S3.E23 - FMC's Final Rule Defining Unreasonable Refusal to Deal or Negotiate w/r/t Vessel Space Accommodations - By Land and By Sea

Episode Transcript
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Speaker 1 (00:28):
no-transcript.
When you see me coming, makesome room.
Everywhere I go, I'm in thespotlight.
This is a good night.
I'm living bold.
This is what it looks like Onthe tips and ends of the world.

(00:49):
The Federal Maritime Commissiondropped another rule this time
it was the final rule ondefining unreasonable refusal to
deal or negotiate with respectto vessel space accommodations.
It's a tricky rule and I thinkit might find itself with some

(01:11):
challenges as it's kind ofentered into the larger wild
wild west, but not only and Isay that not only because we're
in this post-Chevron world, butthere's a few requirements that
leave me with some questions.
So let's dive into it.
What does it say?
What am I a little bitconcerned about?
Let's talk it out, all right.
Hi, welcome to, by Land and bySea, an attorney breaking down
the weekend supply chainpresented by the Maritime

(01:33):
Professor.
Me.
I'm Lauren Began, founder ofthe Maritime Professor and
Squall Strategies, and I'm yourfavorite maritime attorney.
Join me every week as we walkthrough both ocean transport and
surface transport topics in thewild world of supply chain.
As always, the guidance here isgeneral and for educational
purposes only.
It should not be construed tobe legal advice and there is no

(01:54):
attorney-client privilegecreated by this video or this
podcast.
If you need an attorney,contact an attorney.
So before we get into thediscussion of the day, let's go
through my top three stories ofthe week.
All right, story number one wealways do it.
We're checking in on therulemakings.
We are just ticking off thislist left and right.
So we've been watching for goshover two years now, since

(02:18):
Osborne 2022, the OceanShivering Reform Act of 2022.
Since Congress told the FMC toundertake some rulemakings,
we've been watching the topthree.
It was billing practices ofdetention and demurrage.
As we know, that went intoeffect May 28th.
And then now we have the secondone we've been watching the
defining unreasonable refusal todeal and negotiate with respect

(02:39):
to vessels-based accommodationsprovided by an ocean common
carrier.
The rule dropped.
We're going to talk about it ina minute.
And then the third rule thatwe're still waiting on.
We're still waiting on is thisdefining unfair or unjustly
discriminatory methods.
Now, remember this got foldedin.
Though the FMC said this is,for the large part, folded into

(03:00):
this unreasonable refusal todeal and negotiate.
So, while we're waiting onstandalone language, it is
folded into this unreasonable ifwe still negotiate.
So, while we're waiting onstandalone language.
It is folded into thisunreasonable if we still
negotiate.
So might satisfy it, but we'lltalk more about that as we dive
further into the unreasonable ifwe still negotiate.
Final rule but as it stands, asa standalone rulemaking, we

(03:23):
don't have it in a separatecategory on regulationsgov.
But, like I said, the FMC hassaid that they folded it in.
We'll talk about it.
And then the last thing thatwe've been keeping an eye on is
the Maritime Transportation DataInitiative.
They had the RFI Request forInformation number two close up.
That was what was it mid-June?
So that's the roundup.
That's what we've been watching.

(03:44):
So I mean, maybe we can takethe list off of our things that
we're watching.
We're still going to be talkingabout this unreasonable deal
and negotiate for a while.
I think I want to break it down.
It is such a nuanced rule, buttoday we're going to be covering
it kind of from a largerspectrum and also I'm going to
be diving into a few differentthings that I want to highlight,

(04:05):
but we only have so much time,so we're going to be covering
this over a few episodes.
All right.
Story number two, checking in onthe ILA, the International
Longshoremen's Association.
As far as news coverage isconcerned, it doesn't look like
a lot has been happening yetsince the kind of mid to end of
July reporting of the stalleddispute or the excuse me, the

(04:29):
stalled conversations on themaster contract.
So just this week JOC, throughMark Zaccone, he was reporting
that the master contracts talksremain stalled due to the
dispute that the ILA has withthe APM, with APM terminals,
over automation project at itsport of Mobile container
terminal.
So that was previously reported.

(04:51):
Right, that was kind of themid-July news.
The rest of that article it'sreally actually interesting.
You should go check it out.
But it talks about theinopportune situation of kind of
no great options for Gulf Coastand East Coast shippers who
haven't already madejust-in-case options for the
shipment of their goods, just incase the ILA-USMX discussions
do stall out.

(05:11):
The ILA, like we've reportedpreviously, has said that
strikes are on the table ifSeptember 30th comes and goes
and the contract expires andthere's no new master contract
or kind of discussion resolution.
So we're going to be watchingthis.
Now that we're in August Istill think September 30th is

(05:34):
like a world away, but we'regetting closer right, we're
getting in that last eight weeksof needing to close up this
contract negotiation.
So I've previously said I'm nottoo worried about it.
Let's not get overdramatic.
I'm still kind of in that I'mstarting to focus on it a little

(05:57):
bit more.
I guess I would say We'll seewhere it goes.
I think everybody wants aresolution here, but we'll see.
But no real news on thisrecently.
It still stands, as far as Ican tell, that things are
stalled.
All right.
Story number three we discussedship-to-shore cranes a few weeks
ago and just this week therewere some new developments from

(06:19):
the United States TradeRepresentative's Office.
So USTR, the United StatesTrade Representative's Office,
so USTR Namely, they decided tocontinue.
They announced that they intendto continue reviewing the
comments they received.
Remember I was talking thatthey had an open comment period
on Section 301 tariffs that theywere proposing on the ship to
shore.
They were supposed to go intoeffect August 1.

(06:40):
Last week they said that theywould be continuing to review
the comments that they receivedand that they have paused the
August 1.
Last week they said that theywould be continuing to review
the comments that they receivedand that they have paused the
August 1st effective date ofthose ship-to-shore tariffs.
So again, let's overview ofwhat we're talking about here
right?
So this is the proposedmodifications and machinery
exclusions process in theSection 301 investigation.

