The U.S. Federal Maritime Commission (FMC) announced it is delegating authority to the Bureau of Enforcement, Investigations, and Compliance (BEIC) to issue Notice(s) of Violations (NOVs) and to compromise civil penalty claims.

FMC regulations currently provide for two types of enforcement actions seeking civil penalties:  1) formal enforcement actions and 2) informal compromise procedures. Currently, both require Commission approval to proceed at multiple steps during the process.

With this new delegation of authority to the BEIC, the Commission seeks to streamline the enforcement process. BEIC will now have authority to issue NOVs setting forth alleged violations and to compromise such claims, subject to review by the Commission instead of requiring Commission approval at each step. Compromise agreements will be subject to Commission review after the parties have reached an agreement rather than before negotiations begin and again at the conclusion. The Commission believes this will increase the efficiency of enforcement efforts by removing these added levels of Commission approval.

The revised procedure will also give BEIC delegated authority with respect to the investigative and initial compromise phases of the enforcement process. BEIC will have flexibility to assess enforcement matters and to determine the most appropriate process given the facts of a particular matter. Specifically, BEIC will have the authority to:

1. directly enter discussions to compromise civil penalty allegations prior to the issuance of an NOV if a party requests to negotiate a compromise,
2. issue NOVs providing notice of alleged violations and the corresponding civil penalty proposed by BEIC, or
3. recommend that the Commission institute a formal adjudicatory proceeding.

The Commission will retain the authority to review any proposed compromise agreement reached by the parties. Commission approval will also continue to be required to initiate a formal proceeding.

In a statement released by FMC Commissioner Max Vekich, the Commissioner lauded the reform as “. . . another demonstration that the Commission is taking its increased enforcement responsibilities seriously.”

The new regulations go into effect May 17, 2023. For the complete regulation announcement, visit the Federal Register.

The U.S. Federal Maritime Commission (FMC) received two new formal complaints in April 2023 alleging violations of the U.S. Shipping Act and FMC regulations.

Unreasonable Cargo Practices, Unreasonable Charges, and Failure to Provide Complete D&D Invoices – FMC Docket No. 23-01:  Samsung Electronics America, Inc. (SEA) filed a formal complaint against SM Line Corporation, a South Korean-based vessel operating common carrier. SEA alleges that SM Line violated the U.S. Shipping Act by failing to establish, observe, and enforce just and reasonable practices related to the receiving, handling, storing, and delivering of cargo. Additionally, SEA alleges that SM Line issued unreasonable charges and failed to properly invoice for detention and demurrage in accordance with FMC regulations.

Specifically, SEA alleges that beginning in approximately late-2020 to mid-2021, SM Line began repeatedly failing to properly perform its obligations for inland transportation, exposing SEA to unreasonable costs, charges, and delays. As a result, SEA was forced to pay excessive and unlawful detention and demurrage charges, as well as take over inland trucking duties and payment of inland terminal charges from SM Line. SEA did not provide a specific dollar amount for damages but reports it paid over 4,500 individual demurrage charges and over 10,000 individual detention charges due to SM Line’s inland transportation failures.

SEA requests the Commission order SM Line to pay SEA reparations for the unlawful conduct, including interest, attorneys’ fees, and costs, order SM Line to cease and desist from the unlawful conduct, and provide any other further relief that the FMC deems appropriate.

This is the second formal complaint that SEA has filed against an ocean carrier for failure to perform inland transportation. Under Docket 22-30, the FMC is considering SEA’s complaint against ZIM Integrated Shipping Service Ltd. for alleged Shipping Act violations. See our November 2, 2022 SIGNALS issue for more on this.

Unreasonable Cargo Practices & Various Shipping Act Violations – FMC Docket No. 23-02:  Bed Bath & Beyond Inc. (BBB) filed a formal complaint against Orient Overseas Container Line Limited and OOCL (Europe) Limited, alleging that OOCL violated the U.S. Shipping Act by exploiting price inflation in container shipping during the COVID-19 pandemic and unjustly and unreasonably exploiting customers.

