Mavroudis Global Transportation & Logistics

Federal Maritime Commission further deregulates service contracts

April 20, 2021

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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.

When the rule change was proposed in October, then-FMC Chairman Michael Khouri saw it as one of many made recently by the agency to ease administrative burdens on the container shipping industry while still keeping the FMC’s mandate to preserve competition within U.S. international trade.

Also prompting the rule change was the “positive response” of the container-shipping sector to temporary service contract filing relief provided by the agency over the past year to minimize COVID-19-related impacts to the supply chain. That relief expires on June 1.

“As a result of this experience, the commission determined to update the filing requirements to better reflect contemporary business practices,” the FMC announced on Monday. “Additionally, these changes will set conditions that allow ocean carriers to contemplate new ways to make their services available to shippers.”

The FMC received eight comments, including from the National Industrial Transportation League (NITL), a shipper group, and the World Shipping Council, which represents ocean carriers, both of which generally supported the rule change. NITL emphasized, however, that FMC should closely monitor how contracts are filed going forward for signs of abuse of the new flexibility by ocean carriers.

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.

In response, the FMC stated that to the extent that delayed filing increases the risk of carrier abuse of the contracting process, “the commission believes that in line with NITL’s request, increased commission monitoring of carrier contracting practices and the use of Commission and private enforcement tools to address prohibited conduct will help deter such conduct and mitigate its harm if it does occur.”

The agency is also including a provision in the regulation that makes it clear that failing to timely file a service contract or an amendment to it “will not affect the applicability of the contract or amendment to shipments received on or after the effective date, even if those shipments were received more than 30 days before the carrier files the contract or amendment.”

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