- Regional supply chain innovation teams working fine
- 4 key measures to improve efficient cargo movement in US Ports identified
- Some problems identified at the beginning of Fact Finding 29 have diminished
The Federal Maritime Commission (FMC) is an independent federal agency responsible for regulating the international ocean transportation system of the United States of America for the benefit of US exporters, importers, and the US consumer..
The main mission of the FMC is to ensure a competitive and reliable international ocean transportation supply system that supports the economy of the USA and protect the public from unfair and deceptive practices..
The FMC is also responsible for regulating the US international ocean transportation system that supports the transportation of goods by water in the foreign commerce of the United States – in other words, a Liner Service under the auspices of the Shipping Act of 1984, 46 U.S.C. 40101..
As part of this mission/responsibility, the FMC set up Fact Finding 29 in March 2020 in response to many complaints raised with the FMC to investigate challenges to the freight delivery system in the USA and possible violations of the Shipping Act..
Commissioner Rebecca F. Dye was tasked by the FMC to carry out the investigation with the full authority under 46 C.F.R. §§ 502.281 to 502.291, to perform such duties as may be necessary in accordance with U.S. law and Commission regulations..
Supply Chain Innovation Teams and Key Measures
Commissioner Dye identified and created Supply Chain Innovation Teams to address these issues and has since, identified key measures to improve efficient cargo movement in the US ports..
These findings could be considered as an explanation for some of the current issues such as port congestion, blank sailings, lack of schedule reliability, cargo delays and container shortages that the industry is facing mainly in the USA which has a knock on effect on the rest of the world..
While the COVID-19 pandemic was still restricted mostly to China in late 2019/early 2020, the global markets were already experiencing disruptions in supply global chains due to widespread industry and factory closures which then spread to port closures, all of which impacted freight flows, port operations, and ocean carrier service offerings..
As the pandemic spread to other countries, import cargo volumes into the USA dropped quite drastically leading to shipping lines to cut services due to the port and industry closures..
This, coupled with the fact that customers were not picking up containers from the port in time led to severe congestion in US Ports especially the ports on the West Coast..
The congestion was further exacerbated by the number of empty containers awaiting to be repositioned back to the Far East..
The Innovation Teams identified four key measures to improve efficient cargo movement to counter the challenges created by the pandemic especially on the import side :
1) Truckers should be directed to return empty containers to the terminal where they were picked up, allowing them to make dual moves and reduce the number of chassis required.
2) Notice of terminal gate closures should be given no less than three days, and preferably seven days, before gate closing. At no time should a closure occur mid-shift.
3) Notice of blank sailings should be given not only to beneficial cargo owners, but also posted prominently on a carrier’s website, at least seven days in advance. Notice of bypassed ports should be posted at least 72 hours in advance.
4) Carriers and terminals should immediately resolve the confusion for exporters regarding Export Cargo Receiving Timelines, also called Earliest Return Dates.
The FMC was also requested to consider the waiver of certain service contract filing requirements to allow shippers to use service contract provisions immediately, as the COVID-19 restrictions impeded the timely filing of the contracts..
The Commission granted the waiver in April 2020, subsequently extended to 2021 and finally being waived permanently on the 2nd of June 2021..
In her Executive Summary to the Subcommittee on Coast Guard & Maritime Transportation in June, Commissioner Dye reported that “I have been pleased with the cooperation with shippers, marine terminal operators, truckers, shipping intermediaries, and carrier CEOs to understand the challenges they faced to manage logistical operations as trade volumes surged.
I continue to encourage all U.S. international supply chain leaders to focus on the four port process goals identified in the first phase of Fact Finding 29 and to continue to work with the Commission to find workable solutions to these challenges.”
“I am pleased that several carrier CEOs have made progress on solutions to identified operational challenges, and I will continue to work directly with them as this Fact Finding Investigation continues.” added Commissioner Dye..
Phases of Fact Finding 29
The Fact Finding 29 has been approaching the issues in a phased manner with
Phase One : The setting up of form multi-industry Innovation Teams that included all actors of the ocean freight delivery system, including liner shipping companies (i.e., ocean carriers), railroads, public port authorities, marine terminal operators, beneficial cargo owners, ocean transportation intermediaries, drayage trucking companies, longshore labor representatives, and chassis providers..
