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March 28, 2025 42 mins

Topic of the Week (3/28/25):


Doesn’t it feel like there’s a LOT happening in maritime right now? This week was dominated by the USTR 301 tariff hearings, but don’t worry, we’re covering that and everything else you missed! Let’s dive in.


The Maritime Professor® presents By Land and By Sea Podcast 🎙️ – an attorney breaking down the week in supply chain with Lauren Beagen (Founder of The Maritime Professor® and Squall Strategies®)


Let’s get into it...


🔹 Top Three Stories of the Week:


1️⃣ Brent Sadler Nominated as the New Maritime Administrator


 🚢 Brent Sadler, nominated as the U.S. Maritime Administrator, brings a wealth of experience from his distinguished 26-year career in the U.S. Navy. I'm excited to see how he’ll tackle America’s maritime challenges with President Trump taking such a significant interest in the success of this industry. 


2️⃣ Petitions Against Federal Maritime Commission’s Recent Final Rules


 ⚖️ The petitions filed against the FMC’s Detention and Demurrage Billing Practices rule and the FMC's Unreasonable Refusal to Deal or Negotiate continue to evolve. 


3️⃣ FMC Launches Investigation into Global Maritime Chokepoints


 🌍 The FMC is investigating key chokepoints like the Suez Canal, Panama Canal, and Malacca Strait to determine if congestion, geopolitical tensions, and environmental factors are creating unfair conditions for U.S. trade. This could have major consequences for global shipping.


The Maritime Professor® is offering an e-course on the subject to help get you up to speed. (Listen to the discussion for a discount code)


⬛ Deep Dive: United States Trade Representative (USTR) Section 301 China Shipbuilding Hearing

This week, the USTR 301 hearings took center stage, with a focus on China’s dominance in shipbuilding. USTR has proposed fees of up to $1.5 million per ship for Chinese-built or Chinese-flagged vessels entering U.S. ports. Two days of testimony and hundreds of comments filed showed a great interest in the topic.


🔹 The Maritime Professor® provides training and education for global supply chain professionals. Learn more: www.TheMaritimeProfessor.com

🔹 Listen to our podcast – NOW AVAILABLE: https://www.themaritimeprofessor.com/podcast


❗ This content is for educational purposes only and not legal advice. If yo

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Transcript

Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
I got soul coming through, flying free.
Skies are blue, all the wavesare mixing room.

(00:23):
I got soul coming through,won't stop in the beat.
And on top of the world,catwalk to the beat when you see
me coming Mixing room.
Oh, everywhere I go, I'm in thespotlight.
This is a good life.
Oh, I'm living gold.

(00:43):
This is what good life I'mliving for you.
This is what it looks like Onthe tiptoe.
How it works.
Doesn't that feel like there's alot happening in maritime all
at the same time?
It's good, I swear it's good.

(01:06):
This is a good thing that weare having all of these
conversations, because we'removing things forward, but this
week was taken over by the USTR301 tariff hearings, so we're
going to, of course, discussthat briefly.
I'm not going to dive in tootoo deeply, but I do want to
just make sure we're all on thesame page.
What has been going on with theUSTR 301 China shipbuilding

(01:28):
hearings, and you know what?
I'm going to alert you toeverything else you might have
missed this week.
There's other things that arehappening.
There's a lot of fires all atthe same time.
I want to make sure that youknow about all of them and not
just the one biggest one.
Hi, welcome by Landed by SceneAttorney Breaking Down the
Weakened Supply Chain presentedby the Maritime Professor me.
I'm Lauren Began, founder ofthe Maritime Professor and

(01:50):
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
attorney-client privilegecreated by this video or this
podcast.
If you need an attorney,contact an attorney.

(02:10):
So, before we get into thediscussion of the day, let's go
through my top three stories ofthe week and I'm also calling
this things that you should alsobe paying attention to.
All right, story number one thiswould be the top thing we'd be
talking about if it weren't forthe USTR 301 hearings, and that
is Brent Sadler has beennominated to be the new maritime

(02:31):
administrator.
So that's the maritimeadministrator in charge of the
maritime administration, whichis MARAD, which is out of the
Department of Transportation,which, if you know and perhaps
maybe it's time we do an FMCversus MARAD breakdown but if
you listen to this episode orthis podcast, you know that
every once in a while we do acompare and contrast of FMC and

(02:51):
MARAD.
We talk often about FMC.
It's a different agency thanMARAD.
Marad is the promotional arm.
They promote the US flag fleet.
They promote and ensure that wehave merchant mariners.
They create and preserve readyreserve fleets.
They have a whole host ofthings that are aligned with
preserving and promoting the USinterest in the maritime world,

(03:14):
which, as you can imagine, is avery hot topic these days, I
guess I'll say.
But also it's a very importantrole.
So Brent Sadler is coming fromthe Heritage Foundation and has
been nominated to be the newMaritime Administrator.
Great opportunity for what I'mfinding to be.
I think that he has some reallygreat attributes and certainly

