Volume 23, Number 10
October 2, 2019
Oakland, California
SIGNALS™ provides detailed information on the regulations and activities of the US Federal Maritime Commission (FMC), and related developments in the ocean freight industry. For past issues, please consult our index.
Signals™ Headlines - October 2, 2019

FMC Seeks Comments on Proposed Demurrage and Detention Rule

The Federal Maritime Commission issued its Docket 19-05 Interpretive Rule on Demurrage and Detention under the Shipping Act and seeks public comment by October 31, 2019. This notice of proposed rulemaking provides a new interpretation of the Shipping Act and provides guidance on to what the FMC will consider in assessing whether a demurrage or detention practice is unjust or unreasonable.

The Commission’s proposed rule would apply to practices and regulations relating to demurrage and detention for containerized cargo only, and not to breakbulk or ro/ro shipping. For purposes of this rule, demurrage and detention would include any charges, including “per diem,” assessed by ocean common carriers, marine terminal operators or NVOCCs related to the use of marine terminal space or shipping containers, not including freight charges. It defines “demurrage and detention” broadly to encompass all charges customarily referred to as demurrage, detention, or per diem, however defined. The proposed rule makes clear that it applies to charges related to shipping containers, not other equipment, such as chassis.

The Shipping Act Section 41102(c) explicitly states: “A common carrier, marine terminal operator, or ocean transportation intermediary may not fail to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property.”

In assessing the reasonableness of demurrage and detention practices and regulations under the new interpretive rule the FMC will consider the extent to which demurrage and detention are serving their intended purposes as financial incentives to promote freight fluidity. In its commentary on the new interpretive rule the Commission noted its Fact-Finding Investigation No. 28 concluded “the primary purposes of demurrage and detention are to serve as financial incentives to encourage the productive use of assets (containers and terminal space) and promote optimal cargo velocity through marine terminals.” The new rule emphasizes the “incentive principle” for demurrage and detention will be utilized in assessing the reasonableness of these practices and regulations.

Under the new interpretive rule, the FMC will consider notice of cargo availability provided by carriers and terminal operators, including the type of notice, to whom notice is provided, the format of notice, method of distribution of notice, the timing of notice, and the effect of the notice. The existence and accessibility of policies implementing demurrage and detention practices and regulations, including dispute resolution policies, will also be considered. These policies must be provided in “transparent terminology” in FMC tariffs.

Interested parties are invited to submit comments via email to secretary@fmc.gov – include in the subject line: “Docket 19-05, Demurrage & Detention Comments.” Comments should be attached to the email as a Microsoft Word or text-searchable PDF document. Only non-confidential and public versions of confidential comments should be submitted by email. Confidential comments may be submitted by mail to Rachel E. Dickon, Secretary, Federal Maritime Commission, 800 North Capitol Street NW, Washington, DC 20573–0001.

New Procedures for OTI License Hearings Proposed by FMC

The Federal Maritime Commission issued its Docket 19-04 to seek is seeking public comments on proposed modifications to the hearing procedures governing the denial, revocation, or suspension of an ocean transportation intermediary (OTI) license. The revised hearing procedures are intended to align more with other Commission hearing procedures, ensure a more streamlined process and fulfill the need for more detailed procedural requirements.

Commission is proposing to replace its current hearing procedure with a modified version of the formal procedures for the adjudication of small claims in Subpart T of the Commission’s Rules of Practice and Procedure (46 CFR part 502). These hearings, like those in Subpart T, would be conducted by the Commission’s Administrative Law Judges (ALJ). Using a modified form of the Subpart T procedures would ensure a more streamlined procedure which would allow the respondent just 25 days from the service of the complaint to submit a reply to the Commission. Under the current procedures these hearings must be conducted by an FMC appointed Hearing Officer and this requirement along with the related reporting procedures has caused substantial delays. Since 2015, two hearings have been conducted under the current required procedures and the process for both took over 150 days to complete.

Interested parties are invited to submit comments by October 3, 2019 via email to secretary@fmc.gov – include in the subject line: “Docket 19-04, Comments on Hearing procedures governing the denial, revocation, or suspension of an OTI license.” Comments should be attached to the email as a Microsoft Word or text-searchable PDF document. Only non-confidential and public versions of confidential comments should be submitted by email. Confidential comments may be submitted by mail to Rachel E. Dickon, Secretary, Federal Maritime Commission, 800 North Capitol Street NW, Washington, DC 20573–0001.

