FMC Close to Issuing Unreasonable Carrier Conduct Rule, Seeing Spike in Enforcement

The Federal Maritime Commission expects to issue its long-awaited final rule on unreasonable carrier conduct “in the next couple of months,” FMC chair Daniel Maffei said this week. He also said the commission has seen a sharp rise in enforcement cases so far this year, and he and Commissioner Rebecca Dye said they are more closely probing Red Sea-related surcharges being assessed by ocean carriers.

Maffei, speaking during a Feb. 28 Senate Commerce Committee hearing on President Joe Biden’s renomination of Maffei and Dye to the FMC, began his testimony by noting that the FMC collected nearly $2 million in fines during FY 2022 and almost $2.9 million in FY 2023. And through the first two months of this year, the commission has almost twice as many enforcement cases as “the entire year of 2020,” he said. “Overall, this continues to be the most intense period in our agency’s 54-year history.”

Maffei said the FMC has been particularly busy trying to finalize its unreasonable carrier conduct rule, which is expected to define factors the commission should consider when determining whether an ocean carrier is violating shipping regulations by refusing vessel space to exporters (see 2209130040). The initial 2022 proposed rule was widely panned by shippers and lawmakers, who said it missed congressional intent and wouldn’t solve the issue of carriers unfairly declining to take exports in favor of imports (see 2301250032 and 2211090026).

The FMC has since revised the proposal (see 2306120075 and 2308030052) and is close to publishing a final version, Maffei said. “I do believe that the final rule is forthcoming in the next couple of months,” he told the commerce committee, adding that shippers “are definitely going to like” it.

The rule hasn’t yet been released because the FMC is trying to ensure it will “avoid any unintended consequences,” Maffei said. “We don’t want to harm America’s agricultural exports while trying to help them.” The FMC also wants to ensure the final rule “is bulletproof in terms of being challenged in front of the courts,” Maffei added.

Commerce Committee Chair Sen. Maria Cantwell, D-Wash., said the final rule is needed to ensure that foreign carriers that deliver imported goods to U.S. ports don't leave without taking American exports. She urged Maffei to stand firm against what she described as foreign carriers threatening to retaliate in response to the rule.

“We’re not going to put up with foreign carriers intimidating our agriculture economy,” Cantwell told Maffei. “Focus on protecting American businesses. Focus on using our leverage. You want access to our ports? Guess what, there are rules to that, and that is [if] you call on our ports, you have to take stuff out of our ports.”

Both Maffei and Dye also said they are closely monitoring new surcharges being imposed by carriers in response to attacks by Houthi rebels on commercial cargo ships moving through the Red Sea (see 2402080083). The FMC has granted multiple carriers special permissions to immediately increase rates, allowing them to bypass the 30-day notice that is usually required for rate changes (see 2401290052 and 2401050066).

The FMC is starting to take a closer look at those surcharges, and potentially the special permission requests, after shippers questioned whether the added fees are justified (see 2402070078).

“There really has been a lack of transparency,” Maffei said, adding that exporters and importers “really had no idea, no way of knowing whether those were fair.” Dye said shippers are “concerned and suspicious about the amount of the surcharges,” and it’s the FMC’s “responsibility to make sure that those surcharges are reasonable.” She said: “We're in the process now of making sure.”

Maffei said the FMC has begun speaking with carriers to “encourage” them to be more transparent. “I think that would help everybody figure out whether they're getting their money's worth.”

The commission also plans to monitor additional fees that may be charged for transits through the Panama Canal, Maffei said. He said the canal could see another decline in ship traffic due to historically low water levels, and he and Commissioner Louis Sola plan to conduct a “preliminary inquiry” on the water issue and Panama’s handling of it “to determine whether there are any other ways that the FMC can be helpful without overstepping our authority.” The inquiry will likely include a fact-finding trip to Panama, Maffei added.

When Sen. Gary Peters, D-Mich., noted that the Panama Canal Authority has already cut the number of ships transiting the waterway from 38 ships a day to 24, “which is a significant reduction,” Maffei testified that daily traffic “may go down even further” because of the rainfall shortage.

“I am extraordinarily concerned about it,” Maffei told Peters.

Turning to the final rule on demurrage and detention billing requirements that the FMC published Feb. 23 (see 2402230049), Dye said she is “very pleased with the response” the commission has received so far, “from exporters in particular and their truckers.”

Maffei said he believes the new regulations will be "very effective in helping to eliminate some of the billing abuses, but there might still be more and then we'll do another rule."