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Signals™ Headlines - May 3, 2022

FMC Proposes Update to Tariff Regulations


The U.S. Federal Maritime Commission (FMC) issued a Notice of Proposed Rulemaking (NPRM) putting forward updates to key provisions of tariff regulations. These updates are intended to clarify existing regulations and address changes in the industry. This NPRM, issued on April 29, 2022, is the first major update to FMC’s ocean carrier tariff regulations since May 1999. 

The proposed rules would remove the option for ocean common carriers to charge a fee to access their FMC tariff. The update would also allow non-vessel operating common carriers (NVOCCs) to reference certain ocean carrier charges in their FMC tariffs for pass-through purposes, such as bunker charges or detention and demurrage charges but not General Rate Increases (GRIs). Under the proposed rule update, the regulations would also clarify that NVOCCs may pass-through certain charges that are announced on less than 30 days’ notice, such as terminal or canal charges, so long as these charges are referenced in their FMC tariff rules. 

Most significantly, the proposed update will alter the definition of co-loading. Under the proposed changes, the FMC’s definition of co-loading will only apply to less-than-container-load  (LCL) shipments. NVOCCs must continue to include the names of all NVOCCs involved in co-loading transactions on each Bill of Lading. NVOCCs may continue to handle full-container-load (FCL) shipments for other NVOCCs, but must do so under their tariff rates, Negotiated Rate Arrangements (NRAs), or NVOCC Service Arrangements (NSAs). 

Comments on the NPRM will be due 30 days from the date the NPRM is published in the Federal Register.  

Hapag-Lloyd Fined $822k for Unlawful Detention Practices


A Federal Maritime Commission (FMC) Administrative Law Judge (ALJ) ordered Hapag-Lloyd, A. G. to pay $822,220 in penalties for violations of the FMC’s detention and demurrage regulations. The ALJ found that Hapag had charged container detention fees even when appointments to return containers were unavailable. 

Hapag argued that it had a practice of waiving fees on days when no appointments were provided, however if appointments were available, detention was charged even when presented with evidence that a trucker could not obtain any of the appointments offered. Hapag contended that allowing otherwise would incentivize truckers to simply wait until there were no more appointments available for a day to claim detention charges should be waived. The ALJ found that in this case the trucker, Golden State Logistics, was acting in good faith to return the containers. The trucker had a practice of taking screenshots when it was unable to obtain container return appointments and contacting Hapag to alert them of appointment unavailability. 

The ALJ found that 14 days of detention were charged when insufficient appointments were available and issued a fine for each day detention was charged. The ALJ found that Hapag had been well aware of the FMC’s detention and demurrage rule, yet had not taken steps to comply with the rule or train staff on handling disputes under the new rule. For these reasons, the ALJ found the violations were willing and knowing violations of the U.S. Shipping Act and applied higher penalty amounts than would otherwise have applied. 

FMC’s Bureau of Enforcement (BOE) had sought a penalty of $16.5 million in this case. BOE argued that a penalty should be assessed each day the unlawful detention charges were outstanding after Hapag was presented with evidence that appointments were unavailable until the date BOE filed its action before the ALJ. The ALJ rejected this argument stating that there was no case law to support such a calculation and that doing so “would seem to punish the parties for legitimate use of the legal process.”

The FMC has 30 days to review the ALJ’s initial decision issued against Hapag in FMC Docket No. 21-09 on April 22, 2022. If the FMC does not take the matter up for review, the decision will stand. Hapag may appeal the decision. 

Currently there are two similar cases pending against Hapag before the FMC’s Office of Administrative Law Judges. A Florida-based banana importer, One Banana North America Corp., and a California-based trucking provider, Orange Ave Express, Inc., have both alleged that Hapag engaged in unreasonable container return practices in violation of FMC’s detention and demurrage regulations.

FMC Chairman Maffei Requests Budget Increase


U.S. Federal Maritime Commission Chairman Daniel Maffei requested a substantial budget increase in his testimony before the House Subcommittee on Coast Guard and Maritime Transportation in support of the FMC’s Fiscal Year 2023 budget request on April 27, 2022. 

The Commission is seeking a 5.2 percent budget increase to support its operations and expand its enforcement and consumer assistance capabilities. This increase will bring the FMC’s budget to $34,683,500.

Chairman Maffei testified that an increase in the FMC’s budget is needed to add personnel to the Bureau of Enforcement, the Office of Consumer Affairs and Dispute Resolution Services, and the Office of the Administrative Law Judges. 

The requested Fiscal Year 2023 budget will allow FMC to grow from 115 full-time personnel to approximately 150 full-time personnel. Chairman Maffei testified that almost 80 percent of the 36 new positions will be in enforcement and consumer assistance functions to expand the Commission’s abilities “to assist consumers, investigate complaints, and pursue those who have broken the law.” Chairman Maffei emphasized that he anticipates the FMC’s workload will escalate significantly if the Ocean Shipping Reform Act, which is now pending before Congress, is enacted into law. 

In response to lawmaker’s questions on upcoming enforcement against ocean carriers, Chairman Maffei commented that there are additional FMC enforcement actions in the pipeline. 

NSAC Meets to Vote on Committee Recommendations


The U.S. Federal Maritime Commission’s National Shipper Advisory Committee (NSAC) held a meeting to vote on recommendations and discuss committee updates on April 27, 2022. At their first in-person meeting since the committee’s establishment in June 2021, the NSAC voted to approve two recommendations aimed at strengthening FMC’s oversight of detention and demurrage-related charges. 

