Proposed Rule2023-12744
Definition of Unreasonable Refusal To Deal or Negotiate With Respect to Vessel Space Accommodations Provided by an Ocean Common Carrier
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Published
June 14, 2023
Issuing agencies
Federal Maritime Commission
Abstract
The Federal Maritime Commission (Commission) issues this supplemental notice of proposed rulemaking (SNPRM) to address a statutory requirement arising from the Ocean Shipping Reform Act of 2022 that prohibits ocean common carriers from unreasonably refusing to deal or negotiate with respect to vessel space accommodations and a related prohibition against unreasonably refusing cargo space accommodations. This proposal revises certain aspects of the proposed rule issued on September 21, 2022, by modifying defined terms and discussing the relationship between the United States Code and the elements required to establish violations of those provisions. This SNPRM is issued in response to comments to the original proposal and to more directly provide a potential standard for unreasonable conduct by ocean common carriers that prevents shippers from obtaining space aboard vessels for their cargo. In this SNPRM, the Commission proposes to: define unreasonable by stating a general principle and a non-exhaustive list of examples of unreasonable conduct; establish the elements for a refusal of cargo space accommodations; revise the definition of transportation factors to focus on vessel operation considerations; clarify that vessel space services were already included in the definition of vessel space accommodations and add a definition for cargo space accommodations; define documented export policy and add mandatory document export policy requirements; and remove the voluntary certification provision. The Commission seeks comments on these changes.
Full Text
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[Federal Register Volume 88, Number 114 (Wednesday, June 14, 2023)]
[Proposed Rules]
[Pages 38789-38808]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-12744]
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FEDERAL MARITIME COMMISSION
46 CFR Part 542
[Docket No. FMC-2023-0010]
RIN 3072-AC92
Definition of Unreasonable Refusal To Deal or Negotiate With
Respect to Vessel Space Accommodations Provided by an Ocean Common
Carrier
AGENCY: Federal Maritime Commission.
ACTION: Supplemental notice of proposed rulemaking.
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SUMMARY: The Federal Maritime Commission (Commission) issues this
supplemental notice of proposed rulemaking (SNPRM) to address a
statutory requirement arising from the Ocean Shipping Reform Act of
2022 that prohibits ocean common carriers from unreasonably refusing to
deal or negotiate with respect to vessel space accommodations and a
related prohibition against unreasonably refusing cargo space
accommodations. This proposal revises certain aspects of the proposed
rule issued on September 21, 2022, by modifying defined terms and
discussing the relationship between the United States Code and the
elements required to establish violations of those provisions. This
SNPRM is issued in response to comments to the original proposal and to
more directly provide a potential standard for unreasonable conduct by
ocean common carriers that prevents shippers from obtaining space
aboard vessels for their cargo. In this SNPRM, the Commission proposes
to:
[[Page 38790]]
define unreasonable by stating a general principle and a non-exhaustive
list of examples of unreasonable conduct; establish the elements for a
refusal of cargo space accommodations; revise the definition of
transportation factors to focus on vessel operation considerations;
clarify that vessel space services were already included in the
definition of vessel space accommodations and add a definition for
cargo space accommodations; define documented export policy and add
mandatory document export policy requirements; and remove the voluntary
certification provision. The Commission seeks comments on these
changes.
DATES: Submit comments before 11:59 p.m. EDT on July 31, 2023.
ADDRESSES: Since the publication of the NPRM, the Commission has
transitioned from accepting comments via email and using its Electronic
Reading Room for rulemaking activities to accepting rulemaking comments
exclusively through the Federal eRulemaking Portal at
<a href="http://www.regulations.gov">www.regulations.gov</a>. The docket of this SNPRM can be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a> under Docket No. FMC-2023-0010. The NPRM and
related comments can be found in this new docket. Also, comments to
this SNPRM may be submitted and viewed there. Please refer to the
``Public Participation'' heading under the SUPPLEMENTARY INFORMATION
section of this notice for detailed instructions on how to submit
comments, including instructions on how to request confidential
treatment and additional information on the rulemaking process.