(03:34):
great experience that I thinkwill help him in this new role.
I want to direct you to twodifferent articles that I found
helpful myself.
One is by Laura Curtis.
She works for Bloomberg.
She has an article out Ibelieve it was last Friday right
after the announcement was madewhere she talks a little bit
about Brent and his experienceand his perhaps where he will be

(03:56):
going with his interest in thisrole.
But also John Conrad ofGCaptain.
He put out an article as wellBoth of those.
I think those two articlescomplement each other well on
kind of reviewing Brent'sexperience.
So my general thoughts, thoughfrom the little bit of research
that I did this week, he seemsto really be an out of the box
thinker and he really has someinteresting ideas on,

(04:17):
particularly one that I'm kindof calling offshore transloading
.
I think he might refer to it asmultimodalism, but it has to do
with this offshore transloading, right, somehow transloading
cargo, and not onlycontainerized cargo but just
cargo offshore and notnecessarily coming into birth at

(04:38):
a port.
And you know what I like aboutit.
And right, automatically, itseems a little bit like how
would that work?
But you know what I like aboutit.
And right, automatically, itseems a little bit like how
would that work?
But you know what I like aboutit is where an otherwise
automatic no may stop from kindof that further critical
thinking.
It feels like he's presentingthis idea as an idea that needs
a little bit more of criticalthought behind it to see if

(05:01):
there's still golden nuggetsthat can be gained from the
concept behind it.
To see if there's still goldennuggets that can be gained from
the concept and I appreciatethat, you know, through the
years, I guess.
I guess I would say that I'vekind of approached things
similarly when I'm faced with ano, or that's silly, or like a
no way, that won't work, it's.
It's kind of this okay, well,thanks for your feedback, and
then you just kind of pivotaround that roadblock it.
You know, this idea of aoffshore transloading.

(05:24):
Maybe it has legs, maybethere's something there.
I like the approach of let'smove past the traditional
thinking, let's move past theway that it works to see if
there's something else.
And actually and we'll talkabout this in a minute but he
recently there was a book thatwas recently released and he
wrote a chapter and he talks alittle bit more about this idea

(05:45):
and kind of the ways that itmight actually work.
So, yeah, all right, so let'skeep going on Brent, though.
Brent Sadler, recently nominatedto be the US Maritime
Administrator, truly brings awealth of experience.
He has had a 26 year career inthe US Navy and his tenure as a
senior research fellow at theHeritage Foundation.
Career in the US Navy and histenure as a senior research

(06:05):
fellow at the HeritageFoundation so what I found on
his positions on the Jones Act.
So the Heritage Foundation,where he worked.
He's been a senior researchfellow there.
Historically, the HeritageFoundation has been, I don't
want to say categoricallyopposed to the Jones Act, but
perhaps critical of the JonesAct I think would be a fair has

(06:26):
had concerns.
I want to be careful there, buteither way.
So that's the Merchant MarineAct of 1920.
And that mandates essentiallythis is an oversimplification,
but essentially that goodstransported between US ports
need to be carried on ships thatare US built, us owned and US
be carried on ships that areeither US that are, that are US
built, us owned and US crewed.
But it seems like Brent'sstance might be a little bit

(06:48):
more nuanced.
In his 2024 report EnsuringAmerica's Maritime Security, he
acknowledged that the Jones Actintent to bolster the US
maritime industry, but he notesthat inadequacies in achieving
this goal Right.
So he, he, it seems like hekind of likes the intent to
bolster the US maritime industry.
That's something that that Ithink he he seems to believe

(07:10):
very strongly in, but thatthere's some inadequacy.
Like I said, he suggests thatwhile the act has not fully met
its objective, the wholesalerepeal would perhaps
supplementary measures withoutthose supplementary measures
could be counterproductive.
Instead he seems to beadvocating for stronger
cooperation with allies toaddress the immediate shipping
need, while working to regainAmerican maritime

(07:31):
competitiveness.
And I think that last part thatregaining American maritime
competitiveness is really whatthe focus of anybody coming into
this role would be, and itseems that Brent's aligned with
that, which right that's alignedwith the administration and all
of the things that the Trumpadministration has been saying
is that we really need to regainAmerica's maritime

(07:54):
competitiveness as part of theinitiative and the theme that's
going along with thisadministration and in the
Ensuring America's MaritimeSecurity article.
He also identifies geospoofingas a major concern.
He references a case of aBritish tanker being in Iranian
waters and being held versusthinking that you were actually
in the international waters.

(08:15):
This geospoofing I like that hebrings it up and I like that he
brings it up recently.
I think that this one I agreethat this is a major concern and
something that's worthy of moreattention, certainly when
you're in international waters.
I teach law of the sea and sothere's a fine line between
things that can happen in onearea of water and another, and

(08:36):
not knowing exactly where youare is a major, major problem,
so I like that he brings upgeospoofing there.
Key issues addressed at theHeritage Foundation.
During his time at the HeritageFoundation the things that I've
seen that he's focused mostlyon, it seems, are maritime
security, naval warfare andadvanced technologies kind of

(08:58):
advancing and analyzing theintegration of cutting edge
technologies into navaloperations.
Shipbuilding revitalizationhe's advocated for Ships for
America Act and othershipbuilding initiatives and tax
incentives and workforcedevelopment and global threat
assessment and providingtestimony on emerging global
threats and the necessary coursecorrections to address them.

