A New Front in Shipping’s Climate War: The Federal Maritime Commission

By Sean Pribyl, Michael Amy (Holland & Knight) –

Federal Maritime Commission (FMC) Chairman Laura DiBella recently participated in the U.S. delegation to the International Maritime Organization’s (IMO) 84th Marine Environment Protection Committee (MEPC 84) session in London, marking an unprecedented development in U.S. maritime regulatory policy since the FMC has not historically played a visible role in U.S. climate negotiations at the IMO.

THE FMC’S MEPC ATTENDANCE

The FMC is an independent regulatory agency which traditionally has been focused on ensuring a competitive and reliable international ocean transportation supply system. The FMC’s participation at MEPC 84 represents a departure from historical practice. For decades, U.S. engagement with the IMO on environmental and climate matters has been the province of the U.S. Coast Guard and the Department of State, with technical support from agencies such as the Maritime Administration (MARAD) and the Environmental Protection Agency (EPA).  

Chairman DiBella’s statement explained that her attendance was intended to “reinforce U.S. opposition to the proposed Net-Zero Framework,” which she described as “an unnecessary tax on U.S. shippers and vessels operating in international waters.” The FMC’s engagement in climate policy discussions at this level reflects the Commission’s position that proposed international environmental regulations fall within its core statutory mandate of addressing conditions that may affect U.S. commerce.

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THE FMC’S AUTHORITY UNDER 46 U.S.C. §§ 42106 AND 42107

Central to this development is the FMC’s invocation of its authority under 46 U.S.C. §§ 42101 – 42109—provisions that grant the Commission broad powers to address “conditions unfavorable to shipping in the foreign trade of the United States.” Understanding these statutory provisions is essential for stakeholders seeking to assess their potential exposure.

Section 42101: Regulations of the Commission

Section 42101 provides the FMC with the authority to “prescribe regulations affecting shipping in foreign trade, not in conflict with the law, to adjust or meet general or special conditions unfavorable to shipping in foreign trade…which arise out of or result from laws or regulations of a foreign country or competitive methods, pricing practices, or other practices employed by owners, operators, agents, or masters of vessels of a foreign country.” 46 U.S.C. § 42101. The FMC has employed a broad interpretation of this authority as evidenced by several recent and ongoing investigations. Importantly, the statute encompasses not only conduct of foreign governments, but also vessel owners, operators, agents, and masters. 

Section 42106: Conditions Unfavorable to Shipping

Under 46 U.S.C. § 42106, when the FMC finds that “conditions unfavorable to shipping in the foreign trade of the United States” exist, whether created by laws, rules, regulations, or practices of foreign governments, the Commission may take action to address those conditions. This includes the authority to impose limitations on sailings; suspend tariffs, service contracts and agreements; and impose other restrictions or fees on foreign carriers operating in U.S. trade.

Section 42107: Remedial Actions

Section 42107 permits the FMC to implement the remedial measures enumerated in Section 42106 through the Department of Homeland Security. As Chairman DiBella’s statement noted, these include the authority to impose fines and, in some cases, bar foreign-flag vessels from calling at U.S. ports entirely. These are significant remedies with substantial commercial implications for affected parties.

The FMC’s Position on Monitoring Foreign Regulations

The Commission’s statement emphasized its ongoing vigilance: “The FMC is invested in the protection of U.S. cargo and closely monitors regulations or practices of foreign governments that could result in conditions unfavorable to shipping in the foreign trade of the United States.” This language suggests the FMC is actively evaluating whether international environmental frameworks—including the IMO’s Net-Zero Framework—could trigger its enforcement authority.

PRECEDENT FOR ENFORCEMENT

While the FMC’s “unfavorable conditions” authority has historically only been invoked sparingly, recent FMC investigations initiated under Section 42101 show there is significant potential for enforcement when the Commission determines that foreign practices affect U.S. shipping interests.

Historically, the FMC has used these provisions in response to restrictive practices by foreign governments affecting port access, cargo handling, and carrier operations. Notable examples include actions against countries whose port authorities imposed discriminatory fees or whose regulations were perceived to exclude U.S.-flag carriers from certain trades. The Commission has also employed these authorities in response to anticompetitive practices by state-owned carriers.

The Ocean Shipping Reform Act of 2022 (OSRA 2022) significantly expanded the FMC’s enforcement toolkit and demonstrated Congressional intent to empower the Commission to take more active enforcement action. While OSRA 2022 primarily addressed concerns regarding detention and demurrage practices during the COVID pandemic and their impact on cargo interests, the statutory expansion reflects a broader trend toward enhanced FMC enforcement that likely informs the Commission’s current posture.

IMPLICATIONS FOR FUTURE INVESTIGATIONS

The FMC’s involvement at MEPC 84 and its explicit invocation of Sections 42106 and 42107 carry significant implications for future regulatory enforcement.

