Topic of the Week (5/17/24):
Taking inventory of industry news and catching up on a few things - it's the Captain's Log Edition!
The Maritime Professorᵀᴹ presents By Land and By Sea - an attorney breaking down the week in supply chain
with Lauren Beagen (Founder of The Maritime Professorᵀᴹ and Squall Strategiesᵀᴹ)
Let's dive in...
1 - Federal Maritime Commission Final Detention and Demurrage Rule - effective date May 28**
**waiting to see from the U.S. Courts of Appeals for the District of Columbia Circuit if World Shipping Council's petition will delay the effective date)
Reminder: Maritime Transportation Data Initiative (MTDI) Request for Information (RFI) - comments due June 17, 2024
2 - National Shipper Advisory Committee next meeting is May 20.
Email NSAC@fmc.gov to register and receive the link. (This is the federal advisory committee to the FMC.)
3 - Peloton Interactive filed a lawsuit against Flexport at the Federal Maritime Commission. This case seems to be related to store door moves and the FMC's incentive principle for D&D.
4 - FMC Commission Meeting: May 29
FMC's YouTube page (for live stream):
https://www.youtube.com/channel/UCwKTAlGGHIA0xcN3bDt_Uqg
5 - The Fort McHenry Limited Access Channel has reopened to commercial vessels heading toward the Helen Delich Bentley Port of Baltimore (and elsewhere) to an available depth of 45 feet!
And the National Transportation Safety Board initial report of the MV Dali allision has been released:
https://www.ntsb.gov/investigations/Pages/DCA24MM031.aspx
6 - National Maritime Day is this Wednesday, May 22
Maritime Administration (MARAD) live stream:
https://www.youtube.com/watch?v=8O5DTTHT-uQ
7 - The White House Fact Sheet on USTR Section 301 Tariffs:
https://www.whitehouse.gov/briefing-room/statements-releases/2024/05/14/fact-sheet-president-biden-takes-action-to-protect-american-workers-and-businesses-from-chinas-unfair-trade-practices/
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:12):
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oh, oh, oh.
Thank you, I'm living for whatit looks like.
It's been a while since we'vedone a Captain's Log edition.
You know a day where we just gothrough random industry news,
(01:03):
take inventory of what's goingon out there.
So that's what today is theCaptain's Log Edition.
Hi, welcome to, by Land and bySea, an attorney breaking down
the weekend supply chainpresented by Maritime Professor
me.
I'm Lauren Began, founder ofthe Maritime Professor and
Squall Strategies, and I'm yourfavorite maritime attorney.
Join me every week to walkthrough both ocean transport and
(01:25):
surface transport topics in thewild world of supply chain.
As always, the guidance isgeneral and for educational
purposes only.
It should not be construed tobe legal advice and there is no
attorney-client privilegecreated by this video or this
podcast.
If you need an attorney,contact an attorney.
So usually we go through my topthree stories of the week, but
(01:46):
today every story is a top story, so let's get right into it.
All right, story number onefirst stop, let's check in on
those FMC rulemakings.
We've been doing that everyweek, but I think this week it's
worth chatting about again.
So the FMC, as we know, theFederal Maritime Commission, is
working through three differentrulemakings and one request for
information.
The first rulemaking that we'vebeen talking quite a bit about
(02:09):
is the billing practices, thedetention to merge billing
requirements, invoicingrequirements.
Now, as we know, this rule willgo into effect May 28th, that's
in just about what that is, 11days from now.
So last week the FederalMaritime Commission released a
press release saying that theOMB, the Office of Management
and Budget, approved a portionof the rule right.
(02:31):
So we knew it was required bythe Paperwork Production Act and
the FMC reported or announcedthat it had been approved by the
OMB.
And now the entire rule, theentire detention demerge rule,
was set to take effect on May28th.
Recall that the contents ofinvoice.
So that was the section thatwe're talking about here.
The contents of invoice sectionrequired that the OMB, office
(02:54):
of Management and Budget reviewit and approve it before it
could be officially effective.
That was under the PaperworkReduction Act.
Anytime you're soliciting inputor engagement from the industry
, you have to have thisPaperwork Reduction Act.
That's an oversimplification,but that's basically.
What was happening here is thatOMB had to approve this section
(03:15):
contents of invoice.
That happened.
The OMB approved it.
That happened in the FMC madethe announcement that OMB had
approved it and that the entirerule could go into effect on May
28th.
So what also happened?
In that press release the FMCsaid that the commission had
issued a correction to the finalrule and they said that they
were clarifying the final rulesapplication to carrier trucking
(03:38):
relationships, which we talkedabout this last week a little
bit.
But to me that seemed like itwas a nod toward the World
Shipping Council petition,almost to have the FMC say see,
we fixed the problem.
And that's what I meant to say.
And that's what I meant when Isaid last week that the FMC
could be trying to make theargument that the petition's
argument is moot.
(03:58):
But just because the FMC israising that argument doesn't
mean that the court will agreeright, doesn't mean that the
argument is mule.
Like I said, the petition isstill very much alive and very
active and still on the table.
When I say active.
We're actually still waiting ona few things on the petition.
So a little bit more about thepetition.
(04:19):
Last week we did talk about it.
We talked about the WorldShipping Council's petition.
Go, take a listen if you wantto hear more.
But I want to be very clearhere.
The petition is still very muchon the table, right, even
though the FMC, like we justmentioned, seemed to nod in
their press release that it'sall set now.
But the petition is front ofthe US Court of Appeals for the
(04:39):
District of Columbia and theyhaven't said anything yet, right
, they haven't said anythingother than the court said that
they released the dates thatthey want things turned in.
So this is kind of the firstround of procedural due dates
and that's not even until May20th.
So that's next week, right,that's next Monday.
This includes and part of thethings that the court wants the
(05:02):
procedural motions, statementsof issues to be raised, entry of
appearance, right, proceduralstuff.
So right now the petition isstill at the Court of Appeals,
right.
So this is still yet to befleshed out on what's going on.
So what happened?
Right?
Like I said, last week wetalked a little bit more about
(05:22):
the petition.
But what the petition actuallysaid.
I'm going to read it off fromwhat was filed by the World
Shipping Council.
So it said petitioner, which isthe World Shipping Council,
challenges the final rule ongrounds that it is contrary to
statute, including that itexceeds the commission's
authority under the Shipping Actand under OSRA.
They said Section 7B and theyalso said and that it is
(05:45):
arbitrary, capricious, an abuseof discretion and otherwise
contrary to law.
Petitioner seeks an ordervacating and setting aside the
final rule.
So that was what was filed withthe court.
We don't have a lot of otherinformation yet.
Right Last week I brought upthe statement made by the World
Shipping Council on their ownwebsite, but we don't have a lot
(06:05):
more.
That's actually within thecourt and so all this stuff
that's happening around isimportant, but it isn't what's
happening in the court.
So there's nothing that wasactually asserted in that
petition, or I shouldn't saythere was nothing specifically
(06:27):
mentioned in that petition thatthe FMC has resolved.
Right, it was in theirstatement, that was on their Web
site.
It wasn't in the court filings.
So hopefully on Monday we willget more information on the
things that are filed with thecourt, assuming that the court
posts them on Monday.
But hopefully we'll get somemore information from that.
Right, it's probably a step inthe right direction that the FMC
(06:47):
did that clarification, right?
I mean, anytime there'sclarification, that's probably
going to be a good thing.
But that doesn't necessarilychange anything.
Right, that doesn't necessarilychange anything with the
petition filed with the WorldShipping Council.
It has not been withdrawn fromany of the indications on the
court's filing system on thedocketed matter.
So everything is still just thesame, despite all this other
(07:11):
stuff going around.
Right, the petition has beenfiled.
Okay, so let's take another stepback.
What does all of this mean?
There's a lot kind of going onwith this detention to merge
rule.
What does all of this mean?
So, right now, as of right now,may 28th is the rule's
effective date.
Omb approved the contents ofinvoice, so the entire rule will
(07:32):
go into effect May 28th.
That's just under two weeksaway.
But what could happen in themeantime Hasn't happened yet.
But what could happen?
The court where the petitionwas filed could decide to delay
the rule's start date based onthe filings that are going to
happen on Monday.
So, as of now, may 17th, today,friday, may 17th, the effective
(07:59):
date of the D&D rule is stillMay 28th.
That might change on Monday.
I don't know yet.
We don't know yet.
That might change even afterMonday.
We still don't know and that'sup to the court to decide.
So that's what's going on withthe D&D rule.
I mean that's great right thatthe OMB approved it.
That's great that they approvedthe Constance of Invoice.
(08:20):
So now the entire rule.
That's one less thing on thetable of things that might
happen with this rule in themeantime.
So the entire rule goes intoeffect May 28th.
Stay tuned for what else mighthappen, but the entire rule as
of right now goes into effectMay 28th.
All right, so that's the D&Drule.
We still have two other rulesthat we're watching out of.
(08:40):
The Federal Maritime Commission, right.
So we have the definingunreasonable refusal to deal or
negotiate with respect to vesselspace accommodations provided
by an ocean common carrier.
