March 15, 2024 • 40 mins
Topic of the Week (3/15/24):
This week the Federal Maritime Commission released their FY25 Congressional Budget Justification – what’s in it? What clues can we take from the document? What do they have planned for 2024 and even into 2025?? Well hang tight and I’ll tell ya!
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 Strategies)
Let's dive in...
1 - The Federal Maritime Commission is still working through the other two rulemakings: Unreasonable Refusal to Deal or Negotiate and Unfair or Unjustly Discriminatory Methods.
2 - 346 high ranking officials sign a letter to the United States Senate encouraging the ratification of the United Nations Convention on the Law of the Sea
Admiral Thad Allen's LinkedIn post:
https://lnkd.in/gHv5tWjT
3 - United Steelworkers (USW) submitted a petition to USTR calling for an investigation into China's shipbuilding practices.
Financial Times:
https://lnkd.in/gBQFN_KR
Pennsylvania Capital-Star:
https://lnkd.in/gENZfefw
-------------------------------
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Lauren Beagen (00:56):
This week of the Federal Maritime Commission
released their FY 2025Congressional Budget
Justification.
So what's in it?
What clues can we take in thedocument?
What are they?
A plan for the rest of 24 andeven into 2025?
There's some tidbits in here.
Well, hang tight and I'll tellyou.
Hi, welcome to By land and bySea, an attorney breaking down
(01:18):
the weekend supply chainpresented by the Maritime
Professor, me.
I'm Lauren Beagen, founder ofMaritime 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.
(01:38):
It should not be considered tobe legal advice and there is no
attorney-client privilegecreated by this video or this
podcast.
If you need an attorney,contact an attorney.
But before we get into thediscussion of the day, let's go
through my top three stories ofthe week.
All right, story number onewe're keeping it on here.
We're always watching the FMCclosely, obviously, for any
release of any movement of theopen rule makings.
(02:01):
We have one right the detentiondemerge rulemaking that we
talked quite a bit about.
We will continue to talk aboutit, and we have two others that
we're still waiting on.
Right.
So we have definingunreasonable refusal to dealer
negotiate with respect to vesselspace accommodations provided
by an ocean common carrier.
That's one that we're waitingon.
The last we saw movement was asupplemental notice of proposed
(02:23):
rulemaking that came out July2023.
Obviously, they've been workingon the D&D rulemaking.
They got that out, but we'restill waiting on something that
will conclude, probably a finalrule on this.
I've heard a few different timesin a few different public
forums, different commissionersand even the chairman saying
they expect this in the nextshort term, probably the next
(02:47):
few months.
I would say before the one year, since the supplemental would
be my guess.
I would guess.
I keep saying I'm guessing,like May on that.
I don't know, that's a totalguess, but they do say in the
congressional budgetjustification that they expect
this to be concluded by July ornot by July, by 2024 or by the
conclusion of 2024.
(03:07):
So we'll see.
It's coming.
That's the unreasonable orfeasible to deal and negotiate.
Remember this is the one thathad some definitions in it that
I wanted you to take a look at.
I also think that there's someother maybe overflow effects
that this could have.
So even if you don't think thatyou have much to do with
unreasonable or feasible to dealand negotiate with respect to
vessel space accommodations,take a look at it anyways.
(03:30):
This should be getting as muchattention it probably won't, but
as much attention as the D&D.
Obviously, we have the D&D ruleout.
The effective date is May 28th.
It's coming.
Get your systems ready.
It's on its way.
A lot of the industry alreadytook those movements.
Over the summer, when westarted to see some language, or
(03:52):
when language came out lastDecember, some of the industry
was already starting to makesome changes.
Right now is the time.
It's a 90-day effective date,so it was released on the 23rd.
Published in the FederalRegister the 26th.
The 26th of May is a Sunday, soit comes out May 28th, which is
actually a Tuesday.
It's coming out May 28th.
(04:13):
Well, it's effective May 28th.
I should say the third rule thatwe're waiting on that.
We haven't seen any language onindependently, although we have
been told that the FMCconsiders some of this to be
covered by the unreasonable,feasible to deal and negotiate.
This third rule is the definingunfair, unjust to
discriminatory methods, stillwaiting on language here.
We're going to talk about thatin a few minutes, though,
(04:34):
because they talk about that alittle bit in the budget
justification document.
The other thing that we'rewaiting on is the Maritime
Transportation Data Initiative,and I say waiting on, right,
we're all just kind of watchingthese things and I'm helping to
keep you apprised of everythingthat's happening there.
So, maritime TransportationData Initiative there's been a
few different times that there'sbeen talk of another RFI, a
(04:55):
request for information roundcoming.
It hasn't been released yet.
So I'm going to keep watchingthis stuff.
I'm probably going to take thisoff of my top one story of the
week just because I don't expectany movement in the next few
weeks on this.
So we'll clear that up foranother news piece.
Rest assured, I'm going to bewatching these, obviously All
(05:17):
right.
Story number two I previouslyreported that the US had
submitted their US extendedcontinental shelf claim at the
end of 2023.
Again, remember the extendedcontinental shelf claim.
So that's the subsoil.
That's like you have the watercolumn and then you have the
soil underneath.
You can extend beyond 200nautical miles for an extended
(05:38):
continental shelf if you complywith Article 76 of the United
Nations Convention on the Law ofthe Sea.
The United States has said thatthe Law of the Sea this is
close.
The United Nations Conventionon the Law of the Sea is
customary international law.
We have signed it, but we havenot ratified it yet.
There's been a lot of effortsthrough the years to ratify it,
(05:59):
but we haven't yet.
We've only technically signedit, but we're not signatories to
it in the official sense.
So Law of the Sea is back inthe news.
Like I said, we talked aboutthat extended continental shelf
in December.
I believe we talked about itmaybe in January, but it was at
the end of 2023 that that becamea new announcement.
(06:20):
But you look at my past andpresent law students of my Law
of the Sea class.
I teach Law of the Sea at RogerWilliams University School of
Law.
They are probably so excitedbecause they say you'll never
really notice Law of the Seaunless you're in it, right,
obviously, or until you takethat class or a class, because
it actually is all around, butthis is kind of exciting.
So a whole slew of high-rankingofficials.
(06:42):
I mean we have admirals,generals, secretary of Defense,
secretary of Homeland Security,secretary of the Navy, we have
ambassadors on this list I meanit's like, I mean it's everybody
.
It's a pretty impressive list.
It's 346 individuals signed onto this letter.
It's a letter encouraging thatthe US Senate ratify the US
(07:03):
Assessions to the United NationsConvention on the Law of the
Sea.
So what does all that mean?
Like I said, we've signed itbut we haven't ratified it.
And how do we ratify it?
We have to get advice andconsent of the Senate.
In the letter they state that,despite support from presidents
of both parties and that's true,this has not necessarily been
one party or the other there'sbeen support of both parties and
(07:25):
strong support from the actualbusiness community, the private
sector.
Despite all of that, what theletter says is that it has yet
to be voted on by the fullSenate.
And that's true too.
Sometimes it's gotten throughsubcommittees but never actually
brought to the full Senate.
And that's what we need is theadvice and consent of the full
Senate to vote on this.
(07:45):
So if it hasn't even beenbrought.
It hasn't been shot down yeteither.
Look like I said, we've signedit technically but without the
full advice and consent of theSenate, we haven't ratified it
and so we can't be considered aparty to this convention.
It does seem like maybe everyseven to 10 years there's like a
renewed push for joiningUnclose, the United Nations
(08:07):
Convention on the Law of the Sea.
Unclose.
This has some pretty goodweight to it, this effort I feel
I mean over 346, really highranking, really high ranking
people are signing on to this.
And certainly the defense sideof things I mean, if we're
having different Department ofDefense, highest ranking
(08:29):
officials, joint Chiefs of Staffare on here, I mean that's
pretty weighty right.
That's some pretty good weightto it.
So who knows, perhaps this willbe the year, perhaps this
letter will start up thatconversation.
You know what I talk about inmy class is that it's the
freedom of navigation for me.
That keeps me most concernedhere, and it's the United
(08:49):
Nations Convention on the Law ofthe Sea, this Unclose, that has
remedied some of the most well.
So it really kind of providesthat freedom of navigation,
right, and that's what I feel.
And there was concerns when itwas first drafted, first drafted
, but those have been remedied.
All those, the controversialparts that former President
(09:10):
Reagan objected to, and even hisambassador at the time has said
, look, they've been remedied.
The reason that we werecautious and decided not to sign
it as we were negotiating it,because we were part of the
negotiation.
The US was part of thosenegotiations.
There were three differentconferences of the United
Nations Convention on the Law ofthe Sea, three different
conferences, and then ultimatelythe language came out.
(09:32):
But there was a little partthat we didn't like.
