The 1998 Ocean Shipping Reform Act redefined the Federal Maritime Commission from a regulator of tariffs to one of the shipping industry. With ocean carriers winning the privilege of entering into confidential service contracts, the commission’s new role was monitoring the industry to ensure all carriers, shippers and intermediaries played by the rules, and none could exert economic power that could distort the marketplace.
The FMC’s authority hasn’t been expanded since then, but the commission has shown its willingness to use its authority, and where it can, to bring the spirit of the law in line with changing market conditions.
Last year was a case in point. In March, the commission launched its most comprehensive investigation to date after shippers accused carriers of artificially skewing rates and vessel capacity to recoup the $15 billion in losses the industry suffered in 2009. In September, the FMC ordered closer monitoring of the two major discussion groups — the Transpacific Stabilization Agreement and the Westbound Transpacific Stabilization Agreement — in the trans-Pacific trade lanes.
And the commission wasn’t through. Earlier this month, the commission ordered three global vessel alliances to give more timely reports to the commission on available capacity, and on changes in capacity.
With these actions well within the commission’s regulatory authority, the commission is going still further. It is encouraging shippers and carriers to talk out their grievances through the commission’s office dedicated to alternative dispute resolution.
The law says disputes between shippers and carriers must be settled in court, but litigation can be a costly and time-consuming activity, especially for small shippers. As an alternative, FMC Chairman Richard A. Lidinsky Jr. is promoting the use of “rapid response teams” to broker contract disputes before they end up in court.
Lidinsky also sees the commission as a forum to get shippers and carriers talking to one another through discussion groups on best practices, and on model service contracts.
None of this is spelled out in the Shipping Act. In 2010, the FMC proposed that Congress amend the law to give the commission the legal authority to mediate contract disputes. A bill to put the changes into law died at the end of the 111th Congress, and it’s uncertain if the new Congress will introduce the same legislation.
The Shipping Act does give the commission the authority to modify regulations if the changes result in greater competition in the marketplace. The FMC has used that authority to put non-vessel-operating common carriers on an equal footing with vessel operators.
The 1998 law explicitly excluded NVOs from entering into service contracts with customers, but in September 2005, the FMC approved regulations allowing NVOs and their customers to conclude service “arrangements.” Last year, the commission said it was ready to go further.
NVOs for years have chafed under regulations that force them to maintain rate tariffs. They complain that it’s a costly, needless activity because only a small fraction of all cargo moves under tariff rates. NVOs raised the issue during the commission’s deliberations on contracting, but the commission dismissed the petition.
The NVOs tried again last year, and the commission responded more favorably. A new regulation easing the tariff-filing burden is expected within the next two or three months.
Contact R.G. Edmonson at email@example.com.