(07:01):
China's acts, policies andpractices relating to technology
transfer, intellectual propertyand innovation.
This was the proposed tariff onship-to-shore cranes, and the
proposal was an increase from acurrent 0% tariff to a 25%
tariff.
Now, the way that it was beingread from some of the industry
was that on August 1st, if thecrane didn't arrive on the

(07:23):
shores, even if it waspreviously purchased or
previously ordered or kind ofbudgeted for.
Essentially was the issue, ifit wasn't here on the shores of
the US by August 1st, then itwas going to be subject to a 25%
tariff, which is I mean we'retalking these cranes can be in
the millions of dollar range.
So 25% on top of that is ahefty additional unexpected cost

(07:48):
.
So that was partly whycertainly the American
Association of Port Authoritieswas getting in on this and
saying look, this is going to bea major impact and potentially
debilitating.
So that was some of thediscussion around it.
This is what these Section 301tariffs were.
These were related to Trump eratariffs.
These were those China tariffsthat happened.

(08:10):
What was it?
I mean last, lastadministration, and now they're
undergoing their four yearreview so it was four years ago
Right by USTR saying that intheir findings that the Section
301 actions have been effectivein encouraging China to take
steps toward eliminating some ofits technology transfer-related
acts, policies and practices,but that China had not

(08:32):
eliminated many of its actualtechnical transfer related,
which continue to impose aburden or restriction on the US
commerce.
Economic analysis generallyfound that the duties have had
small negative effect on USaggregate economic welfare,
positive impacts on USproduction in the 10 sectors
most directly affected by theduties and minimal impacts on

(08:52):
economy-wide prices andemployment.
So kind of saying, look, thesetariffs haven't been terrible
and maybe in some respectsthey're pushing forward the way
that they were intended.
And this is from the currentUSTR report on this where they
also continue to say economicanalysis, including the
principal US government analysispublished by the US
International Trade Commission,generally found that Section 301

(09:14):
tariffs have contributed toreducing US imports of goods
from China and increasingimports from alternate sources.
So it said, based on thosefindings, the USTR recommended
to the president that Section301 tariffs on covered products
be maintained and then they wenton to expand it potentially on
these ship to shore, they say,to further encourage China to

(09:35):
eliminate the acts, policies andpractices at issue and to
counteract the burden orrestriction of these acts,
policies and practices.
The trade representative shallmodify the actions taken in the
investigation to increaseSection 301 ad valorem rates on
duty for certain specifiedproducts of China.
Part of the public commentsincluded a request for comments

(09:56):
on the scope of the productdescription to cover
ship-to-shore cranes undersubheading 8426.19.00, and then
in parentheses said transportercranes, gantry cranes and bridge
cranes.
So that's where this became aninteresting discussion for ports
and terminals, mtos andterminals.
Right, that last part was theone that I wanted people to pay

(10:17):
attention to and I previouslybrought this up.
So what's the update?
July 30th, so just this weekOffice of the USTR said in an
announcement they werecontinuing to review public
comments for proposedmodification to China 301
actions.
So on May 28th I'm just goingto read off the announcement,
it's a brief one On May 28, 2024, ustr proposed certain

(10:39):
modifications of the actions inthe Section 301 investigation of
China's acts, policies andpractices related to technology
transfers, transfer,intellectual property and
innovation.
In response to the May 28thnotice, ustr received more than
1,100 comments from the public.
That's great, by the way,everybody Good job submitting
comments, because I always saythis is the way that you can

(11:01):
talk to these agencies, this isthe way that you can have your
voice be heard.
Take advantage of open commentperiod.
All right, continuing on.
In consultation with the Section301 Committee, ustr continues
to review all comments andexpects its final determination
will now be issued in August2024.
So they're saying, look, it waspreviously probably supposed to
go into effect August 1, butnow they're saying, look, the

(11:23):
final determination probablywon't be issued until they said
August 2024.
So this month sometime.
It continues on to say USTRexpects that the modification
slated for 2024 will take effectapproximately two weeks after
it makes the final determinationpublic.
So they're saying, look, we'regoing to finish up these
comments within the month, right, within August 2024, which is

(11:46):
the month we're in now.
This was released just on the30th, so they were saying within
the next month.
And they're saying two weeksafter they make that final
determination is when it willtake effect.
So while it's given notice foran August 1st, start from this
May 28th notice, which is a goodamount of time, right, that's

(12:06):
June and July.
Now they're saying you're goingto get two weeks after it makes
its final determination.
I don't know how to read of that.
Really, I don't know if they'regoing to rest on the 60 days
plus two weeks, saying if theykeep this tariff, that well, you
had plenty of time.
Look, you had two months plustwo weeks or if they're going to
potentially repeal this thoughtof 25% tariff on these

(12:30):
ship-to-shore cranes andpotentially others.
I'm not sure.
I'm not sure how this is goingto go, but I think that's
interesting.
I'm just kind of noting thethings that I think are
interesting here.
But the good news is the thingthat I love to see is the US
USTR and really any agency istaking extra time here.
But they're they're really kindof considering the impact and

(12:51):
the comments that came in.
They they're saying, look,we're still getting through
these comments, we're stilldetermining what we're going to
be doing and in consultationwith the section 301 committee
that's how they're they'recontinuing to look at all of
this.
So I think, because this wassuch an impact, I like that
they're continuing to look at it.
So that's it.
It's on pause right now butexpect some more information

(13:14):
sometime in the months, which isinteresting, right, because
August is usually the month thatDC takes off, and I say that
because the Hill kind of doesthat.
But I mean it's it's the heatof summer, it's a hot month for
for Washington DC, but we'llI'll continue to watch it.
All right, so let's get intothe meat and potatoes of the day
.
We got a lot to cover.
The FMC released their finalrule on the definition the

(13:36):
definition of unreasonable ifit's a deal to negotiate with
respect to vessel spaceaccommodations provided by an
ocean common carrier.
They to vessel spaceaccommodations provided by an
Ocean Common carrier.
They released that on July 23rd2024.
The final rule is effective in60 days, 60 days from
publication in the FederalRegister.
So the final rule on this willbe effective September 23rd 2024
.
So remember the Federal Register.

(13:58):
They might announce the rule,but the official announcement is
the Federal Register.
I always kind of like to saythe Federal Register is like the
federal government's classifiedad section.
So they have to announce itthere and it can't just
instantly go up.
It has to be part of their,their full system.
So usually it takes a couple ofdays, a day or two.
So it was published on July23rd in the Federal Register.