That's been remedied, and theambassador, who was part of
those negotiations, has said ithimself.
He's actually signed on to thisletter as well.
So the objections have fallenaway that were present at the
beginning.
So I don't know.
So we'll see.
Look, that was the prohibitivepart then.
It has since been remedied.
(09:53):
Maybe the US should have noobjection now, but we'll see.
We're still waiting on this.
We'll see how this goes, allright, well, story number three
I'm going to link two differentarticles on this.
I think both the FinancialTimes and Pennsylvania Capital
Star cover this pretty well, andI actually like some of the
information from the PennCapital Star here.
(10:14):
But so this week the UnitedStates.
The United Steelworkers Unionsubmitted a petition to the
United States Trade Reps Office.
So that's USTR.
So who is USTR?
We don't talk about USTR thatoften, but I want to make sure
that everybody's on the samepage, right?
We always do that.
The Office of the US Trade Repis USTR.
The Trade Representative is anagency of the United States
(10:37):
federal government.
They're responsible fordeveloping and promoting
American trade policy.
So, developing and promotingAmerican trade policy.
So USTR is a little differentfrom the State Department, right
?
Because when you think aboutforeign things, you're thinking
about, maybe, the StateDepartment.
So the State Department is theDepartment of the US government
(10:58):
responsible for the country'sforeign policy and relations,
but it's not necessarilyexclusively focused on trade,
right, and so it's going to bethe broader range and it's going
to be the foreign policy andrelations.
That's State Department.
Ustr, the United States TradeRepresentative's office, is
really focused on that tradepiece.
Obviously it's in the name fordeveloping and promoting
(11:20):
American trade policy.
Okay, so that's where thispetition went.
So what happened this week?
Well, the steel workers said intheir petition that they're
concerned about China's growingprominence in the shipbuilding
industry.
There's been a lot of talkabout US shipbuilding lagging
behind US shipbuilding beingwoefully underfunded.
If you want more information onthis, I think Dr Salmar
(11:44):
Cogliano does a great jobtalking about the US
shipbuilding capabilities.
But what they're saying in thissteel workers petition is that
they're worried about Chinafilling that void, and they're
growing prominence.
So in the Financial Times, Ithink this stat came from, china
went from producing roughly 12%of global commerce ships by
(12:07):
tonnage to producing more than50%.
It went from only producingabout 12% of global commercial
ships by tonnage to now 50%.
So in the Pennsylvania'sCapital Star article it said
according to the petition filedTuesday with USTR, in 2012, the
Communist Party of Chinaelevated the construction of a
strong maritime country as anational goal.
(12:29):
So that was in 2012.
And the following year,president Xi Jinping announced a
Maritime Silk Road initiativeaimed at increasing China's
influence over maritimecorridors across the globe.
That was 12 years ago.
Math, that was 12 years ago2012.
Key aspects continuing on fromthe article, key aspects of the
program include promoting stateowned shipping and logistics
(12:52):
companies, investing instrategically located foreign
ports and terminals, dominatingthe supply of cranes used at
ports around the globe.
And promoting a governmentsponsored logistics platform,
lodz Inc.
The petition states as a result, chinese companies, primarily
state owned companies, havebecome leaders in financing,
building, operating and owningport terminals around the world.
(13:13):
So that was sub quoted in thisarticle from the petition itself
.
So we've talked a little bitabout I think we've talked about
lodging, and the cranes havenow come into forefront right.
There being talked about a lotin different news articles
saying that potentially theremight be some security concerns
with them.
I can tell you from what Iunderstand is that the cranes
(13:35):
are thoroughly looked at,thoroughly scrubbed, I think
pretty on a routine basis theyare looked at there.
So I mean that's good, but it'sstill the piece of this is it's
coming from the steelworkersand so their concern is really
that the dominance happeninghere.
So last year so continuing onwith the article last year
(13:59):
McCall said Tuesday the US Okay,that was a little bit strangely
worded.
So the petition and thepresident of the union said the
US produced fewer than 10oceanic vessels while China
produced more than 1000.
If we do not act, we will soonbe dependent on China, not only
for the products their vesselsbring to our ports but also for
(14:21):
the ships themselves.
And that's where thesteelworker piece comes in.
Right.
Steelworkers are obviously partof the shipbuilding process.
So they're saying not only arewe going to be dependent on
China for the products, butpotentially the ships themselves
.
And he's seeing that that is ashift.
So continuing on with this withthis article snippet here,
casey said China's practices inthe meantime in the maritime
(14:43):
sector also pose grave nationalsecurity implications.
Us shipyards and suppliers donot have the capability to
replace ships lost in combat orthe ability to supply our own
needs, much less those offriends and allies, he said,
citing the petition.
The petition outlined steps theunions want the US TR to take
beyond simply eliminatingChina's practices.
So here's some of theadditional things that the
(15:06):
petition is saying that they'reasking for as a remedy.
They're asking for a port feeon Chinese built ships that dock
at US ports and the creation ofa shipbuilding revitalization
fund to help the domesticindustry and its workers compete
.
So the second part, right,shipbuilding revitalization fund
to help the domestic industryand its workers compete, isn't
necessarily aimed at China.
(15:27):
That's just probably goodpractice for the US.
We really, really, really,really, really, really need to
get back into shipbuilding, andwe certainly do, but we need to
expand our shipbuildingcapabilities, and so this
shipbuilding revitalization fundcould help do that.
That's going to be a little bitinsulated from anything that
China is doing.
But certainly the point being,maybe we need to get kind of
(15:52):
moving on this.
The port fee on Chinese builtships that dock at US port, that
one is interesting.
I'm going to be following thatto see what they do with that.
So there's a piece that the FMCcan play, a role that they can
play in this, in that there'sSection 19 Act of the Merchant
Marine Act of 1920, foreignShipping Practices Act, which
(16:16):
give the FMC, the FederalMaritime Commission, the
authority to issue penalties pervoyage if they find that
countries are beingdiscriminatory toward.
Well, and it's not.
I can't remember if it'sexactly clear on whether it's
discriminatory towards USefforts or interests or just
(16:37):
generally discriminatory, and Ithink I don't know if that's
ever actually been fully tested,but don't hold me to that.
Again, none of this is legalinformation.
This is kind of educationaldiscussion.
So it's possible the FMC mightget looped in here.
It's also possible that maybeUSTR didn't know about the
Section 19, foreign Shipping andthe Foreign Shipping Practices
Act, so maybe now they will belooped in.
(17:00):
But that port fee on Chinesebuilt ships that dock at US
ports, I don't see how thatwould actually go into
implementation, right, becausethey're saying Chinese built
ships, which aren't necessarilyChinese owned or operated, that
could be just out in the generalcommercial world.
So what they're trying to do isdisincentivize commercial
(17:22):
activity from purchasing andusing Chinese built ships.
I just don't think that thatone's probably going to fly, but
I'm going to be interested tosee the discussion around it and
where, if anywhere, theyultimately land, them being, I
guess, the federal authorities.
That one's going to beinteresting.
I think a shipbuildingrevitalization fund is probably
a good idea.
(17:42):
That's going to be somethingthat will be interesting to see
take effect and come into play,because we need ships.
Right, it still remains Amaritime presence, is an
important presence.
So continuing on.
They also said other measures tostimulate demand for and the
capacity to construct commercialvessels built in the United
(18:03):
States.
The steel workers are sayinglook, we need more vessels.
Continuing on on this article.
Just finishing up real quick.
The commercial shipbuilding andrepair industry in the US can
compete and grow in the massivemarket distortions that the
government of China has createdor remedy.
The petition states we haveseen the people's Republic of
China create dependencies andvulnerabilities in multiple
(18:24):
sectors like steel, aluminum,solar batteries and critical
minerals, harming Americanworkers and businesses and
creating real risk for oursupply chains.
Ustr this is from the USTR traderep themselves.
So USTR trade rep tie.
So they said USTR and the BidenHarris administration are
fighting every day to putworking families first, rebuild
(18:46):
American manufacturing andstrengthen our supply chains.
And they said I'll look forwardto reviewing this petition in
detail.
So we'll see.
We're going to be getting thisjust came out this week so we're
going to be getting probably alittle bit more info on this.
We're going to see discussions.
I mean steelworkers.
Obviously, if the union andit's supported by a few other
unions, this will be a topicthat is certainly going to be
(19:11):
coming up again, I think,especially because it's in an
election year.
I think this is going to besomething that will probably
enter into the politicalrhetoric at least partially.
And with the US trade repsaying that they're going to be
looking at this, I think we'regoing to get more information
here.
So we'll see.
Shipbuilding and funding forshipbuilding is probably going
to be a great idea here.
So whether we're going to beassessing penalties on US or
(19:34):
Chinese built vessels servicingour ports, I don't see that one
as flying, but we'll see too.
