FMC needs more staff to enforce ocean shipping reforms, official says

The Federal Maritime Commission may not have enough staff to properly enforce ocean shipping reforms enacted in June, an official at the agency says.

“We are resource-strained right now,” said FMC Commissioner Carl Bentzel, speaking Monday during a webinar on the Ocean Shipping Reform Act of 2022 (OSRA) and its effect on global supply chains.

Bentzel said the FMC has six investigators to oversee $6 trillion in containerized cargo value and affiliated intermodal services and economic activity — one investigator for every trillion dollars of commerce. In comparison, he said, the U.S. Securities and Exchange Commission has 150 investigators for every trillion dollars of securities and financial instruments that it regulates.

While OSRA authorized increased FMC funding to help boost staff ($32.9 million in 2022 to $49.2 million in 2025), hiring takes time.

“We have major rulemakings we’ll be starting in the short term but very few people to do the work, so we’re wrestling with that,” Bentzel said at the webinar, hosted by Capital Link. “We’ll have to prioritize how we go through the legislation.”

The first of those rulemakings will be on demurrage and detention and will be aimed at further defining prohibited practices by common carriers, marine terminal operators, shippers and ocean transportation intermediaries regarding how demurrage or detention charges are assessed.

Demurrage and detention — late fees assessed by ocean carriers when shippers do not move loaded containers off the terminals or get empties returned in a prescribed time — has “been a source of tension between carriers and customers in one form or another for a long time,” said John Butler, president and CEO of the World Shipping Council, who joined Bentzel on the panel and represented the container carriers.

“I do think that some clear rules of the road will make a difference in improving that [carrier-shipper] relationship.”

Butler also said it is critical to keep in mind during the rulemaking process that demurrage and detention penalties exist to keep cargo moving. “So we’re going to look for a balanced rulemaking that I think will go a long way to reducing some of the tension among the commercial players.”

Neither Butler nor Bentzel agreed with messaging from other Biden administration officials — and notably, from President Joe Biden himself — that OSRA was an antidote to alleged collusion among ocean carriers, which purportedly was causing supply chain congestion and driving up inflation.

“OSRA is designed to do specific things,” Butler said. “The market will be driven by supply and demand, so as we see inflationary pressures, as we see the possibility of a recession, you can only think that that’s going to reduce demand and that will help things get back into [balance].”

Bentzel said that despite talk from economists about a recession, “when I talk to the ocean shipping companies about their volumes, they’re not telling me about any recession. I see a continuation of [container] volumes through the balance of this year, and it may even get worse as we ramp up for the traditional high-volume [fall peak] season. It’s tough to say we’re going to have a recession when people keep on buying.”

Butler said that a “silver lining” from the media attention paid to supply chain disruptions over the past two years has been that the general public now notices where products come from and how they get here.

In addition, he asked, “Are we as a society willing to pay for a system that can handle any surge no matter how huge and how protracted? I think we’ve already seen the answer to some extent as investment in warehouses has already peaked and gone back down. So as we have this policy debate, people have to ask, ‘What do I really need, and what am I willing to pay for?’”

Related articles:

• Maritime official wants more control over ocean carrier contracting
• Buttigieg vows to fight container-rate inflation
• New legislation would strip ocean carrier antitrust protections

Click for more FreightWaves articles by John Gallagher.

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