FMC Deregulates on Ocean Carrier Service Contracts – Shippers Await Action on Fees
The Federal Maritime Commission (FMC) made a regulation move concerning ocean freight carriers. It’s actually a bit of deregulation when it comes to carriers filing service contracts. Maybe it would even be more accurate to say it’s an easing of regulation on filing service contracts.
John Gallagher – not the Gallagher who used to smash watermelons with mallets; his first name was actually Leo – reports in an American Shipper article:
The Federal Maritime Commission (FMC) will begin this year what it calls a “new era of flexibility” for service contract filing for container lines and their U.S. importer and exporter customers.
An amended rule that takes effect on June 2 will allow ocean carriers to file original service contracts with the agency up to 30 days after they go into effect. Current regulations require that they be filed with the FMC before an ocean carrier is allowed to receive and move cargo under the terms of that contract.
Reaction to Easing of Contract Filing Regulation
Shippers in general probably won’t mind this bit of deregulation. The flexibility does have the potential to improve service from carriers, allowing them to load shippers’ cargo faster after signing a contract. It doesn’t make the contract any less binding and shouldn’t decrease the FMC’s ability to review contracts to make sure carriers aren’t taking advantage of shippers. Ultimately, though, most shippers – especially small to medium shippers – are not likely to see any real difference from this deregulation.
Most in the international shipping industry – and the container shipping sector in particular – either view this bit of deregulation positively or with indifference. Gallagher’s article did, however, make note of the one dissenting opinion that was submitted to the FMC:
BassTech International, a raw materials supplier, was the sole commenter that opposed the change, asserting that “eliminating any regulation that will reduce transparency and meaningful Commission oversight of ocean carrier behavior will have a negative impact on U.S. businesses that rely on importing and exporting by ocean transportation,” according to the FMC.
Transparency, or the lack thereof, from carriers is something worth being concerned about. Carriers are notoriously opaque in their practices. However, I don’t believe there is much risk of this deregulation decreasing carrier transparency (and not just because it seems impossible for them to be less transparent). Contracts still must be filed and will be reviewed. This simply allows the contracts to go into effect faster.
Granted, I’m generally for less regulation rather than more when it comes to business. However, I do recognize the need for some regulation to prevent monopolies, stop unethical practices that would take advantage of consumers, and protect communities and environments in which businesses operate. There is regulation, which I believe should be put in place, that shippers have been waiting for from the FMC.
Shippers Waiting for Real FMC Action
For years, shippers have complained of unfair fees, especially detention and demurrage fees, from carriers and terminal operators. Unfair fees levied against shippers because of out-of-their-control factors such as congestion and limited operations due to Covid restrictions have been especially prevalent during the pandemic.
Meanwhile, U.S. exporters, especially in the agricultural sector, have been denied service by carriers so shipping lines could ship empty containers back to Asia faster to feed into the more profitable (for carriers) eastbound transpacific shipping routes.
While the FMC has talked a decent talk about investigating carrier practices and fees, shippers have seen almost nothing in terms of regulatory action. Probably the biggest bit of regulatory action the FMC has taken is to increase the frequency with which carrier alliances must report key trade data.
Shippers are still waiting for the FMC redress some of their complaints.