(09:19):
He comes for the Navy, the USNaval Academy.
He graduated with honors.
He earned a degree in systemsengineering and robotics and a
minor in Japan excuse me, inJapanese.
He actually did study in Japanquite extensively.
He was an Olmstead scholar inTokyo.
He obtained a master's of artsfrom Yoki University and a

(09:40):
master of science from theNational War College when he
came back stateside and a Masterof Science from the National
War College when he came backstateside.
His 26-year Navy careerincluded operational tours on
nuclear-powered submarines,roles on the personal staff of
senior defense departmentleaders, service as a military
diplomat in Asia and hisexpertise at Heritage really

(10:02):
seemed to focus, like I said, onmaritime security, the
integration of advancedtechnologies into defense and
his recently published chapterin the just this week released
book.
This is Returning from Ebtideand you may have seen on
LinkedIn this Returning fromEbtide book.
It is a free PDF download.
So if you go, if you pull it up, I think it's under the US

(10:26):
Naval Institute Under thepicture of the book there's a
PDF link.
You can actually download thePDF version.
But this is what I wanted totalk about.
He talks about the commercialshipping industry and the United
States' interest in kind ofreturning to commercial shipping
as a power in that world.
But he also notably discussesoffshore transloading.

(10:46):
Like I said at the outset, hementions that the Navy's
actually already demonstratedthe ability to deliver a
50-pound cargo 200 miles to aship at sea using a drone.
Okay, so we think about50-pound cargo, that's nice, 200
miles, that's impressive.
But that's not what thecontainer cargos are using.

(11:07):
But he actually addresses that.
He says for commercial use,this would have to be
significantly scaled up.
But it's kind of a test case,right.
He's saying a 50 pound cargo200 miles to a ship at sea using
a drone, that's a feat, that'sa technological advancement,
that's impressive.
And that's a feat, that's atechnological advancement,
that's impressive.
And so, like I said, Iappreciate the out of the box or

(11:31):
breaking the mold, thinking ofwell, it seems wild, but is it?
Can we pursue this?
Is this something that hasmaybe a commercial applicability
to it?
I kind of like that.
I think that that's.
It's a very can I say archaicindustry.
It's a very.

(11:53):
Things have worked well the waythat they've worked for a very
long time, and so I appreciatefresh, fresh looks and new
technologies and and new ideasentering into the world.
I'm really interested to seewhere Brent takes this role.
I think he, more than any otheradministrator in recent years,
really has this rare opportunityto actually move the ball
forward and grow a US flag fleet, grow the Mariner base and
really ready a ready reservefleet, given this

(12:14):
administration's not onlysupport but prioritization of
these initiatives.
Last week at the AmericanAssociation of Port Authorities
Legislative Summit, I talkedabout this.
Last week, kellyanne Conwayspoke as a keynote.
She said that it was entirelyPresident Trump's call to have
shipbuilding included in hisremarks in the joint address to
Congress.
So what happens is he's given awhole list of topics that could

(12:38):
be included in his finalremarks and he suggested of what
gets included, but he has finalsay over what's included.
And not only was shipbuildingnot taken out, it was obviously
included.
The standing up of ashipbuilding office was included
.
So I think that this is reallycool.
I think that this is somethingthat there's a real opportunity

(13:01):
for Brent to make big moves inthis industry, and he's got a
really great list of experience.
I know that we've heard fromsome people already this week
saying that it would be nice ifwe had a little bit more of a
Merchant Mariner perspective,but we still don't have a deputy
.
Maybe we'll have a deputy ofsomebody who's coming from the

(13:22):
Merchant Mariner side of thingsto help support this role.
I think this is cool.
I'm excited to see where Brenttakes it.
I think that his experience,his knowledge, is vast.
He comes ready to get to work,it feels.
So I'm excited to see where hetakes this and I'm going to be
watching with interest andexcitement to see where we go,

(13:47):
because we've needed a leader inthis role and now we have one,
and so let's get to work.
All right.
Story number two a few updateson the petition.
So we've talked about the FMC'sfinal rules.
We have the detention of urgebilling practices rule that has
a petition filed against it, andwe also have the unreasonable
refusal to deal or negotiate.
That has a petition against it.
Not much has happened in awhile there, but I wanted to

(14:09):
bring it back around just tobring it top of mind.
We're getting closer to when wemight be having some movement
on these two petitions.
So, as you know, if you listento this podcast, but if you're
not aware, so the detention tomerge, billing practices rule
the final rule came out last Mayso we've had it almost for a
full year now and it has apetition filed against it for

