The coronavirus pandemic may have disrupted international supply chains for much of the year, but a top official at the Federal Maritime Commission said his agency has remained vigilant in its responsibility to ensure competition within the U.S. ocean container shipping trades.
“I am pleased to say that, because of advance planning and preparation, the commission has remained fully open and operational throughout these difficult times,” FMC Chairman Michael Khouri told online attendees of the National Customs Brokers and Forwarders Association of America (NCBFAA) Government Affairs Conference on Monday.
Khouri offered the NCBFAA’s ocean freight forwarder and consolidator members assurance that the FMC has not diminished its attention to their regulatory and competitive concerns involving ocean container shipping.
“The commission is committed to fulfilling its statutory and constructive role for the U.S. economy in ensuring competition and integrity in the international supply chain,” he said.
Detention & Demurrage
One of the key issues for forwarders and consolidators prior to COVID-19 is the imposition of demurrage and detention fees by ocean carriers and marine terminal operators due to supply chain disruptions not of their making.
For years, shippers have complained to the FMC about the unfair imposition of these fees whenever container equipment cannot be returned or picked up during the free period for reasons out of their control. The daily fees reportedly range from $150 to $350 per container.
The FMC initiated its container availability rulemaking process last fall, after the commission unanimously approved Commissioner Rebecca Dye’s container availability recommendations on Sept. 6, 2019. The proposed rule received over 100 comments, which were mostly positive.
In April, the FMC finalized new guidance on how it will assess whether ocean carriers’ and marine terminal operators’ demurrage and detention practices are reasonable.
Khouri believes the interpretative rule is already having a positive impact on the imposition of demurrage and detention fees.
“We have some anecdotal evidence by way of CADRS (Consumer Affairs and Dispute Resolution Services) complaint resolution processes that marine terminals and vessel operators — when presented with the new rules as a defense to detention-demurrage charges — are reducing or even canceling charges in certain fact situations,” he said.
Khouri wants the FMC to revisit and refine tariff-filing requirements for “co-loads” as part of the agency’s regulatory reform initiative.
“Differences of the definition of co-loading between the commission and other [federal] agencies, such as Customs and Border Protection (CBP), and even within the commission, has created confusion among stakeholders,” he said, adding that he has spoken with the NCBFAA about its co-load concerns. The FMC had last considered its co-loading requirements in 2004 and discontinued the matter without further action.
“It is time for the commission to revisit the co-loading rules in light of the continuing evolution of the competitive container shipping industry and changes in commission regulations over the last 16 years, including the important effects that NRAs (negotiated rate arrangements) and NSAs (NVOCC service arrangements) have had in bringing greater rate flexibility to the NVO (non-vessel-operating common carrier) market,” Khouri told the NCBFAA.
Other enforcement policy reviews included the commission’s response to unauthorized access to service contracts.Khouri said the FMC is looking into a concern from the NCBFAA that some ocean carriers are inserting a clause into their standard bill of lading that lumps forwarders, consolidators and customs brokers among “shippers” who are responsible for paying freight and related accessorial charges.
COVID-induced blank sailings and rates
The FMC is aware of recent capacity and rate concerns among forwarders and consolidators due to ocean carriers using blank sailings in their port schedules as a means to shield their vessel-operation costs against erratic container volumes during the COVID-19 pandemic.
Under the Shipping Act, ocean container carriers may use blank sailings to reduce capacity in response to low demand. The FMC, however, has an obligation under section 6(g) of the act to ensure that the capacity reductions are not unreasonable and do not cause unreasonable increases in transportation costs for shippers.
The FMC generally requires notice from the alliances before blank sailings are implemented and no later than 15 days after any such changes are agreed upon. Alliances may request a waiver from the FMC if they are unable to make a timely filing.
Khouri said the FMC places the highest level of scrutiny on alliance blank sailing announcements. “If the FMC detects any indication of carrier behavior that may violate section 6(g), we will immediately seek to address these concerns with the carriers directly, and if necessary, the FMC will go to federal court to seek an injunction to enjoin further operation of the alliance agreement,” he said.
Khouri is hopeful that ocean carrier blank sailings are abating as global COVID-19 restrictions are gradually lifted and American shippers seek to replenish diminished inventories. He said the FMC is already receiving notices from ocean carriers of reinstated sailings in the trans-Pacific and trans-Atlantic.