I'll keep watching, all right,well, let's get into the meat
and potatoes of the day.
We went through the threestories at length, but we're
going to hit.
The FMC release their fiscalyear 2025 congressional budget
justification and you know Ilove a good overview mission
(19:55):
statement.
So we're going to go with whatthey put right at the beginning
of this document.
So the FMC, the FederalMaritime Commission, is an
independent agency withjurisdiction in the US over
competition practices andservice in the ocean shipping
industry.
Our mission this is quoted fromthe document our mission is to
ensure a competitive andreliable international ocean
transportation system thatsupports the US economy and
(20:18):
protects the public from unfairand deceptive practices.
Facilitating commerce andprotecting US shippers remains
the essential focus of the FMC.
The commission requiresadditional resources to carry
out its responsibilities toensure vigilant industry
oversight, enhance enforcementand improve service to shippers
and consumers.
Love a good mission, they'resaying, as we've seen kind of in
(20:39):
different iterations over theyears to ensure a competitive
and reliable international oceantransportation supply system
that supports the US economy.
It used to say for the benefitof the US importer, exporter and
consumer.
Now it just says supports theUS economy.
Little changes there, missionand priorities.
So under priorities for OSRA,they have a priority on ocean
(21:02):
shipping and form act of 2022.
They said implementing OSRA 22is a leading priority of the
commission.
Obviously because Congress toldthem to do it by fiscal year
2025, the majority of OSRA 22'senhanced authority and
provisions for revisedregulations will be implemented
and fully integrated in supportof our mission.
There were a lot of differentthings that were part of that
(21:23):
right, and they were.
The rule makings were part ofthat.
There was a little bit ofrestructuring and employee
expansion right.
They hired more people.
They also said that there aregoing to be some additional rule
makings required under OSRA 22that are going to continue in
fiscal year 2024.
So they're saying, look, we'recontinuing to finish this up.
(21:45):
They said OSRA 22 require thecommission to develop a process
for charge complaintinvestigations and adjudication.
The FMC said, right, theydeveloped and posted interim
guidance on its website in 23,along with an accompanying
webinar to help the publicunderstand the process.
In less than 18 months sincethe enactment of OSRA and the
(22:05):
enactment of the chargecomplaints, they said more than
$2 million has been voluntarilywaived or refunded under the new
process.
So that's under the chargecomplaints process at the FMC.
We've talked about that a fewtimes.
They've been able to affect Iguess I'll say affect more than
$2 million in charge complaints.
(22:25):
So the way that they affectthat is they go through the
charge complaints process.
Those invoices, those charges,can either voluntarily be waived
or voluntarily refunded and forthe most part I think it was
like I don't know the staff willlike over 90%.
That's how it happened.
They also said that theyincreased investigations and
enforcement.
The FMC protects the US publicthrough its investigatory and
(22:49):
enforcement programs thatidentify, deter and stop
unlawful activities of regulatedentities ocean carriers, marine
terminal operators and oceantransportation intermediaries.
Those are the regulatedentities.
New enforcement prioritiesestablished by the chairman
focus on unlawful practices thatnegatively impact significant
portions of the maritimeindustry or appear to cause
(23:10):
market distortion.
As a result of these changes,the enforcement program this is
the enforcement program has beensuccessful in legal actions,
collecting $2.8 million in civilpenalties for violations in the
law of fiscal year 2023.
So that's $2,896,332 is theexact.
(23:33):
That's what they did inenforcement this year.
That is a significant increasefrom, I mean, even five or 10
years ago.
They have significantlyincreased their civil penalties.
We'll talk about that againkind of hitting the overview
here.
Compliance the commission'sstatutory and regulatory
authorities are applicable tothe international waterborne
commerce, valued at trillions ofdollars, as well passenger
(23:55):
vessel operations embarking atUS ports.
Vigilant oversight of industryactivity by FMC program offices
includes compliance in additionto investigations and
enforcement.
They said increased complianceefforts will continue in fiscal
year 2025, with outreach toregulated entities, including
webinars and other educationalmaterials, and revised IT
(24:16):
systems to provide advancedanalytical capabilities to drive
targeted compliance efforts.
One thing that the FMC has beendoing and while the consumer
facing side or the public facingside can feel a little clunky
in its IT or in its platforms,it looks like from this budget
justification that that'ssomething that the FMC is going
(24:36):
to continue to try to modernize.
They've been modernizing on theinternal side, on the FMC kind
of platform side that they use,and certainly when I was there,
we got all new computers.
So they have been.
I mean, it was it was needed.
It's not like we got the bestof the best.
It was and we did at the time,but we were a little bit old
(24:58):
school in the computers and I,you know, I was there in the
2010s, so it was time since netthen right Since then, I'm sure
that they've been taking moresteps.
And now what we're going to seeis more webinars, more
education materials, and they'resaying revised IT systems
provide advanced analyticalcapabilities.
So I mean that's.
I think that's all going to begreat.
(25:19):
They're going to have more of ahandle because their workload
has certainly increased and soby having some of these more
automated processes or certainlymore IT driven capabilities,
it's going to be great.
And they said this is to drivetargeted compliance efforts.
So, getting down to the budget,what are they asking for?
They're asking for $48.4million.
(25:41):
That's not a lot.
That's really not a lot If youthink about it.
Some of these other agenciesgive out $48 million in grant
funding, and here the FMC, anentire agency, is asking for $48
million.
So it's $48 million.
$452,000.
That's an increase of $4.7million over last year's
(26:05):
authorization.
So last year they got $43.72million.
This year they're asking for a.
I mean it's millions, right,but it's a mild increase of
4,732,000.
That's not a lot.
That's really not a lot.
(26:27):
167 full-time positions is whatthat covers, in addition to the
IT applications, and they'resaying the IT development tools
are gonna be $2 million.
The full-time positions are, Imean that's about $35.8 million.
We have also listed here 10.5million allocated to other
(26:47):
operating expenses, includingrent, building, security,
administrative services.
I mean it's a pretty leanagency when you break it down.
If you were to look at any ofthese other agencies, especially
when they go out for theirauthorization I mean they're up
with Merrad or with Coast Guardor anybody else dealing with
(27:08):
maritime stuff I mean they're aline item for most other
agencies.
I say this every year when wego through this.
I mean 48 million, 48.5 millionis not much.
So hopefully that's fullyfunded and maybe even I don't
know if this is true but maybeeven Congress will give them
extra.
But, like I said, I think thatthe FMC runs a very lean
(27:30):
operation, so we'll seeInvestigations and enforcement.
We were kind of talking aboutthis, but so the piece that I
want to highlight here is thatthey also mentioned their
priorities for 2025.
So they say that they arecovering all sorts of penalties
and one thing that I do wannanote so, even though I mentioned
that they recovered $2 millionover $2 million in civil
(27:53):
penalties, civil penaltiescollected by the FMC don't go
back to the FMC, so they don'tactually have a personal reason
to be collecting these civilpenalties.
They're collecting these civilpenalties on behalf of the
industry, but that money doesn'tgo to the FMC for them to use.
(28:13):
It goes to the US Treasury.
It doesn't go right into thebank for the FMC.
It goes to the US Treasury,totally bypasses the FMC, to be
honest.
So, if anything, it makes theircivil penalties and their
violations when they go afterthem probably a little bit more
neutral, because it's not theirinterest in getting that money.
So what are their prioritiesfor 2025?
(28:38):
They say a failure to establish,observe and enforce just and
reasonable regulations andpractices relating to or
connected with receiving,handling, storing or delivering
property.
That's probably one of the bigones, right.
They also have unlawful demergeand detention practices and
improper use of merchant clausesto impose liability on
non-contract parties.
They have unreasonable ifyou're able to deal or negotiate
(29:00):
that potentially violate theShipping Act.
Right, that's gonna be comingback in right Cause it's already
unreasonable if you're able tonegotiate is part of the
Shipping Act, but they're goingto be defining it in that
rulemaking.
Unreasonable or feasible todeal, refusals of cargo, space,
accommodations or other unfair,unjust to discriminatory conduct
that potentially violates theShipping Act.
(29:20):
So that's where we're going toget a little bit more clarity
from that rulemaking that we'rewaiting on, but this is already
a rule under the Shipping ActUnreasonable or feasible of
cargo space accommodations orother unfair, unjust to
discriminatory conduct.
You're also gonna be focusingon retaliation that potentially
violates the Shipping Act, whichis the section 46, usc 41102D,
and tariff and service contractactivity that potentially
(29:43):
violates the Shipping Act.
So, in like we said, in FY 2023,the enforcement program
collected a combined total of$2.65 million in civil penalties
to resolve allegations ofmisconduct.
What they broke this down at,which I thought was interesting
that they broke this down butthey said two large ocean common
carriers and an additional246,000 in other civil penalties
(30:06):
.