(14:21):
So 60 days from publication inthe Federal Register, which puts
us at September 23rd, the FMCactually noted in their
announcement that therequirements for Ocean Common
Carriers to file a documentedexport policy with the
commission are delayed.
That's pending approval of thecollection of information by the
OMB, the Office of Managementand Budget.
We saw this on thoserequirements that were in the

(14:45):
detention to merge rulemaking.
Remember, anytime you're askingthe public to submit feedback
or submit something, usually ithas to go through the collection
of information and reviewed bythe Office of Management and
Budget.
So once OMB approves that, thenthe commission will then be
able to publish the effectivedate of those requirements.

(15:06):
But it's got to be approved byOMB, all right.
So what's the rule?
Right?
The FMC was charged by theOcean Shipping Reform Act of
2022.
So OSRA 22, which was fromCongress, which makes this
statutory, which means that whenwe're talking about kind of a
post-Chevron repeal world, thisis something that's coming

(15:27):
direct from Congress and I onlykind of point that out.
We're not going to get into thenuances of that.
But what did Osra say?
They told the FMC to initiate arulemaking defining
unreasonable refusal to deal ornegotiate with respect to vessel
space under Section 411004A10.
That's of title 46.

(15:47):
So 46 USC 41104A10.
They were also directed toundertake this in consultation
with the commandant of the CoastGuard.
They mentioned it a little bitin the intro but obviously it's
not a major piece of this rule.
But I'm just interested to seeif there's like a little bit
more information about like howthose conversations went, if any

(16:11):
of that's public, kind of whatthe commandant said and I only
say that because it's a littlebit tangential to what the Coast
Guard does this unreasonablerefusal to deal or negotiate.
But just an interesting point.
All right, getting back to it,so this is supposed to define
right.
Congress told FMC to define41104A10, which said what does

(16:31):
that rule say?
It says this is current law,not something Osra created.
This is current law under theShipping Act.
So A is in general a commoncarrier, either alone or in
conjunction with any otherperson, directly or indirectly
shall not.
And then it lists out a wholebunch of things that they're not
allowed to do.
And number 10 says unreasonablyrefuse to deal or negotiate,

(16:54):
including with respect to vesselspace accommodations provided
by an ocean common carrier.
I mean, that's the title of therule.
So unreasonably refuse to dealor negotiate.
That's why it's so important tonotice and that's why I kept
hearkening on this rule that theFMC just released is not the
unreasonable refusal to deal andnegotiate.
It's defining what isunreasonably refusing to deal

(17:18):
and negotiate, which is why thisrule is so important, also why
the FMC was so careful here, andwe're going to break this down
for a very long time on all thenuances that I see of this and I
think that this is going to bereally interesting to watch as

(17:40):
it's incorporated into theecosystem of the supply chain
and if it has any challenges, itwouldn't be surprising if there
were a few challenges,particularly on the documented
export strategy or documentedexport policy, but we're going
to talk about that in a minute.
So I keep going tangential.
Let's keep this simple.
The FMC also expanded this rule,so it was A10, but it also

(18:04):
expanded this rule to a three,where it says you know, a said
in general, a common carrier,either alone or in conjunction
with any other person, directlyor indirectly, shall not.
So a common carrier shall notunreasonably refuse cargo space
accommodations when available orresort or resort to other
unfair, unjustly discriminatorymethods.
So the 10 says unreasonablyrefuse to deal or negotiate.

(18:27):
Three says unreasonably refusecargo space accommodations when
available or resort to otherunfair, unjustly discriminatory
methods.
And that second part is kind ofthat third rulemaking that we
were waiting for right, definingunfair, unjustly discriminatory
methods.
And that's where the FMC isreally kind of saying, look, we
folded it in here.
It was kind of a delineationbetween A10 and A3,

(18:50):
oversimplification, but yeah,that's partly where they're
folding it in.
So I want to read from the it'salmost the last section right
before they get into the text ofthe rule, where the FMC in the
full discussion, so they releasethe rule, right.
I think it's like 30 pages orso.
They have all this preamble,they have all this discussion

(19:11):
and then at the very end, rightbefore they get into the rule
text, it says summary of finalrule and changes from SNPRM,
which is the supplemental noticeof proposed rulemaking.
So a little bit of therulemaking history here.
Remember they released theirnotice of proposed rulemaking as
prompted by Ocean ShippingReform Act of 2022, and then
they opened it back up forcomments again and they called

(19:33):
that the supplemental notice ofproposed rulemaking.
So usually it goes NPRM topotentially final rule.
Sometimes we see that there's anadvanced notice of proposed
rulemaking, the ANPRM.
That's something that we sawwith the detention to merge rule
.
Here we saw it go from noticeof proposed rulemaking.
So they kind of released sometext they were throwing around

(19:56):
and then they further refined itbut then wanted more feedback
with a supplemental notice ofproposed rulemaking.
Chairman Maffei at the timesaid look, it's more important
to get this right than get thisfast.
I keep repeating that because Ithought that that was a very
important thing for him to sayand that he also said this is a
very tricky rule.
This has some nuances and someimpacts that they want to make

(20:16):
sure that they get it right.
All right.
So this summary of the finalrule and changes from the SNPRM.
It says this final ruledescribes how the commission
will consider private partyadjudications and agency
initiated enforcement cases inwhich violations of 46 USC 41104
.
So this is the A3 and A10 arealleged relating to unreasonable

(20:38):
refusal to deal excuse me,unreasonable refusal to provide
cargo space accommodations andor refusals to deal by ocean
common carriers.
It considers the commoncarriage roots of the Shipping
Act as well as the overallcompetition basis of the
commission's authority.
Future cases that allegeviolations of A3 or A10, I'm
just going to shorten that willbe factually driven and

(21:00):
determined on a case-by-casebasis.
So they're saying look, nomatter what, these are
case-by-case, but it says theframework established by this
final rule is taken fromcommission precedent on refusal
to deal cases generally and onsuggestions offered by
commenters on the NPRM and SNPRM.
So they're saying look all thecase law that we have, the
precedent that's out there.

