the Commission’s environmental assessment. Specifically, the PMSA and WSC alleged the proposed rule would increase congestion in and around seaports disproportionally affecting lower income and minority communities.

The Commission unanimously denied the petition on January 6, 2023 noting that the proposed rules would impact carriers’ detention and demurrage invoicing practices and not physical port operations. Following the denial, FMC Chairman Maffei issued a statement strongly criticizing the WSC and PMSA for gamesmanship.

“The filing of this petition (even after its rejection today) could lay the groundwork for the carriers to obstruct the proposed rule in Federal court by arguing for a full NEPA Environmental Impact Assessment – a process that often takes multiple years – before the rule can go into effect. It would certainly not be the first time that an industry utilized legal proceedings to find administrative avenues to undermine needed regulatory changes.”

OSRA-2022 mandates the Commission issue a final rule on detention and demurrage invoicing not later than June 16, 2023.

The Federal Maritime Commission increased the maximum penalties assessed for statutory violations effective January 11, 2023, 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 $70,752 from $65,666. Maximum penalties for violations that are not knowing and willful increased to $14,149 from $13,132.

One of the largest maximum penalties that the FMC can assess increased to $2,232,281 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 $2,232,281.

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, 2023, including CMA CGM, COSCO, Evergreen, 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 2023 for the East Asia/USA trade lane.

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

NOTE 2:  Yang Ming GRIs will be USD 1000 per 40ft container for cargo to destinations USWC, USEC, US Gulf coast, and USD 2000 per 40ft container for cargo to destinations IPI, MLB, RIPI. 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, 2023, 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 2023 for the East Asia/USA trade lane.

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

NOTE 2:  Yang Ming GRIs will be USD 1000 per 40ft container for cargo to destinations USWC, USEC, US Gulf coast, and USD 2000 per 40ft container for cargo to destinations IPI, MLB, RIPI. 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.