(14:35):
essentially going too far.
Right, there's a few differentthings that are.
It's a petition against thefinal rule to really kind of
review some of the things thatare within the rule but hinged
on this exceeding authority,arbitrary and capricious some of
these thresholds.
But what I see is the main issuehere is that direct contractual

(14:56):
relationship for motor carriersand the inability through the
rule to directly bill motorcarriers for detention to merge.
It was the World ShippingCouncil who filed this petition
and this is anoversimplification.
This summary is not intended tobe an overview summary of
what's actually happening.
But that's the rule, right,it's detention to merge, fine,

(15:17):
and billing practices.
There's that direct contractualrelationship.
That is a new tenant of thisrule.
But the direct contractualrelationship does not extend to
motor carriers, as the FMCexplains, and the World Shipping
Council has taken issue withthat in the form of this
petition.
We had the American TruckingAssociation, agtc, association
of Bi-State Motor Carriers, awhole slew of trucking

(15:38):
associations, join into this asfiling a joint amicus curiae
brief, so a non-party friend ofthe court.
They offered information,expertise, general insight to
the court on the matter.
Final rule.
So what the World ShippingCouncil has said here is that
the final rule prohibits billingmotor carriers even when those

(15:58):
motor carriers have contractualrelationships with the ocean
common carrier.
So they're saying directcontractual relationship, that's
the tenant.
But they're saying sometimeseven the motor carriers have
direct contractual relationshipswith the Ocean Common Carrier
and so there the intention fromthe FMC was that the direct
contractual relationship wouldbe best positioned to receive

(16:20):
the invoice.
The World Shipping Councilsaying look, sometimes they are
the direct contractualrelationship and then they
therefore are the best authorityto receive the invoice.
The World Shipping Council thensays this fundamental mismatch
between reasoning and resultrenders the commission's action
both outside of its statutoryauthority and arbitrary and
capricious.

(16:40):
They are calling for the finalrule to be vacated.
So that's kind of where we were.
We were waiting on an oralargument scheduled.
It was scheduled for March 13th.
Unfortunately we don't have alot of readout from that.
The transcript was not public.
So if you go to the PACER PACERis the Public Acts Record,
something, something CourtElectronic System, I think.

(17:00):
But PACER is where you can pullany of these documents.
The minimal amount of money Ithink it's 10 cents or whatever
per page, but you can pull thesedocuments to actually see
what's happening in the docket.
You can see that the oralargument happened on March 13th,
but it says that thetranscript's not public.
So unfortunately we don't knowwhat was said in that oral
argument.
I'm going to keep watching.

(17:20):
For now, not legal advice, butfor now the detention demurrage
rule remains in place and thepetition continues on.
But that's a possibility hereis, if the Court of Appeals for
the DC Circuit determines thatsomething's happening here that
needs to be overturned orvacated, it could potentially

(17:41):
impact this final rule that weall have had integrated into
common business practices thesedays.
So this is one worth watching,this detention to marriage
billing practices petition.
We're getting closer, I think,to having some information,
perhaps some decisions beingmade by the court that would
potentially impact thisdetention to murder rule in how

(18:03):
it's supposed to be or allowedto be out there in the world.
So I'll keep watching it foryou.
The other rule that has apetition against it is this
unreasonable refusal to deal ornegotiate with respect to
vessel-based accommodations.
It's a mouthful of a title.
This was released right aroundthe time that we were having our
port strike, october 1st portstrike.
This was released, I think,with that last week of September

(18:26):
, so it kind of got a littlesnowed in news-wise, but it did
come out.
Unreasonable refusal to deal ornegotiate is a final rule that
was released by the FMC is afinal rule that was released by
the FMC.
There was a motion to dismissthat the court wanted to address
and it wanted to have abriefing schedule on the motion
to dismiss.
So I was a little concernedthat we weren't going to see

(18:49):
discussion of the actual topicsand rather that we were just
going to see a discussion overthis motion to dismiss.
The briefing schedule was thatMarch 3rd is when the
petitioner's brief was supposedto be filed, april 2nd is the
respondent's brief that's theFMC and then a reply brief from
the petitioner April 23rd, withfinal briefs totally being due
May 14th.
So we passed that March 3rd.

(19:09):
We did have a filing from theWorld Shipping Council and I was
happy to see that they wentinto substantive issues and not
just related to the motion todismiss.
So some of the issues that theypresented to the World Shipping
Council was that they said theFMC exceeded its authority
through the rules review ofquoting rates that are so far
above market rates that theycannot be considered a real

(19:30):
offer or an attempt at engagingin good faith negotiations and
information regarding oceancarriers pricing strategies.
So that's part of what's inthat final rule right, this
unreasonable refusal to deal andnegotiate, including that one
of the determinations that theFMC would review is this quoting
of rates that are so far abovemarket rates that they cannot be

