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Ocean Carriers Take Issue With FMC Proposed Rule Over Price Regulation

Ocean carriers argue that revisions made to a proposed rule, which is aimed to limit their ability to deny vessel space to customers, have ventured into the dangerous territory of price regulation.

Last year, the U.S. Federal Maritime Commission (FMC) attempted to define what constitutes an "unreasonable refusal to deal or negotiate" vessel space with customers' containers. Both carriers and shippers objected to the FMC's efforts to modify the regulations. Carriers found the proposal burdensome, while import and export customers felt it didn't go far enough.

In response to the feedback, the FMC issued a revised proposal through a supplemental notice of proposed rulemaking (SNPRM) in June. However, carriers contend that the revised proposal goes beyond reasonable modifications to improve customer protections.

One provision in the revised proposal has particularly concerned carriers. It allows the FMC to consider a list of factors when evaluating the reasonableness of an ocean carrier's refusal to deal or negotiate on vessel space. This list includes instances where carriers quote rates "so far above current market rates they cannot be considered a real offer or an attempt at engaging in good faith negotiations."

The Pacific Merchant Shipping Association (PMSA), representing ocean carriers and marine terminal operators, argues that such a provision could inadvertently turn the FMC into a pricing regulator. The World Shipping Council (WSC), claiming to represent 90% of the world's liner vessel services, asserts that the FMC lacks the authority to regulate prices and should not use rate levels as a measure of reasonableness.

Carriers also highlight another problematic revision proposed by the FMC: a requirement for carriers to submit an annual export policy to the agency. This policy would include disclosing pricing strategies, offered services, container equipment provisions, and market descriptions. Carriers are concerned that revealing such sensitive information could put them at a competitive disadvantage and hinder their ability to innovate and invest in export strategic initiatives.

On the other hand, shippers support the changes made by the FMC, as they believe the revised proposal provides a broader basis for determining the reasonableness of carriers' refusal to provide vessel space. The Agriculture Transportation Coalition (AgTC) backs the revision, which replaces carriers' pursuit of "profitability" and "compatibility with business development strategy" with "transportation factors" to determine whether they are reasonably rejecting exports.

The Retail Industry Leaders Association (RILA) also welcomes the changes and suggests including an import policy alongside the export policy. They believe this would allow examination of carrier behavior in all types of transactions, helping determine if it aligns with the U.S. Shipping Act's requirements and whether it is fair and reasonable.


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