As a temporary measure to relieve COVID-19 impacts to the supply chain the Federal Maritime Commission issued an order on April 27, 2020 to allow ocean carriers to file service contracts with the Commission up to thirty (30) days after they take effect. This temporary order was issued under FMC Docket No. 20-06 and it is valid through December 31, 2020, but could be extended or made permanent.

FMC’s decision to grant an extra 30 days to file new service contracts into FMC’s SERVCON database is similar to a decision it issued in 2017 that allows service contract amendments to be filed in SERVCON within thirty (30) calendar days after the effective date. That decision covered only service contract amendments. Now, FMC is accepting both new and amended service contracts filed up to thirty (30) days after they take effect.

The benefits of this type of service contract filing relief were identified by the Fact Finding 29 Supply Chain Innovation Teams working under the direction of FMC Commissioner Rebecca Dye. “Our prompt consideration and approval of a temporary amendment to how service contracts are filed at the FMC demonstrates our commitment to keeping America’s ocean supply chain functioning reliably and efficiently,” said FMC Chairman Michael A. Khouri. A unifying theme in the initial meetings of the FMC’s Supply Chain Innovation Teams was that service contract negotiations are being disrupted for a variety of COVID-19 related causes. FMC has learned many service contracts are expiring in the next 60 days and teleworking arrangements complicate negotiations between carriers and shippers. Additionally, some businesses are technically challenged to file service contracts from remote locations. Providing flexibility in service contract filing requirements helps the industry adapt to market conditions while still providing the Commission with information required by law.

The current COVID-19 pandemic and its effect on the international supply chain and commercial operations has demonstrated a need for the Federal Maritime Commission to provide immediate regulatory relief in appropriate circumstances. To that end, the Commission has issued Docket No. 20-05 to revise its exemption procedures for service contracts. This will allow the Commission to consider requests for exemptions from service contract regulatory requirements without the usual notice and opportunity for a hearing. Specifically, the Commission is revising its service contract regulations as provided 46 CFR Part 530.13(b) to make exemptions from the requirements in this part governed by the Shipping Act’s Section 40103, Administrative Exceptions. This change permits the Commission to grant exemptions on a case-by-case basis and waive its administrative rules to prevent undue hardship, manifest injustice, or if the expeditious conduct of business so requires.

The Commission emphasizes that these changes only affect the procedures for granting exemptions from the regulatory requirements for service contracts. The final rule does not affect the procedures for exemptions from the statutory requirements of the Shipping Act and will not affect the substantive criteria for granting exemptions from the regulatory requirements of the Commission’s service contract regulations as per 46 CFR Part 530.

The Federal Maritime Commission has finalized the new interpretative rule it proposed in September 2019 under Docket 19-05 to clarify its interpretation of the Shipping Act prohibition against failing to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property with respect to demurrage and detention. Specifically, the Commission is providing guidance as to what it may consider in assessing whether a demurrage or detention practice is unjust or unreasonable. Comments on this rule by more than one hundred organizations were submitted to the FMC; these can be viewed in the online activity log for Docket 19-05. This new FMC rule will be added to 46 CFR Part 545 effective upon publication in the Federal Register on May 18, 2020.

545.5 Interpretation of Shipping Act of 1984 – Unjust and unreasonable practices with respect to demurrage and detention.

(a) Purpose. The purpose of this rule is to provide guidance about how the Commission will interpret 46 U.S.C. 41102(c) and § 545.4(d) in the context of demurrage and detention.

(b) Applicability and Scope. This rule applies to practices and regulations relating to demurrage and detention for containerized cargo. For purposes of this rule, the terms demurrage and detention encompass any charges, including “per diem,” assessed by ocean common carriers, marine terminal operators, or ocean transportation intermediaries (“regulated entities”) related to the use of marine terminal space (e.g., land) or shipping containers, not including freight charges.

(c) Incentive Principle.

(1) General. In assessing the reasonableness of demurrage and detention practices and regulations, the Commission will consider the extent to which demurrage and detention are serving their intended primary purposes as financial incentives to promote freight fluidity.

(2) Particular Applications of Incentive Principle.

(i) Cargo Availability. The Commission may consider in the reasonableness analysis the extent to which demurrage practices and regulations relate demurrage or free time to cargo availability for retrieval.

(ii) Empty Container Return. Absent extenuating circumstances, practices and regulations that provide for imposition of detention when it does not serve its incentivizing purposes, such as when empty containers cannot be returned, are likely to be found unreasonable.

(iii) Notice of Cargo Availability. In assessing the reasonableness of demurrage practices and regulations, the Commission may consider whether and how regulated entities provide notice to cargo interests that cargo is available for retrieval. The Commission may consider the type of notice, to whom notice is provided, the format of notice, method of distribution of notice, the timing of notice, and the effect of the notice.

(iv) Government Inspections. In assessing the reasonableness of demurrage and detention practices in the context of government inspections, the Commission may consider the extent to which demurrage and detention are serving their intended purposes and may also consider any extenuating circumstances.

(d) Demurrage and Detention Policies. The Commission may consider in the reasonableness analysis the existence, accessibility, content, and clarity of policies implementing demurrage and detention practices and regulations, including dispute resolution policies and practices and regulations regarding demurrage and detention billing. In assessing dispute resolution policies, the Commission may further consider the extent to which they contain information about points of contact, timeframes, and corroboration requirements.

(e) Transparent Terminology. The Commission may consider in the reasonableness analysis the extent to which regulated entities have clearly defined the terms used in demurrage and detention practices and regulations, the accessibility of definitions, and the extent to which the definitions differ from how the terms are used in other contexts.

(f) Non-Preclusion. Nothing in this rule precludes the Commission from considering factors, arguments, and evidence in addition to those specifically listed in this rule.

Several leading carriers serving the Transpacific container trades have recently updated their respective tariffs to include new General Rate Increases (GRIs) effective May 15, 2020, including American President Lines (APL), CMA CGM, COSCO, Evergreen, Hapag Lloyd, Hyundai Merchant Marine, 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 2020 for the East Asia/USA trade lane.

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

Some carriers updated their tariffs to include new General Rate Increases (GRIs) effective June 1, 2020, including American President Lines (APL), CMA CGM, COSCO, Evergreen, Hapag Lloyd, Hyundai Merchant Marine, 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 2020 for the East Asia/USA trade lane.

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