Chairman Dan Maffei, at arecent budget hearing, I believe
it was said he expects thefinal language on this to be
coming out in the next fewmonths.
Cool, I'll keep watching for it.
I haven't seen anything comeout there yet.
And we're also waiting on thedefining unfair and just the
(09:03):
discriminatory methods.
This is the third rule.
The FMC hasn't releasedindependent language on this
rule but they have folded inpart of it into that.
Unreasonable.
If we're supposed to negotiaterulemaking, these two rules are
definition rules.
These are defining theseotherwise prohibited activities
(09:23):
under the Shipping Act, sounreasonable if it's a deal to
negotiate.
Or unfair, unjustlydiscriminatory methods.
Whenever rulemaking seek todefine, pay attention.
Right Pay attention and notlegal advice, just general good
practices.
Pay attention becausedefinitions can have unexpected
or undue effects and I thinkthat's what Chairman Maffei has
(09:46):
often said with the definingunreasonable results to
negotiate.
He wants to make sure that allof those nuances are kind of
thought through, because he saidthat has been one of the most
tricky rulemakings because theyneed to get it right without
accidentally getting it wrong.
And so check those out.
Certainly we don't have anindependent defining unfair,
unjust, discriminatory methodsrulemaking out, yet we do have
(10:09):
defining unreasonable refusal todeal and negotiate.
That language has come out.
It was even reopened for asupplemental notice and proposed
rulemaking.
That closed last July, soalmost a year ago.
We're just waiting on the finalrule to come out there, right,
so now we're just waiting.
But go, take a look.
Go look at those definitions,see if they kind of jive with
what your business practices are, your operations.
(10:30):
Just make sure that you'repaying attention anytime that
there's definitions beingcreated or defined or precision
brought around to them.
Make sure that they match upwith how your operations work in
the ocean global shipping worldbecause they can have those
effects.
(10:51):
Right Definitions the FMC ingeneral likes to provide
guardrails where they don't liketo get too specific if they
don't have to.
They want the case law to reallygo into the details and the
specificity because there are somany different fact patterns,
there's so many differentspecifics of situations that
they can't and don't want to, Ithink, enter into on a
(11:13):
rulemaking.
They really want the case lawto fill those parts in.
But they were asked by Congressto define these two areas right
the unreasonable refusal tonegotiate and define unfair,
unjustly discriminatory methods.
And so since they were told,told, asked, told to do that,
they have to do that.
So just pay attention there.
So we're also watching theMaritime Transportation Data
(11:34):
Initiative.
They have their second requestfor information out.
We covered that a few weeks ago.
If you'd like to learn more, gocheck out that episode.
But those comments are due June17, 2024.
Request for information numbertwo and again it's kind of
talking a little bit about howis data exchanged?
What are the sticking points?
How do you not get the bestinformation back and forth?
(11:58):
Go, take a look at that.
They break it out by kind ofindustry stakeholder group.
There's set questions.
But I'm sure that they wouldalso appreciate general feedback
.
But there's set questions inthat request for information.
So take a look.
All right Story number one,right Story number two.
So what else is happening at theFMC?
(12:18):
Quite a few of the storiestoday are kind of taking
inventory of what's happening atthe Federal Maritime Commission
.
There's plenty going on.
So next week the NationalShipper Advisory Committee, nsac
, is holding their publicmeeting.
So this is set for Monday, may20th Interesting date, although
nothing to do with that petition.
I just have May 20th and May28th circling in my head.
(12:38):
It's set for May 20th.
It's going to be in theafternoon for us East Coasters.
If you'd like to listen in, youhave to actually register to
get the link.
So it's NSAC, n-s-a-c at FMCgov.
You have to register, requestthe link.
There's going to be a publiccomment section of the meeting
and they from their federalregister announcements say that
(12:59):
they always actually acceptpublic comments, written public
comments.
But, yeah, there's anopportunity for live engagement.
We've talked about thiscommittee plenty of times before
, but I always like to make surethat we're all on the same page
, right?
Not everybody is an every weeklistener, although you should be
.
From the FMC's announcement ofthe meeting, though, here's the
background information on NSACand how they present it.
(13:20):
So it says the National ShipperAdvisory Committee is a federal
advisory committee.
It operates under theprovisions of the Federal
Advisory Committee Act.
You may have heard FACA isoften the acronym for that
Federal Advisory Committee Actfor these federal advisory
committees.
It said the committee wasestablished on January 1st 2021,
when the NDAA the NationalDefense Authorization Act for
(13:41):
fiscal year 2021 became law.
The committee providesinformation, insight and
expertise pertaining toconditions in the ocean freight
delivery system to thecommission.
Specifically, the committeeadvises the FMC, the Federal
Maritime Commission, on policiesrelating to the competitiveness
, reliability, integrity andfairness of the international
ocean freight delivery system.
(14:02):
Continuing on, it says thecommittee will receive an update
from each of its subcommittees.
The committee may receiveproposals for recommendations to
the Federal Maritime Commissionand may vote on these
recommendations.
Any proposed recommendationswill be available for the public
to view in advance of themeeting on the NSAC's website
and then they list the website.
The committee will also takepublic comment in the meeting.
So, like the background sayshere, this is the federal
(14:26):
advisory committee to the FMC,meaning it's the avenue for
private industry to engage withthe FMC on a regular basis and
provide recommendations andinput on the federal agency and
what they're doing.
I think federal advisorycommittees are so important,
right, and I think that the FMCspecifically does a good job of
taking the federal advisorycommittee recommendations into
(14:47):
consideration.
Right, they respond to each one.
Did you hear that?
They respond to each one ofthese recommendations?
And they actually house thoserecommendations on a landing
page on the FMC's website, sothey're so easy to go check out.
Take a look at all thedifferent recommendations that
have been listed before thathave been submitted to the FMC,
and then I mean not immediately,but then you can look at the
(15:09):
response that the FMC gives tothose recommendations.
It's not an immediate response,right, it's not like the next
day.
They have to certainly belooking through the
recommendations and thoughtfullyconsidering them, but that's
what they do.
They respond to thoserecommendations, and I just love
(15:30):
that level of engagement fromthe agency itself.
So take a look.
Hopefully I'll see you onlineon Monday with the NSAC
committee meeting.
Story number three more FMC news.
This one I didn't report onlast week and I had fully
intended to.
So Peloton, yes, the at-homeworkout hit their height during
(16:00):
COVID.
Peloton filed a lawsuit againstFlexport at the FMC.
Certainly two big names intheir respective industries,
right?
So I always need to mentionthis.
Right that we only have oneside of the story.
We've brought up a lot of thecomplaints as they're filed with
some of these big names.
Right, we've had Samsung, we'vehad just a whole bunch of Bed
Bath Beyond some really bignames filing lawsuits at the FMC
, and whenever I report on those, I always make sure to say look
(16:24):
, this is just the complaint,it's not both sides of the story
.
So this is just the complaint.
Again, here we only have oneside of the story.
This is Peloton's complaintbeing filed.
But essentially, let's go overwhat they're asserting.
Right, they're asserting thatFlexport promised a store door
transportation, and so we'vetalked about the store door
thing before.
It's previously come up in theSamsung line of cases.
(16:46):
But so what they say in thefiling here is store door
transportation is also commonlyreferred to as carrier haulage
because, in addition to theocean transportation, the common
carrier of the oceantransportation is also
responsible for the inlandmovement of the container from
the arrival port to the namedplace of delivery via rail and
(17:06):
or truck drayage.
That's in the complaint, that'swhat the petitioner, that's
what Peloton is saying here, orcomplainant, I should say that's
what Peloton.
The complainant is saying thatthey thought that they had
store-door transportation, asdefined here, with Flexport and
Flexport is that the commoncarrier.
They are the NVOCC non-vesseloperating common carrier.
(17:30):
So, continuing to read from thecomplaint, in the store-door
shipments, flexport wasresponsible for arranging and
paying for all aspects of theinland movement of the Peloton
containers, including theprovision of chassis, and for
ensuring the Peloton containerswere removed from US Marine and
intermodal terminals, deliveredto the final designated inland
destination and the emptycontainers were returned to the
(17:51):
carrier designated returnlocations.
They continue on in thecomplaint to say Flexport
arranged for the inlandtransportation of the Peloton
containers from port of arrivalto the final inland place of
delivery by subcontracting withmotor carriers and railroads.
They continue on beginning in2020 and continuing through 2023
, peloton paid thousands ofindividual D&D detention to
(18:12):
merge and other related chargesin connection with Flexport
store door transportation ofPeloton containers which were
improperly invoiced by Flexport,in violation of the shipping
act.
These are the allegations,right, these are simply
allegations, but these are theallegations from Peloton to
Flexport and this is justPeloton side of things.
So they continue on to say from2020 to 2023,port repeatedly
(18:36):
and chronic, chronically failedto properly perform its inland
transportation obligations,including, but not limited to,
failing to timely remove pelotoncontainers from us marine and
intermodal terminals, failing totimely deliver peloton
containers to their designatedinland locations and failing to
timely return the emptycontainers within the applicable
free time periods.