(19:51):
considered a real offer or anattempt at engaging in good
faith negotiations.
They cannot be considered areal offer or an attempt at
engaging in good faithnegotiations.
This is interesting because theFMC does regulate
reasonableness of rates, but notthe rate itself.
So this argument is actually afair argument, well received, in

(20:13):
that it suggests, or it says,that perhaps the FMC is getting
too close to that rate settingarea right by saying if the FMC
is reviewing the quoting ofrates that are so far above
market rates, it's getting moreinto the actual number of the
rates and not a generalreasonableness, although you can
see both sides right that maybeyou need to know the numbers to

(20:35):
get to the reasonableness.
If it is reasonable versus notreasonable, this is going to be.
This is kind of one of thoseissues that's tale as old as
time.
Where the FMC authority is isthey're not setting the rates,
they're not getting into thespecific numbers, but they are
on the reasonableness.
How close can they get to therates itself before they've gone
too far?
In my opinion, it feels likethat's where this is hinging a

(20:57):
little bit.
The second thing they brought upasserted that the final rule is
arbitrary and capricious andexceeds authority because it
requires this documented exportstrategy.
This is something that we'vetalked about with this
unreasonable refusal tonegotiate this documented export
strategy.
I've been weary of thisdocumented export strategy

(21:19):
strategy.
I've been weary of thisdocumented export strategy
mostly because I wanted to seethe discussion and the
justification and I think that apetition against the final rule
with a documented exportstrategy was probably not
surprising.
This is a little bit of adeparture from normal, I guess I
would say, the way that the FMCtypically moves, requiring this

(21:39):
documented export strategy.
The argument from WorldShipping Council says it fails
to provide meaningful guidanceon what should be included in
such a policy or how it would beused in evaluation of
reasonableness, and I think Iagree with that.
I think I would just like tosee a little bit more of a
justification on this documentedexport strategy and a little
bit more of a discussion there.

(21:59):
So hopefully that'll be in thefiling from the FMC in just next
week.
And then the last thing thatthey said and this is, like I
said, kind of a summary of thethings that they presented the
World Shipping Council in theirpetition or in their filing
their brief, that they justfiled counsel in their petition
or in their filing their briefthat they just filed, they said

(22:21):
and departs the FMC departs frompast commission precedent
without justification byremoving business decision as
expressed factors to beconsidered in reasonableness
analysis.
I've always taken a littlepersonal issue with the
documented export strategy.
Like I said, not entirely, butI just wanted a little bit more
justification.
I always thought thatultimately that is what a
petition filed against this rulewould probably have right the
strongest argument against.
This is just one side of thecoin.

(22:43):
I'm interested to see what theFMC's brief that's going to be
filed next week says and thenthe final response in May.
I never like to do too much ofan analysis on one side versus
the other briefs until we havethem both filed so we can kind
of compare and contrast, seewhat's going on.
But ultimately I'll report onwhat the court decides, because
it's one thing for me to makedecisions or opinions is really

(23:06):
what they are, but it's anotherfor what the court decides, and
that's where we really want tofollow.
So I'm going to be watching tosee what the court does with
either one of these, the oralarguments, if we get any sort of
information out of the Court ofAppeals for the DC Circuit on
the oral arguments on thedetention to marriage billing
requirements or on thisunreasonable refusal to
negotiate.
We just have one side.

(23:27):
Next week we'll get the otherfiling from the FMC.
We'll see if they respond tothe motion to dismiss or if they
go for this more substantivediscussion like the World
Shipping Council did in theirfiling and then a final response
in May.
All right.
Story number three.
Did you miss my webinaryesterday?
There were quite a few people.
It was a great webinar.

(23:48):
It was a deep dive into FMC'sfact-finding investigation to
examine whether transitconstraints at some of the
world's most critical shippingpassages are creating unfair or
unfavorable conditions for UStrade.
Don't fret, there's a lot goingon.
That's why I actually createdan e-course for this topic.
So I'm going to be releasing acode, a special code for the

(24:09):
listeners here.
It's new release, all spelledout, new release.
You'll get a special discountedpricing through the month of
April if you use that code.
Newrelease.
But essentially, what'shappening here?
We've talked about this.
I think we talked about thislast week the FMC investigation
into global maritime chokepoints.
They launched an investigationinto vessel transit constraints

(24:30):
at critical global maritimechoke points all across the
world.
They want to examine howcongestion, geopolitical
tensions, environmental factors,regulations, requirements,
restrictions, kind of all thosethings that might gum up any of
these maritime choke points.
That's what the investigationis focusing on.
It's focusing on high traffictrade routes such as the Suez

(24:51):
Canal, the Panama Canal, theMalacca Strait, the English
Channel, the Singapore Strait.
I mean it's all over.
There's seven differentoutlined northern sea route,
seven different outlined areaswhere delays and bottlenecks
could pose, or have posed,significant risks to global
trade.
What the FMC wants to get toknow is you know, initially I

(25:12):
say that this investigation isbenign on its face.
Of course there's geopoliticsinvolved in probably every one
of these areas, but I wouldconsider this to be an honest
review, an honest review of allof these maritime choke points.
They want to know, are any ofthe restrictions in these areas,
whether they're environmentalrelated or if they're otherwise
regulatory related or if they'reotherwise regulatory?