Expanded Scope of “Unfavorable Conditions”

The FMC’s characterization of international environmental regulations as potentially creating “unfavorable conditions” represents a significant expansion of the traditional scope of these provisions. If the Commission proceeds to investigate or take action based on the costs imposed by international climate frameworks, and the practice is unchallenged in court, it would establish new precedent for what constitutes an unfavorable condition triggering FMC jurisdiction.

Potential Investigation Triggers

Based on the FMC’s statements, stakeholders should anticipate potential investigations related to: (1) implementation of IMO environmental levies or carbon pricing mechanisms that affect costs in U.S. trade; (2) differential treatment of vessels from certain flag states in connection with environmental compliance; (3) practices by foreign governments or port authorities that condition market access on environmental compliance in ways that affect U.S. commerce; and (4) any regulatory framework perceived as imposing disproportionate burdens on vessels serving U.S. trade lanes.

Heightened Carrier Scrutiny

Foreign-flag carriers operating in U.S. trades may face increased scrutiny regarding how they implement international environmental requirements and allocate associated costs. Carriers should expect the FMC to examine whether environmental surcharges or operational changes could be characterized as unfavorable conditions under the statute.

PROTECTING YOUR INTERESTS: GUIDANCE FOR STAKEHOLDERS

Given the FMC’s evolving enforcement posture, stakeholders across the maritime industry should take proactive steps to protect their interests.

For Shipping Interests

Vessel owners and vessel operators should: (1) Review and document the basis for any environmental-related surcharges or rate adjustments to demonstrate they are cost-based and applied consistently; (2) Ensure compliance with FMC tariff filing requirements and maintain clear communication with commercial partners regarding environmental costs; (3) Monitor FMC rulemaking and enforcement actions for signals of regulatory priorities; (4) Develop internal compliance protocols that anticipate heightened regulatory scrutiny; and (5) Engage proactively with industry associations and the FMC’s rulemaking processes to ensure their perspectives are represented.

For Shippers and Beneficial Cargo Owners

Shippers and cargo owners should: (1) Monitor developments in international environmental regulations and assess how they may affect transportation costs and service availability; (2) Review contracts and tariff provisions related to environmental surcharges to ensure clarity and compliance with FMC requirements; (3) Understand the FMC complaint process and evaluate whether any shipping interests practices raise concerns under applicable regulations; and (4) Engage with the FMC’s rulemaking processes to ensure their perspectives are represented in policy development.

If You Are Targeted by an Investigation

If your organization becomes the subject of an FMC investigation under Sections 42101 – 42109, consider the following steps:

Immediate Response: Engage experienced maritime regulatory counsel immediately upon receiving notice of an investigation. Preserve all documents and communications that may be relevant to the inquiry. Conduct an internal assessment to understand the factual basis for the investigation and identify potential exposure.

Cooperation Strategy: Develop a strategy for engagement with FMC staff that balances cooperation with protection of legal rights. Respond to information requests thoroughly and in a timely manner, but ensure responses are appropriately scoped and do not inadvertently expand the investigation. Consider whether voluntary disclosure of certain information may be advantageous.

Legal Defenses and Arguments: Identify and develop potential legal positions, which may include: analyzing whether the alleged conditions constitute “unfavorable conditions” under the statute; demonstrating that costs are reasonably related to legitimate compliance requirements; showing consistent application of environmental measures; or examining the scope of FMC jurisdiction over the conduct at issue.

CONCLUSION

Chairman DiBella’s participation at MEPC 84 and the FMC’s explicit invocation of its “unfavorable conditions” authority signal a potentially significant shift in U.S. maritime regulatory policy. By engaging directly in international climate negotiations and referencing its enforcement authority, the FMC has indicated that environmental regulations affecting U.S. trade may be evaluated under its statutory framework.

Stakeholders should closely monitor developments as the IMO’s environmental framework evolves and the FMC’s enforcement posture becomes clearer. Proactive compliance efforts, careful documentation, and early engagement with regulatory counsel can help organizations navigate this uncertain environment and protect their commercial interests.

Sean Pribyl is a partner with Holland & Knight in Washington, D.C. who advises on U.S. Coast Guard (USCG) matters, global shipboard investigations and delivers practical, business-focused counsel on maritime and international trade regulatory compliance. Before becoming a trusted advisor to maritime and energy companies doing business in the U.S. and globally, he served as a USCG attorney (JAG), U.S. Department of Justice (DOJ) Special Assistant U.S. attorney and senior claims executive with the world’s largest protection and indemnity (P&I) club in Norway.

Michael Amy is a maritime and trade associate in Holland & Knight’s Washington. D.C. office. Mr. Amy previously served as counsel to the chair and commissioner of the Federal Maritime Commission (FMC).

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