So they switched over to chargecomplaints.
The commission will review theinterim procedure and draft a
new rulemaking in 2024.
We've talked about this beforetoo.
So charge complaints that was acreation of OSRA.
Osra 2022 was an interimcreation.
The FMC had to kind of quicklycreate a process that they were
(30:27):
gonna use, because as soon asOSRA 22 was signed June 16, 2022
, it became law, and so, all ofa sudden, charge complaints were
a thing.
The FMC had to build theparachute, as they had already
been told to jump out of theplane but now that they can
breathe a little bit, that theyhave a good charge complaints
process in place, this kind ofinterim process, they're saying
(30:51):
now it's time to do the officialrulemaking.
So that's what they're saying.
In 2024, we will see anotherrulemaking.
I'm gonna add it to my list.
Charge complaints will be arulemaking.
The procedure for chargecomplaints will be a rulemaking
in 2024.
And they're saying chargecomplaints procedure is gonna
require additional resources.
So they're saying that twofull-time employees are
(31:11):
projected to be hired in 2024and 25 to process and
investigate the complaints.
In 2025, the final procedurewill be established and fully
operational.
They also said OSRA 22 mandatedrulemaking for unfair and just
the discriminatory methodsrelating to cargo space
accommodations and shippingexchange registries.
This is the third one this isprobably the first time I've
(31:34):
seen the title this long andinclude shipping exchange
registries.
So take note of that.
This is the unfair and just thediscriminatory methods.
Usually that's all we say.
It's always kind of saidrelated cargo space
accommodations.
Like I said, I just don't thinkthat I've seen this shipping
exchange registries, although itwas in OSRA 22,.
But this is the first time thatI've seen this third rulemaking
(31:56):
and perhaps I missed it,perhaps I got too casual with
the name, but this shippingexchange registries.
The commission anticipatesreviewing the use of shipping
exchange registries in FY 2024.
That will be interesting towatch too, to see where they go
with that.
The FMC audit program.
We don't talk about this veryoften, but it is something that
(32:16):
is present.
They said the need for clearcommunications between the
commission and carriers is theunderpinning of the VOCC audit
program initiated by ChairmanMephane July 2021.
In fiscal year 23, the FMCexpanded the program to include
marine terminal operators andports.
In 23, they expanded it.
So the FMC audit programprovides a forum for senior FMC
(32:38):
staff to communicate directlywith representatives from the
largest carriers, as well as,under as of 2023, port
authorities and marine terminaloperators.
The agendas for these regularmeetings are topical to issues
in the supply chain.
Past issues have includedcongestion and movement of empty
containers, fees and billingpractices, export strategies and
challenges faced by theindustry.
(32:59):
Under the program, thecommission has tracked trends,
policies and procedures relatingto D&D billing and identified
best practices for carriersrelated to communicating their
practices to the shipping public.
What the justification says isthat this was actually created
under fact-finding.
29, led by commissioner die,included a recommendation that
all carriers and MTOs identifyFMC compliance officers.
(33:22):
The idea there was to increasecommunication right.
Having these points of contact,as the report says, has
increased communication, so it'sworked between the FMC and
carriers and terminal operatorsand helped ensure that carriers
and MTOs are aware of, and areadhering to, commission policies
.
So another area that theyhighlight here that I wanna make
(33:44):
sure we spend a little bit oftime on here is cater, so the
office of consumer affairs anddispute resolution services.
This is the informal disputeprocess for informal dispute
assistance that the FMC provides.
In CATARS, this ConsumerAffairs and Dispute Resolution
Services, they have, as they say, experienced analysts and
attorneys on staff who assistthe public in finding solutions
(34:05):
to their commercial disputescommercial disputes without
bringing formal legal actions.
When assistance is requested,catars staff will work with
parties to identify solutionsthat will get cargo moving
whenever possible, avoidingfurther delays and increase in
charges.
Other services offered by CATARSinclude mediation and
arbitration.
All CATARS assistance isprovided without charge and all
(34:26):
communications are keptconfidential.
This is a free service withCATARS.
It's free.
You can do mediation andarbitration at the FMC under
this Office of Consumer Affairsand Dispute Resolution.
So in 2023, they broke downCATARS requests.
I mean this is free, a freesystem for commercial disputes.
They only had 199 requests forcargo assistance.
(34:50):
They had 75 requests forpassenger vessel or cruise
assistance and they had 34requests for household goods.
That's not a lot.
That's like 200 requests in theyear.
This is free.
I mean it's up to you.
This is not legal advice, but Ido want you to know that this
is a service that's out there.
(35:11):
It is mediation or arbitrationor other just general Consumer
Affairs and Dispute ResolutionServices.
You can ask for assistance infinding solutions to commercial
disputes by contacting CATARS.
I want you to know that that'savailable.
The Commission also talks abouta couple of Commission decisions
(35:31):
that were key decisions.
I'm only going to highlight twohere.
So we have the Evergreen case.
This is the TCW Incorporatedversus Evergreen Shipping Agency
.
This is the one where I'm justgoing to read off what they said
.
The Commission have held thesmall claims officer's decision
that the charging of per DM whena port was closed for a weekend
and equipment could not bereturned was unjust and
(35:51):
unreasonable in the absence ofextenuating circumstances.
This case is now adjudicatoryfilings before the FMC.
The volume of filings and ohwell, all right, that's pulling
in the wrong information.
I'm just going to tell you.
So, basically, this is the casethat they have kind of hailed
as the case that says you can'thave detention to merge charges,
(36:13):
and I'm paraphrasing here, andthis is not legal advice you
can't have detention to mergecharges on a weekend or a
holiday or when you can't return.
They're saying, as of this case, that that was unjust and
unreasonable, but this case isnot final yet.
It's before the US Court ofAppeals for the District of
Columbia Circuit.
So what they did mention thoughand this is reading back off of
(36:35):
their summary here the casecould significantly impact how
the industry deals with chargesrelated to weekends, holidays
and other times when containersor chassis cannot be returned.
They said some companies arewaiving D&D charges in light of
the commission's decision.
This is still pending, thoughright, this is on appeals at the
DC Circuit.
The other case that theymentioned is the chassis
(36:56):
decision that we were talkingabout just the other day.
Intermodal Motor CarrierConference American Trekking
Association, versus OSIMA OceanCarrier Equipment Management
Association, initial decisionpartially granting summary
decision.
Complainant IMCC, a Conferenceof American Trekking Association
, alleges that OSIMA and CCMthose are VOCC backed equipment
(37:16):
management groups which have FMCfiled agreements have engaged
in unreasonable practicesrelated to chassis chassis
choice in gray pools and nearlyevery port in the US.
As a result and this is readingoff of what the FMC summary of
this is as a result, imccmaintains motor carriers,
shippers in the downstreampublic, have paid higher chassis
prices and sufferedinefficiencies and thus OSIMA
(37:37):
CCM actions violate the shippingact.
Imcc requests cease and desistrelief from these practices.
The factually and legallycomplex case is now pending with
the commission on review ofrespondents' exceptions to the
initial decision.
They didn't mention that.
Basically, the initial decisionsaid that the exclusivity was
(38:02):
contrary to the shipping act,but this is on exception, so
it's not final.
We talked about it.
There was a lot of oh, this isgreat, but this isn't final
because exceptions have beenfiled, which exceptions means
appeal.
So that's why I think that theyhaven't said too much about
what was decided, because it ison appeal, but they noted that
as a marquee case, it will be amarquee case.
(38:23):
There was also discussion overwhether chassis is under the
purview or the jurisdiction ofthe FMC.
There's a lot that's going tobe happening on this case, but
TBD right to be continued.
So this document, thiscongressional budget
justification.
I love to look at it, eventhough it's a little bit boring,
right, it might be a little bitnerdy looking through all this.
I love to look at it because Ithink that it gives some
(38:46):
glimpses of what the FMC findsimportant.
Maybe what the FMC wants totell Congress is important, but
also it gives you some timelinesand some expectations, and if
they put it in thiscongressional document, they're
most likely going to adhere toit.
So the 2024 procedure forcharge complaints I really think
(39:07):
that we're going to see thatthis year.
I think that they are going toconclude the unreasonable
physical dealer.
Negotiate the unjust ordiscriminatory, unfair or
unjustly discriminatory with theshipping exchanges.
That's going to be interesting,right.
That was a little nugget fromhere, so take a look.
I haven't linked.
If you want to check out whatthe FMC thinks are its
priorities for fiscal year 2025,it's a great document to review
(39:31):
.
So, as always, though, theguidance here is general, for
educational purposes only,should not be construed by legal
advice directly related to yourmatter.
You need an attorney, contactan attorney, but if you do have
specific legal questions, feelfree to reach out to make my
legal company skull strategies.