(25:34):
You know, maybe it's a pilot,maybe it's surcharges, maybe
it's an icebreaker requirement,whatever those requirements in
these areas are.
I think what the FMC is reallygoing to look at here is are
there opportunities to takeadvantage of the situation?
And have those opportunities totake advantage been taken
advantage of?
So, to the tune of, is thisunfavorable shipping conditions

(25:59):
that have been created in theseareas unfair, unfavorable
shipping conditions?
The significance of thisinvestigation really lies in its
potential regulatory andindustry-wide impact.
Right, these choke points serveas vital arteries for global
commerce.
Disruptions can lead tocascading effects on supply
chain, shipping costs, marketstability, and that's why the

(26:19):
FMC has decided to undertakethis investigation.
But the FMC's findings.
Should they find unfair orunreasonable excuse me
unfavorable shipping conditionscould result in corrective
actions.
That's pretty significant.
The FMC could include a $1million per voyage as a
corrective action, for if theyfind a particular common carrier

(26:45):
, vessel owner, vessel operator,even if it's related to a
country, it could assess thosemillion dollars per voyage
against vessels attached to thatcountry.
They could also turn awayvessels of a certain flag, right
, and that's where the PanamaCanal becomes really interesting
as part of this conversation.
Initially you might look at thisinvestigation and say, okay,
well, this is a Panamainvestigation plus a few.

(27:06):
I wouldn't say that I don'tthink that this is a Panama plus
a few.
I think that they are honestlylooking at each and every one of
these seven choke points, butthen also they've opened it up
to if other things happen.
Maybe there are other areasthat they should take a look at
to make sure that the free flowof good continues and that's
really the heart of what the FMCis looking at here is the free

(27:26):
flow of goods continuing to moveacross the world for the
benefit of the US importer,exporter and consumer.
That's their mission, so I meanthey could also.
Here's some other things thatthey could do as corrective
action.
They could restrict the abilityto file agreements with the FMC
, which might include vesselsharing agreements those are the
alliances that are out there.
If somehow something'sconnected to one of the alliance

(27:49):
members or to a country that'sconnected to an alliance member,
it could have an impact thereor service contracts that are
anything that's kind of filedwith the FMC.
The FMC scope here of action isreally significant.
And look, while much of theindustry's attention has been on
tariffs and broader tradedisputes, the investigation
highlights a critical yet oftenoverlooked factor in supply

(28:13):
chain disruptions.
Understanding these chokepoints in the FMC's role is
essential essential foreverybody, and I know that
there's a lot going on here.
But this investigation is a bigdeal and I can't say it enough.
You don't want to find yourselfin a position where the
comments are due by May 13th Ifyou have cargo that moves
through these areas or if youhave vessels that move through

(28:35):
these areas and it's notnecessarily only containerized
cargo.
There's a lot of indications inthis investigation that talk
about not just liner shipping,they talk about bulk.
They talk about wanting to hearfrom bulk carriers and tramp
operations and other areas ofthe supply chain that are not
just the otherwise typical FMCliner shipping world.

(28:57):
So take a look, this isimportant.
There's six questions that areoutlined on what the FMC is
looking for, but really theyjust want to start that
conversation.
They want to have thoseconversations with anybody who
uses these routes or could beimpacted by these routes being
taken advantage of or some sortof unfavorable shipping
condition.

(29:18):
All right, let's get into themeat and potatoes of the day and
again.
I could talk about Section 301forever.
I'm not going to.
We're just going to dohigh-level topics today.
Just want you to be briefed onwhat's happening, what happened
this week and perhaps what'scoming next.
So I haven't talked much aboutthe USTR 301 China shipbuilding
hearings much.
I did review it last spring Ithink it was oh gosh, a year now

(29:43):
.
But that was when there weretwo USTR investigations kind of
happening at the same time.
One that was potentiallyimpacting cranes, ship-to-shore
cranes.
Remember there was a lot oftalk about potentially having a
25% tariff associated with aship-to-shore crane.
That would have been for lastyear.
And then there was also thissecond investigation that we
were kind of paying attention to, but not significantly.