(18:57):
They say, because Flexport'sfailure to properly perform its
inland transportationobligations, peloton ultimately
engaged a third-party logisticsprovider to manage the inland
intermodal transportation ofcertain Peloton containers.
So they're kind of saying, look, they thought Flexport was
taking care of this.
Because they weren't.
And I remember at the time thatthere was a backlog and
certainly there were a lot ofpeople buying Pelotons during
(19:19):
this 2020 to 2023 time period.
But I remember it hit the newsright that Pelotons were so
delayed, perhaps related to this.
They don't go on to say that ornot, that I saw, but they say
they went on and found their own, another third-party logistics
provider to manage the inlandpart, which part of this
(19:40):
allegation is that they thoughtFlexport was doing that.
They also say Flexportimproperly charged a Peloton D&D
charges on the carriage ofgoods arranged by Flexport,
despite the carriage of goodsbeing on store door terms.
So, like we were saying, theythought that it was going to go
all the way from store to door.
Despite continuing on, despiteFlexport's responsibility for
arranging and maintaining theinland transportation, including
(20:01):
timely removal and return ofPeloton containers.
And they keep saying timelyremoval and return, because
that's really what the detentionto merge is hinging on right,
continuing on, and I'm almostdone here, but I do think that
reading right off the complaintis important.
Continuing on.
It says upon information andbelief, flexport categorically
assessed these D&D chargesagainst Peloton and Peloton
(20:21):
containers without firstundertaking an evaluation as to
whether Flexport was responsiblefor the charges or whether its
acts or omissions were a causeor contributing factor to the
charges.
So they're saying, look, theywere passing them on to Peloton
under this store door situationwhere Peloton understood that
Flexport was going to be takingcare of all that inland stuff.
(20:42):
And so what?
The allegation here is that,look, flexport maybe had an
opportunity or a reason to sendsome of these things to Peloton.
But they're saying, look,flexport was, just as they said,
categorically assessing theseD&D charges against Peloton, not
even looking to see didFlexport mess up on the timely
removal or return of thecontainers?
(21:04):
So that's kind of the hinge ofthe argument inside that piece.
Last two parts from thecomplaint Flexport assessed
these D&D charges againstPeloton and Peloton containers
in circumstances where Pelotonwas not the party responsible to
pick up, move or return thecontainers.
And then they say Flexportassessed these D&D charges
against Peloton and Pelotoncontainers in circumstances
(21:25):
where charging Peloton D&Dcharges did not incentivize the
pickup of the cargo or primarilyfunction to promote cargo
fluidity.
So they're saying, look,flexport had control of the
pickup, move and return of thecontainers.
They're saying, look, pelotonwas not in control.
Right, they were not the partyresponsible for that.
And additionally, peloton couldnot have incentivized the
(21:50):
pickup of the cargo or primarilyfunction to promote the cargo
fluidity because they didn'thave control of it.
They couldn't impact that.
Does this all sound familiar?
This is a similar argument tothe Samsung cases that were
recently filed that we coveredhere, right?
Similar general facts of thisstore-door movement right.
(22:10):
And the argument hinging on theincentivization principle,
saying that the complainantright, the one filing the
lawsuit is asserting that theyunderstood that they were under
a store door arrangement andtherefore had no control over
the movement of the goods.
And so right.
Part of the incentivizationprinciple is that you can only
charge the detention ordemurrage if it actually is
(22:32):
incentivizing the movement ofthe goods.
And the FMC has sometimesbrought up that on days that
port yards are closed, there'sno charge that you could assess
that would incentivize themovement of goods on that closed
day, because it's animpossibility that anybody could
pick up that day.
I mean, that is also underappeal.
That's the Evergreen case.
(22:53):
That's under appeal as well.
But previously the FMC hasreleased a news, a press release
on that, saying kind of likelook the incentiv.
Others in there are saying look, we had no control over the
movement of the goods and so howcan we be in charge of
(23:27):
incentivizing the movement?
Or how can we be in charge ofgoing to pick them up when we
were in control of them, incontrol of them.
And so you charging us thischarge in no way is
incentivizing us to pick it up,because they're not ours to pick
up, even though they ultimatelywere Peloton containers.
They had hired Flexport to dothese movements for them and
that's that store door thing.
(23:47):
It gets a little confusing butI hope that you're kind of
following along with that andthat's the arguments being made
here, right, I'm just trying tooversimplify and translate kind
of what I understand ishappening here.
So that's what Peloton wassaying.
Right, therefore they had noreason to be assessed the
detention demerits chargesbecause they could not control
the movement of the cargo andtherefore there was no
(24:08):
incentivization of the movementof the cargo.
And again, this is general,very simplified overview.
So Peloton ultimately is makingsome requests here and I'm going
to read from the filing sayingcomplainant respectfully
requests that respondent soFlexport be required to answer
the charges in this complaintand that after a hearing the FMC
issue an order.
And they have four differentrequests here.
(24:29):
One an order ordering therespondent cease and desist from
the unlawful conduct.
So ordering that respondentcease and desist from the
unlawful conduct.
So I mean that's saying look,stop doing this sliding through
of D&D charges under store doormovements, right, I mean that's
kind of what that seems to besignaling.
Number two requiring respondentto pay complainant reparations
(24:51):
for the unlawful conductdescribed above, along with
interest and complainant'sattorney's fees and costs
Requiring.
Number three, requiringrespondent's payment of any
other amounts that the FMC deemsappropriate.
And number four, providingcomplainant such other and
further relief that the FMCdeems is just improper.
These are going to be a reallyinteresting collection of cases
(25:13):
on these store door movementsand the assessment of D&D
charges.
They're in right and thepassing along of those charges,
especially as it interfaces withthe incentive principle.
Right, because it's the storedoor hinged with the argument of
the incentive principle sayingthere's an impossibility of
incentivizing the ultimate ownerof the cargo but not who the
(25:37):
owner of the cargo was sayinglook, I thought that this was
going to be covered under astore door movement.
I didn't know that I wassupposed to be interceding to
make sure that those containersgot off the yard because I had
hired somebody to do that for me.
We'll see.
These are some prettyinteresting things.
I mean, between the minimumquantity commitment collection
of cases and then now the storedoor incentivization principle,
(26:00):
we have some kind of themedcases that are coming before the
FMC that are going to be makingsome pretty important decisions
.
Well, I hope they do.
I hope that these collection ofcases find some clarity in
these gray areas and force theFMC's hand in really making some
(26:21):
clarifying remarks.
Because, like I said, the FMC,when they do the rulemakings,
really prefer to have thatguardrail provision to them,
that they want to stay on theoutsides and they want the
specifics to really be definedthrough case law.
Well, now, here we go.
Now we have cases being filed.
This is where the FMC, therubber meets the road, as it
(26:43):
were.
That the FMC will probably be.
Hopefully, the legal proceduralstuff keeps going forward and
everything is fine there.
But the FMC will probably berequired to have a discussion on
the subject matter of thesecases, right On the minimum
quantity commitments in oneregard and the enforceability,
potentially, of servicecontracts.
(27:04):
And then the other side wouldbe the store door
incentivization principlesrelated to D&D charges.
Cool stuff, right?
I mean, this is like this isniche-y and this is very nerdy,
but this is cool, all right.
Story number four.
So what else is happening?
Fmc again, they announced thatthey were going to be having
their next commission meeting onMay 29th, so that's one day
(27:25):
after the detention demurragerules to set and to go into
effect.
So May 29th on the agenda theyhave two different portions, as
they usually do, right, theyhave an open to the public
portion and a closed to thepublic portion.
So on the open part, they'regoing to be doing a staff update
on BCL, so the Bureau ofCertification and Licensing
Programs, about the OTI, oceanTransportation, intermediary and
(27:48):
passenger vessel operators, soBVOs.
They're also going to be doinga staff update on the Vessel
Operating Common Carrier AuditProgram, so that's the VOCC,
which will also flow into theclosed section.
They will continue thatdiscussion of the VOCC audit
program.
Not surprisingly right,especially some of those audit
programs, there's some protectedinformation that is better
(28:12):
served under the closed to thepublic section.
If you want to see that hearing, it's going to be live streamed
on the FMC's YouTube channel.
Yes, they have a YouTubechannel.
It's actually prettyinteresting.
You can check out the MTDI here, the MTDI weekly stakeholder
engagement.
You can check out the old FMChearing recordings.
You can check out the NationalShipper Advisory Committee
(28:34):
recordings on there and you cansee live streamed the FMC
hearings themselves.
All right, story number five,continuing on the Port of
Baltimore is reopened.
Well, let me clarify that itnever actually closed, to be
clear.
But here we have.
The Coast Guard captain of theport has officially reopened the
Fort McHenry limited accesschannel to an available depth of
(28:57):
45 feet for commercial vesseltraffic, daily from 8 pm to 6 am
.
So there's certain parametersfor vessels using the channel.
Notably, deep draft vessels aregoing to require a Maryland
pilot and two tug escort andthey must secure authorization
by the Coast Guard, among otherrequirements.
Right, check the announcementfor more information there.
