The FMC Announces New Rules! Crackdown on Shipping Companies’ Unreasonable Refusals to Provide Space!

The U.S. Federal Maritime Commission (FMC) has issued a new regulation aimed at protecting shippers during negotiations with shipping companies. This regulation, set to be implemented on September 23, includes the following key points:

• Prevention of Refusing Booked Containers: Shipping companies are prohibited from unreasonably refusing to provide space for booked containers. This measure ensures that shippers’ cargo can be shipped on time, reducing delays and financial losses caused by unilateral refusals by carriers.
• Shipper Protection: Shippers will receive more protection during negotiations. For instance, if shippers make reasonable shipping requests during negotiations, shipping companies must provide reasonable explanations and make efforts to accommodate these requests rather than arbitrarily rejecting them.
• Transparency: The regulation requires shipping companies to be more transparent in handling bookings and shipping requests. Carriers must clearly inform shippers about the status of their bookings, the availability of space, and any reasons that might lead to a booking being refused.
• Implementation Date: This regulation is scheduled to take effect on September 23.
  These measures aim to increase fairness and transparency in the international shipping market, ensure the protection of shippers’ rights, and promote more reliable and efficient shipping services.

The FMC has issued a final rule defining what constitutes an “unreasonable refusal to deal or negotiate with respect to vessel space.” This rule establishes the standards for assessing whether the refusal by ocean common carriers (VOCCs) is unreasonable and thus violates federal regulations. Specifically, it distinguishes between refusals occurring during the “negotiation” phase (governed by 46 U.S.C. 41104(a)(10)) and those occurring during the “performance” phase (under 46 U.S.C. 41104(a)(3)).

FMC Publishes Final Rule on Unreasonable Refusal to Deal

The FMC emphasizes that not all refusals by carriers will be considered violations. Each claim made under these provisions will be evaluated on a case-by-case basis, ensuring that the unique facts and circumstances of each case are taken into account. If the carrier can demonstrate a reasonable basis for its refusal, it will not be found to have violated the law.

The rule will require carriers to submit a confidential annual export policy document to the FMC. This documented export policy should include information about pricing strategies, services offered, equipment supply strategies, and descriptions of the markets served. This will help in assessing allegations of unreasonable conduct by carriers.

The rule will take effect 60 days after its publication in the Federal Register. However, the requirement for carriers to submit their annual export policy to the FMC is delayed until it is approved by the Office of Management and Budget. The FMC will announce the effective date for this requirement once approval is obtained.

Maritime law consulting firm FourOneOne stated, “During the pandemic, we saw many cases where BCOs had contracts, but carriers refused to allocate contract space and placed them on the spot market to gain additional profits.” Under the new regulations, shippers will be protected from such practices.

However, for shipping companies, the implementation of the new regulations will increase operational costs and compliance challenges. The requirement for carriers to submit confidential annual export policy documents, in particular, could expose their trade secrets and market competition strategies. Hapag-Lloyd, the world’s fifth-largest container shipping company, expressed concerns that this could place companies at a significant competitive disadvantage. The FMC dismissed this concern, insisting that the required export information will help determine whether the behavior of ocean carriers is reasonable.

Overall, the new regulations issued by the FMC are significant for maintaining fair competition in the maritime market and protecting shippers’ rights. They will effectively curb unreasonable refusals by carriers, promoting the healthy development of the maritime market. At the same time, shipping companies will need to enhance their compliance awareness to ensure their actions meet the new requirements, thereby avoiding unnecessary legal risks and commercial losses.

The specific developments are pending, and further details will be announced.