(30:05):
I guess I would say we werepaying attention to it, but it
was based on the Chinashipbuilding and so it's this
shipbuilding one that's the onethat's being talked about today
or this week.
I want to give you an update onwhat's happening, particularly
since it really dominated themaritime news this week.
So Section 301 of the Trade Actof 1974, that's what we're
talking about when we talk aboutUSTR Section 301 investigations

(30:28):
.
It's this trade act.
It's the section of the TradeAct of 1974 that empowers the
United States TradeRepresentative, ustr, to
investigate and respond toforeign countries' unfair trade
practices.
So it almost kind of feelssimilar to this FMC authority of
the Foreign Shipping PracticesAct and the Section 19 of the
Merchant Marine Act of 1920,right there it's an unfavorable

(30:52):
shipping condition, here it's anunfair trade practice, but in
this case the focus is onChina's actions in the maritime
logistics and shipbuildingsectors.
So it was initiated on March12th, 2024.
Again, like I said, we talkedabout it about a year ago.
Petitioners filed a Section 301petition and on April 17th the
USTR initiated thisinvestigation into China's acts,

(31:14):
policies and practicestargeting these sectors for
dominance.
What I want to highlight hereis last year 2024, was a
different administration.
It doesn't really matter, otherthan this investigation is not
necessarily a weaponization ofthis USTR.
I've heard weaponization ofagencies kind of all throughout
and I don't want to get into thepolitics of any of this but the

(31:36):
USTR, the Section 301, startedand the investigation itself was
determined under the Bidenadministration.
And now here we are, a yearlater.
It's that corrective action iswhat we're being, what we're
talking about, that is happeningunder the Trump administration.
So yeah, so March 12th was whenit was filed.
April 17th is when the actualinvestigation was initiated, the

(31:59):
findings and I'm going to bereading right off of what USTR
said in their hearingannouncement actually, based on
the information obtained duringthe investigation, ustr released
a public report on theinvestigation.
The report supports thedetermination that China's
targeting of the maritimelogistics and shipbuilding
sectors for dominance isunreasonable and burdens or
restricts US commerce and thusis actionable.

(32:20):
So there we have it.
They said look, we determinedthat it's unfair under the
Section 301 threshold andtherefore it's now actionable.
Senate continues to say China'stargeting of these sectors for
dominance has undercutcompetition and taken market
share with dramatic effect,raising China's shipbuilding
market share from less than 5%of global tonnage in 1999 to

(32:42):
over 50% in 2023, increasingChina's ownership of the
commercial world fleet to over19% as of January 2024, and
controlling production of 95% ofshipping containers and 86% of
the world's supply of intermodalchassis, among other components
and products.
And actually here's a littlenod to the FMC.

(33:02):
It was an FMC report done bythen Commissioner Carl Bensel,
who reviewed the production ofthe shipping containers and the
world's supply of the intermodalchassis.
He did a whole report so youcan actually go look at that in
more detail on what he found.
But that was part of it, right,the 95% of shipping containers
and 86% of the world's supply ofintermodal chassis.

(33:24):
So here's where it gets reallycontentious and here's where you
got a lot of attention is thatin February, so just last month
the USTR proposed measuresincluding imposing fees of up to
$1.5 million on Chinese builtor Chinese flagged ships
entering US ports.
So the Chinese built or Chineseflagged it's that Chinese built

(33:57):
vessel itself, or on the, orhaving a Chinese built vessel in
your fleet.
And so there are some grayareas in the proposed actions.
And I think that that's whatpart of this week was all about
was trying to figure out thespecificity that was required to

(34:19):
either keep the proposedmeasures or perhaps pivot a
little bit.
So this week, the reason whythis week was so big on this is
because there were hearingsscheduled and initially it was
just supposed to be one day.
It was going to be March 24th.
It got extended to two days itwas March 24th and 26th.
I'm not exactly sure why theydidn't have it on the 25th, why
they had that pause.

(34:41):
The other thing that'sinteresting and if you listen to
Sal Mercogliano's, what's GoingOn With Shipping he is taking
big issue with this, andrightfully so.
But there were over 500comments filed for this.
It was over two days oftestimony and there was not a
video camera, a video feed or anaudio feed coming out of it.
And you know, it feels likethings don't happen on accident

(35:04):
and I don't know.
I'm wondering if maybe therewas no audio feed or no video
feed because they wanted toprovide some sort of cover, some
sort of ability of the industryto chat amongst itself without
that instant reaction from therest of the world.
I don't know, maybe, maybe Italked about this a little bit

(35:28):
last week but maybe there was apurposeful intention to create a
lot of noise around thishearing, to get some comments,
to get some feedback to get someideas flowing, and maybe that's
why there's no audio, no videofeed, but I'm not sure.
But, sal, if you follow Sal, hehas offered to have a puppet
show, a sock puppet show, andI'm going to hold him to it.

(35:51):
Sal, I would love to see a sockpuppet show happen on your take
once we get the transcript,because there will be a
transcript coming out.
I still haven't seen it.
It hasn't been posted, that Iknow of, but we've been promised
that there will be a transcriptfrom the hearing.
And once that's released, sal,do your AI magic.
Create a script, and I'm sureyou don't even use AI there.

(36:14):
Create a script from thetranscript, and I want to see
the sock puppet show.
But we'll see.
So what are the implications forthe maritime industry here?
Look, china's dominance inshipbuilding really has grown
significantly, of course, itsshare of global shipbuilding
capacity increasing from 5% toover 50% in 2023.
The US now ranks, I mean,pretty low right.