But this is great because,similarly announced, the Port of
(29:20):
Baltimore said that this meansthat cruise ships are going to
be returning on May 25th.
Royal Caribbean's vision of theseas is going to be departing
the Port of Baltimore on afive-night cruise from Baltimore
to Bermuda.
This is such a great show ofresilience and resolve to get
this channel back open.
Like I said, the port itselfnever actually closed, right,
but at some point without vesseltraffic, and certainly
(29:41):
commercial vessel traffic, thatcan severely affect the ability
of the port to continueoperations.
Luckily, things are movingforward.
I also want to mention and justbriefly here, the NTSB report.
So the NTSB did the report.
They did the investigation intowhat happened with the MV Dali
Elysian with the Francis ScottKey Bridge.
They released their interimreport this week and it seems to
(30:04):
point to electrical systemsbeing the problem.
I'm going to pause before I gotoo deeply on kind of reporting
on this, and I'm not an experton the mechanical level of a
vessel, so I want to wait andsee kind of how the industry
reacts to this report.
It's just the interim report.
It was just released from thisMarch 26th incident March 26th,
(30:28):
right?
I mean it's only May 17th, lessthan two months later.
And here we are.
We have the channel open tocommercial traffic 45 feet.
I mean we have cruise shipscoming back.
The vessels that were stuck onthe inside have now been able to
leave.
I mean this is really fast.
Like I said, this is really atestament to resilience and
(30:52):
resolve of the port.
So go check out the NTSB report, though it is pretty
interesting.
Like I said, I want to wait alittle bit here.
I don't want to get ahead ofanybody and I certainly want to
make sure that I allow theoperational mechanical experts
to weigh in on this and I'llprobably report on their
interpretation of the NTSBreport.
But it is available, Go checkit out.
(31:18):
National Maritime Day is thisweek and how appropriate that we
are celebrating NationalMaritime Day as the Port of
Baltimore is finding its footingagain From the MARAD's website.
So the Maritime Administration,which is a agency of the
Department of Transportation.
They post on their website kindof the impetus what National
Maritime Day is so each year onMay 22nd this is from the MARAD
website.
Each year on May 22nd, ourcountry celebrates National
(31:39):
Maritime Day.
The US has always been and willalways be a great maritime
nation, from our origins as 13British colonies, through every
period of peace and conflict,since the Merchant Marine has
been a pillar in this country'sfoundation of prosperity and
security economy and strengthenour ties with trading partners
around the world, all whilesupporting our military forces
by shipping troops and supplieswherever they need to go.
(32:02):
91 years ago I'm continuing toread off the Marriott's website
91 years ago, congress declaredNational Maritime Day to
commemorate the Americansteamship Savannah's voyage from
the United States to England,marking the first successful
crossing of the Atlantic Oceanwith steam propulsion.
During World War II, more than250,000 members of the American
Merchant Marine served theircountry, with more than 6,700
(32:26):
giving their lives, hundredsbeing detained as prisoners of
war and more than 800 USmerchant ships being sunk or
damaged.
Maritime Day is a time-honoredtradition that recognized one of
our country's most importantindustries.
Each year, ceremonies andcelebrations throughout the
country recognize NationalMaritime Day and the people our
maritime nation depends on.
So you can tune into theNational Maritime Day
(32:47):
celebration, which is held atDepartment of Transportation
headquarters through a YouTubepage, right Through their
YouTube page.
I'm going to link the YouTubepage in the show notes here.
But this is an exciting day forthe entire industry and I like
the things that Marriott hits onwhen they make their
announcement and theircommemoration National Maritime
(33:09):
Day.
So that'll be coming up thisweek.
Take a minute to think about itand really the magnitude and
the importance of being amaritime strength and having
maritime strength as a nation.
All right, story number sevenOne last story that's still
developing.
This is about the movement onthe Section 301 investigation at
the United States TradeRepresentative's Office.
(33:30):
This is the USTR.
We've talked about the USTRinvestigation on the Section 301
, but this week the White Houseweighed in and they announced
that, in response to China'sunfair trade practices and to
counteract the resulting harms,today President Biden is
directing his traderepresentative to increase
tariffs under Section 301 of theTrade Act of 1974 on $18
(33:53):
billion of imports from China toprotect American workers and
businesses.
That was right off of the factsheet that was released May 14th
, just this week.
Now that seems like a goodthing at first blush, right, the
argument is from so many thatthere are unfair trade practices
that China's engaging in, so wehave to counteract them.
Right, but this came uppreviously under the Trump
(34:13):
administration tariffs onimports from China and one of
the major oversights, I guess Iguess I'll call it an oversight,
but it was ultimately correctedbefore being implemented was
the tariff being assessed onship-to-shore cranes.
So, yes, the cranes that are atports and move the cargo boxes
from vessels to shore, rightship to shore, they're pretty
(34:34):
much only made in China and manyare on order around the country
for US ports.
So the question is if thecranes, most of which have been
ordered years in advance, arriveafter the implementation date
of these tariffs, theseannounced tariffs or proposed
tariffs some have said that theymay even go into effect with as
little as 90 days notice.
(34:54):
So we're waiting on the FederalRegister announcement that will
have kind of more completeinformation on this.
But if these cranes potentiallyarrive after the implementation
dates, then these cranes mightbe subject to a 10, 20, 25%
surcharge in the form of thistariff 25% on a multi-million
(35:16):
dollar purchase of these cranes,and usually there's more than
one, I mean sometimes just one,but more than one crane being
purchased.
It's not a small fee, right,it's a big deal.
So under the Trumpadministration, the
ship-to-shore cranes wereultimately taken off the list
entirely, not even exempted, butsimply completely removed, and
(35:36):
perhaps that's why it wasforgotten, I guess, or
overlooked, or maybe thehistorical information wasn't
necessarily there to remove themagain this time.
But this can potentially be abig deal and might need some
correcting quickly here, right?
So sure, if we tell the portsthat they should buy American,
(35:58):
right, these ship-to-shorecranes don't really exist as
they understand it in the USmarket, and without them,
without ship-to-shore cranes,things derail quickly, right?
As you know, 90% of everythingmoves by ocean transit, and if
ports don't have cranes that canaccommodate the vessels in both
speed and size right, a lot ofthese orders are for larger
(36:21):
cranes then that's going toimpact the end user, and the end
user is the American consumer.
So, and actually I shouldquickly note they weren't
necessarily forgotten, right?
Or maybe that's why I kind ofpaused and said maybe the
discussion that happened aroundthem being removed wasn't
necessarily available, becausethey were specifically listed in
the White House announcement.
So they listed a fewcommodities and ship to shore
(36:44):
cranes was on there and I'mgoing to read off the fact sheet
from the White House.
So it said the tariff rate onship to shore cranes will
increase from 0% to 25% in 2024.
Let me say in 2024, which, likeI said, I've heard that 90 days
might be at play here.
I mean we're already in May.
So, like they said, in 2024,which, like I said, I've heard
that 90 days might be at playhere, I mean we're already in
(37:05):
May.
So, like they said, in 2024,this will be happening, said the
administration.
It says will increase, said theadministration continues to
deliver for the American peopleby rebuilding the United States
industrial capacity to produceport cranes with trusted
partners.
A 25% tariff rate onship-to-shore cranes will help
protect US manufacturers fromChina's unfair trade practices
that have led to excessiveconcentration in the market.
(37:26):
Port cranes are essential piecesof infrastructure that enable
the continuous movement and flowof critical goods to, from and
within the United States, andthe administration is taking
action to mitigate risks thatcould disrupt American supply
chain.
This action also builds off ofongoing work to invest in US
port infrastructure through thePresident's Investing in America
agenda.
(37:46):
This port security initiativeincludes bringing port crane
manufacturing capabilities backto the United States to support
US supply chain security andencourages ports across the
country and around the world touse trusted vendors when
sourcing cranes or other heavyequipment.
So this is an interestinglittle piece because they're
saying, look, we are investingin port crane manufacturing back
(38:06):
in the United States.
I mean, as I understand it, Ireally don't think that there's
a comparable US cranemanufacturer.
I've heard of some small cranemanufacturers that potentially
edge into this, but as far as Iunderstand it, at least for the
fixed arm shipped to shorecranes, it's not available in
the US.
And so that's great that we areinvesting in it, because I
(38:28):
think that that's important.
But if it's not available yetand if in 90 days there's going
to be a multi-million dollaradditional charge on these
cranes because they just didn'tget here in time for this tariff
that was just announced, that'sgoing to have some major, major
, major impacts for these ports.
(38:48):
Look, I don't know.
This is what I'm reading.
I just want to report it out Alittle bit of my own perception
in there, but I'm going to keepwatching this.
I'm open to see what happenshere.
I'm open to see maybe ifthere's further justification
for why these 25% tariffs werespecifically attached to ship to
short cranes.
But I'm going to keep watchingthis.
(39:10):
Changing and charging on thingsthat have to do with the supply
chain can have knock-on effectsthat'll ultimately end with the
end consumers.
So I'm going to keep watchingit.