(21:21):
We brought that in, but then wealso wanted to really
understand the commenters andthe suggestions offered there.
You can read more about that inthe preamble.
That's the part that we'regoing to be covering as we
continue to look at this ruleToday.
I really wanted to kind of keepit overview with a few little
pieces that I'm diving into.
So, continuing on in thissection, this rule ensures that

(21:41):
shippers can readily discernwhen a carrier has acted outside
the bounds of reasonablenessand know what type of claim an
A3 or an A10, to bring beforethe commission.
So it continues on to say so.

(22:01):
This is where this is going tobecome section 542 of the CFR.
So CFR is the Code of FederalRegulations.
That's where the FMC.
So there's statute, which is USCode, which is USC, 46, usc,
and then this is where it turnsinto the regulatory FMC-created
rules based on that statutoryauthority that was given to them
in the code, in the statute.
Very simple, but very simple,oversimplified explanation.

(22:25):
But just so that you kind ofunderstand the difference
between the two.
What are all these numbers?
Cfr is something that the FMChas created.
Usc well, not always, but forthe sections that we're talking
about.
The CFR that the FMC isrelating to, this part 542,
that's an FMC-created rulemakingUSC for this section of the

(22:47):
code.
This USC, that's somethingCongress created and so Congress
gives the authority to the FMCthrough the code and then the
FMC takes that, turns it into arulemaking and puts it as a CFR
Oversimplification.
But just so you kind ofunderstand the difference there.
And those are regs.
So statutes are the USC, regsare the CFR.

(23:07):
See, you guys can all pass thebar now, just kidding, this is
an oversimplification, but justso you know.
I mean that's a big thing, allright.
So section 542.1A purpose sothis is still part of that
overview, discussion of summarythat the FMC is providing.
So while 46 USC 41104 appliesgenerally to both VOCCs and

(23:32):
NVOCCs, they're saying this ruleonly applies to VOCCs.
So they continue the specificprohibition in 46 USC 41104 A10,
so that's A10, that is thesubject of this rule applies
only to VOCCs because oceancommon carrier is defined as a
vessel operating common carrierin the Shipping Act, although

(23:53):
section 41104A3,.
So this A3 applies to bothVOCCs and NVOCCs.
This rule, so this rule thatthe FMC is talking about today,
this defining unreasonablerefusal to deal and negotiate,
only applies to VOCCs.
To mirror the scope of theaffected population, of the
affected population, of the NPRM, the Notice of Proposal Making.
Importantly, however, this ruledoes not limit the application

(24:16):
of A3 or the rest of 46 US CA 10to VOCCs.
Rather, nvoccs remain legallyliable under A3 and A10 for
violations of the Shipping Act.
So what is that saying?
They're saying look ourdefinitions and the things that
we're putting out in this CFR,this rule that's being released
is saying that these only applyto VOCCs.

(24:38):
But the statute that this isall based on, that A3 and A10,
that still applies to everybody,it always applied to.
The FMC is saying look right,today the things that we've

(24:59):
focused on are just VOCCs, theVessel Operating Common Carriers
.
So they're saying not theNVOCCs in this rulemaking, but
that doesn't take away theapplication of that statute as
it applies to NVOCCs.
So a little bit of a nuance.
It gets a little complicated,but continuing on.
Similarly, section 4.1.1.0.4applies generally to row-row,

(25:20):
roll-on roll-off cargo, bulkcargo and containerized cargo.
This rule, however, onlyapplies to containerized cargo
because the issues arising fromcontainer availability during
the pandemic were not present,or at least not present to the
same extent, for row-row or bulkcargo vessels.
While this rule is limited tocontainerized cargo, it does not
, so they kind of repeat thisagain.
It does not preclude refusal todeal claims arising in the

(25:44):
context of row-row cargo or bulkcargo.
Fmc has amended section 542.1ato clarify that the rule is
limited in scope tocontainerized cargo.
So they're saying same thing,right?
This is VOCC and this iscontainerized cargo.
That does not mean that this iseliminating any of the duties,
excuse me, this is noteliminating any of the

(26:06):
application of that statute toroworo or Bulk or any of the
other potentially liablesections of the industry.
This is just saying look, allwe're talking about here in this
defining unreasonable refusalto negotiate is containerized
cargo and VOCCs.

(26:26):
I'm only pausing because anytimeyou need to be that clear means
any that specific.
I'm just wondering if that isfodder for a challenge, right,
and I don't know.
I don't know, we'll see.
I anticipate because this is sonuanced that there will
probably be a challenge to it,but I think that that might be

(26:50):
one thing that that people mightgo after is like well, why is
it NVOCC, why is it VO and notNVO and um, trying to kind of
drill down on that and andwhether that's the right call.
Um, but that's what the FMCsaying, that's what they did.
They, they were rooting it inUm, as far as I can understand,
I'm going to have to be divinginto this more because, right,
as far as I can understand, I'mgoing to have to be diving into

(27:11):
this more because, right, thisis all nuance, but for right now
, as far as I can understand,they were saying that Congress
told them to do that.
So I'm going to dive into thatsection a little bit more just
to make sure that I'm fullyunderstanding that correctly.
But yeah, so that's what theysaid.
Vos and containerized cargo.
Ok, so what does the rule say?
That's what I really want tohit today.
What does the rule say?
That's what I really wanted tohit today.

(27:31):
What does the rule actually say?
I'm going to let you read itfor yourself for the most part,
but I'm going to highlight someareas here.
So, definitions, section 542.1,definition of unreasonable
refusal.
Excuse me, it just rolls offthe tongue that it's hard to
stop once you keep going.
So definition of unreasonablerefusal of cargo space
accommodations when available,and unreasonable refusal to deal
and negotiate with respect tovessel space provided by an

(27:53):
So it's refusal of cargo space,unreasonable refusal of cargo
space when available andunreasonable refusal to deal and
negotiate with respect tovessel space.
All right.
So the purpose this is theactual text that will be going
into effect September 23rd,barring any pauses.
So this part establishes theelements and definitions

(28:15):
necessary for the FMC to apply46 USC A3.
I'm just going to shorten it A3, with respect to refusals of
cargo space accommodations whenavailable for containerized
cargo, and to apply A10 withrespect to refusals of vessel
space accommodations provided byan ocean common carrier with
respect to containerusals ofvessel space accommodations
provided by an ocean commoncarrier with respect to
containerized cargo.
Again, those were shortened,I'm just saying A3 and A10, but