FOR FURTHER INFORMATION CONTACT: William Cody, Secretary; Phone: (202)
523-5725; Email: <a href="/cdn-cgi/l/email-protection#8cffe9effee9f8edfef5cceae1efa2ebe3fa"><span class="__cf_email__" data-cfemail="bbc8ded8c9decfdac9c2fbddd6d895dcd4cd">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
A. Legislative Authority and Regulatory History
On September 21, 2022, the Commission proposed adding a new part
542 under title 46 of the Code of Federal Regulations (CFR) that would
address prohibited acts by ocean common carriers under 46 U.S.C.
41104(a)(10). 87 FR 57674. The proposal was issued in response to
certain obligations imposed on the Commission as a result of
legislation signed by the President on June 16, 2022. That legislation,
the Ocean Shipping Reform Act of 2022 (OSRA 2022), amended various
statutory provisions contained in Part A of Subtitle IV of Title 46,
United States Code, which collectively comprise the Shipping Act. Among
these changes were amendments to 46 U.S.C. 41104(a)(3) and (a)(10)
along with accompanying requirements for the Commission to initiate and
complete specific rulemakings related to each amendment.
Although OSRA 2022's focus on export cargo is new, the Commission
and the courts have considered similar Shipping Act prohibitions
against unreasonable conduct and refusals to deal or negotiate in the
past.
Section 7(d) of OSRA 2022 requires the Commission, in consultation
with the United States Coast Guard, to initiate and complete a
rulemaking to define the phrase ``unreasonable refusal to deal or
negotiate with respect to vessel space accommodations'' and this
rulemaking implements that requirement. This rulemaking now also
addresses OSRA 2022's amendment to part of section 41104(a)(3), which
prohibits a common carrier from unreasonably refusing cargo space
accommodations when available. At a different time, the Commission will
address the statutory requirement in section 7(c) of OSRA 2022 to
complete a rulemaking defining unfair or unjustly discriminatory
methods in a separate rulemaking.
B. Need for SNPRM
After receiving comments on its proposal and examining the feedback
received in response, the Commission has decided to issue this SNPRM to
further explore certain issues and to modify other aspects of the
initial September 2022 proposal. The Commission proposes to make the
following changes: (1) revise the definition of transportation factors
to focus on vessel operation considerations; (2) revise the definition
of the term unreasonable to include a general definition and a non-
exhaustive list of unreasonable conduct scenarios; (3) clarify that
vessel space services are already included in the definition of vessel
space accommodations; (4) remove the voluntary export strategy
documentation language; (5) propose a definition of documented export
policy and that ocean common carriers submit a documented export policy
to the Commission once per year; and (6) remove the voluntary
certification provision. These modifications, along with the reasoning
behind these changes, are discussed in the sections that follow.
In its September 2022 proposal, the Commission explained that OSRA
2022 amended 46 U.S.C. 41104(a) as a whole by replacing ``may not''
with ``shall not'' to highlight the mandatory nature of that section's
list of common carrier prohibitions and sought comment on the treatment
of these terms. See 87 FR 57674. The Commission sought comment on its
initial proposal to apply the amended prohibitions under section
41104(a)(10) to ocean common carriers and its proposed definition of
the phrase ``unreasonable refusal to deal or negotiate with respect to
vessel space accommodations'' contained in that provision. The
Commission also noted other key terms and phrases remained undefined,
such as ``unreasonably,'' ``refuse to deal or negotiate,'' and ``vessel
space accommodations,'' and sought comment regarding the meaning of
these terms. See 87 FR 57676-57677.
In applying the common carrier prohibitions in 46 U.S.C. 41104, the
Commission stresses that the statute does not distinguish between U.S.
exports or imports and this supplemental proposal also applies to both.
The Commission explained its basis for this view as part of its initial
proposal, noting the challenges faced by U.S. exporters to obtain
vessel space and observing that the purpose of the Commission's
authority under the Shipping Act contains an export focus while also
noting reports of restricted access to equipment and vessel space for
U.S. importers, particularly in the Trans-Pacific market. 87 FR 57674-
57675. Further background and discussion on market conditions can be
found in the notice of proposed rulemaking. 87 FR 57674-57675.
The Commission also notes that nothing in the previous proposed
rule or in this SNPRM is meant to restrict the ability of ocean common
carriers to reposition empty containers. The repositioning of empty
containers can include the use of sweeper vessels. Vessels cannot be
arbitrarily designated as sweeper vessels to avoid accepting exports.