Otherwise, for the non-legalquestions that you're learning
and the general industryinformation and insights.
Come find me at the MaritimeProfessor.
(39:52):
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
by Sea.
If you prefer to see the video,they live on my YouTube page by
Landon by Sea, presented by theMaritime Professor.
And, while you're at it, checkout our website,
maritimeprofessorcom.
So until next week, this isLauren Began, the Maritime
Professor, and you've justlistened to by Landon by Sea.
(40:13):
See you next time.
This week of the Federal Maritime Commission
released their FY 2025Congressional Budget
Justification.
So what's in it?
What clues can we take in thedocument?
What are they?
A plan for the rest of 24 andeven into 2025?
There's some tidbits in here.
Well, hang tight and I'll tellyou.
Hi, welcome to By land and bySea, an attorney breaking down
(01:18):
the weekend supply chainpresented by the Maritime
Professor, me.
I'm Lauren Beagen, founder ofMaritime 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.
(01:38):
It should not be considered tobe legal advice and there is no
attorney-client privilegecreated by this video or this
podcast.
If you need an attorney,contact an attorney.
But before we get into thediscussion of the day, let's go
through my top three stories ofthe week.
All right, story number onewe're keeping it on here.
We're always watching the FMCclosely, obviously, for any
release of any movement of theopen rule makings.
(02:01):
We have one right the detentiondemerge rulemaking that we
talked quite a bit about.
We will continue to talk aboutit, and we have two others that
we're still waiting on.
Right.
So we have definingunreasonable refusal to dealer
negotiate with respect to vesselspace accommodations provided
by an ocean common carrier.
That's one that we're waitingon.
The last we saw movement was asupplemental notice of proposed
(02:23):
rulemaking that came out July2023.
Obviously, they've been workingon the D&D rulemaking.
They got that out, but we'restill waiting on something that
will conclude, probably a finalrule on this.
I've heard a few different timesin a few different public
forums, different commissionersand even the chairman saying
they expect this in the nextshort term, probably the next
(02:47):
few months.
I would say before the one year, since the supplemental would
be my guess.
I would guess.
I keep saying I'm guessing,like May on that.
I don't know, that's a totalguess, but they do say in the
congressional budgetjustification that they expect
this to be concluded by July ornot by July, by 2024 or by the
conclusion of 2024.
(03:07):
So we'll see.
It's coming.
That's the unreasonable orfeasible to deal and negotiate.
Remember this is the one thathad some definitions in it that
I wanted you to take a look at.
I also think that there's someother maybe overflow effects
that this could have.
So even if you don't think thatyou have much to do with
unreasonable or feasible to dealand negotiate with respect to
vessel space accommodations,take a look at it anyways.
(03:30):
This should be getting as muchattention it probably won't, but
as much attention as the D&D.
Obviously, we have the D&D ruleout.
The effective date is May 28th.
It's coming.
Get your systems ready.
It's on its way.
A lot of the industry alreadytook those movements.
Over the summer, when westarted to see some language, or
(03:52):
when language came out lastDecember, some of the industry
was already starting to makesome changes.
Right now is the time.
It's a 90-day effective date,so it was released on the 23rd.
Published in the FederalRegister the 26th.
The 26th of May is a Sunday, soit comes out May 28th, which is
actually a Tuesday.
It's coming out May 28th.
(04:13):
Well, it's effective May 28th.
I should say the third rule thatwe're waiting on that.
We haven't seen any language onindependently, although we have
been told that the FMCconsiders some of this to be
covered by the unreasonable,feasible to deal and negotiate.
This third rule is the definingunfair, unjust to
discriminatory methods, stillwaiting on language here.
We're going to talk about thatin a few minutes, though,
(04:34):
because they talk about that alittle bit in the budget
justification document.
The other thing that we'rewaiting on is the Maritime
Transportation Data Initiative,and I say waiting on, right,
we're all just kind of watchingthese things and I'm helping to
keep you apprised of everythingthat's happening there.
So, maritime TransportationData Initiative there's been a
few different times that there'sbeen talk of another RFI, a
(04:55):
request for information roundcoming.
It hasn't been released yet.
So I'm going to keep watchingthis stuff.
I'm probably going to take thisoff of my top one story of the
week just because I don't expectany movement in the next few
weeks on this.
So we'll clear that up foranother news piece.
Rest assured, I'm going to bewatching these, obviously All
(05:17):
right.
Story number two I previouslyreported that the US had
submitted their US extendedcontinental shelf claim at the
end of 2023.
Again, remember the extendedcontinental shelf claim.
So that's the subsoil.
That's like you have the watercolumn and then you have the
soil underneath.
You can extend beyond 200nautical miles for an extended
(05:38):
continental shelf if you complywith Article 76 of the United
Nations Convention on the Law ofthe Sea.
The United States has said thatthe Law of the Sea this is
close.
The United Nations Conventionon the Law of the Sea is
customary international law.
We have signed it, but we havenot ratified it yet.
There's been a lot of effortsthrough the years to ratify it,
(05:59):
but we haven't yet.
We've only technically signedit, but we're not signatories to
it in the official sense.
So Law of the Sea is back inthe news.
Like I said, we talked aboutthat extended continental shelf
in December.
I believe we talked about itmaybe in January, but it was at
the end of 2023 that that becamea new announcement.
(06:20):
But you look at my past andpresent law students of my Law
of the Sea class.
I teach Law of the Sea at RogerWilliams University School of
Law.
They are probably so excitedbecause they say you'll never
really notice Law of the Seaunless you're in it, right,
obviously, or until you takethat class or a class, because
it actually is all around, butthis is kind of exciting.
So a whole slew of high-rankingofficials.
(06:42):
I mean we have admirals,generals, secretary of Defense,
secretary of Homeland Security,secretary of the Navy, we have
ambassadors on this list I meanit's like, I mean it's everybody
.
It's a pretty impressive list.
It's 346 individuals signed onto this letter.
It's a letter encouraging thatthe US Senate ratify the US
(07:03):
Assessions to the United NationsConvention on the Law of the
Sea.
So what does all that mean?
Like I said, we've signed itbut we haven't ratified it.
And how do we ratify it?
We have to get advice andconsent of the Senate.
In the letter they state that,despite support from presidents
of both parties and that's true,this has not necessarily been
one party or the other there'sbeen support of both parties and
(07:25):
strong support from the actualbusiness community, the private
sector.
Despite all of that, what theletter says is that it has yet
to be voted on by the fullSenate.
And that's true too.
Sometimes it's gotten throughsubcommittees but never actually
brought to the full Senate.
And that's what we need is theadvice and consent of the full
Senate to vote on this.
(07:45):
So if it hasn't even beenbrought.
It hasn't been shot down yeteither.
Look like I said, we've signedit technically but without the
full advice and consent of theSenate, we haven't ratified it
and so we can't be considered aparty to this convention.
It does seem like maybe everyseven to 10 years there's like a
renewed push for joiningUnclose, the United Nations
(08:07):
Convention on the Law of the Sea.
Unclose.
This has some pretty goodweight to it, this effort I feel
I mean over 346, really highranking, really high ranking
people are signing on to this.
And certainly the defense sideof things I mean, if we're
having different Department ofDefense, highest ranking
(08:29):
officials, joint Chiefs of Staffare on here, I mean that's
pretty weighty right.
That's some pretty good weightto it.
So who knows, perhaps this willbe the year, perhaps this
letter will start up thatconversation.
You know what I talk about inmy class is that it's the
freedom of navigation for me.
That keeps me most concernedhere, and it's the United
(08:49):
Nations Convention on the Law ofthe Sea, this Unclose, that has
remedied some of the most well.
So it really kind of providesthat freedom of navigation,
right, and that's what I feel.
And there was concerns when itwas first drafted, first drafted
, but those have been remedied.
All those, the controversialparts that former President
(09:10):
Reagan objected to, and even hisambassador at the time has said
, look, they've been remedied.
The reason that we werecautious and decided not to sign
it as we were negotiating it,because we were part of the
negotiation.
The US was part of thosenegotiations.
There were three differentconferences of the United
Nations Convention on the Law ofthe Sea, three different
conferences, and then ultimatelythe language came out.
(09:32):
But there was a little partthat we didn't like.
That's been remedied, and theambassador, who was part of
those negotiations, has said ithimself.
He's actually signed on to thisletter as well.
So the objections have fallenaway that were present at the
beginning.
So I don't know.
So we'll see.
Look, that was the prohibitivepart then.
It has since been remedied.
(09:53):
Maybe the US should have noobjection now, but we'll see.
We're still waiting on this.
We'll see how this goes, allright, well, story number three
I'm going to link two differentarticles on this.