(28:35):
it's the 46 USC 41104.
This part applies to complaintsbrought before the commission
by a private party andenforcement cases brought by the
commission.
So then it goes into thedefinitions and this is the part
that I really, for the past fewmonths years I guess have been
saying pay attention to thedefinitions.
The whole thing is important,but pay attention to the

(28:58):
definitions because that's whereit feels to me the rubber meets
the road.
Right're proposing, or not evenproposing, what will be the
final rule, barring any, anypauses or, like I said, anything
else.
Blank sailing means a sailingskipping one or more specific

(29:19):
ports while still traversing therest of the scheduled route, or
the entire sailing.
Being canceled means spacewhich has been negotiated for or
confirmed aboard the vessel ofan ocean common carrier for
laden containers being importedto or exported from the United
States.
Cargo space accommodationsincludes the services necessary
to access and load or unloadcargo from a vessel calling at a

(29:42):
US port.
Documented export policy meansa written report produced by an
ocean common carrier thatdetails the ocean common
carrier's practices andprocedures for US outbound
services.
This part is the part that isgoing to be very interesting to
see how this is kind ofstomached by the overall supply

(30:03):
chain ecosystem and certainly bythe Ocean Common Carriers that
are going to be responsible forthis documented export policy.
Okay, continuing on.
Sweeper vessel means a vesselexclusively designated to load
and move empty containers from aUS port for the purpose of
transporting them to anotherdesignated location.
Transportation factors meansfactors that encompass the

(30:24):
vessel operation considerationsunderlying an ocean common
carrier's ability to accommodateladen cargo for import or
export, which can include butare not limited to vessel safety
and stability, weather-relatedscheduling considerations and
other factors related to vesseloperation outside of the vessel
operator's control and notreasonably foreseeable
Transportation factors.

(30:44):
I guess this is maybe whereCoast Guard could have some
impact in the discussion.
Some of these things are kindof related to Coast Guard, but
I'm going to look into that parttoo.
All right, continuing on withthe definitions unreasonable,
this is the one that I just wantto do to focus on and I want to
stop and say under definitionsit says for the purposes of this

(31:06):
section, and I think thatthat's important because I'm not
.
I'd have to go back and checkto see if that was included, but
I always just get nervousanytime reasonableness or
unreasonableness gets defined inbroad sense.
So at least this says for thepurposes of this section.
So it kind of limitsunreasonableness to this section

(31:27):
, this 542.
But anyway, so unreasonablemeans ocean common carrier
conduct that unduly restrictsthe ability of shippers to
meaningfully access oceancarriage services from that
Continuing it on vessel spaceaccommodations means space
available aboard a vessel of anocean common carrier for laden

(31:48):
containers being imported to orexported from the United States.
Vessel space accommodationsalso includes the services
necessary to book or accessvessel space accommodations.
So those are the definitionsthat are written into this final
rule.
The rule continues part C.
Subpart C is elements forclaims.
The following elements arenecessary to establish a

(32:09):
successful private party orenforcement claim under 46,
again shortened the USC.
So this is A3.
So this is the elementsnecessary to establish a
successful private party orenforcement claim under A3 with
respect to refusals of cargospace accommodations when
available.
So there's three here.

(32:29):
One, the respondent must be anocean common carrier as defined
in 46 USC 4-0-1-0-2.
Two, the respondent refuses orrefused cargo space
accommodations when available.
And three, the ocean commoncarrier's conduct is
unreasonable.
I mean those all for the mostpart right, make sense.
They're kind of based on thelanguage, but it says must be an

(32:50):
ocean common carrier, mustrefuse or refuse cargo space
accommodations when available.
And ocean common carrier'sconduct was unreasonable.
Right, because the whole thingis unreasonably.
Refusal of cargo spaceaccommodations when available.
The next part non-bindingconsiderations when evaluating
unreasonable conduct.
So it's interesting they saidnon-binding considerations when

(33:12):
evaluating unreasonable conduct.
So it's interesting, they saidnon-binding considerations, but
they're kind of giving thisglimpse of like.
Here are the things that we'regoing to be looking at when a
claim comes in based onunreasonable conduct.
This is in the final rule.
It says this is subsection Dnon-binding considerations when
evaluating unreasonable conduct.
In evaluating the reasonablenessof an ocean common carrier's
refusal to provide cargo spaceaccommodations, the commission

(33:34):
may consider the followingfactors.
So three factors here Whetherthe ocean common carrier
followed a documented exportpolicy that enables the timely
sorry, there's four factors hereWhether the ocean common
carrier followed a documentedexport policy that enables the
timely and efficient movement ofexport cargo.
So whether they're following adocumented export policy.

(33:57):
Two, whether the Ocean CommonCarrier made a good faith effort
to mitigate the impact of arefusal.
So were they trying to mitigatethe impact of that refusal?
Three, whether the refusal wasbased on legitimate
transportation factors, which ispreviously defined.
And then four, any otherrelevant factors of conduct.

(34:19):
So those were the kind of threemajor things.
And then there's the catch-allthat the FMC has said look, when
we're evaluating this, theseare three of the things that
we're going to be looking atNon-binding examples of
unreasonable conduct.
So D was non-bindingconsiderations when evaluating E

(34:40):
is non-binding.
Examples of unreasonable conduct.
The following are examples ofconduct, kinds of conduct that
may be considered unreasonableunder A3 when linked to a
refusal to provide cargo spaceaccommodations.
One blank sailings or schedulechanges with no advanced notice
or with insufficient advancednotice.
I'm going to stop there again.

(35:00):
That first one.
An example of unreasonableconduct when linked to a refusal
to provide cargo spaceaccommodations, blank sailings
or schedule changes with noadvance notice or with
insufficient advance notice.
That's going to be interesting.
No notice or insufficientadvance notice, because they
don't really say what sufficientadvance notice is, but they're

(35:22):
just saying look, this is anexample of something non-binding
that we're going to bereviewing.
Number two vessel capacitylimitations not justified by
legitimate transportationfactors.
Again, that was defined above.
Three failing to alert ornotify shippers with confirmed
bookings of any other changes tothe sailing that will affect
when their cargo arrives at itsdestination port.