FMC Plans to Change Enforcement Procedures

The Federal Maritime Commission plans to move forward with the publication of a direct final rule that would restructure how the agency oversees enforcement matters. The Commission met in closed session to discuss revisions to the delegated authority of the Bureau of Enforcement (BoE) and enforcement procedures. Commissioners voted to issue a Request for Comments on a Direct Final Rule creating a new enforcement process for BoE, especially regarding Commission oversight. The revised procedures will:

  • Provide notice to the subjects of investigations that BoE intends to recommend that the Commission initiate enforcement proceedings and allow them an opportunity to respond before BoE submits those recommendations.
  • Require Commission approval before formal or informal enforcement action is taken; and
  • Require Commission approval of any proposed informal compromise agreements.

These changes would insert the FMC Commissioners into the investigation and enforcement process to a much greater degree. Barring significant adverse comments to the changes, the rule and changes will become final 75 days from its publication in the Federal Register.

An effective date for this change has not yet been set. At this writing an official FMC Docket number has not yet been assigned and the direct final rule has not been published in the Federal Register. Once published, interested parties will be invited to submit comments via email to secretary@fmc.gov The FMC Reading Room at https://www2.fmc.gov/readingroom/ will provide access to the Docket.

FMC to Amend Carrier Service Contract Regulations

The Federal Maritime Commission announced plans to amend its regulation of ocean carrier service contracts by issuing a notice of proposed rulemaking to exempt ocean carriers from publishing essential terms of service contracts. Ocean carriers will continue to be required to file complete service contracts, amendments and notices into the Commission’s SERVCON database, but will no longer be required to publish essential terms of their service contracts and make these available to the shipping public. The essential term publications are limited to five key service contract terms: origins, destinations, commodities, the minimum volume, and the service contract duration.

FMC’s decision on this issue came at a recent meeting where Commissioners granted in part a petition filed by the World Shipping Council (Petition P3-18) in September 2018 seeking regulatory relief from service contract filing requirements of the Shipping Act, 46 U.S.C 40502. The Commission agreed to the part of the petition that requested the Commission exempt ocean carriers from the essential terms publication requirement, but denied the part of the petition that sought exemption from service contract filing requirements because the agency found it was unable to determine such an exemption would not be detrimental to commerce. FMC’s service contract regulations are provided 46 CFR Part 530, which will be updated in due course to reflect the elimination of the essential terms publication requirement.

An effective date for this change to FMC regulations has not yet been set. An official FMC Docket number has not yet been assigned and a rule has not been published in the Federal Register. Once published, interested parties will be invited to submit comments via email to secretary@fmc.gov The FMC Reading Room at https://www2.fmc.gov/readingroom/ will provide access to the Docket.

Transpacific Eastbound Carriers File GRIs Effective October 15 and November 1, 2019

Several leading carriers serving the Trans Pacific container trades have recently updated their respective tariffs to include new General Rate Increases (GRIs) effective October 15, 2019, including American President Lines (APL), CMA CGM, COSCO, Evergreen, Hapag Lloyd, Hyundai Merchant, Ocean Network Express (ONE), and Yang Ming. See table below for GRI amounts per 40ft container; GRI amounts for all other container sizes are as per formula. The October 15th GRIs will be the twentieth GRI of 2019 for the East Asia/USA trade lane.

TRANSPACIFIC EASTBOUND (Asia to USA)
GENERAL RATE INCREASE (GRI)
Effective October 15, 2019
Carrier
in USD, per 40ft ctr
APL
1000
CMA CGM
1000
COSCO (see note 1)
800
Evergreen
1000
Hapag Lloyd
700
Hyundai
1000
ONE
1000
Yang Ming
1000

NOTE 1: COSCO GRIs apply on all cargo moving under service contracts only.

Some carriers updated their tariffs to include new General Rate Increases (GRIs) effective November 1, 2019, including American President Lines (APL), CMA CGM, COSCO, Evergreen, Hapag Lloyd, Hyundai Merchant, Ocean Network Express (ONE), and Yang Ming. See table below for GRI amounts per 40ft container; GRI amounts for all other container sizes are as per formula. The November 1st GRIs will be the twenty-first GRI of 2019 for the East Asia/USA trade lane.

TRANSPACIFIC EASTBOUND (Asia to USA)
GENERAL RATE INCREASE (GRI)
Effective November 1, 2019
Carrier
in USD, per 40ft ctr
APL
1000
CMA CGM
1000
COSCO (see note 1)
800
Evergreen
1000
Hapag Lloyd
700
Hyundai
1000
ONE
1000
Yang Ming
1000

NOTE 1: COSCO GRIs apply on all cargo moving under service contracts only.

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