I think both the FinancialTimes and Pennsylvania Capital
Star cover this pretty well, andI actually like some of the
information from the PennCapital Star here.
(10:14):
But so this week the UnitedStates.
The United Steelworkers Unionsubmitted a petition to the
United States Trade Reps Office.
So that's USTR.
So who is USTR?
We don't talk about USTR thatoften, but I want to make sure
that everybody's on the samepage, right?
We always do that.
The Office of the US Trade Repis USTR.
The Trade Representative is anagency of the United States
(10:37):
federal government.
They're responsible fordeveloping and promoting
American trade policy.
So, developing and promotingAmerican trade policy.
So USTR is a little differentfrom the State Department, right
?
Because when you think aboutforeign things, you're thinking
about, maybe, the StateDepartment.
So the State Department is theDepartment of the US government
(10:58):
responsible for the country'sforeign policy and relations,
but it's not necessarilyexclusively focused on trade,
right, and so it's going to bethe broader range and it's going
to be the foreign policy andrelations.
That's State Department.
Ustr, the United States TradeRepresentative's office, is
really focused on that tradepiece.
Obviously it's in the name fordeveloping and promoting
(11:20):
American trade policy.
Okay, so that's where thispetition went.
So what happened this week?
Well, the steel workers said intheir petition that they're
concerned about China's growingprominence in the shipbuilding
industry.
There's been a lot of talkabout US shipbuilding lagging
behind US shipbuilding beingwoefully underfunded.
If you want more information onthis, I think Dr Salmar
(11:44):
Cogliano does a great jobtalking about the US
shipbuilding capabilities.
But what they're saying in thissteel workers petition is that
they're worried about Chinafilling that void, and they're
growing prominence.
So in the Financial Times, Ithink this stat came from, china
went from producing roughly 12%of global commerce ships by
(12:07):
tonnage to producing more than50%.
It went from only producingabout 12% of global commercial
ships by tonnage to now 50%.
So in the Pennsylvania'sCapital Star article it said
according to the petition filedTuesday with USTR, in 2012, the
Communist Party of Chinaelevated the construction of a
strong maritime country as anational goal.
(12:29):
So that was in 2012.
And the following year,president Xi Jinping announced a
Maritime Silk Road initiativeaimed at increasing China's
influence over maritimecorridors across the globe.
That was 12 years ago.
Math, that was 12 years ago2012.
Key aspects continuing on fromthe article, key aspects of the
program include promoting stateowned shipping and logistics
(12:52):
companies, investing instrategically located foreign
ports and terminals, dominatingthe supply of cranes used at
ports around the globe.
And promoting a governmentsponsored logistics platform,
lodz Inc.
The petition states as a result, chinese companies, primarily
state owned companies, havebecome leaders in financing,
building, operating and owningport terminals around the world.
(13:13):
So that was sub quoted in thisarticle from the petition itself
.
So we've talked a little bitabout I think we've talked about
lodging, and the cranes havenow come into forefront right.
There being talked about a lotin different news articles
saying that potentially theremight be some security concerns
with them.
I can tell you from what Iunderstand is that the cranes
(13:35):
are thoroughly looked at,thoroughly scrubbed, I think
pretty on a routine basis theyare looked at there.
So I mean that's good, but it'sstill the piece of this is it's
coming from the steelworkersand so their concern is really
that the dominance happeninghere.
So last year so continuing onwith the article last year
(13:59):
McCall said Tuesday the US Okay,that was a little bit strangely
worded.
So the petition and thepresident of the union said the
US produced fewer than 10oceanic vessels while China
produced more than 1000.
If we do not act, we will soonbe dependent on China, not only
for the products their vesselsbring to our ports but also for
(14:21):
the ships themselves.
And that's where thesteelworker piece comes in.
Right.
Steelworkers are obviously partof the shipbuilding process.
So they're saying not only arewe going to be dependent on
China for the products, butpotentially the ships themselves
.
And he's seeing that that is ashift.
So continuing on with this withthis article snippet here,
casey said China's practices inthe meantime in the maritime
(14:43):
sector also pose grave nationalsecurity implications.
Us shipyards and suppliers donot have the capability to
replace ships lost in combat orthe ability to supply our own
needs, much less those offriends and allies, he said,
citing the petition.
The petition outlined steps theunions want the US TR to take
beyond simply eliminatingChina's practices.
So here's some of theadditional things that the
(15:06):
petition is saying that they'reasking for as a remedy.
They're asking for a port feeon Chinese built ships that dock
at US ports and the creation ofa shipbuilding revitalization
fund to help the domesticindustry and its workers compete
.
So the second part, right,shipbuilding revitalization fund
to help the domestic industryand its workers compete, isn't
necessarily aimed at China.
(15:27):
That's just probably goodpractice for the US.
We really, really, really,really, really, really need to
get back into shipbuilding, andwe certainly do, but we need to
expand our shipbuildingcapabilities, and so this
shipbuilding revitalization fundcould help do that.
That's going to be a little bitinsulated from anything that
China is doing.
But certainly the point being,maybe we need to get kind of
(15:52):
moving on this.
The port fee on Chinese builtships that dock at US port, that
one is interesting.
I'm going to be following thatto see what they do with that.
So there's a piece that the FMCcan play, a role that they can
play in this, in that there'sSection 19 Act of the Merchant
Marine Act of 1920, foreignShipping Practices Act, which
(16:16):
give the FMC, the FederalMaritime Commission, the
authority to issue penalties pervoyage if they find that
countries are beingdiscriminatory toward.
Well, and it's not.
I can't remember if it'sexactly clear on whether it's
discriminatory towards USefforts or interests or just
(16:37):
generally discriminatory, and Ithink I don't know if that's
ever actually been fully tested,but don't hold me to that.
Again, none of this is legalinformation.
This is kind of educationaldiscussion.
So it's possible the FMC mightget looped in here.
It's also possible that maybeUSTR didn't know about the
Section 19, foreign Shipping andthe Foreign Shipping Practices
Act, so maybe now they will belooped in.
(17:00):
But that port fee on Chinesebuilt ships that dock at US
ports, I don't see how thatwould actually go into
implementation, right, becausethey're saying Chinese built
ships, which aren't necessarilyChinese owned or operated, that
could be just out in the generalcommercial world.
So what they're trying to do isdisincentivize commercial
(17:22):
activity from purchasing andusing Chinese built ships.
I just don't think that thatone's probably going to fly, but
I'm going to be interested tosee the discussion around it and
where, if anywhere, theyultimately land, them being, I
guess, the federal authorities.
That one's going to beinteresting.
I think a shipbuildingrevitalization fund is probably
a good idea.
(17:42):
That's going to be somethingthat will be interesting to see
take effect and come into play,because we need ships.
Right, it still remains Amaritime presence, is an
important presence.
So continuing on.
They also said other measures tostimulate demand for and the
capacity to construct commercialvessels built in the United
(18:03):
States.
The steel workers are sayinglook, we need more vessels.
Continuing on on this article.
Just finishing up real quick.
The commercial shipbuilding andrepair industry in the US can
compete and grow in the massivemarket distortions that the
government of China has createdor remedy.
The petition states we haveseen the people's Republic of
China create dependencies andvulnerabilities in multiple
(18:24):
sectors like steel, aluminum,solar batteries and critical
minerals, harming Americanworkers and businesses and
creating real risk for oursupply chains.
Ustr this is from the USTR traderep themselves.
So USTR trade rep tie.
So they said USTR and the BidenHarris administration are
fighting every day to putworking families first, rebuild
(18:46):
American manufacturing andstrengthen our supply chains.
And they said I'll look forwardto reviewing this petition in
detail.
So we'll see.
We're going to be getting thisjust came out this week so we're
going to be getting probably alittle bit more info on this.
We're going to see discussions.
I mean steelworkers.
Obviously, if the union andit's supported by a few other
unions, this will be a topicthat is certainly going to be
(19:11):
coming up again, I think,especially because it's in an
election year.
I think this is going to besomething that will probably
enter into the politicalrhetoric at least partially.
And with the US trade repsaying that they're going to be
looking at this, I think we'regoing to get more information
here.
So we'll see.
Shipbuilding and funding forshipbuilding is probably going
to be a great idea here.
So whether we're going to beassessing penalties on US or
(19:34):
Chinese built vessels servicingour ports, I don't see that one
as flying, but we'll see too.
I'll keep watching, all right,well, let's get into the meat
and potatoes of the day.
We went through the threestories at length, but we're
going to hit.
The FMC release their fiscalyear 2025 congressional budget
justification and you know Ilove a good overview mission
(19:55):
statement.
So we're going to go with whatthey put right at the beginning
of this document.
So the FMC, the FederalMaritime Commission, is an
independent agency withjurisdiction in the US over
competition practices andservice in the ocean shipping
industry.
