FMC HEARING: ENFORCEMENT INCREASES AND FINAL RULE FOR UNREASONABLE CARRIER CONDUCT

At a February 28^th congressional hearing, the FMC confirmed the final rule surrounding unreasonable carrier conduct can be expected to arrive in “the next couple of months.” This rule will come during a time of increased enforcement by the FMC as they have been closely watching surcharges related to the situations in both the Red Sea and Panama Canal. FY 2022 saw the FMC collect approximately $2 million in fines with FY 2023 resulting in more than $2.8 million. With this increase the FMC states, “this continues to be the most intense period in the agency’s 54-year history.”

FINAL RULE FOR UNREASONABLE CARRIER CONDUCT

The goal of the rule on unreasonable carrier conduct is to define the factors considered during investigations into whether an ocean carrier violates shipping regulations. There was a rule proposed in 2022 but it lacked congressional intent and wouldn’t have addressed the main issue of carriers favoring imports over exports. Carriers have continued to display a clear preference for shipping imports to the US and then returning to foreign ports without loading (often agricultural) US exports. The FMC is not rushing the new rule to avoid replicating the issues seen by the 2022 proposal. While they do want to “avoid any unintended consequences” with this new rule, the FMC also needs it to be “bulletproof” if challenged in court.

MONITORING NEW SURCHARGES IN PANAMA AND RED SEA

Outside of the new rule, there was discussion of the FMC monitoring new surcharges by carriers as a response to the scenario playing out in the Red Sea. Shippers have been questioning whether the charges are justified, coinciding with a “lack of transparency” from the ocean carriers.

The bottleneck at the Panama Canal and the associated charges seen by shippers were also brought up during the hearing. The FMC will be conducting an inquiry on Panama’s handling of the issue to see if they can provide any assistance “without overstepping (their) authority.” Capacity at the Panama Canal has gone from 38 to 24 ships per day and that number could continue to decrease if water levels do not improve.

POSITIVE REACTIONS TO DEMURRAGE AND DETENTION RULE

In better news, the FMC has received a generally positive response from both exporters and truckers regarding the February 23^rd rule outlining demurrage and detention billing requirements. The rule should be effective in eliminating billing abuses, but the FMC is not ruling out the possibility of another rule to ensure the outlook remains optimistic.

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