But, as always, the guidancehere is general and for
educational purposes only.
It should not be construed tobe legal advice directly related
to your matter.
If you need an attorney,contact an attorney, but if you
(39:31):
have specific legal questions,feel free to reach out to me at
my legal company, skollStrategies.
Otherwise, for the non-legalquestions, the e-learning and
general industry information andinsights, come find me at the
Maritime Professor.
If you like these videos, letme know, comment, like and share
.
If you want to listen to theseepisodes on demand, or if you
missed any previous episodes,check out the podcast by Landon
Bysie.
If you prefer to see the video,they live on the YouTube page
(39:53):
by Landon Bysie, presented bythe Maritime Professor.
Check out the website atMaritimeProfessorcom.
Until next week, this is LaurenBegan, the Maritime Professor,
and you've just listened to byLand and by Sea.
See you next time.
Oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh,
oh, oh, oh, oh, oh, oh, oh, oh,oh, oh, oh, oh, oh, oh, oh, oh,
oh, oh, oh, oh, oh, oh, oh, oh,oh, oh, oh, oh, oh, oh, oh, oh,
oh, oh, oh, oh, oh, oh, oh, oh,oh, oh, oh, oh, oh, oh, oh, oh,
(00:40):
oh, oh, oh.
Thank you, I'm living for whatit looks like.
It's been a while since we'vedone a Captain's Log edition.
You know a day where we just gothrough random industry news,
(01:03):
take inventory of what's goingon out there.
So that's what today is theCaptain's Log Edition.
Hi, welcome to, by Land and bySea, an attorney breaking down
the weekend supply chainpresented by Maritime Professor
me.
I'm Lauren Began, founder ofthe Maritime Professor and
Squall Strategies, and I'm yourfavorite maritime attorney.
Join me every week to walkthrough both ocean transport and
(01:25):
surface transport topics in thewild world of supply chain.
As always, the guidance isgeneral and for educational
purposes only.
It should not be construed tobe legal advice and there is no
attorney-client privilegecreated by this video or this
podcast.
If you need an attorney,contact an attorney.
So usually we go through my topthree stories of the week, but
(01:46):
today every story is a top story, so let's get right into it.
All right, story number onefirst stop, let's check in on
those FMC rulemakings.
We've been doing that everyweek, but I think this week it's
worth chatting about again.
So the FMC, as we know, theFederal Maritime Commission, is
working through three differentrulemakings and one request for
information.
The first rulemaking that we'vebeen talking quite a bit about
(02:09):
is the billing practices, thedetention to merge billing
requirements, invoicingrequirements.
Now, as we know, this rule willgo into effect May 28th, that's
in just about what that is, 11days from now.
So last week the FederalMaritime Commission released a
press release saying that theOMB, the Office of Management
and Budget, approved a portionof the rule right.
(02:31):
So we knew it was required bythe Paperwork Production Act and
the FMC reported or announcedthat it had been approved by the
OMB.
And now the entire rule, theentire detention demerge rule,
was set to take effect on May28th.
Recall that the contents ofinvoice.
So that was the section thatwe're talking about here.
The contents of invoice sectionrequired that the OMB, office
(02:54):
of Management and Budget reviewit and approve it before it
could be officially effective.
That was under the PaperworkReduction Act.
Anytime you're soliciting inputor engagement from the industry
, you have to have thisPaperwork Reduction Act.
That's an oversimplification,but that's basically.
What was happening here is thatOMB had to approve this section
(03:15):
contents of invoice.
That happened.
The OMB approved it.
That happened in the FMC madethe announcement that OMB had
approved it and that the entirerule could go into effect on May
28th.
So what also happened?
In that press release the FMCsaid that the commission had
issued a correction to the finalrule and they said that they
were clarifying the final rulesapplication to carrier trucking
(03:38):
relationships, which we talkedabout this last week a little
bit.
But to me that seemed like itwas a nod toward the World
Shipping Council petition,almost to have the FMC say see,
we fixed the problem.
And that's what I meant to say.
And that's what I meant when Isaid last week that the FMC
could be trying to make theargument that the petition's
argument is moot.
(03:58):
But just because the FMC israising that argument doesn't
mean that the court will agreeright, doesn't mean that the
argument is mule.
Like I said, the petition isstill very much alive and very
active and still on the table.
When I say active.
We're actually still waiting ona few things on the petition.
So a little bit more about thepetition.
(04:19):
Last week we did talk about it.
We talked about the WorldShipping Council's petition.
Go, take a listen if you wantto hear more.
But I want to be very clearhere.
The petition is still very muchon the table, right, even
though the FMC, like we justmentioned, seemed to nod in
their press release that it'sall set now.
But the petition is front ofthe US Court of Appeals for the
(04:39):
District of Columbia and theyhaven't said anything yet, right
, they haven't said anythingother than the court said that
they released the dates thatthey want things turned in.
So this is kind of the firstround of procedural due dates
and that's not even until May20th.
So that's next week, right,that's next Monday.
This includes and part of thethings that the court wants the
(05:02):
procedural motions, statementsof issues to be raised, entry of
appearance, right, proceduralstuff.
So right now the petition isstill at the Court of Appeals,
right.
So this is still yet to befleshed out on what's going on.
So what happened?
Right?
Like I said, last week wetalked a little bit more about
(05:22):
the petition.
But what the petition actuallysaid.
I'm going to read it off fromwhat was filed by the World
Shipping Council.
So it said petitioner, which isthe World Shipping Council,
challenges the final rule ongrounds that it is contrary to
statute, including that itexceeds the commission's
authority under the Shipping Actand under OSRA.
They said Section 7B and theyalso said and that it is
(05:45):
arbitrary, capricious, an abuseof discretion and otherwise
contrary to law.
Petitioner seeks an ordervacating and setting aside the
final rule.
So that was what was filed withthe court.
We don't have a lot of otherinformation yet.
Right Last week I brought upthe statement made by the World
Shipping Council on their ownwebsite, but we don't have a lot
(06:05):
more.
That's actually within thecourt and so all this stuff
that's happening around isimportant, but it isn't what's
happening in the court.
So there's nothing that wasactually asserted in that
petition, or I shouldn't saythere was nothing specifically
(06:27):
mentioned in that petition thatthe FMC has resolved.
Right, it was in theirstatement, that was on their Web
site.
It wasn't in the court filings.
So hopefully on Monday we willget more information on the
things that are filed with thecourt, assuming that the court
posts them on Monday.
But hopefully we'll get somemore information from that.
Right, it's probably a step inthe right direction that the FMC
(06:47):
did that clarification, right?
I mean, anytime there'sclarification, that's probably
going to be a good thing.
But that doesn't necessarilychange anything.
Right, that doesn't necessarilychange anything with the
petition filed with the WorldShipping Council.
It has not been withdrawn fromany of the indications on the
court's filing system on thedocketed matter.
So everything is still just thesame, despite all this other
(07:11):
stuff going around.
Right, the petition has beenfiled.
Okay, so let's take another stepback.
What does all of this mean?
There's a lot kind of going onwith this detention to merge
rule.
What does all of this mean?
So, right now, as of right now,may 28th is the rule's
effective date.
Omb approved the contents ofinvoice, so the entire rule will
(07:32):
go into effect May 28th.
That's just under two weeksaway.
But what could happen in themeantime Hasn't happened yet.
But what could happen?
The court where the petitionwas filed could decide to delay
the rule's start date based onthe filings that are going to
happen on Monday.
So, as of now, may 17th, today,friday, may 17th, the effective
(07:59):
date of the D&D rule is stillMay 28th.
That might change on Monday.
I don't know yet.
We don't know yet.
That might change even afterMonday.
We still don't know and that'sup to the court to decide.
So that's what's going on withthe D&D rule.
I mean that's great right thatthe OMB approved it.
That's great that they approvedthe Constance of Invoice.
(08:20):
So now the entire rule.
That's one less thing on thetable of things that might
happen with this rule in themeantime.
So the entire rule goes intoeffect May 28th.
Stay tuned for what else mighthappen, but the entire rule as
of right now goes into effectMay 28th.
All right, so that's the D&Drule.
We still have two other rulesthat we're watching out of.
(08:40):
The Federal Maritime Commission, right.
So we have the definingunreasonable refusal to deal or
negotiate with respect to vesselspace accommodations provided
by an ocean common carrier.
Chairman Dan Maffei, at arecent budget hearing, I believe
it was said he expects thefinal language on this to be
coming out in the next fewmonths.
Cool, I'll keep watching for it.
I haven't seen anything comeout there yet.
And we're also waiting on thedefining unfair and just the
(09:03):
discriminatory methods.
This is the third rule.
The FMC hasn't releasedindependent language on this
rule but they have folded inpart of it into that.
Unreasonable.
If we're supposed to negotiaterulemaking, these two rules are
definition rules.
These are defining theseotherwise prohibited activities
(09:23):
under the Shipping Act, sounreasonable if it's a deal to
negotiate.
Or unfair, unjustlydiscriminatory methods.
Whenever rulemaking seek todefine, pay attention.
Right Pay attention and notlegal advice, just general good
practices.