Dwell Fees:  The NSAC recommended that the FMC ensure dwell fees charged by Marine Terminal Operators may only be assessed when they meet the FMC’s incentive principle applicable to detention and demurrage charges. The recommendation also requests the FMC shift the burden of proof to vessel operators and/or marine terminal operators and strengthen requirements for proper dispute resolution. Committee members reported that several terminals have instituted container dwell fees and are assessing dwell fees against importers regardless of the actual container availability. 

Intermodal Oversight via Through Bills of Lading:  The NSAC recommended that the FMC be given oversight over all transportation covered under through Bills of Lading that include rail and trucking. Committee members reported that shippers often have little recourse when rail storage or rail port per diem charges are incurred. Additionally, the Committee recommended that the FMC mandate the provision of accurate transit, cargo location, and container pickup/return locations by carriers to shippers and their nominated forwarders and/or brokers. Finally, the Committee recommended that FMC regulations prevail in the event of any conflict with the terms of the Uniform Intermodal Interchange Access Agreement (UIIA).

Both recommendations were approved by unanimous vote of committee members in attendance. The recommendations will be sent to the FMC for the Commission’s review. 

The NSAC also received a brief update from FMC Commissioner Bentzel on the Maritime Transportation Data Initiative. Commissioner Bentzel reported that he plans to unveil his recommendations on minimum mandatory data standards and terms for industry feedback the FMC’s Data Summit in early June. All committee members were invited to the Data Summit and encouraged to provide their feedback. 

The NSAC’s next meeting will be in July 2022. In the meantime, the members will continue to work on recommendations in their subcommittees. Full minutes of the meeting will be posted for the public on www.fmc.gov

Established in June 2021, the NSAC is a federal advisory committee made up of 23 U.S. importers and exporters tasked with providing information, insight, and expertise pertaining to conditions in the ocean freight delivery system to the FMC.

FMC Receives Three New Formal Complaints

The U.S. Federal Maritime Commission (FMC) received three new formal complaints in April 2022 alleging violations of the U.S. Shipping Act and FMC regulations. 

Fraud and CoercionAeneas Exporting LLC,  a U.S.-based car exporter, filed a formal complaint against  Honeybee International Inc. and All America Shipping, alleging that the two entities violated the U.S. Shipping Act by raising ocean freight rates after receipt of cargo, charging fees that were not quoted, and coercing payment of storage fees by holding shipments. As a result, Aeneas alleges it was forced  to pay over $10,000 in additional shipping and storage costs.

Anti-competitive MTO Agreement:  The International Longshoremen’s Association (ILA), filed a formal complaint against Gateway Terminals, LLC,, Charleston Stevedoring Company, LLC, Ports America Florida, Inc., Ceres Marine Terminals, Inc., and SSA Atlantic, LLC, alleging that the entities violated the U.S. Shipping Act by entering into an agreement at the ports of Savannah, Georgia and Charleston, South Carolina that resulted in anti-competitive and trade restrictive practices through a de-facto merger of marine terminal operators. As a result, the ILA alleges the agreement is unlawful and should be rejected by the FMC. 

Service Contract ViolationsInternational Express Trucking, Inc. (IET), a U.S.-based trucking company, filed a formal complaint against ZIM Integrated Shipping Services Ltd., alleging that ZIM violated the U.S. Shipping Act by assessing demurrage and/or detention charges even when containers could not be returned due to lack of space, congestion, and weather conditions. As a result, IET alleges it was charged $134,655 in unlawful detention costs. 

Transpacific Eastbound Carriers File GRIs Effective May 15, 2022, and June 1, 2022

Several leading carriers serving the Transpacific container trades have recently updated their respective tariffs to include new General Rate Increases (GRIs) effective May 15, 2022, including 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 May 15th GRIs will be the tenth GRI of 2022 for the East Asia/USA trade lane.

TRANSPACIFIC EASTBOUND (Asia to USA)
GENERAL RATE INCREASE (GRI)
Effective May 15, 2022
Carrier
in USD, per 40ft ctr
COSCO (see note 1)
1000
  Evergreen (see note 2)
1000 / 2000
HMM (see note 3)
1000 / 2000
ONE
1000
Yang Ming (see note 4)
1000 / 2000
ZIM
1000

NOTE 1:  COSCO GRIs apply on all cargo moving under service contracts only. The GRIs previously effective 15Feb2022 were postponed to effective 15Mar2022, and subsequently postponed to effective 15Apr2022, then to effective 01May2022, and now to effective 15May2022.

NOTE 2:  Evergreen GRIs will be USD 1000 per 40ft dry container for dry cargo, and USD 2000 per reefer container. GRI amounts for all other container sizes are as per formula.

NOTE 3:  HMM 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.

NOTE 4:  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 June 1, 2022, including 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 June 1st GRIs will be the eleventh GRI of 2022 for the East Asia/USA trade lane.

TRANSPACIFIC EASTBOUND (Asia to USA)
GENERAL RATE INCREASE (GRI)
Effective June 1, 2022
Carrier
in USD, per 40ft ctr
 COSCO (see note 1)
1000
Evergreen (see note 2)
1000 / 2000
HMM (see note 3)
1000 / 2000
 ONE
1000
Yang Ming (see note 4)
1000 / 2000
ZIM
1000

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

NOTE 2:  Evergreen GRIs will be USD 1000 per 40ft dry container for dry cargo, and USD 2000 per reefer container. GRI amounts for all other container sizes are as per formula.

NOTE 3:  HMM 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.

NOTE 4:  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.

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