(36:36):
19th, I think, is where I'veseen building fewer than five
ships annually, depending onwhat criteria you're kind of
looking at.
Look, the proposed fees aim tocounteract China's subsidies and
support for its shipbuildingindustry, potentially leveling
right.
The intention is to level theplaying field for US
shipbuilders.
However, as we know, we're notable to build ships at a

(36:59):
moment's notice.
I think I mentioned last weekthat maybe this is an
opportunity for spaceships toget involved and SpaceX can make
ships go up, but if you tipthem over and float them, can
they be vessels?
And so maybe this is anopportunity for some creative
thinking.

(37:19):
I guess is my point creativethinking in the shipbuilding
world, where we have ourtraditional ships that take a
while and the more we make, thebetter and faster we'll get at
doing that when we move thatdirection.
But perhaps there's someopportunities for cutting edge
technology, new ideas inshipbuilding, really kind of
breaking that mold oftraditional thinking and kind of

(37:40):
again going back to this newwave of critical thinking and
creative ideas and having theopportunity and the space to
have those crazy ideas and notnecessarily crazy ideas, but
these non-traditional ideasactually critically thought
about to see if there's anythingthere that we can pull from.
But look, obviously thesemeasures could also lead to

(38:03):
increased shipping costs andimpact to global supply chains
across the board.
What we saw at TPM was MSCSorentoff saying that if the
proposed fee were to beimplemented the way it is now.
It's likely that a lot of theocean carriers would then limit
their calls to the US Becauseit's not clear if it's going to
be a call, if it's going to beper call, per route, per voyage.

(38:26):
Those are some of the thingsthat hopefully this week were
discussed and I know that someof the comments that were filed
gave some alternative ideas to,even though the way that they
were presented might berestrictive.
Here's how we change it alittle bit to be a little bit
more beneficial over here.
So these Section 301s, eventhough there's over 500 comments

(38:46):
filed, take a look at them,scroll through, read through
them.
There's some really interestingarguments for the protest.
Obviously, there's a lot ofpotential for disruption.
That happens should thesetariffs be implemented the way
that they're being presented.
Where it's 1.5 million, I meaneven up to, I think, 3 to 3.5
million, it could potentially be12 million, I mean depending on

(39:09):
how many calls and how it'sassessed and kind of all of
these questions on how thiswould actually work.
But the other thing is there'sa lot of suggestions throughout
the comments and I think thatthose are really worthy of
review and intention of notice,because that's maybe where we go

(39:30):
as an industry, some of thosegood ideas that are coming from
the.
I don't like this.
But here's another idea, andagain that's what I mentioned
from the APA Legislative Summit.
There was this feeling thatfrom Kellyanne Conway's remarks,
that the administration wantsideas on how to make things
better.
If you don't like the waythings are going, maybe there's

(39:52):
an opportunity to have thoseconversations and really engage
and find good ideas being pushedforward.
So, despite the 301 hearingsthis week, I'm going to go back
to the FMC side for a minutehere.
I implore you to take some timewith that FMC investigation.
This is a giant deal thateverybody seems to be not having
the capacity to take a look at.

(40:13):
This will impact the entiresupply chain if the FMC finds
unfavorable shipping conditionsand ultimately the intention is
to make these choke points morefair, more efficient, remove any
opportunity for wrongdoing.
I guess is kind of theassumption or the connotation
here.
But look.

(40:33):
Comments closed, may 13th.
What I don't want is foreverybody to wake up in June
when the FMC perhaps if theymove that quickly and start
levying corrective action saywhoa, whoa, whoa.
Did the FMC even have authorityhere?
What did they do?
Now is the time to payattention to this investigation.
It's a relatively shortdocument of the investigation.

(40:55):
These authorities that theyhave are different than we've
ever seen in the FMC world, butthey've always been there.
They've been there for quitesome time now.
It's just that they've beenlightly used and so now we're
seeing a kind of more completeinvestigation in seven
checkpoints checkpoints andperhaps others if they rise to

(41:15):
that occasion.
So I'll keep watching it all.
I'll keep watching it all.
That's it for this week.
Keep it here for all theupdates on what you need to know
on the global supply chain.
As always, can't say it enoughthe guidance here is general for
educational purposes.
It should not be considered tobe legal advice directly related
to your matter.
If you need an attorney,contact an attorney, but if you
do have specific legal questions, feel free to reach out to me

(41:37):
at my legal company, skollStrategies.
Otherwise, for the non-legalquestions, the e-learning, the
general industry information andinsights, the corporate
trainings, the e-courses, thelive webinars, come find me at
the Maritime Professor.
If you like these videos, letme know, comment, like and share
.
If you want to listen to theseepisodes on demand, or if you
missed any previous episodes,check out my podcast by Land and
by Sea.
If you prefer to see the videothey live, my YouTube page by

(41:58):
Land and by Sea, presented bythe Maritime Professor.
While you're at it, check outthe website
themaritimeprofessorcom.
Until next week.
This is Lauren Began, theMaritime Professor and you've
just listened to by Land and bySea.
See you next time.
You.
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