Background
On July 22, The Commercial Daily reported that the U.S. Federal Maritime Commission (FMC) has announced a new regulation aimed at enhancing transparency and fairness in the shipping industry. This rule mandates that shipping companies must document and clarify their policies regarding the handling of export cargo, promptly inform shippers of any changes to schedules or services, and ensure sufficient time is provided for the shipping of export goods. The rule, which seeks to level the playing field between exporters and liner operators, will be officially implemented on September 23, 2024.
Key Provisions of the New Rule
1. Prohibition of Unreasonable Practices:
Shipping companies are prohibited from neglecting contractual obligations, unreasonably refusing to load cargo, arbitrarily offloading containers, and refusing to negotiate contract terms with customers regarding bookings.
Different stages of refusal will be regulated under specific legal provisions: 46 U.S.C. § 41104(a)(10) (negotiation phase) and § 41104(a)(3) (execution phase).
2. Case-by-Case Review:
The FMC will review claims and complaints on a case-by-case basis, considering specific circumstances and evidence before making decisions.
3. Annual Export Policy Report:
Shipping companies must submit a confidential annual export policy document to the FMC, detailing pricing strategies, service provisions, equipment supply strategies, and market descriptions. This allows the FMC to assess the reasonableness of these actions.
4. Reasonable Grounds for Refusal:
Not all refusals will be deemed illegal. If a shipping company can provide reasonable justification for refusing to negotiate or carry cargo, such actions will not be considered a violation.
Impact on Shippers and Shipping Companies
Positive Protection for Shippers:
This new rule offers substantial protection for shippers. During the pandemic, many shippers suffered economic losses due to shipping companies refusing to honor contracts. The FMC’s new regulation will help curb such practices, safeguarding shippers’ interests.
Operational Costs and Compliance Challenges:
The rule may increase operational costs and compliance pressures for shipping companies. The requirement to submit a confidential annual export policy document could lead to concerns about the potential leakage of trade secrets and market strategies, which might place companies at a competitive disadvantage.
Risks and Commercial Implications:
Despite these concerns, the FMC asserts that the submission of export information is crucial for assessing the reasonableness of shipping companies’ actions and ensuring fair competition in the market. Shipping companies will need to enhance compliance efforts to meet the new regulatory requirements and avoid potential legal and commercial risks.
Conclusion
The FMC’s new regulation is a significant step toward ensuring fair competition in the maritime market and protecting the legitimate rights of shippers. By deterring unreasonable refusals from shipping companies, the rule promotes orderly development within the shipping industry. At the same time, shipping companies must adjust their operational strategies and improve compliance to meet the new requirements, thereby avoiding the legal and commercial risks associated with non-compliance.
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