After the fact or ad hoc reclassifications of a vessel as a sweeper
vessel may be closely scrutinized by the Commission. A shipper or the
Commission's Bureau of Enforcement, Investigations, and Compliance
(BEIC) can also allege that a reclassification was a subterfuge to
avoid providing vessel space for exports. As the Commission previously
explained, staff review of ocean common carrier documents indicates
that ocean common carriers typically maintain documented procedures and
policies related to their operations. The Commission stated further
that effective export policies should be tailored to specific
categories of cargoes and include documented policies on export
business practices. Because every ocean common carrier operating in the
U.S. market is presumed by the Commission--barring the submission of
[[Page 38791]]
further information to the contrary--to be able to transport both
exports and imports, an ocean carrier may not categorically exclude
U.S. exports from its service without showing how this action is
reasonable. 87 FR 57675. This presumption continues to apply in this
SNPRM.
The Commission also took note of common carrier assertions that
they have seen delays in the movement of export cargo due to a lack of
mutual commitment between shippers and common carriers leading to
cancellations of vessel space accommodation by either party, sometimes
as late as the day of sailing. These actions contribute to uncertainty
for both the common carriers and shippers. See 87 FR 57675. Bookings
canceled by common carriers lead to rolled freight and other negative
consequences for shippers. See American Chemistry Council (ACC) at 4.
Finally, as stated in the initial proposed rule and elsewhere,
ocean common carriers and those with whom they contract to operate and
load/unload their vessels have the best information on the ability of
any particular vessel to accept cargo for import or export--information
that shippers generally do not have. See 87 FR 57675-57676; see also
Fact Finding Investigation 29 Final Report (F.M.C.), 2022 WL 2063347 at
11, 21-23, 26, 34-35 (noting difficulties experienced by non-carrier
entities to obtain information such as earliest return dates and vessel
scheduling information held by ocean common carriers). As a result, the
Commission proposed a mechanism by which, upon a prima facie case of a
violation of section 41104(a)(10) being made, the burden would shift
from the shipper (or the BEIC) to the ocean common carrier. At this
step, the ocean common carrier would need to satisfy its burden of
showing that the refusal to deal or negotiate was reasonable. The
Commission stressed that its proposal concerned the negotiations or
discussions that lead up to a decision about whether an import or
export load is accepted for transportation. It added that while there
will be situations where an ocean common carrier and a shipper engage
in good faith negotiations or discussions that do not result in the
provision of transportation, cases where an ocean common carrier
categorically excludes U.S. exports from its service will create a
presumption of an unreasonable refusal to deal. See 87 FR 57675-57676.
The specific provisions of OSRA 2022 that are the subject of this
SNPRM are new, and accordingly there is a lack of prior Commission
precedent to aid in interpretation of this newly-enacted amendment. In
the Commission's history, many cases found the essence of the
prohibition on unreasonable refusals to deal or negotiate in
contravention of the amended section 41104(a)(10) and its predecessors
to be the imposition by a common carrier of an unreasonable impediment
to a shipper's access to common carriage. Such impediments can take
many forms, and no legislation or regulatory process can predict or
attempt to encompass every possible scenario in which an unreasonable
refusal to deal or negotiate might occur. Thus, the caselaw is
instructive when considering the new legislation. Commission
determinations will be factually driven and determined on a case-by-
case basis.
This SNPRM describes how the Commission will consider private party
adjudications and agency-initiated enforcement cases in which
violations of 46 U.S.C. 41104(a)(3) and (a)(10) are alleged relating to
unreasonable refusal to provide cargo space accommodations and/or
refusals to deal by ocean common carriers. It also considers the common
carriage roots in the Shipping Act, as well as the overall competition
basis of the Commission's authority,\1\ and lays out the framework for
considering violations of section 41104(a)(10). In this SNPRM, the
Commission continues to note that future cases that allege violations
of section 41104(a)(3) and (a)(10) will be factually driven and
determined on a case-by-case basis. The framework for this supplemental
proposal is taken from Commission precedent on refusal to deal cases
generally and on suggestions offered by commenters.
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\1\ See Orolugbagbe v. A.T.I.,U.S.A., Inc., Informal Docket No.
1943(I) at *31-38.