Pay attention becausedefinitions can have unexpected
or undue effects and I thinkthat's what Chairman Maffei has
(09:46):
often said with the definingunreasonable results to
negotiate.
He wants to make sure that allof those nuances are kind of
thought through, because he saidthat has been one of the most
tricky rulemakings because theyneed to get it right without
accidentally getting it wrong.
And so check those out.
Certainly we don't have anindependent defining unfair,
unjust, discriminatory methodsrulemaking out, yet we do have
(10:09):
defining unreasonable refusal todeal and negotiate.
That language has come out.
It was even reopened for asupplemental notice and proposed
rulemaking.
That closed last July, soalmost a year ago.
We're just waiting on the finalrule to come out there, right,
so now we're just waiting.
But go, take a look.
Go look at those definitions,see if they kind of jive with
what your business practices are, your operations.
(10:30):
Just make sure that you'repaying attention anytime that
there's definitions beingcreated or defined or precision
brought around to them.
Make sure that they match upwith how your operations work in
the ocean global shipping worldbecause they can have those
effects.
(10:51):
Right Definitions the FMC ingeneral likes to provide
guardrails where they don't liketo get too specific if they
don't have to.
They want the case law to reallygo into the details and the
specificity because there are somany different fact patterns,
there's so many differentspecifics of situations that
they can't and don't want to, Ithink, enter into on a
(11:13):
rulemaking.
They really want the case lawto fill those parts in.
But they were asked by Congressto define these two areas right
the unreasonable refusal tonegotiate and define unfair,
unjustly discriminatory methods.
And so since they were told,told, asked, told to do that,
they have to do that.
So just pay attention there.
So we're also watching theMaritime Transportation Data
(11:34):
Initiative.
They have their second requestfor information out.
We covered that a few weeks ago.
If you'd like to learn more, gocheck out that episode.
But those comments are due June17, 2024.
Request for information numbertwo and again it's kind of
talking a little bit about howis data exchanged?
What are the sticking points?
How do you not get the bestinformation back and forth?
(11:58):
Go, take a look at that.
They break it out by kind ofindustry stakeholder group.
There's set questions.
But I'm sure that they wouldalso appreciate general feedback
.
But there's set questions inthat request for information.
So take a look.
All right Story number one,right Story number two.
So what else is happening at theFMC?
(12:18):
Quite a few of the storiestoday are kind of taking
inventory of what's happening atthe Federal Maritime Commission
.
There's plenty going on.
So next week the NationalShipper Advisory Committee, nsac
, is holding their publicmeeting.
So this is set for Monday, may20th Interesting date, although
nothing to do with that petition.
I just have May 20th and May28th circling in my head.
(12:38):
It's set for May 20th.
It's going to be in theafternoon for us East Coasters.
If you'd like to listen in, youhave to actually register to
get the link.
So it's NSAC, n-s-a-c at FMCgov.
You have to register, requestthe link.
There's going to be a publiccomment section of the meeting
and they from their federalregister announcements say that
(12:59):
they always actually acceptpublic comments, written public
comments.
But, yeah, there's anopportunity for live engagement.
We've talked about thiscommittee plenty of times before
, but I always like to make surethat we're all on the same page
, right?
Not everybody is an every weeklistener, although you should be
.
From the FMC's announcement ofthe meeting, though, here's the
background information on NSACand how they present it.
(13:20):
So it says the National ShipperAdvisory Committee is a federal
advisory committee.
It operates under theprovisions of the Federal
Advisory Committee Act.
You may have heard FACA isoften the acronym for that
Federal Advisory Committee Actfor these federal advisory
committees.
It said the committee wasestablished on January 1st 2021,
when the NDAA the NationalDefense Authorization Act for
(13:41):
fiscal year 2021 became law.
The committee providesinformation, insight and
expertise pertaining toconditions in the ocean freight
delivery system to thecommission.
Specifically, the committeeadvises the FMC, the Federal
Maritime Commission, on policiesrelating to the competitiveness
, reliability, integrity andfairness of the international
ocean freight delivery system.
(14:02):
Continuing on, it says thecommittee will receive an update
from each of its subcommittees.
The committee may receiveproposals for recommendations to
the Federal Maritime Commissionand may vote on these
recommendations.
Any proposed recommendationswill be available for the public
to view in advance of themeeting on the NSAC's website
and then they list the website.
The committee will also takepublic comment in the meeting.
So, like the background sayshere, this is the federal
(14:26):
advisory committee to the FMC,meaning it's the avenue for
private industry to engage withthe FMC on a regular basis and
provide recommendations andinput on the federal agency and
what they're doing.
I think federal advisorycommittees are so important,
right, and I think that the FMCspecifically does a good job of
taking the federal advisorycommittee recommendations into
(14:47):
consideration.
Right, they respond to each one.
Did you hear that?
They respond to each one ofthese recommendations?
And they actually house thoserecommendations on a landing
page on the FMC's website, sothey're so easy to go check out.
Take a look at all thedifferent recommendations that
have been listed before thathave been submitted to the FMC,
and then I mean not immediately,but then you can look at the
(15:09):
response that the FMC gives tothose recommendations.
It's not an immediate response,right, it's not like the next
day.
They have to certainly belooking through the
recommendations and thoughtfullyconsidering them, but that's
what they do.
They respond to thoserecommendations, and I just love
(15:30):
that level of engagement fromthe agency itself.
So take a look.
Hopefully I'll see you onlineon Monday with the NSAC
committee meeting.
Story number three more FMC news.
This one I didn't report onlast week and I had fully
intended to.
So Peloton, yes, the at-homeworkout hit their height during
(16:00):
COVID.
Peloton filed a lawsuit againstFlexport at the FMC.
Certainly two big names intheir respective industries,
right?
So I always need to mentionthis.
Right that we only have oneside of the story.
We've brought up a lot of thecomplaints as they're filed with
some of these big names.
Right, we've had Samsung, we'vehad just a whole bunch of Bed
Bath Beyond some really bignames filing lawsuits at the FMC
, and whenever I report on those, I always make sure to say look
(16:24):
, this is just the complaint,it's not both sides of the story
.
So this is just the complaint.
Again, here we only have oneside of the story.
This is Peloton's complaintbeing filed.
But essentially, let's go overwhat they're asserting.
Right, they're asserting thatFlexport promised a store door
transportation, and so we'vetalked about the store door
thing before.
It's previously come up in theSamsung line of cases.
(16:46):
But so what they say in thefiling here is store door
transportation is also commonlyreferred to as carrier haulage
because, in addition to theocean transportation, the common
carrier of the oceantransportation is also
responsible for the inlandmovement of the container from
the arrival port to the namedplace of delivery via rail and
(17:06):
or truck drayage.
That's in the complaint, that'swhat the petitioner, that's
what Peloton is saying here, orcomplainant, I should say that's
what Peloton.
The complainant is saying thatthey thought that they had
store-door transportation, asdefined here, with Flexport and
Flexport is that the commoncarrier.
They are the NVOCC non-vesseloperating common carrier.
(17:30):
So, continuing to read from thecomplaint, in the store-door
shipments, flexport wasresponsible for arranging and
paying for all aspects of theinland movement of the Peloton
containers, including theprovision of chassis, and for
ensuring the Peloton containerswere removed from US Marine and
intermodal terminals, deliveredto the final designated inland
destination and the emptycontainers were returned to the
(17:51):
carrier designated returnlocations.
They continue on in thecomplaint to say Flexport
arranged for the inlandtransportation of the Peloton
containers from port of arrivalto the final inland place of
delivery by subcontracting withmotor carriers and railroads.
They continue on beginning in2020 and continuing through 2023
, peloton paid thousands ofindividual D&D detention to
(18:12):
merge and other related chargesin connection with Flexport
store door transportation ofPeloton containers which were
improperly invoiced by Flexport,in violation of the shipping
act.
These are the allegations,right, these are simply
allegations, but these are theallegations from Peloton to
Flexport and this is justPeloton side of things.
So they continue on to say from2020 to 2023,port repeatedly
(18:36):
and chronic, chronically failedto properly perform its inland
transportation obligations,including, but not limited to,
failing to timely remove pelotoncontainers from us marine and
intermodal terminals, failing totimely deliver peloton
containers to their designatedinland locations and failing to
timely return the emptycontainers within the applicable
free time periods.
(18:57):
They say, because Flexport'sfailure to properly perform its
inland transportationobligations, peloton ultimately
engaged a third-party logisticsprovider to manage the inland
intermodal transportation ofcertain Peloton containers.
So they're kind of saying, look, they thought Flexport was
taking care of this.
Because they weren't.
And I remember at the time thatthere was a backlog and
certainly there were a lot ofpeople buying Pelotons during
(19:19):
this 2020 to 2023 time period.
But I remember it hit the newsright that Pelotons were so
delayed, perhaps related to this.
They don't go on to say that ornot, that I saw, but they say
they went on and found their own, another third-party logistics
provider to manage the inlandpart, which part of this
(19:40):
allegation is that they thoughtFlexport was doing that.