(35:43):
So these are just examples.
These are things that they'resaying they're going to be
taking into consideration andexamples of the kinds of conduct
that may be consideredunreasonable.
Four is scheduling insufficienttime for cargo tendering or
vessel loading so that cargo isconstructively refused, so not

(36:05):
outright refused, but if thereisn't time for cargo tendering
or vessel loading, that it thenis in turn constructively
refused.
That's interesting.
Number five providinginaccurate or unreliable vessel
information Also interesting.
It feels like they're trying toclean up some of the shipper
complaints that have beenpercolating over the past few

(36:28):
years, complaints that have beenpercolating over the past few
years and these are non-bindingexamples of unreasonable conduct
that the FMC has put in thisfinal rule.
This will be in the CFR.
Number six the de facto,absolute or systematic exclusion
of exports in providing cargospace accommodations.
So they're saying the de facto,the absolute or the systemic
exclusion of exports inproviding cargo space

(36:49):
accommodations.
So they're saying the de facto,the absolute or the systemic
exclusion of exports inproviding cargo space
accommodations.
They're saying outright refusal, basically right, all right.
So, continuing on elements forclaims, the following elements
are necessary to establish asuccessful private party or
enforcement claim under A-10.
So those were all for A-3.
Now we're into A-10 with respectto refusals of vessel space
accommodations provided by anocean common carrier.

(37:10):
So it says these are three therespondent must be an ocean
common carrier, the respondentrefuses or refuse to deal or
negotiate with respect to vesselspace accommodations and the
ocean common carrier's conductis unreasonable.
They're basically justoutlining the rule as it is.
Non-binding considerations whenevaluating unreasonable conduct
, right?
So again, this is for A10.
The last one was A3.

(37:31):
This is A10.
In evaluating the reasonablenessof an ocean common carrier's
refusal to deal or negotiatewith respect to vessel space
accommodations, the commissionmay consider the following
factors.
Number one whether the oceancommon carrier followed a
documented export policy thatenables the timely and efficient
movement of export cargo.
So again, this documentedexport policy.
Number two whether the oceancommon carrier engaged in good

(37:53):
faith negotiations.
That'll be interesting to seehow good faith negotiations is
kind of ultimately molded.
Whether the refusal was basedon legitimate transportation
factors, again previouslydefined, and any other relevant
factors or conduct.
Now here's where it getsinteresting again, right.
Non-binding examples ofunreasonable conduct Non-binding

(38:15):
.
The following are examples ofthe kinds of conduct that may be
considered unreasonable under46A10 when linked to a refusal
to deal or negotiate.
So number one there's only twohere.
Number one quoting rates thatare so far above current market
rates that they cannot beconsidered a good faith offer or
an attempted engaging in goodfaith negotiations.
So like you can't, essentiallywhat they're saying is you can't

(38:38):
price it out so high that thatit's they're saying.
It would be then in temp notgood faith, then in turn being
non good faith.
So that was the firstnon-binding example of
unreasonable conduct for A10.
The second is the de facto,absolute or systematic exclusion
of exports in providing vesselspace accommodation.

(38:59):
So the just general exclusion,or de facto or absolute, all
right.
So that was A10.
The use of sweeper vessels isalso listed here.
So part I ocean common carriersare not precluded from using
sweeper vessels previouslydesignated for that purpose to

(39:19):
reposition empty containers.
And that's what sweeper vesselsreally do, right, they're
moving around the emptycontainers so that they can.
But there was some feedbackfrom the industry.
I guess I would say there weresome vessels that might have
been doing too much sweeping, orI don't want to go too far into
that.
But so sweeper vessels became aproblem, or at least something

(39:43):
that was worthy of a discussionor something that Congress
deemed important to be includedin some of this discussion.
And I say I guess I'd say thatit was Congress that said it.
Like I said, it was more kindof the industry talking about
the sweeper vessels enough thatthe FMC included it here, right?
So use the sweeper vessels.
Ocean common carriers are notprecluded from using sweeper

(40:05):
vessels previously designatedfor that purpose to reposition
empty containers.
However and here's where theFMC weighs in However, the
designation of a vessel as asweeper vessel is subject to
commission review to determinewhether the designation results
in an unreasonable refusal ofocean carriage services.
So this is kind of a tough one,right, because it's like

(40:29):
sweeper vessels are really partof an operational side of things
.
But now the FMC is saying thedesignation of a vessel as a
sweeper vessel is subject tocommission review, as whether
that designation results in an adetermination of a business
thing.
It ultimately puts a lot ofemphasis on how the FMC is going

(40:59):
to come down on this, and Ithink that that's important
because this is putting a lot of.
We're going to have to see howthe FMC starts to handle these
things in order to really haveclear guidance on where it's
going right.
All right, so that's subpart Ais the sweeper vessels.
That's going to be somethingthat I'm going to dive into

(41:22):
further because I think thatthat's going to be interesting.
Is this intersection betweenoperational and business
decisions Granted right?
Intersection betweenoperational and business
decisions Granted right, like ifyou're using sweeper vessels so
much so that it's now anunreasonable refusal of ocean
common carriage services, sayingoh no, that was a sweeper
vessel, when really you're justtrying to cover it.
I mean, maybe that's wheretheir thinking is like it's only

(41:42):
going to be in these extremesituations.
But when you start to move intothat gray area, that's where it
gets a little bit.
To move into that gray area,that's where it gets a little
bit, I'll say, concerning rightand that's where you really want
.
I mean, they've said these areall going to be case by case,
but that's where you really wantsome clarity.
And this isn't giving a ton ofclarity on that.
But it's saying look, it'ssomething that we're going to be
considering.

(42:02):
All right, so part K, shiftingthe burden of production.
In accordance with applicablelaws, the following standard
applies the initial burden ofproduction to establish a prima
facie case of a violation ofthis part is with the
complainant or with theCommission's Bureau of
Enforcement, investigations andCompliance.
And then, once a complaint acomplainant sets forth a prima
facie case of its violation, theburden shifts was the NPRM
where this was um, perhaps theocean carrier had to had to

(42:34):
initially come up with why itwas, why it was not unreasonable
.
Now they're saying, look, theinitial burden.
You have to say, um, thecomplainant has to say, look,
why are you saying this isunreasonable?
And then, kind of appropriately, so.
Then the burden then wouldshift to the Ocean Common
Carrier to justify why it wasreasonable.

