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A tug escorts a containership at the Port of Los Angeles, California. Photo: Robert V Schwemmer / Shutterstock.com

A tug escorts a HMM containership at the Port of Los Angeles, California. Photo: Robert V Schwemmer / Shutterstock.com

FMC Finalizes Rule for Assessing Ocean Carriers’ Denial of Cargo Space

Mike Schuler
Total Views: 2304
July 22, 2024

The U.S. Federal Maritime Commission (FMC), the independent federal agency responsible for regulating the nation’s international ocean transportation system, has published its final rule defining what constitutes an “unreasonable refusal to deal or negotiate with respect to vessel space accommodations.”

The regulation sets forth the criteria for the Commission to enforce sections 46 U.S.C. 41104(a)(3) and 46 U.S.C. 41104(a)(10) regarding the denial of cargo and vessel space accommodations by an ocean shipping company.

The rule delineates the standards for assessing whether a refusal by an ocean common carrier (VOCC) is unreasonable and thus violates federal regulations. Specifically, it differentiates between refusals occurring during the “negotiation” phase—governed by 46 U.S.C. 41104(a)(10)—and those during the “execution” phase—under 46 U.S.C. 41104(a)(3).

Each claim brought before the FMC under these sections will be evaluated individually, ensuring that the unique facts and circumstances of each case are considered. Not every refusal by a VOCC will be deemed a violation; if a carrier can substantiate a reasonable basis for their refusal, they will not be found in breach of the law.

In an effort to provide clarity, the rule offers non-binding examples and considerations to help assess allegations of unreasonable behavior by ocean common carriers. One significant requirement of the rule mandates that VOCCs submit a confidential documented export policy to the FMC annually. This policy must include details on pricing strategies, services, equipment provision strategies, and market descriptions.

The rule will take effect 60 days from its publication in the Federal Register. However, the requirement for carriers to file documented export policies is delayed pending approval from the Office of Management and Budget. The FMC will announce the effective date for these requirements once approval is granted.

The new regulation marks a step towards ensuring fair practices in the maritime shipping industry, providing clearer guidelines for both carriers and shippers.

The Ocean Shipping Reform Act (OSRA) of 2022 mandated that ocean common carriers cannot unreasonably refuse to deal or negotiate vessel space accommodations. However, “vessel space accommodations” had never been defined in legislation, or interpreted by the FMC. A Notice of Proposed Rulemaking (NPRM) published after the law’s passing aimed to define “vessel space accommodations” and outlined criteria for establishing violations, shifting the burden of proof from shippers to carriers.

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