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C. Inclusion of Claims of Unreasonable Refusals of Cargo Space
Accommodations Subject to 46 U.S.C. 41104(a)(3)
Although this rulemaking was initiated under OSRA 2022 section 7(d)
to define terms and elements required for a cause of action under 46
U.S.C. 41104(a)(10), shippers and exporters in particular commented on
conduct that occurs outside the scope of that provision. Section
41104(a)(10) prohibits unreasonable refusals during the negotiation
stage, when the parties do not have an existing relationship and/or are
initiating negotiations over terms and conditions of service. That is
different from conduct prohibited under 46 U.S.C. 41104(a)(3). The
latter would apply to situations where the parties have an existing
relationship and/or already mutually agreed on terms and conditions via
a booking confirmation, but the ocean common carrier then unreasonably
refuses cargo space accommodations when available, or in other words,
refuses to execute on the deal negotiated on the previously agreed-upon
terms.
The restrictions that 46 U.S.C. 41104(a)(3) and (a)(10) impose on
ocean common carriers are distinct but closely related. Both provisions
address refusals by ocean common carriers to accommodate shippers'
attempts to secure overseas transportation for their cargo. The
distinction between the conduct covered by these two provisions is
timing, more specifically whether the refusal occurred while the
parties were still negotiating and attempting to reach a deal on
service terms and conditions (negotiation stage) or after a deal was
reached (execution stage). If the refusal occurred at the negotiation
stage, 46 U.S.C. 41104(a)(10) would apply. If the refusal occurred at
the execution stage, after the parties reached a deal or mutually
agreed on service terms and conditions, then 46 U.S.C. 41104(a)(3)
would apply. When a shipper acting in good faith follows the export
policy of the ocean common carrier with which it has been negotiating,
either 46 U.S.C. 41103(a)(3) or (a)(10) would still apply if the
shipper was unreasonably denied space.
Comments to the NPRM show that shippers and exporters in particular
consistently cited blank sailings, no-notice or delayed notice of
schedule changes, inadequate loading times, and similar actions as
primary drivers that prevented them from getting their cargo to
overseas markets. These impediments occur during the execution stage
over shippers' interactions with ocean common carriers, taking them
outside the scope of 46 U.S.C. 41104(a)(10) and beyond the confines of
the initial proposal. In order to fully address the comments received,
the Commission has decided to issue an SNPRM and expand the scope of
the rulemaking. Rather than defer addressing these concerns in a
separate rulemaking, the Commission proposes broadening the scope of
this rulemaking. The Commission is also currently working on addressing
section 7(c) of OSRA 2022 and will separately complete a rulemaking
defining different terms than those defined in this SNPRM from section
41104(a)(3), i.e., ``unfair or unjustly discriminatory methods.''
Protecting shippers from unreasonable refusals to deal or negotiate
only partially addresses the obstacles that shippers and trade
associations have identified in the
[[Page 38792]]
comments as major impediments to their ability to get their cargo to
overseas markets. As commenters have pointed out, there are far-
reaching consequences that cannot easily or quickly be reversed if they
cannot meet their contractual obligations to their overseas buyers.
U.S. exporters' ability to rely on ocean common carriers meeting their
obligations by providing cargo space accommodations negotiated for or
as advertised is a critical component of that equation. U.S. exporters
are in an untenable position if they cannot rely on vessels calling at
U.S. ports to load and transport their cargo to overseas destinations
as scheduled or agreed to by the ocean common carrier. Missed or late
deliveries to overseas buyers are likely to cause them to lose
confidence in the reliability of their U.S. suppliers and prompt them
to look to alternative suppliers from other countries able to commit to
a more reliable delivery system. Overseas buyers would not continue
dealing with U.S. suppliers who repeatedly miss delivery dates and
cannot promise on-schedule deliveries because they are at the mercy of
ocean common carriers who unpredictably change scheduled sailings,
blank scheduled sailings, or otherwise unreasonably refuse to execute
on their commitments. Business that U.S. exporters lose to competitors
from other countries will be difficult to recapture over the short term
and perhaps over the long term as well. The longer reliability issues
persist, the more harm U.S. exporters will suffer and the more
difficult it will be to restore lost confidence in ocean transportation
for U.S. exports.
