FMC Provides Ocean Shipping Reform Update

The U.S. Federal Maritime Commission met in an open session meeting this week to provide an update on the implementation of the Ocean Shipping Reform Act of 2022 (OSRA) and a briefing on economic and industry trends.

The OSRA was signed into law by President Biden last June giving the FMC the greater authority to regulate container shipping. The law contains a laundry list of provisions that the agency must complete, included with timelines, intended to help solve challenges in the nation’s supply chains.

During this week’s meeting, the Commission announced that it will issue a Supplemental Notice of Proposed Rulemaking (SNPRM) that addresses issues commenters raised in response to a proposed rule related to the Unreasonable Refusal to Deal or Negotiate with Respect to Vessel Space Accommodations issued last September as one of the first action items included in the OSRA. The Commission received almost 30 comments in response to its Notice of Proposed Rulemaking (NPRM) raising a multitude of substantive questions that the FMC says demand appropriate time and thorough consideration, which the SNPRM will address.

During the briefing on OSRA implementation, the Commission was advised that progress is also being made on other rulemakings ordered in the statute.

Commission staff are reviewing the more than 180 public comments received in response to the Notice of Proposed Rulemaking on Demurrage and Detention Billing Requirements, as well as working on a draft proposed rule addressing Unfair or Unjustly Discriminatory Methods.

The Commission also announced it has completed its review of market conditions finding circumstances at this time do not warrant invoking Temporary Emergency Authority. The Commission had issued a Request for Information on the issue last summer, as required under the OSRA. The temporary emergency order, now deemed unnecessary, would have forced ocean common carriers and marine terminal operators (MTOs) to share certain information, such as cargo throughput and availability info, directly with shippers, truckers, and railroads.

The Commission also reports that the public continues to take advantage of the ability to file Charge Complaints, also created as a provision of OSRA. The Commission has received more than 200 filings since the law’s enactment in June 2022. Among those, more than 70 Charge Complaints met the threshold requirements for being referred to investigators. Commission staff reported that the Charge Complaint process is proving successful at promoting informal settlements as well as waivers of Demurrage and Detention billings, with staff estimating that more than $700,000 in charges have been refunded by carriers since June.

The OSRA implementation briefing was followed by an update on economic and competition issues that included a discussion of the Commission’s monitoring program. During the briefing, Commissioners were advised that both container volumes and freight rates on inbound trades have returned to essentially pre-pandemic levels—a point that some experts dispute.

“Significant amounts of containerized imports have shifted to East and Gulf Coast ports. Exports off the Gulf Coast are not enjoying parallel growth, upsetting what has been the traditional model of fairly balanced import and export volumes. The cost to ship exports remains slightly elevated compared to pre-pandemic,” the Commission said in its update.

“The market share of MSC has increased substantially in the U.S.-Asia and U.S.-Europe trades over the past two years. Both MSC and Maersk have substantial market shares and have been offering additional services outside their alliance. Despite growth of alliance carriers, non-alliance carrier market share has been consistent on the U.S.-Europe trade and trending upward somewhat on the U.S.-Asia trade.

“The U.S. trades are seeing the abandonment of the marketplace by new entrants that began calling during the height of the pandemic. Those lines, typically smaller companies that operate in the Intra-Asia, Oceania, and Africa markets, redeployed ships to the transpacific trade lane when cargo was abundant and rates were historically high. With volumes and rates returning to more typical and traditional levels, there is no longer the incentive for these carriers to operate in what is not their usual markets. Despite the withdrawal of these carriers, more than sufficient capacity exists to serve U.S. shippers,” the update added.

The Commission also met in closed session to receive a more detailed briefing on economic and competition matters that included confidential information that could not be discussed in open session.

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