They also say Flexportimproperly charged a Peloton D&D
charges on the carriage ofgoods arranged by Flexport,
despite the carriage of goodsbeing on store door terms.
So, like we were saying, theythought that it was going to go
all the way from store to door.
Despite continuing on, despiteFlexport's responsibility for
arranging and maintaining theinland transportation, including
(20:01):
timely removal and return ofPeloton containers.
And they keep saying timelyremoval and return, because
that's really what the detentionto merge is hinging on right,
continuing on, and I'm almostdone here, but I do think that
reading right off the complaintis important.
Continuing on.
It says upon information andbelief, flexport categorically
assessed these D&D chargesagainst Peloton and Peloton
(20:21):
containers without firstundertaking an evaluation as to
whether Flexport was responsiblefor the charges or whether its
acts or omissions were a causeor contributing factor to the
charges.
So they're saying, look, theywere passing them on to Peloton
under this store door situationwhere Peloton understood that
Flexport was going to be takingcare of all that inland stuff.
(20:42):
And so what?
The allegation here is that,look, flexport maybe had an
opportunity or a reason to sendsome of these things to Peloton.
But they're saying, look,flexport was, just as they said,
categorically assessing theseD&D charges against Peloton, not
even looking to see didFlexport mess up on the timely
removal or return of thecontainers?
(21:04):
So that's kind of the hinge ofthe argument inside that piece.
Last two parts from thecomplaint Flexport assessed
these D&D charges againstPeloton and Peloton containers
in circumstances where Pelotonwas not the party responsible to
pick up, move or return thecontainers.
And then they say Flexportassessed these D&D charges
against Peloton and Pelotoncontainers in circumstances
(21:25):
where charging Peloton D&Dcharges did not incentivize the
pickup of the cargo or primarilyfunction to promote cargo
fluidity.
So they're saying, look,flexport had control of the
pickup, move and return of thecontainers.
They're saying, look, pelotonwas not in control.
Right, they were not the partyresponsible for that.
And additionally, peloton couldnot have incentivized the
(21:50):
pickup of the cargo or primarilyfunction to promote the cargo
fluidity because they didn'thave control of it.
They couldn't impact that.
Does this all sound familiar?
This is a similar argument tothe Samsung cases that were
recently filed that we coveredhere, right?
Similar general facts of thisstore-door movement right.
(22:10):
And the argument hinging on theincentivization principle,
saying that the complainantright, the one filing the
lawsuit is asserting that theyunderstood that they were under
a store door arrangement andtherefore had no control over
the movement of the goods.
And so right.
Part of the incentivizationprinciple is that you can only
charge the detention ordemurrage if it actually is
(22:32):
incentivizing the movement ofthe goods.
And the FMC has sometimesbrought up that on days that
port yards are closed, there'sno charge that you could assess
that would incentivize themovement of goods on that closed
day, because it's animpossibility that anybody could
pick up that day.
I mean, that is also underappeal.
That's the Evergreen case.
(22:53):
That's under appeal as well.
But previously the FMC hasreleased a news, a press release
on that, saying kind of likelook the incentiv.
Others in there are saying look, we had no control over the
movement of the goods and so howcan we be in charge of
(23:27):
incentivizing the movement?
Or how can we be in charge ofgoing to pick them up when we
were in control of them, incontrol of them.
And so you charging us thischarge in no way is
incentivizing us to pick it up,because they're not ours to pick
up, even though they ultimatelywere Peloton containers.
They had hired Flexport to dothese movements for them and
that's that store door thing.
(23:47):
It gets a little confusing butI hope that you're kind of
following along with that andthat's the arguments being made
here, right, I'm just trying tooversimplify and translate kind
of what I understand ishappening here.
So that's what Peloton wassaying.
Right, therefore they had noreason to be assessed the
detention demerits chargesbecause they could not control
the movement of the cargo andtherefore there was no
(24:08):
incentivization of the movementof the cargo.
And again, this is general,very simplified overview.
So Peloton ultimately is makingsome requests here and I'm going
to read from the filing sayingcomplainant respectfully
requests that respondent soFlexport be required to answer
the charges in this complaintand that after a hearing the FMC
issue an order.
And they have four differentrequests here.
(24:29):
One an order ordering therespondent cease and desist from
the unlawful conduct.
So ordering that respondentcease and desist from the
unlawful conduct.
So I mean that's saying look,stop doing this sliding through
of D&D charges under store doormovements, right, I mean that's
kind of what that seems to besignaling.
Number two requiring respondentto pay complainant reparations
(24:51):
for the unlawful conductdescribed above, along with
interest and complainant'sattorney's fees and costs
Requiring.
Number three, requiringrespondent's payment of any
other amounts that the FMC deemsappropriate.
And number four, providingcomplainant such other and
further relief that the FMCdeems is just improper.
These are going to be a reallyinteresting collection of cases
(25:13):
on these store door movementsand the assessment of D&D
charges.
They're in right and thepassing along of those charges,
especially as it interfaces withthe incentive principle.
Right, because it's the storedoor hinged with the argument of
the incentive principle sayingthere's an impossibility of
incentivizing the ultimate ownerof the cargo but not who the
(25:37):
owner of the cargo was sayinglook, I thought that this was
going to be covered under astore door movement.
I didn't know that I wassupposed to be interceding to
make sure that those containersgot off the yard because I had
hired somebody to do that for me.
We'll see.
These are some prettyinteresting things.
I mean, between the minimumquantity commitment collection
of cases and then now the storedoor incentivization principle,
(26:00):
we have some kind of themedcases that are coming before the
FMC that are going to be makingsome pretty important decisions
.
Well, I hope they do.
I hope that these collection ofcases find some clarity in
these gray areas and force theFMC's hand in really making some
(26:21):
clarifying remarks.
Because, like I said, the FMC,when they do the rulemakings,
really prefer to have thatguardrail provision to them,
that they want to stay on theoutsides and they want the
specifics to really be definedthrough case law.
Well, now, here we go.
Now we have cases being filed.
This is where the FMC, therubber meets the road, as it
(26:43):
were.
That the FMC will probably be.
Hopefully, the legal proceduralstuff keeps going forward and
everything is fine there.
But the FMC will probably berequired to have a discussion on
the subject matter of thesecases, right On the minimum
quantity commitments in oneregard and the enforceability,
potentially, of servicecontracts.
(27:04):
And then the other side wouldbe the store door
incentivization principlesrelated to D&D charges.
Cool stuff, right?
I mean, this is like this isniche-y and this is very nerdy,
but this is cool, all right.
Story number four.
So what else is happening?
Fmc again, they announced thatthey were going to be having
their next commission meeting onMay 29th, so that's one day
(27:25):
after the detention demurragerules to set and to go into
effect.
So May 29th on the agenda theyhave two different portions, as
they usually do, right, theyhave an open to the public
portion and a closed to thepublic portion.
So on the open part, they'regoing to be doing a staff update
on BCL, so the Bureau ofCertification and Licensing
Programs, about the OTI, oceanTransportation, intermediary and
(27:48):
passenger vessel operators, soBVOs.
They're also going to be doinga staff update on the Vessel
Operating Common Carrier AuditProgram, so that's the VOCC,
which will also flow into theclosed section.
They will continue thatdiscussion of the VOCC audit
program.
Not surprisingly right,especially some of those audit
programs, there's some protectedinformation that is better
(28:12):
served under the closed to thepublic section.
If you want to see that hearing, it's going to be live streamed
on the FMC's YouTube channel.
Yes, they have a YouTubechannel.
It's actually prettyinteresting.
You can check out the MTDI here, the MTDI weekly stakeholder
engagement.
You can check out the old FMChearing recordings.
You can check out the NationalShipper Advisory Committee
(28:34):
recordings on there and you cansee live streamed the FMC
hearings themselves.
All right, story number five,continuing on the Port of
Baltimore is reopened.
Well, let me clarify that itnever actually closed, to be
clear.
But here we have.
The Coast Guard captain of theport has officially reopened the
Fort McHenry limited accesschannel to an available depth of
(28:57):
45 feet for commercial vesseltraffic, daily from 8 pm to 6 am
.
So there's certain parametersfor vessels using the channel.
Notably, deep draft vessels aregoing to require a Maryland
pilot and two tug escort andthey must secure authorization
by the Coast Guard, among otherrequirements.
Right, check the announcementfor more information there.
But this is great because,similarly announced, the Port of
(29:20):
Baltimore said that this meansthat cruise ships are going to
be returning on May 25th.
Royal Caribbean's vision of theseas is going to be departing
the Port of Baltimore on afive-night cruise from Baltimore
to Bermuda.
This is such a great show ofresilience and resolve to get
this channel back open.
Like I said, the port itselfnever actually closed, right,
but at some point without vesseltraffic, and certainly
(29:41):
commercial vessel traffic, thatcan severely affect the ability
of the port to continueoperations.
Luckily, things are movingforward.
I also want to mention and justbriefly here, the NTSB report.
So the NTSB did the report.
They did the investigation intowhat happened with the MV Dali
Elysian with the Francis ScottKey Bridge.
They released their interimreport this week and it seems to
(30:04):
point to electrical systemsbeing the problem.