Specifically, BBB alleges that between July 2020 and April 2022 OOCL consistently failed to meet its existing service contract commitments and thereby coerced BBB to enter premium rate contracts. As a result, BBB alleges that it suffered $11.5 million in damages by paying open market prices, $13.7 million in damages for peak season surcharges and other related fees, and $6.3 million in improperly assessed detention and demurrage charges.

BBB requests the Commission order OOCL to pay BBB reparations for the unlawful conduct, including interest, attorneys’ fees, and costs, order OOCL to cease and desist from the unlawful conduct, and provide any other further relief that the FMC deems appropriate.

BBB filed for Chapter 11 bankruptcy on April 23, 2023.

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

The U.S. Federal Maritime Commission (FMC) closed out two complaints in April 2023 by issuing Notices Not to Review.

Notice Not to Review – FMC Docket No. 21-16:  Wan Hai Lines, Ltd. and the FMC’s Bureau of Enforcement, Investigations, and Compliance (BEIC) requested approval on May 2, 2022 for an $850,000 settlement for alleged detention and demurrage regulation violations. The settlement required Wan Hai to post locations for container returns daily by 4 PM and included specific details for detention and demurrage waiver requests. While this settlement was nearly identical to an approved Hapag-Lloyd settlement, the FMC’s Administrative Law Judge (ALJ) declined to approve the settlement.

After requests for a stay in the proceedings were denied, Wan Hai and the BEIC requested approval for a new settlement agreement. The new settlement includes an increased settlement amount of $950,000. It also requires Wan Hai to refund all 21 invoices identified as including unlawful detention and demurrage charges. Lastly, Wan Hai must cease and desist from knowingly assessing detention charges where:

• (a) Wan Hai failed to provide an equipment return location;
• (b) where Wan Hai identified an equipment return location that was not accepting the container chassis; or
• (c) where appointments were unavailable for equipment return.

The ALJ commented that “[u]nlike the prior settlement agreement, this settlement agreement is clear, narrowly tailored to the specific facts of this case, and does not contain prescriptive measures which may or may not be reasonable as applied to future litigants.”

The Commission declined to review the settlement approval on April 13, 2023, and the settlement is now administratively final.

Notice Not to Review – FMC Docket No. 22-26:  In September 2022, Philip Reinisch Company LLC (PRC), an Indiana-based importer, filed a formal complaint against Flexport International LLC, a San Francisco-based non-vessel-operating common carrier, alleging that Flexport violated the U.S. Shipping Act. PRC alleged that Flexport failed to issue detention and demurrage invoices in compliance with FMC’s new invoicing requirements.

PRC requested that the Commission find Flexport in violation of the U.S. Shipping Act, order Flexport to refund PRC $56,117.19 plus interest, and nullify $49,643.32 in outstanding detention and demurrage charges. PRC further requested the Commission award PRC damages for wrongful withholding of containers and injuries sustained to its business interests.

In March 2023, the parties requested and received approval for a confidential settlement. The Commission declined to review the settlement approval on April 24, 2023, and the settlement is now administratively final.

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

Several leading carriers serving the Transpacific container trades have recently updated their respective tariffs to include new General Rate Increases (GRIs) effective May 15, 2023, including CMA CGM, COSCO, Evergreen, Hapag Lloyd, HMM Company Limited, Ocean Network Express (ONE), 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 2023 for the East Asia/USA trade lane.

NOTE 1:  CMA CGM GRIs will be USD 1000 per 40ft container for dry cargo, and USD 1125 per 40ft container for reefer cargo. GRI amounts for all other container sizes are as per formula.

NOTE 2:  COSCO GRIs apply on all cargo moving under service contracts only.

Some carriers also updated their tariffs to include new General Rate Increases (GRIs) effective June 1, 2023, including CMA CGM, COSCO, Evergreen, Hapag Lloyd, HMM Company Limited, Ocean Network Express (ONE), 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 2023 for the East Asia/USA trade lane.

NOTE 1:  CMA CGM GRIs will be USD 1000 per 40ft container for dry cargo, and USD 1125 per 40ft container for reefer cargo. GRI amounts for all other container sizes are as per formula.

NOTE 2:  COSCO GRIs apply on all cargo moving under service contracts only.

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.