Our mission this is quoted fromthe document our mission is to
ensure a competitive andreliable international ocean
transportation system thatsupports the US economy and
(20:18):
protects the public from unfairand deceptive practices.
Facilitating commerce andprotecting US shippers remains
the essential focus of the FMC.
The commission requiresadditional resources to carry
out its responsibilities toensure vigilant industry
oversight, enhance enforcementand improve service to shippers
and consumers.
Love a good mission, they'resaying, as we've seen kind of in
(20:39):
different iterations over theyears to ensure a competitive
and reliable international oceantransportation supply system
that supports the US economy.
It used to say for the benefitof the US importer, exporter and
consumer.
Now it just says supports theUS economy.
Little changes there, missionand priorities.
So under priorities for OSRA,they have a priority on ocean
(21:02):
shipping and form act of 2022.
They said implementing OSRA 22is a leading priority of the
commission.
Obviously because Congress toldthem to do it by fiscal year
2025, the majority of OSRA 22'senhanced authority and
provisions for revisedregulations will be implemented
and fully integrated in supportof our mission.
There were a lot of differentthings that were part of that
(21:23):
right, and they were.
The rule makings were part ofthat.
There was a little bit ofrestructuring and employee
expansion right.
They hired more people.
They also said that there aregoing to be some additional rule
makings required under OSRA 22that are going to continue in
fiscal year 2024.
So they're saying, look, we'recontinuing to finish this up.
(21:45):
They said OSRA 22 require thecommission to develop a process
for charge complaintinvestigations and adjudication.
The FMC said, right, theydeveloped and posted interim
guidance on its website in 23,along with an accompanying
webinar to help the publicunderstand the process.
In less than 18 months sincethe enactment of OSRA and the
(22:05):
enactment of the chargecomplaints, they said more than
$2 million has been voluntarilywaived or refunded under the new
process.
So that's under the chargecomplaints process at the FMC.
We've talked about that a fewtimes.
They've been able to affect Iguess I'll say affect more than
$2 million in charge complaints.
(22:25):
So the way that they affectthat is they go through the
charge complaints process.
Those invoices, those charges,can either voluntarily be waived
or voluntarily refunded and forthe most part I think it was
like I don't know the staff willlike over 90%.
That's how it happened.
They also said that theyincreased investigations and
enforcement.
The FMC protects the US publicthrough its investigatory and
(22:49):
enforcement programs thatidentify, deter and stop
unlawful activities of regulatedentities ocean carriers, marine
terminal operators and oceantransportation intermediaries.
Those are the regulatedentities.
New enforcement prioritiesestablished by the chairman
focus on unlawful practices thatnegatively impact significant
portions of the maritimeindustry or appear to cause
(23:10):
market distortion.
As a result of these changes,the enforcement program this is
the enforcement program has beensuccessful in legal actions,
collecting $2.8 million in civilpenalties for violations in the
law of fiscal year 2023.
So that's $2,896,332 is theexact.
(23:33):
That's what they did inenforcement this year.
That is a significant increasefrom, I mean, even five or 10
years ago.
They have significantlyincreased their civil penalties.
We'll talk about that againkind of hitting the overview
here.
Compliance the commission'sstatutory and regulatory
authorities are applicable tothe international waterborne
commerce, valued at trillions ofdollars, as well passenger
(23:55):
vessel operations embarking atUS ports.
Vigilant oversight of industryactivity by FMC program offices
includes compliance in additionto investigations and
enforcement.
They said increased complianceefforts will continue in fiscal
year 2025, with outreach toregulated entities, including
webinars and other educationalmaterials, and revised IT
(24:16):
systems to provide advancedanalytical capabilities to drive
targeted compliance efforts.
One thing that the FMC has beendoing and while the consumer
facing side or the public facingside can feel a little clunky
in its IT or in its platforms,it looks like from this budget
justification that that'ssomething that the FMC is going
(24:36):
to continue to try to modernize.
They've been modernizing on theinternal side, on the FMC kind
of platform side that they use,and certainly when I was there,
we got all new computers.
So they have been.
I mean, it was it was needed.
It's not like we got the bestof the best.
It was and we did at the time,but we were a little bit old
(24:58):
school in the computers and I,you know, I was there in the
2010s, so it was time since netthen right Since then, I'm sure
that they've been taking moresteps.
And now what we're going to seeis more webinars, more
education materials, and they'resaying revised IT systems
provide advanced analyticalcapabilities.
So I mean that's.
I think that's all going to begreat.
(25:19):
They're going to have more of ahandle because their workload
has certainly increased and soby having some of these more
automated processes or certainlymore IT driven capabilities,
it's going to be great.
And they said this is to drivetargeted compliance efforts.
So, getting down to the budget,what are they asking for?
They're asking for $48.4million.
(25:41):
That's not a lot.
That's really not a lot If youthink about it.
Some of these other agenciesgive out $48 million in grant
funding, and here the FMC, anentire agency, is asking for $48
million.
So it's $48 million.
$452,000.
That's an increase of $4.7million over last year's
(26:05):
authorization.
So last year they got $43.72million.
This year they're asking for a.
I mean it's millions, right,but it's a mild increase of
4,732,000.
That's not a lot.
That's really not a lot.
(26:27):
167 full-time positions is whatthat covers, in addition to the
IT applications, and they'resaying the IT development tools
are gonna be $2 million.
The full-time positions are, Imean that's about $35.8 million.
We have also listed here 10.5million allocated to other
(26:47):
operating expenses, includingrent, building, security,
administrative services.
I mean it's a pretty leanagency when you break it down.
If you were to look at any ofthese other agencies, especially
when they go out for theirauthorization I mean they're up
with Merrad or with Coast Guardor anybody else dealing with
(27:08):
maritime stuff I mean they're aline item for most other
agencies.
I say this every year when wego through this.
I mean 48 million, 48.5 millionis not much.
So hopefully that's fullyfunded and maybe even I don't
know if this is true but maybeeven Congress will give them
extra.
But, like I said, I think thatthe FMC runs a very lean
(27:30):
operation, so we'll seeInvestigations and enforcement.
We were kind of talking aboutthis, but so the piece that I
want to highlight here is thatthey also mentioned their
priorities for 2025.
So they say that they arecovering all sorts of penalties
and one thing that I do wannanote so, even though I mentioned
that they recovered $2 millionover $2 million in civil
(27:53):
penalties, civil penaltiescollected by the FMC don't go
back to the FMC, so they don'tactually have a personal reason
to be collecting these civilpenalties.
They're collecting these civilpenalties on behalf of the
industry, but that money doesn'tgo to the FMC for them to use.
(28:13):
It goes to the US Treasury.
It doesn't go right into thebank for the FMC.
It goes to the US Treasury,totally bypasses the FMC, to be
honest.
So, if anything, it makes theircivil penalties and their
violations when they go afterthem probably a little bit more
neutral, because it's not theirinterest in getting that money.
So what are their prioritiesfor 2025?
(28:38):
They say a failure to establish,observe and enforce just and
reasonable regulations andpractices relating to or
connected with receiving,handling, storing or delivering
property.
That's probably one of the bigones, right.
They also have unlawful demergeand detention practices and
improper use of merchant clausesto impose liability on
non-contract parties.
They have unreasonable ifyou're able to deal or negotiate
(29:00):
that potentially violate theShipping Act.
Right, that's gonna be comingback in right Cause it's already
unreasonable if you're able tonegotiate is part of the
Shipping Act, but they're goingto be defining it in that
rulemaking.
Unreasonable or feasible todeal, refusals of cargo, space,
accommodations or other unfair,unjust to discriminatory conduct
that potentially violates theShipping Act.
(29:20):
So that's where we're going toget a little bit more clarity
from that rulemaking that we'rewaiting on, but this is already
a rule under the Shipping ActUnreasonable or feasible of
cargo space accommodations orother unfair, unjust to
discriminatory conduct.
You're also gonna be focusingon retaliation that potentially
violates the Shipping Act, whichis the section 46, usc 41102D,
and tariff and service contractactivity that potentially
(29:43):
violates the Shipping Act.
So, in like we said, in FY 2023,the enforcement program
collected a combined total of$2.65 million in civil penalties
to resolve allegations ofmisconduct.
What they broke this down at,which I thought was interesting
that they broke this down butthey said two large ocean common
carriers and an additional246,000 in other civil penalties
(30:06):
.
So they switched over to chargecomplaints.
The commission will review theinterim procedure and draft a
new rulemaking in 2024.
We've talked about this beforetoo.
So charge complaints that was acreation of OSRA.
Osra 2022 was an interimcreation.
The FMC had to kind of quicklycreate a process that they were
(30:27):
gonna use, because as soon asOSRA 22 was signed June 16, 2022
, it became law, and so, all ofa sudden, charge complaints were
a thing.
