FMC Receives Fact Finding 29 Final Recommendations & Intermodal Equipment Report

The Federal Maritime Commission met in open session Wednesday to receive updates on:

• Fact Finding 29, International Ocean Transportation Supply Chain Engagement;
• Assessment of the People’s Republic of China’s Control of Container and Intermodal Chassis Manufacturing;
• the Vessel-Operating Common Carrier (VOCC) Audit Program; and,
• a Notice of Proposed Rulemaking on Carrier Automated Tariffs.

The Commission met in closed session pursuant to Commission regulations in 46 CFR § 503.73 to further discuss aspects of the VOCC Audit Program that involve proprietary information.

Fact Finding 29

Commissioner Rebecca Dye presented her Final Report of Fact Finding 29, “International Ocean Transportation Supply Chain Engagement”, a two-year investigation she is bringing to conclusion.  Commissioner Dye said she identified two major concerns of importers and exporters: the high cost of shipping cargo, and excessive demurrage and detention charges.

Based on her work, Commissioner Dye concluded that, though high by historical standards, freight rates reflected market forces of supply and demand in a supply chain challenged by the COVID-19 pandemic and an unprecedented surge in consumer demand. As to detention and demurrage, Commissioner Dye highlighted the Interpretive Rule of the Commission and how it is being enforced to address unreasonable detention and demurrage practices.

To help address these, and other identified issues, Commissioner Dye unveiled 12 new recommendations for the Commission to consider next week. This is the second set of recommendations developed from Fact Finding 29 Commissioner Dye has presented to the Commission. In July 2021, she issued eight Interim Recommendations that the Commission voted to accept and has implemented all that did not require legislative action.

Assessment of the People’s Republic of China’s Control of Container and intermodal Chassis Manufacturing

Commissioner Carl Bentzel briefed his colleagues about his Assessment of the People’s Republic of China’s Control of Container and intermodal Chassis Manufacturing, released in March.  Commissioner Bentzel reported that he found production of containers and chassis is dominated by three China-based manufacturers who collectively control almost 90% of the world’s supply of both intermodal containers and chassis. Commissioner Bentzel expressed concern about so heavily relying on essentially only one source for the equipment necessary for international trade to flow.

VOCC Audit Program

The Commission’s Vessel-Operating Common Carrier Audit Program plays an important role in engaging ocean carriers on matters related to detention and demurrage and how key shipping lines are serving the U.S. export market.  The VOCC Audit Program lead reported significant progress in helping approximately two dozen carriers of all sizes adopt a list of best practices issued in October 2021.  Ocean carriers continue to collect significant revenues in demurrage and detention fees and the Audit Team will use future meetings with the lines to probe the disparity between assessed and waived charges.

The Audit Team advised that while almost all 11 ocean carriers they are engaging on export issues have an export strategy, the robustness of those strategies varies from line to line.  Some companies have comprehensive service programs and view U.S. exports as an attractive business opportunity while others provide more rudimentary offerings.  The Audit Team also found that some non-pandemic related developments, such as the loss of key markets for wastepaper and scrap materials, have impeded the ability of U.S. companies to export.  The Audit Team is committed to identifying and addressing the complexities associated with the export trade to meet the critical goal of U.S. shippers having access to overseas markets.

Carrier Automated Tariffs

Two perennial and complementary goals of the Commission are improving transparency in business transactions while making certain regulatory requirements reflect best and current practices in the trade.  The Commission heard how six major changes to Commission rules contained in a Notice of Proposed Rulemaking (NPRM) on Carrier Automated Tariffs (Docket No. 21-03) will meet these objectives if adopted.

The Commission issued a NPRM on May 6, 2022, soliciting comments on whether ocean carriers should post their tariffs free of charge on their websites, if the definition of co-loading should apply only to less than container loads, and if documentation accompanying full container load shipments should be annotated with the names of all non-vessel operating common carriers with the cargo carried in a container. Three additional proposed changes would allow NVOCCs to cross-reference certain aspects of other carriers’ terms in their tariffs; clarify the ability of NVOCCs to reflect increases in certain charges passed through by other entities without notice; make other miscellaneous updates and clarifications to 46 Code of Federal Regulations Part 520.