I'm going to pause before I gotoo deeply on kind of reporting
on this, and I'm not an experton the mechanical level of a
vessel, so I want to wait andsee kind of how the industry
reacts to this report.
It's just the interim report.
It was just released from thisMarch 26th incident March 26th,
(30:28):
right?
I mean it's only May 17th, lessthan two months later.
And here we are.
We have the channel open tocommercial traffic 45 feet.
I mean we have cruise shipscoming back.
The vessels that were stuck onthe inside have now been able to
leave.
I mean this is really fast.
Like I said, this is really atestament to resilience and
(30:52):
resolve of the port.
So go check out the NTSB report, though it is pretty
interesting.
Like I said, I want to wait alittle bit here.
I don't want to get ahead ofanybody and I certainly want to
make sure that I allow theoperational mechanical experts
to weigh in on this and I'llprobably report on their
interpretation of the NTSBreport.
But it is available, Go checkit out.
(31:18):
National Maritime Day is thisweek and how appropriate that we
are celebrating NationalMaritime Day as the Port of
Baltimore is finding its footingagain From the MARAD's website.
So the Maritime Administration,which is a agency of the
Department of Transportation.
They post on their website kindof the impetus what National
Maritime Day is so each year onMay 22nd this is from the MARAD
website.
Each year on May 22nd, ourcountry celebrates National
(31:39):
Maritime Day.
The US has always been and willalways be a great maritime
nation, from our origins as 13British colonies, through every
period of peace and conflict,since the Merchant Marine has
been a pillar in this country'sfoundation of prosperity and
security economy and strengthenour ties with trading partners
around the world, all whilesupporting our military forces
by shipping troops and supplieswherever they need to go.
(32:02):
91 years ago I'm continuing toread off the Marriott's website
91 years ago, congress declaredNational Maritime Day to
commemorate the Americansteamship Savannah's voyage from
the United States to England,marking the first successful
crossing of the Atlantic Oceanwith steam propulsion.
During World War II, more than250,000 members of the American
Merchant Marine served theircountry, with more than 6,700
(32:26):
giving their lives, hundredsbeing detained as prisoners of
war and more than 800 USmerchant ships being sunk or
damaged.
Maritime Day is a time-honoredtradition that recognized one of
our country's most importantindustries.
Each year, ceremonies andcelebrations throughout the
country recognize NationalMaritime Day and the people our
maritime nation depends on.
So you can tune into theNational Maritime Day
(32:47):
celebration, which is held atDepartment of Transportation
headquarters through a YouTubepage, right Through their
YouTube page.
I'm going to link the YouTubepage in the show notes here.
But this is an exciting day forthe entire industry and I like
the things that Marriott hits onwhen they make their
announcement and theircommemoration National Maritime
(33:09):
Day.
So that'll be coming up thisweek.
Take a minute to think about itand really the magnitude and
the importance of being amaritime strength and having
maritime strength as a nation.
All right, story number sevenOne last story that's still
developing.
This is about the movement onthe Section 301 investigation at
the United States TradeRepresentative's Office.
(33:30):
This is the USTR.
We've talked about the USTRinvestigation on the Section 301
, but this week the White Houseweighed in and they announced
that, in response to China'sunfair trade practices and to
counteract the resulting harms,today President Biden is
directing his traderepresentative to increase
tariffs under Section 301 of theTrade Act of 1974 on $18
(33:53):
billion of imports from China toprotect American workers and
businesses.
That was right off of the factsheet that was released May 14th
, just this week.
Now that seems like a goodthing at first blush, right, the
argument is from so many thatthere are unfair trade practices
that China's engaging in, so wehave to counteract them.
Right, but this came uppreviously under the Trump
(34:13):
administration tariffs onimports from China and one of
the major oversights, I guess Iguess I'll call it an oversight,
but it was ultimately correctedbefore being implemented was
the tariff being assessed onship-to-shore cranes.
So, yes, the cranes that are atports and move the cargo boxes
from vessels to shore, rightship to shore, they're pretty
(34:34):
much only made in China and manyare on order around the country
for US ports.
So the question is if thecranes, most of which have been
ordered years in advance, arriveafter the implementation date
of these tariffs, theseannounced tariffs or proposed
tariffs some have said that theymay even go into effect with as
little as 90 days notice.
(34:54):
So we're waiting on the FederalRegister announcement that will
have kind of more completeinformation on this.
But if these cranes potentiallyarrive after the implementation
dates, then these cranes mightbe subject to a 10, 20, 25%
surcharge in the form of thistariff 25% on a multi-million
(35:16):
dollar purchase of these cranes,and usually there's more than
one, I mean sometimes just one,but more than one crane being
purchased.
It's not a small fee, right,it's a big deal.
So under the Trumpadministration, the
ship-to-shore cranes wereultimately taken off the list
entirely, not even exempted, butsimply completely removed, and
(35:36):
perhaps that's why it wasforgotten, I guess, or
overlooked, or maybe thehistorical information wasn't
necessarily there to remove themagain this time.
But this can potentially be abig deal and might need some
correcting quickly here, right?
So sure, if we tell the portsthat they should buy American,
(35:58):
right, these ship-to-shorecranes don't really exist as
they understand it in the USmarket, and without them,
without ship-to-shore cranes,things derail quickly, right?
As you know, 90% of everythingmoves by ocean transit, and if
ports don't have cranes that canaccommodate the vessels in both
speed and size right, a lot ofthese orders are for larger
(36:21):
cranes then that's going toimpact the end user, and the end
user is the American consumer.
So, and actually I shouldquickly note they weren't
necessarily forgotten, right?
Or maybe that's why I kind ofpaused and said maybe the
discussion that happened aroundthem being removed wasn't
necessarily available, becausethey were specifically listed in
the White House announcement.
So they listed a fewcommodities and ship to shore
(36:44):
cranes was on there and I'mgoing to read off the fact sheet
from the White House.
So it said the tariff rate onship to shore cranes will
increase from 0% to 25% in 2024.
Let me say in 2024, which, likeI said, I've heard that 90 days
might be at play here.
I mean we're already in May.
So, like they said, in 2024,which, like I said, I've heard
that 90 days might be at playhere, I mean we're already in
(37:05):
May.
So, like they said, in 2024,this will be happening, said the
administration.
It says will increase, said theadministration continues to
deliver for the American peopleby rebuilding the United States
industrial capacity to produceport cranes with trusted
partners.
A 25% tariff rate onship-to-shore cranes will help
protect US manufacturers fromChina's unfair trade practices
that have led to excessiveconcentration in the market.
(37:26):
Port cranes are essential piecesof infrastructure that enable
the continuous movement and flowof critical goods to, from and
within the United States, andthe administration is taking
action to mitigate risks thatcould disrupt American supply
chain.
This action also builds off ofongoing work to invest in US
port infrastructure through thePresident's Investing in America
agenda.
(37:46):
This port security initiativeincludes bringing port crane
manufacturing capabilities backto the United States to support
US supply chain security andencourages ports across the
country and around the world touse trusted vendors when
sourcing cranes or other heavyequipment.
So this is an interestinglittle piece because they're
saying, look, we are investingin port crane manufacturing back
(38:06):
in the United States.
I mean, as I understand it, Ireally don't think that there's
a comparable US cranemanufacturer.
I've heard of some small cranemanufacturers that potentially
edge into this, but as far as Iunderstand it, at least for the
fixed arm shipped to shorecranes, it's not available in
the US.
And so that's great that we areinvesting in it, because I
(38:28):
think that that's important.
But if it's not available yetand if in 90 days there's going
to be a multi-million dollaradditional charge on these
cranes because they just didn'tget here in time for this tariff
that was just announced, that'sgoing to have some major, major
, major impacts for these ports.
(38:48):
Look, I don't know.
This is what I'm reading.
I just want to report it out Alittle bit of my own perception
in there, but I'm going to keepwatching this.
I'm open to see what happenshere.
I'm open to see maybe ifthere's further justification
for why these 25% tariffs werespecifically attached to ship to
short cranes.
But I'm going to keep watchingthis.
(39:10):
Changing and charging on thingsthat have to do with the supply
chain can have knock-on effectsthat'll ultimately end with the
end consumers.
So I'm going to keep watchingit.
But, as always, the guidancehere is general and for
educational purposes only.
It should not be construed tobe legal advice directly related
to your matter.
If you need an attorney,contact an attorney, but if you
(39:31):
have specific legal questions,feel free to reach out to me at
my legal company, skollStrategies.
Otherwise, for the non-legalquestions, the e-learning and
general industry information andinsights, come find me at the
Maritime Professor.
If you like these videos, letme know, comment, like and share
.
If you want to listen to theseepisodes on demand, or if you
missed any previous episodes,check out the podcast by Landon
Bysie.
If you prefer to see the video,they live on the YouTube page
(39:53):
by Landon Bysie, presented bythe Maritime Professor.
Check out the website atMaritimeProfessorcom.
Until next week, this is LaurenBegan, the Maritime Professor,
and you've just listened to byLand and by Sea.
See you next time.
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