Maritime official wants more control over ocean carrier contracting

Container ships docked at the Port of Oakland

The U.S. Federal Maritime Commission has had unprecedented support from Congress and the White House for holding the container shipping industry accountable to its customers, but the agency’s top official says more oversight is needed.

Speaking at the National Industrial Transportation League’s (NITL) Transportation Summit on Thursday, FMC Chairman Daniel Maffei acknowledged he may have been too optimistic about the ocean carriers’ ability to self-regulate, particularly as it relates to late fees associated with container demurrage and detention.

“I will admit to being a bit naïve,” Maffei said. “I thought our [interpretive rule on demurrage and detention, issued in April 2020] was pretty simple to understand: If the fee incentivizes cargo movement, it’s appropriate. If it doesn’t, it isn’t.”

In April 2022, container operator Hapag-Lloyd was ordered by the FMC to pay $822,000 for failing to meet that demurrage/detention incentive principle. The agency is also considering a new rule on demurrage and detention billing practices that could apply to marine terminal operators and non-vessel-operating common carriers as well as the vessel operators.

“We needed to get tougher, particularly on the enforcement side,” Maffei said. “I think that was what was missing; we didn’t have the credibility. Now our enforcement efforts are turned up in order to convince the carriers that we’re not going to let them get away with it.”

Making contracts fair

Lori Fellmer, VP of logistics at chemical company BassTech International and chair of NITL’s ocean committee, pointed out to Maffei at the conference that carriers’ market power has led the carriers to start insisting on minimum volume requirements before even considering entering into a contract with potential customers.

“When I see this, I fear that the concept of reliable common carriage of availability and accessibility to ocean transportation is being removed from all but a select group of shippers,” Fellmer said.

“We’ve gotten so many complaints of shipping lines breaking their contracts,” Maffei responded. “When we do look into them, unfortunately we find that most of the time the carrier, while they may have violated the spirit of the contract, the actual letter of the contract somehow gets them out of it.

“I do think we have a role to play in making sure they’re more clear, and that shippers know what’s guaranteed and what isn’t. That to me seems to be a place where we should apply some sort of ‘shippers’ bill of rights,’ where the contract has to be clear enough that you know exactly what is guaranteed. But that’s a longer process.”

Competition and antitrust

NITL’s general counsel, Karyn Booth, an attorney at Thompson Hine, said that while carrier vessel sharing agreements can be pro-competition and are generally supported by NITL’s members, shippers fear that capacity management coordinated among carriers could be going on behind the scenes and influencing rates. “There’s really no way to know what’s going on,” she told Maffei.

“What I would like to see — and this is just my opinion — that in addition to [ocean reform legislation currently being considered by Congress], an enhancement of some of our ability to be the watchdog of antitrust.”

While Maffei does not want to see vessel alliances eliminated, he said, he does want the FMC to “have more of an affirmative ability to delay or hold up an alliance if we feel there might be an issue. There will always be an opportunity for those alliance members to go to court and have a court override the FMC if they feel we acted beyond our authority.”

He also wants to see the alliance agreements that are filed with the commission have an expiration date.

“We can challenge an alliance in court at any time, but the fact is, they never have to resubmit it.”

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