FMC Should Revise Unreasonable Carrier Conduct Rule to Better Support Exporters, Ag Secretary Says

The Federal Maritime Commission should amend its proposed rule on unreasonable carrier conduct to better address carriers that refuse to carry exports in favor of imports (see 2209130040), USDA Secretary Tom Vilsack said. In a letter released by the FMC this week, Vilsack said the commission should broaden the proposed definition for unreasonable refusal to negotiate or deal, “significantly narrow” its guidance on reasonable refusals and better “encourage specific actions by carriers to guard against unreasonable refusals.”

Vilsack said U.S. agricultural exporters have faced “a host of challenges” shipping their goods during the past two years, such as “broken export contracts, canceled bookings, inadequate receiving windows, and shortages of empty containers and other equipment.” These problems have “compromised bottom lines for agricultural companies” and damaged the standing” of U.S. exporters with their global customers.

Although the FMC’s rulemaking is “one step toward righting an unfair situation,” Vilsack said a “few key changes” should be made, echoing other comments received by the FMC on the rulemaking. The Agriculture Transportation Coalition urged the commission in October to scrap the rule and start over, saying it missed congressional intent under the Ocean Shipping Reform Act “by a wide margin” (see 2210280051).

The FMC can start by “explicitly” detailing a broad definition for “unreasonable refusal to negotiate or deal” to extend beyond a carrier’s “failure to make good faith efforts to work with the shipper,” Vilsack said. Several other carrier actions also should fall under that definition, including carrier cancellations without sufficient notice, perpetual rebookings, carrier failures to provide necessary equipment -- such as containers and chassis -- and other “effective refusals,” he said.

Vilsack said a carrier’s decision to cancel a booking or roll it to a later date “raises questions about whether the carrier initially engaged in good faith discussions and negotiations -- especially when such disruptions happen frequently.” Those actions, “which repeatedly appear in shippers’ comments,” are a “lack of good faith effort by carriers.”

The FMC also should narrow its proposed guidance on reasonableness, Vilsack said, adding that USDA believes “the circumstances are rare in which the Commission should consider it reasonable for a common carrier to fail to make good faith efforts to find a mutually beneficial arrangement that works for both parties.” The FMC should “excuse only a few exceptional circumstances,” Vilsack said, but the “broadness” of the rule’s language “leaves USDA wondering whether any refusals to negotiate or deal would be considered unreasonable.”

Vilsack specifically pointed to the rule’s “broad concepts” of “profitability” and “compatibility” with its business development strategy. He also said the “existence of legitimate transportation factors alone should not immunize a practice, especially in the face of a pattern of problematic practices."

Although legitimate factors may derail a deal between the shipper and carrier, common carriers should be “required to do everything they can to work with the shipper before refusing to deal,” Vilsack said. “USDA urges the Commission to narrow its language on reasonableness, clarify that the existence of multiple factors will not absolve problematic practices, and focus more on illuminating actions it would consider to be unreasonable.”

Aside from providing definitions and guidance, FMC can also do more to encourage “specific actions” by carriers to “guard against engaging in an unreasonable refusal.” Vilsack applauded the commission’s proposal to “require the proponent make only a prima facie case of unreasonableness to trigger review” and the FMC’s proposed rebuttable presumption of unreasonableness for situations in which a carrier excludes U.S. exports from its backhaul trips from the U.S.

Vilsack also said he supports requiring carriers to document their export practices to prove they’re reasonable, including by maintaining “documented export strategies,” written policies and procedures for negotiations and dealings, and “certifications by U.S.-based compliance officers affirming and documenting the reasonableness of specific decisions.” He also said “nonconfidential” portions of those documents should be made public for shippers.

Vilsack said USDA “may offer additional perspective” on the rule and is willing to work with the FMC on any of its recommendations. It remains unclear where the rulemaking currently stands, partly because the FMC was facing a December statutory deadline to finalize the rule. An FMC spokesperson didn't respond to a request for comment.