(42:55):
They don't have to say it rightoff the bat.
They're saying, look, here'swhy I think it's unreasonable
with the complaint.
And then the Ocean CommonCarrier says and here's why I
think it was actually reasonable.
And then it continues on.
The ultimate burden ofpersuading the commission always
remains with the complainant orwith the commission's Bureau of
Enforcement, investigations andCompliance.
Ok, so this next part is stilldelayed.

(43:15):
This is where OMB has to weighin on it.
This has to do with thedocumented export strategy.
So this of this collection ofinformation, right.
So this is subpart J under partfive.
For two, point one J documentedexports policy.
Part 542.1J documented exportspolicy.
Ocean common carriers must filewith the Federal Maritime
Commission a documented exportpolicy that enables the timely
and efficient movement of exportcargo.

(43:37):
This is where, potentially,there could be an argument of
this is beyond what Congress wasdirecting them to do, right?
We kind of talked about thatsection where they said define
unreasonable.
If he's dealing with thisback-to-bustle space
accommodations, at least in thatlittle part.

(43:58):
It doesn't necessarily talkabout documented export policy.
It may in other areas, and thisis where I want to dive into
this further.
But I think this documentedexport policy is ripe for
conversation and what I mean bythat is I wouldn't be surprised
if this potentially because itfeels like a bolder action.

(44:20):
This is potentially where theremight be some petitions or some
complaint filings againstdocumented export policy,
because in the comments thatwere filed with the notice and
comment period the kind ofconversation back and forth the
comments that were filed wassaying look, this is probably
going too far, okay.
So J says documented exportpolicy and then L says each

(44:44):
ocean common carrier must submita documented export policy to
the commission once per calendaryear and include, in a manner
prescribed by the Commission,pricing strategies, services
offered, strategies forequipment provision and
descriptions of markets served.
Updates may be submitted morethan once per year if the Ocean
Common Carrier chooses to do so.
Other topics a documentedexport policy should also

(45:05):
address, if applicable, includethe effect of blank sailings or
other scheduled disruptions onthe Ocean Common Carrier's
ability to accept shipments, theOcean Common Carrier's rules
and practices for thedesignation and use of sweeper
vessels.
And three, the alternativeremedies or assistance the Ocean
Common Carrier would makeavailable to a shipper to whom
it refused vessel spaceaccommodations.
So the documented export policyrequired to be followed by this

(45:28):
part must be submitted to theDirector of BTA, the Bureau of
Trade Analysis at the FMC,through export policy at fmcgov.
Continuing on, it says thedocumented export policies filed
in accordance with this sectionshall not be circulated outside
of the FMC.
These documents and theinformation contained therein
shall not be publicly disclosed,disclosable in whole or in part
, including in response torequests under the Freedom of

(45:50):
Information Act.
The information may, however,be disclosed to the extent that
it is relevant to anadministrative or judicial
action or proceeding, or toeither House of Congress or a
duly authorized committee orsubcommittee of Congress.
So this documented exportpolicy is one that I wanted to
highlight what the FMC said inthe preamble about, because I

(46:10):
think that it's important to gettheir take Right and I'm going
to be diving into this furtherand kind of looking back at the
historical NPRM and SNPRM.
But in this final rule, thepreamble, under subpart J of the
preamble, which actually issection 542.1, subpart J of the
rule is this documented exportpolicy.
It says the commission amended542.1 j to state that the ocean

(46:33):
common carrier must file thedocument with the commission,
not that the ocean commoncarrier must follow the document
.
It's kind of an interestingthing for them to say, right,
that they must file the documentwith the commission but that
they don't have to follow thedocument.
This change aligns with thecommission's intent to whether
the that whether the oceancommon carrier followed a

(46:53):
documented export policy as anon-binding consideration that
the commission may consider indetermining whether unreasonable
conduct has occurred.
So they're saying look, youhave to provide this baseline
document but you don't have tofollow it.
But if you don't follow it,we're going to be bringing it
into consideration.
Non-binding considerationswe're going to be looking at to
see if what you said you did andwhat you actually did was a

(47:15):
departure and became anunreasonable conduct.
I don't know, I'm going to haveto read more into this.
My gut reaction is this feels alittle stifling of the
competition.
I guess I'm really interestedto see how this one kind of

(47:36):
comes into society, ourcollective supply chain society.
So, continuing on this preamblediscussion, in addition to using
documented export policies todetermine whether an ocean
common carrier's conduct is in aspecific matter aligns with
their general policies and thuswhether the ocean common
carrier's conduct is in aspecific matter aligns with
their general policies and thuswhether the ocean common carrier
actor acted reasonably.

(47:57):
The policies will be used bythe commission to monitor the
industry for the unreasonableand like when they're just
totally being ignored, because Ithink that's the history here
is that during the COVIDcongestion years, there were
some carriers that just poppedup out of nowhere.

(48:17):
They were hopping in on the$20,000 rates for the Asia to
West Coast, but then they wereturning around, not taking
empties, not taking exports, andjust leaving, sometimes only
taking empties right and nottaking the exports, and so that
was a problem, because they werecategorically denying exports,
saying nope, don't have time,we're just getting out of here,
we don't want to deal with theexports, we're just turning

(48:39):
around.
We're all about this cargomovement from Asia to the West
Coast.
As I understand it, that has,for the most part, part resolved
, and so I've heard from theindustry that this might be
trying to solve a problem thatdoesn't really exist anymore.
But that doesn't mean that itwon't again, and I think that's
what the intention of continuingon this activity is is that

(49:02):
maybe it will in the future, andso let's wrangle it now.
This is just.
There's a lot of discussion.
I think that's going to bereally interesting here, but
this documented export policyI'm going to be following with
with a lot of interest, so Ialso think the NVOCCs versus

(49:22):
VOCCs is an interesting one aswell.
We're going to be covering abunch of this stuff through
multiple episodes, but I justwant to point out that the FMC
kind of takes painstakingly,explains the scope of that rule
and then addresses it in thepreamble discussion where it
says there are two types ofcommon carriers vessel operating
common carriers and non-vesseloperating common carriers.

