Port of long beach

MSC at the Port of Long Beach in August 2019. Photo: Port of Long Beach

U.S. Maritime Regulator Probing Legality of Carriers’ Congestion Surcharges

Mike Schuler
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August 4, 2021

The U.S. Federal Maritime Commission has requested answers from eight ocean carriers regarding congestion-related surcharges they have either implemented or announced.

The FMC says the information request is part of an expedited inquiry into the timing and legal sufficiency of ocean carrier practices with respect to the surcharges. The action is being taken in response to communications received by the FMC from “multiple parties” reporting that the carriers are improperly implementing surcharges.

The eight companies that have been requested to provide information to the FMC’s Bureau of Enforcement (BoE) are CMA CGM, Hapag-Lloyd, HMM, Matson, MSC, OOCL, SM Line and Zim. The FMC said each has been identified as having recently implemented or announced congestion or related surcharges.

The BoE has given the carriers until August 13, 2021 to provide details that “confirm any surcharges were instituted properly and in accordance with legal and regulatory obligations”.

Ocean carriers are subject to specific requirements related to tariff changes or rate increases, including providing a 30-day notice to shippers and ensuring that published tariffs are clear and definite.

In reviewing the responses, the FMC will determine if surcharges were “implemented following proper notice; if the purpose of the surcharge was clearly defined; if it is clear what event or condition triggers the surcharge; and is it clear what event or condition has been identified that would terminate the surcharge”.

The FMC has the authority to initiate enforcement actions for any improperly established tariffs.

“The COVID-related spike in demand for imports has pushed cargo rates to record highs,” said Chairman Maffei. “Now, we hear increasing reports of ocean carriers assessing new additional fees, such as ‘congestion surcharges,’ with little notice or explanation.”

“The congestion is due mostly to the tremendous volume of traffic coming from ocean carriers and through ports to satisfy the record demand for imports. Far from being a sudden occurrence or isolated to a port or geographical area, congestion of the freight transportation system is everywhere and has been going on for many months. It seems to me that these factors would already have been included into the record high rates charged by the carriers,” added Chairman Maffei. “As Chairman, I want to know the carriers’ justifications for additional fees and I strongly support close scrutiny by the FMC’s Bureau of Enforcement aimed at stopping any instance where these add-on fees may not fully comply with the law or regulation.”

The information request comes amid a wider FMC investigation into challenges facing the ocean transportation supply chain brought on by the COVID-19 pandemic, as well as heightened scrutiny of carriers’ detention and demurrage practices.

Last month, President Biden issued an executive order directing over a dozen federal agencies, including the FMC, to take action to promote competition in the American economy and urge a crack down on anti-competitive practices.

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