The Federal Maritime Commission (FMC) ups the ante with new enforcement unit

The Federal Maritime Commission (FMC), an independent federal agency responsible for regulating the U.S. international ocean transportation system for the benefit of U.S. exporters, importers, and the U.S. consumer seems to have been busy and on overdrive since the onset of the COVID-19 pandemic..

Among other tasks, the FMC is responsible for

• Reviewing and monitoring agreements among ocean common carriers and marine terminal operators (MTOs) serving the U.S. foreign ocean borne trades to ensure that they do not cause substantial increases in transportation costs or decreases in transportation services
• Maintaining and reviewing confidentially filed service contracts to guard against detrimental effects to shipping
• Providing a forum for exporters, importers, and other members of the shipping public to obtain relief from ocean shipping practices or disputes that impede the flow of commerce
• Ensuring common carriers’ tariff rates and charges are published in automated tariff systems and electronically available to the public
• Monitoring rates, charges, and rules of government-owned or controlled carriers to ensure they are just and reasonable
• Taking action to address unfavorable conditions caused by foreign governments or business practices in U.S.-foreign shipping trades

FMC Enforcements & Actions

Ocean Shipping Reform Act 2022

The Commission reported that it is moving expeditiously to fulfill the requirements of the new law with the most immediate deadline for the Commission to meet being the initiation and completion of a rulemaking on unreasonable refusal to deal with or negotiate on vessel space accommodations..

Cracking the whip on non-compliant parties, the Chairman of the FMC – Daniel B. Maffei said “Rarely does the Congress give an agency a specific to-do list, but here the Congress provided us with explicit tasks with timelines intended to help solve some of the Nation’s supply-chain challenges.

These are important initiatives that will make a difference to people who depend on the movement of ocean cargo. This is the law of the land. Our job is to implement it and we are well along the way in doing so.

Parties who are not compliant are inviting the scrutiny of the Commission and exposing themselves to the consequences for not following the law or acting in a manner inconsistent with the clear direction of Congress,”..

Pursuant to the signing of the Ocean Shipping Reforms Act 2022 into law on the 16th of June 2022, the FMC has reported that they have already met several requirements as below

• Establishing an interim process for submitting Charge Complaints.
• Placing trade on notice that self-executing provisions of OSRA were in immediate effect, simultaneously publishing an opinion of the General Counsel on the issue.
• Placing trade on notice that common carriers are required to immediately comply with detention and demurrage billing practices.
• Initiating hiring actions to enhance investigatory capacity by adding nine additional staff in key functions.
• Publishing the Fact Finding 29 Final Report; and,
• Maintaining an Office of Consumer Affairs and Dispute Resolution Services and enhancing its capabilities.

Demurrage and Detention Billing Practices

FMC has been vocal about demurrage and detention practices followed by shipping lines and issued new guidance about how the FMC will assess the reasonableness of detention and demurrage regulations and practices of ocean carriers and marine terminal operators (MTOs) under 46 U.S.C. 41102(c)..

The final rule, “Docket No. 19-05, Interpretive Rule on Demurrage and Detention under the Shipping Act”, became effective from the 18th of May 2020..

FMC has made it clear that Vessel-Operating Common Carriers (VOCCs) are required to comply with demurrage or detention billing practices established by the Ocean Shipping Reform Act of 2022 (PL 117-146) and that there is no phase-in period for this provision of the law and its enforcement is immediate as of June 16, 2022..

The FMC has advised that it will pursue enforcement action against any VOCCs who are not compliant with the self-executing provisions in the Ocean Shipping Reform Act of 2022, specifically the requirements for demurrage and detention billing..

These actions seem to have borne fruit quickly with at least 2 container shipping lines, Wan Hai and Hapag Lloyd reaching agreements to pay civil penalties of USD850,000/- and USD2 million respectively for alleged violations related to their demurrage and detention practices..

FMC’s Bureau of Enforcement, Investigations, and Compliance (BEIC)

In order to ensure that its enforcements and actions are in line with the Shipping Act, the FMC has reorganised its investigative and prosecution functions by consolidating them into a newly created Bureau of Enforcement, Investigations, and Compliance (BEIC)..

Announcing the creation of this newly established Bureau which will be headed by an attorney in the Senior Executive Service with regulatory, prosecutorial, and investigatory experience, Chairman Maffei said “Robust enforcement of the Shipping Act is absolutely key to the effectiveness of the Federal Maritime Commission.

This reorganization has the support of all five Commissioners and creates a structure better suited to meeting the mandate the President and Congress have given this agency to prioritize enforcement. 

Specifically, it enhances FMC’s capacity to closely scrutinize the conduct of the ocean carrier companies and marine terminal operators to ensure compliance with the law and fairness for American importers and exporters,”