Unreasonable Carrier Conduct Rule Should Be Withdrawn, Reworked, Group Tells FMC

The Federal Maritime Commission should scrap its notice of proposed rulemaking on how it should define certain unreasonable conduct by ocean carriers, the Agriculture Transportation Coalition said in comments to the FMC last week. The group said the NPRM misses congressional intent “by a wide margin” and would not solve the issue of carriers unfairly declining to take exports in favor of imports.

The September NPRM requested feedback on the set of factors the FMC should consider when determining whether an ocean carrier is violating shipping regulations by refusing vessel space to shippers (see 2209130040). Although the rule would require the FMC to assess whether a carrier followed a “documented export strategy” and engaged in good faith negotiations with the exporter, it also allows carriers to use their “pursuit of ‘profitability’ and ‘compatibility with business development strategy’ as a reasonable basis upon which to refrain from accepting and carrying export cargo,” AgTC said.

That language suggests the FMC has a “greater interest” in promoting ocean carriers’ profits than in supporting U.S. exporters, the group said. “The NPRM “provides carriers a loophole large enough to sail a 22,000 [twenty-foot equivalent unit] ship through -- with room to spare.”

The trade group said the FMC’s “deference to the carriers’ own assessment of adequate profitability” is “troublesome,” particularly because the NPRM recognizes that the drop in exports carried during the pandemic was caused by carriers. Industry and lawmakers have urged FMC for months to penalize carriers that decline to carry U.S. exports in favor of imports because they can charge higher rates for imports (see 2103100027 and 2205190035).

The FMC should withdraw the rule and draft a new one, this time with definitions for “deal or negotiate with respect to vessel space allocations,” AgTC said, adding that the definitions should include decisions by carriers to refuse or cancel bookings or delay export cargo. “These are never ‘negotiated,’ they are almost always sudden, arbitrary decisions, tardily communicated (or not communicated by the carrier to the exporter at all),” AgTC said. “This Rule must address this kind of ‘dealing.’ It does not currently.”

An FMC spokesperson said Oct. 28 that the commission is "reviewing all responses filed during the public comment period" and "careful consideration will be given to all issues raised by commenters." It’s unclear whether the commission has enough time to withdraw the rule and draft a new one because it’s facing time pressure from a statutory deadline currently set for December (see 2209210063). AgTC said the FMC should ask Congress for an extension, which will have the support of the U.S. export industry.