FMC Chairman Michael Khouri and Commissioners Louis E. Sola and Daniel B. Maffei recently appeared before the U.S. Senate Committee on Commerce, Science and Transportation Subcommittee on Security where they presented the Commission’s 57th Annual Report and testified in support of the Commission’s Fiscal Year 2020 budget request. Chairman Khouri read a prepared statement which reviewed the work of the agency and recent developments in the international ocean transportation industry.

In his remarks Chairman Khouri noted the “Frank LoBiondo Coast Guard Authorization Act of 2018” became Public Law No. 115-282 (LoBiondo Act) effective December 4, 2019. The LoBiondo Act provides the first substantive changes to the statutes administered by the FMC since 1998. Chairman Khouri complimented Congress on this important legislation and advised the Commission is diligently working on the LoBiondo Act’s implementation. He pointed out most of the changes made by the LoBiondo Act are aimed at broadening the FMC’s authority. It places further restrictions on cooperation between or among ocean carriers and marine terminal operators, including removing antitrust immunity for certain activities; prohibiting certain joint procurement activities; restricting overlapping agreement participation; and modifying the legal standard for enjoining agreements to jointly procure certain services.

The FMC’s Fiscal Year (FY) 2020 Budget Request is USD 28,000,000 to support 128 full-time equivalents (FTEs). This funding level builds on the Commission’s FY 2019 budget request of USD 27,490,000 and reflects primarily necessary increases in operating costs and information technology modernization. Over 80 percent of the FMC’s budget covers staff salaries and office rents.

During his review of industry developments in 2018, Chairman Khouri noted it was a more stable period for the container shipping industry. He highlighted two key transactions: COSCO Shipping’s acquisition of a majority interest in Orient Overseas Container Line (OOCL) and the completion of the merger of three Japanese container lines (K Line, MOL, and NYK) into Ocean Network Express (ONE). Looking ahead to 2019, Chairman Khouri explained to Congress the industry faces the challenge of excess capacity and low freight rates. He noted ocean freight rates have been relatively flat over the past decade, however, adjusted for inflation, real rates for shipments from China to the USA are 29 percent lower than they were ten years ago. The impact of the International Maritime Organization’s rule which will require ocean carriers, beginning in January 2020, to burn low sulfur fuel or install exhaust scrubbers on board vessels was also highlighted.

As he has done in the past, Chairman Khouri emphasized “at the heart of the mission of the Federal Maritime Commission is ensuring a competitive and reliable international ocean transportation system that supports the U.S. economy and protects the public from unfair and deceptive practices.” He advised Congress the Commission achieves these objectives through constant oversight of the marketplace and by monitoring of ocean carrier and/or marine terminal operator behavior under agreements filed at the FMC.

Several leading carriers serving the Trans Pacific container trades have recently updated their respective tariffs to include new General Rate Increases (GRIs) effective May 15, 2019, including American President Lines (APL), CMA CGM, COSCO, Evergreen, Hapag Lloyd, Hyundai Merchant, 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 May 15th GRIs will be the tenth GRI of 2019 for the East Asia/USA trade lane.

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

NOTE 2: Instead of filing an increase in their tariff, Maersk announced a contract increase for effective May 15, 2019 for the Far East Asia/USA trade lane. The contract increase will affect those with service contract (SC) rates that expire May 14, 2019, who want new SC rates valid May 15, 2019 and beyond. The contract increase will be USD 480/600/600/750 per 20ft/40ft/40HC/45HC dry container, respectively. Once SC rates expire on May 14, 2019, tariff rates will apply until a SC written agreement is finalized to reflect the contract increase. Filing of original SCs with FMC is required on or before the effective date; the deadline for filing SC amendments with FMC is within 30 days of scheduled effective date.

Some carriers updated their tariffs to include new General Rate Increases (GRIs) effective June 1, 2019, including American President Lines (APL), CMA CGM, COSCO, Evergreen, Hapag Lloyd, Hyundai Merchant, 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 June 1st GRIs will be the eleventh GRI of 2019 for the East Asia/USA trade lane.

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

NOTE 2: Instead of filing an increase in their tariff, Maersk announced a contract increase for effective June 1, 2019 for the Far East Asia/USA trade lane. The contract increase will affect those with service contract (SC) rates that expire May 31, 2019, who want new SC rates valid June 1, 2019 and beyond. The contract increase will be USD 480/600/600/750 per 20ft/40ft/40HC/45HC dry container, respectively. Once SC rates expire on May 31, 2019, tariff rates will apply until a SC written agreement is finalized to reflect the contract increase. Filing of original SCs with FMC is required on or before the effective date; the deadline for filing SC amendments with FMC is within 30 days of scheduled effective date.