Industry News

FMC Commissioner Issues Fact-Finding Report

 

In March of 2020, the Federal Maritime Commission launched Fact Finding 29, an investigation into the impacts of COVID-19 and the global supply chain. The two-year investigation incorporated input from stakeholders across the supply chain from importers and exporters to shipping companies. Commissioner Rebecca Dye issued the final report in late May, which most notably included concerns over the high cost of shipping cargo and excessive demurrage and detention charges.

Though there has been discussion of anti-competitive behavior between ocean shippers, Dye concluded that this isn’t necessarily the case and is a result of supply and demand intertwined with COVID-19 and congestion in the supply chain:

“The Fact Finding Officer has concluded that… the current market for ocean liner services in the Trans-Pacific trade is not concentrated and the Trans-Atlantic trade is only minimally concentrated. Competition among ocean common carriers, among the three major alliances and among the members in each of these alliances, is vigorous. The market for ocean services remains highly contestable, particularly in the Trans-Pacific trade. Finally, the Fact Finding Officer concludes that although certain ocean transportation prices, especially spot prices, are disturbingly high by historical measures, those prices are exacerbated by the pandemic, an unexpected and unprecedented surge in consumer spending, particularly in the United States, and supply chain congestion, and are the product of market forces of supply and demand.”

With regard to demurrage and detention charges, Dye acknowledged the concern that carriers are not in full compliance with the FMC’s rulings on these fees. She states, “the Commission has moved forward on the Interpretive Rule on Detention and Demurrage and ensuring compliance by carriers with the ‘incentive principle’ embodied in the rule.” The incentive principle essentially states that detention and demurrage fees must facilitate freight fluidity.

In the 65-page report, Dye outlined 12 major recommendations addressing the complaints of shippers and the function of the global supply chain:

  • A new Commission “International Ocean Shipping Supply Chain Program”;
  • A rulemaking to provide coherence and clarity on Empty Container Return practices;
  • A rulemaking to provide coherence and clarity on Earliest Return Date practices;
  • Continued Commission support for the new FMC “Ocean Carrier Compliance Program” including a new requirement for ocean common carriers, seaports, and marine terminals to employ an FMC Compliance Officer;
  • An FMC Outreach Initiative to provide more information to the shipping public about FMC competition enforcement, service contracts, forecasting, and shippers associations, among other topics;
  • Enhanced cooperation with the federal agency most experienced in agricultural export promotion, the Department of Agriculture, concerning container availability and other issues;
  • A Commission Investigation into practices relating to the numerous charges assessed by ocean common carriers and seaports and marine terminals through tariffs;
  • A rulemaking to provide coherence and clarity on merchant haulage and carrier haulage;
  • A new “National Seaport, Marine Terminal, and Ocean Carrier Advisory Committee” to work cooperatively with the Commission’s National Shipper Advisory Committee;
  • A revival of the Export Rapid Response Team program as agreed by all ocean carrier alliance CEOs;
  • An FMC Supply Chain Innovation Teams engagement to discuss blank sailing coordination and information availability; and
  • A reinvigorated focus on the extreme supply chain equipment dislocations in Memphis railheads, other rail facilities, and other facilities around the country.

What happens next? The U.S. Senate passed the Ocean Shipping Reform Act of 2022 a few months ago, which if also passed by the House would increase the FMC’s regulatory authority. In the interim, Dye believes that shippers and ocean carriers should enter into more solid agreements that are clear, enforceable documents. In our eyes, like many of the proposed supply chain solutions, this is easier said than done.

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