(49:45):
Section 41104 applies generallyto both VOCCs and NVOCCs.
However, this rule only appliesto VOCCs.
This is from the scope of therule in the preamble.
We talked about it in thesummary.
I'm not going to go too farinto it today, but I just want
to really highlight that again,where they are making a specific
mention that this defining rulefinal rule is only for VOCCs

(50:07):
and it's only for thecontainerized cargo rule.
Final rule is only for VOCCsand it's only for the
containerized cargo.
So they do pull in and I thinkthat this is important to
mention application of the ruleto NVOCCs.
They pull in in the preamblethrough some of these issues,
some of the comments and thespecific quotes from some of the
comments, and so they say theissue.
World Shipping Council arguedthat 46 USC 41104A3, so that's

(50:31):
A3, applies to all commoncarriers, including NVOCCs, and
that to exempt NVOCCs fromapplication of the Shipping Act,
the Commission would need tofirst provide an opportunity for
a hearing in accordance with 46USC 401103.
World Shipping Council furtherargued that the Commission
creates a competitive advantagefor NVOCCs by exempting them
from liability under 46 USC41104 A3.

(50:53):
So that's A3.
While at the same time creatinga situation that is detrimental
to commerce by denying theNVOCC's customer a meaningful
remedy for an NVOCC's violationof A3.
And I'm shortening these rightA3.
World Shipping Council statedthat this would violate 486 USC
40103A's standard, that thecommission may only grant an

(51:17):
exemption if it finds that theexemption would not result in a
substantial reduction incompetition or be detrimental to
commerce.
World Shipping Council alsoasserted that it is important to
include NVOCCs within the scopeof the rule as a practical
matter as well as a legal matter, because NVOCCs control cargo
space accommodations.
World Shipping Council arguedthat NVOCCs, like VOCCs, can

(51:38):
face situations in which thespace available to them is
exceeded by customer demand oris limited by safety, weight
stability or other operationalfactors.
And that's where the CoastGuard piece comes in right those
transportation factors, safety,weight stability.
World Shipping Council saidthat in such a situation, the
NBOCC will have to decide whichof its customers' containers are
booked on that vessel and whichare not.

(51:59):
So that's all the FMC kind ofhighlighting the comments, and
then they continue this lastlittle section.
By contrast, the NationalCustoms Broker and Forwarders
Association of America, ncbfaa,commented the rules exclusions
of NVOCCs.
Fmc's response World ShippingCouncil is correct that 46 USC

(52:21):
A3 applies to both VOCCs andNVOCCs.
They say the FMC says this rule, however, only applies to VOCCs
.
The NPRM was limited to theOSBRA 2022 amendments to 46 USC
A-10, which is statutorilylimited in scope to VOCCs,
because the Shipping Act definesan ocean common carrier as a
vessel operating common carrier.

(52:42):
So they're saying, becauseCongress only told them to go
for A-10, even though they'reexpanding it into A3, they kept
it limited in the A10 discussionof that ocean common carrier.
So they continue on.
This is the FMC's kind ofresponse to that comment.
The SNPRM, the SupplementalNotice of Proposal making it
here to this exclusion, despitethe expansion of the proposal to

(53:04):
also address A3, to mirror thescope of the affected population
of the NPRM.
So they're saying, look, theFMC kept it, or the A3, they
kept it tight on VOCC to mirrorthe affected population of the
notice of proposed roaming.
The limitation in scope of thisrule, the VOCCs, however, does

(53:25):
not in any way limit the scopeof A3.
And VOCCs are legally liableunder A3 for unreasonably
refusing cargo spaceaccommodations.
And they're saying, look, wediscussed that.
So that's their explanation.
For even though it's limited toVOCCs, the rules where they do

(53:46):
are still applicable outside ofthe VOCCs that are just covered
in this rule.
And I, like I said at thebeginning, if you have to get
that specific with theexplanation, I think that that's
fodder for a largerconversation which potentially
could be a filing of some sortof a challenge to this.
But I don't know, we'll see.
This is, I mean, fresh off thepresses.

(54:06):
It's only been out for what?
Two weeks, now a week.
So this will be reallyinteresting to see kind of what
the trade press, how it digestsit.
I think that it's reallyimportant for the supply chain
society to pay attention to thisone, because there are some
potentially larger than normalgray areas where the FMC really

(54:26):
gets to decide the nuances.
They say case-by-case basis,but we don't really have a lot
of.
We do have precedent, but inthese specific areas I think
that it's creating a new worldand so, anytime you don't really
have a lot of guidance otherthan these non-binding examples
I mean the FMC.
This was always going to betricky and they said that from

(54:47):
the get-go.
I think that it remains atricky thing.
So we'll see.
I, I, you know it's a.
It's a start, um, it's a startof the conversation.
This is the final rule.
It's going to be going intoeffect in September.
Um, we have 60 days from whenit was released, so we'll see
what happens over the next lessthan 60 days Now.
Um, as always though I can'tsay this enough the guidance
here is general, for educationalpurposes.

(55:09):
It should not be construed tobe legal advice directly related
to your matter.
The discussion is general,educational purposes only.
If you need an attorney,contact an attorney, but if you
have specific legal questions,feel free to reach out to me at.
Let Me Legal Companies CallStrategies Otherwise.
For the non-legal questions,the e-learning and the general
industry information andinsights.
Come find me at the MaritimeProfessor.
A little bit of a programmingnote.

(55:30):
We are going to be taking asummer break, which we normally
do, which we usually do earlierthan now that it's August 2nd.
We're going to be returningSeptember 27th, so we'll see you
in just over a month.
But if you like these videos,let me know, comment, like and
share.
If you want to listen to theseepisodes on demand or if you
missed any previous episodes, orif in the next month or so you
miss me, go find by Land and bySea on wherever you get your

(55:53):
podcasts.
If you prefer to see the video,they live on my YouTube page by
Land and by Sea, presented bythe Maritime Professor and,
while you're at it, check outthe website Maritime Professor.
So until next week.
Actually, I should take thatback until September 27th.
This is Lauren Began, maritimeProfessor, and you've just
listened to by Land and by Sea.
When we come back, we're goingto dive further into this.
We're probably going to have alot more digestion of this rule

(56:15):
into the industry and we'll beable to talk a lot more about it
.
See you next time.

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S3.E23 - FMC's Final Rule Defining Unreasonable Refusal to Deal or Negotiate w/r/t Vessel Space Accommodations

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}S3.E23 - FMC's Final Rule Defining Unreasonable Refusal to Deal or Negotiate w/r/t Vessel Space Accommodations