Phase Two : was the setting up of Regional Innovation Teams to discuss challenges by specific port range or major ports and accordingly regional team meetings specific to challenges in Southern California, New York/New Jersey, and New Orleans were held..
Phase Three : involved the follow up on the actions taken in the first two phases with additional information and evidence gathering which revealed that some of the problems facing supply chains at the beginning of the pandemic diminished, especially on the West Coast where fewer issues were experienced with blank sailings..
Based on the initial findings of Fact Finding 29, there were concerns that the global shipping alliances which call the Ports of New York, New Jersey, Long Beach and Los Angeles may be employing practices and regulations that violated 46 U.S.C. § 41102(c)..
The concerns were
- Inefficient Container return practices
- Carrier policies regarding Demurrage and Detention practices
- Carriers reluctance to provide containers for U.S. exports
To address this, the Commission approved a Supplemental Order to Fact Finding 29 in November 2020 which allowed Commissioner Dye to investigate these global shipping alliances to determine if the policies and practices of the lines related to detention and demurrage, container return, and container availability for U.S. export cargoes violated 46 U.S.C. § 41102(c)..
As per Commissioner Dye, “This law enforcement aspect of Fact Finding 29 is aimed at potential unreasonable demurrage and detention charges and is currently underway, and it may result in civil penalty proceedings or other formal enforcement actions.”..
Preliminary Findings from Fact Finding 29
While the investigations are continuing, preliminary findings indicate that “there is reason to believe that not all regulated entities may acted reasonably as required by 46 U.S.C. § 41102(c), including with respect to demurrage and detention in light of the May 2020 guidance.” as per Commissioner Dye..
Preliminary findings included :
1. The main complaints received by the commission about ports, in order of importance :
- Empty Container Returns
- Earliest Return Dates(ERDs)
- Congestion/Long Lines
- Availability of Containers for Export
- Dispute Resolution
- Terminal Closure
- New Fees
- Shut Out/Locked Out
2. Demurrage and detention amounts collected generally increased from 2019 to 2020 while refunds and waivers generally decreased from 2019 to 2020, but this does not necessarily account for free-time extensions.
3. While a few carriers have made significant changes to their demurrage and/or detention tariffs, practices, or policies since the effective date of the FMC’s interpretive rule on demurrage and detention, many carriers indicated that their past practices were already compliant with the Commission’s guidance..
4. Some of the changes that carriers have made to their demurrage/detention practices include :
- Made information about their demurrage and detention practices more easily accessible and understandable.
- Clarified that demurrage will not accrue while a container is at an off-terminal customs examination site.
- Pre-emptively cancelled demurrage or detention charges incurred because there is a change in ERD caused by vessel delays or blank sailings after an empty container has left a terminal for loading.
- Invoice demurrage and detention charges to their customers directly rather than to truckers, for customers using merchant haulage.
5. Several carriers assert that they provide notice of return location by at least 1:00 pm the day before, but this deadline does not appear to be firm.
6. Most of the carriers require shippers or truckers to request a free time extension and provide documentation if there are problems with empty container return and have in some instances, provided off-dock or off-terminal space to facilitate empty container returns.
7. After an initial slump, agricultural exports have generally increased in 2020 compared to 2019.
8. Carriers ship empty containers back to Asia for several reasons, including to balance heavy agriculture commodity shipments with lighter empty containers for vessel safety and to enable carriers to fulfill contractual obligations to U.S. importers. Liner services are designed to meet the demand of high volume headhaul trade.
9. Compared to other years, the peak season for imports and exports did not coincide due to the long import peak in 2020 and early 2021, which resulted in an overlap that resulted in competing demands for the same containers.
10. Proposals to alleviate challenges to export container availability include container depots, collapsible containers, digitized two-way committed contract practices or products, and increasing container supply.
While from the preliminary findings, improvements in certain conditions faced by the shippers have been noticed, whether these improvements are going to be sustainable and/or adaptable to counter similar or derived issues that the industry could face in the future remains to be seen..
As the business of trade and shipping continues to evolve so have the problems be it the debate around ship sizes being one of the causes of containers falling overboard, ships burning and sinking or getting stuck in canals and other maritime disasters..
Will the shippers get the relief they seek in the end and end up singing “kumbaya” with the carriers or will there be further complaints and investigations..!!