The FMC had to build theparachute, as they had already
been told to jump out of theplane but now that they can
breathe a little bit, that theyhave a good charge complaints
process in place, this kind ofinterim process, they're saying
(30:51):
now it's time to do the officialrulemaking.
So that's what they're saying.
In 2024, we will see anotherrulemaking.
I'm gonna add it to my list.
Charge complaints will be arulemaking.
The procedure for chargecomplaints will be a rulemaking
in 2024.
And they're saying chargecomplaints procedure is gonna
require additional resources.
So they're saying that twofull-time employees are
(31:11):
projected to be hired in 2024and 25 to process and
investigate the complaints.
In 2025, the final procedurewill be established and fully
operational.
They also said OSRA 22 mandatedrulemaking for unfair and just
the discriminatory methodsrelating to cargo space
accommodations and shippingexchange registries.
This is the third one this isprobably the first time I've
(31:34):
seen the title this long andinclude shipping exchange
registries.
So take note of that.
This is the unfair and just thediscriminatory methods.
Usually that's all we say.
It's always kind of saidrelated cargo space
accommodations.
Like I said, I just don't thinkthat I've seen this shipping
exchange registries, although itwas in OSRA 22,.
But this is the first time thatI've seen this third rulemaking
(31:56):
and perhaps I missed it,perhaps I got too casual with
the name, but this shippingexchange registries.
The commission anticipatesreviewing the use of shipping
exchange registries in FY 2024.
That will be interesting towatch too, to see where they go
with that.
The FMC audit program.
We don't talk about this veryoften, but it is something that
(32:16):
is present.
They said the need for clearcommunications between the
commission and carriers is theunderpinning of the VOCC audit
program initiated by ChairmanMephane July 2021.
In fiscal year 23, the FMCexpanded the program to include
marine terminal operators andports.
In 23, they expanded it.
So the FMC audit programprovides a forum for senior FMC
(32:38):
staff to communicate directlywith representatives from the
largest carriers, as well as,under as of 2023, port
authorities and marine terminaloperators.
The agendas for these regularmeetings are topical to issues
in the supply chain.
Past issues have includedcongestion and movement of empty
containers, fees and billingpractices, export strategies and
challenges faced by theindustry.
(32:59):
Under the program, thecommission has tracked trends,
policies and procedures relatingto D&D billing and identified
best practices for carriersrelated to communicating their
practices to the shipping public.
What the justification says isthat this was actually created
under fact-finding.
29, led by commissioner die,included a recommendation that
all carriers and MTOs identifyFMC compliance officers.
(33:22):
The idea there was to increasecommunication right.
Having these points of contact,as the report says, has
increased communication, so it'sworked between the FMC and
carriers and terminal operatorsand helped ensure that carriers
and MTOs are aware of, and areadhering to, commission policies
.
So another area that theyhighlight here that I wanna make
(33:44):
sure we spend a little bit oftime on here is cater, so the
office of consumer affairs anddispute resolution services.
This is the informal disputeprocess for informal dispute
assistance that the FMC provides.
In CATARS, this ConsumerAffairs and Dispute Resolution
Services, they have, as they say, experienced analysts and
attorneys on staff who assistthe public in finding solutions
(34:05):
to their commercial disputescommercial disputes without
bringing formal legal actions.
When assistance is requested,catars staff will work with
parties to identify solutionsthat will get cargo moving
whenever possible, avoidingfurther delays and increase in
charges.
Other services offered by CATARSinclude mediation and
arbitration.
All CATARS assistance isprovided without charge and all
(34:26):
communications are keptconfidential.
This is a free service withCATARS.
It's free.
You can do mediation andarbitration at the FMC under
this Office of Consumer Affairsand Dispute Resolution.
So in 2023, they broke downCATARS requests.
I mean this is free, a freesystem for commercial disputes.
They only had 199 requests forcargo assistance.
(34:50):
They had 75 requests forpassenger vessel or cruise
assistance and they had 34requests for household goods.
That's not a lot.
That's like 200 requests in theyear.
This is free.
I mean it's up to you.
This is not legal advice, but Ido want you to know that this
is a service that's out there.
(35:11):
It is mediation or arbitrationor other just general Consumer
Affairs and Dispute ResolutionServices.
You can ask for assistance infinding solutions to commercial
disputes by contacting CATARS.
I want you to know that that'savailable.
The Commission also talks abouta couple of Commission decisions
(35:31):
that were key decisions.
I'm only going to highlight twohere.
So we have the Evergreen case.
This is the TCW Incorporatedversus Evergreen Shipping Agency
.
This is the one where I'm justgoing to read off what they said
.
The Commission have held thesmall claims officer's decision
that the charging of per DM whena port was closed for a weekend
and equipment could not bereturned was unjust and
(35:51):
unreasonable in the absence ofextenuating circumstances.
This case is now adjudicatoryfilings before the FMC.
The volume of filings and ohwell, all right, that's pulling
in the wrong information.
I'm just going to tell you.
So, basically, this is the casethat they have kind of hailed
as the case that says you can'thave detention to merge charges,
(36:13):
and I'm paraphrasing here, andthis is not legal advice you
can't have detention to mergecharges on a weekend or a
holiday or when you can't return.
They're saying, as of this case, that that was unjust and
unreasonable, but this case isnot final yet.
It's before the US Court ofAppeals for the District of
Columbia Circuit.
So what they did mention thoughand this is reading back off of
(36:35):
their summary here the casecould significantly impact how
the industry deals with chargesrelated to weekends, holidays
and other times when containersor chassis cannot be returned.
They said some companies arewaiving D&D charges in light of
the commission's decision.
This is still pending, thoughright, this is on appeals at the
DC Circuit.
The other case that theymentioned is the chassis
(36:56):
decision that we were talkingabout just the other day.
Intermodal Motor CarrierConference American Trekking
Association, versus OSIMA OceanCarrier Equipment Management
Association, initial decisionpartially granting summary
decision.
Complainant IMCC, a Conferenceof American Trekking Association
, alleges that OSIMA and CCMthose are VOCC backed equipment
(37:16):
management groups which have FMCfiled agreements have engaged
in unreasonable practicesrelated to chassis chassis
choice in gray pools and nearlyevery port in the US.
As a result and this is readingoff of what the FMC summary of
this is as a result, imccmaintains motor carriers,
shippers in the downstreampublic, have paid higher chassis
prices and sufferedinefficiencies and thus OSIMA
(37:37):
CCM actions violate the shippingact.
Imcc requests cease and desistrelief from these practices.
The factually and legallycomplex case is now pending with
the commission on review ofrespondents' exceptions to the
initial decision.
They didn't mention that.
Basically, the initial decisionsaid that the exclusivity was
(38:02):
contrary to the shipping act,but this is on exception, so
it's not final.
We talked about it.
There was a lot of oh, this isgreat, but this isn't final
because exceptions have beenfiled, which exceptions means
appeal.
So that's why I think that theyhaven't said too much about
what was decided, because it ison appeal, but they noted that
as a marquee case, it will be amarquee case.
(38:23):
There was also discussion overwhether chassis is under the
purview or the jurisdiction ofthe FMC.
There's a lot that's going tobe happening on this case, but
TBD right to be continued.
So this document, thiscongressional budget
justification.
I love to look at it, eventhough it's a little bit boring,
right, it might be a little bitnerdy looking through all this.
I love to look at it because Ithink that it gives some
(38:46):
glimpses of what the FMC findsimportant.
Maybe what the FMC wants totell Congress is important, but
also it gives you some timelinesand some expectations, and if
they put it in thiscongressional document, they're
most likely going to adhere toit.
So the 2024 procedure forcharge complaints I really think
(39:07):
that we're going to see thatthis year.
I think that they are going toconclude the unreasonable
physical dealer.
Negotiate the unjust ordiscriminatory, unfair or
unjustly discriminatory with theshipping exchanges.
That's going to be interesting,right.
That was a little nugget fromhere, so take a look.
I haven't linked.
If you want to check out whatthe FMC thinks are its
priorities for fiscal year 2025,it's a great document to review
(39:31):
.
So, as always, though, theguidance here is general, for
educational purposes only,should not be construed by legal
advice directly related to yourmatter.
You need an attorney, contactan attorney, but if you do have
specific legal questions, feelfree to reach out to make my
legal company skull strategies.
Otherwise, for the non-legalquestions that you're learning
and the general industryinformation and insights.
Come find me at the MaritimeProfessor.
(39:52):
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
by Sea.
If you prefer to see the video,they live on my YouTube page by
Landon by Sea, presented by theMaritime Professor.
And, while you're at it, checkout our website,
maritimeprofessorcom.
So until next week, this isLauren Began, the Maritime
Professor, and you've justlistened to by Landon by Sea.
(40:13):
See you next time.
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