Restricting this rulemaking to refusals to deal or negotiate under
46 U.S.C. 41104(a)(10) will not address the reliability issues that
commenters identified as a critical and a driving factor impeding their
ability to ship cargo overseas. Shippers impacted by unlawful refusals
to accommodate their requests for vessel space accommodations have been
able to bring a cause of action against ocean common carriers since the
OSRA 2022 amendments took effect immediately in June 2022. They may
find it more difficult, however, to plead, and prevail on those claims
without implementing regulations from the Commission defining the
elements and statutory terms. Parties may also find it more difficult
to identify and litigate claims for unreasonable refusals under 46
U.S.C. 41104(a)(3) without a clearer indication from the Commission of
conduct covered by that provision as distinguished from 46 U.S.C.
41104(a)(10). Absent further guidance now from the Commission, shippers
and BEIC are likely to devote considerable resources to litigating how
an ``unreasonable refusal'' under 46 U.S.C. 41104(a)(3) should be
defined and the elements required to prove a violation of that
provision. That may make litigating 46 U.S.C. 41104(a)(3) claims a
time-consuming and resource-intense process as parties litigate not
just the facts of their particular case but also advocate for their
proposed interpretation of key terms like ``unreasonable refusal'' and
the factors relevant in determining whether an ocean common carrier
acted unreasonably. Parties would also expend time litigating the
difference between ``unreasonable refusals to deal or negotiate'' and
``unreasonable refusals to provide vessel space accommodations.''
Clearly delineating these distinctions as part of the current
rulemaking will lessen the time and resources that shippers, carriers
and the Commission will otherwise need to devote to defining these
concepts in individual cases. Defining the elements and terms used in
46 U.S.C. 41104(a)(3) requirements as part of this rulemaking is also
important because in practice it may be difficult to discern whether a
carrier's refusal was at the negotiation or execution stage and
additional guidance now from the Commission may help avoid needless
disputes over that issue. Shippers' and carriers' interactions about
service terms and conditions and securing vessel space may not always
march consistently forward from the initial offer through booking and
loading cargo on the vessel bound for the destination point. It is
important for ocean common carriers to have sufficient guidance to
conform their conduct and practices to fall within the bounds of
reasonable or unreasonable within the meaning of 46 U.S.C. 41104(a).
Also, this rule would ensure that shippers can readily discern when a
carrier has acted outside the bounds of reasonableness and know what
type of claim to bring before the Commission.
Interpreting these related provisions in tandem in a single
rulemaking will allow the Commission to delineate the types of refusal
conduct covered by 46 U.S.C. 41104(a)(3) and (a)(10) and highlight
where the differences are between them.
D. Differences in Cases Involving Section 41104(a)(10) and Section
41104(a)(3)
Generally, the distinction between those acts covered under section
41104(a)(3) and those falling under section 41104(a)(10) is temporal-
based. Although it is possible for claims to arise later in the
process, ``refusal to deal or negotiate'' (section 41104(a)(10)) will
frequently involve those actions occurring prior to a carrier providing
a shipper with a booking confirmation to carry that shipper's cargo. If
negotiations to reach an agreement have ceased (or if efforts to engage
in negotiations were ignored), then a claim of unreasonable refusal to
deal or negotiate under section 41104(a)(10) could arise. When read in
conjunction with this provision, to ``unreasonably refuse cargo space
accommodations'' or ``resort to other unfair or unjustly discriminatory
methods'' under section 41104(a)(3) would necessarily involve a set of
acts that occur after a booking has been confirmed. As a result, this
SNPRM adds to the scope of the original NPRM by proposing to address
those refusals that occur at the execution stage, after the parties
reached a deal or mutually agreed on service terms and conditions via a
booking confirmation subject to section 41104(a)(3). In a future
rulemaking, the Commission will define ``unfair and unjustly
discriminatory methods'' within the meaning of section 41104(a)(3). The
Commission seeks comment on its approach with respect to the difference
between potential violations of 46 U.S.C. 41104(a)(3) and 46 U.S.C.
41104(a)(10).
II. Comments to the NPRM and Responses by the Commission
In developing this SNPRM, the Commission carefully considered the
comments it received regarding its previous proposed rule. These
comments, along with issues relevant to those comments, are addressed
in greater detail in the discussion that follows.
A. Commenters
The Commission received responses from shippers, shipping industry
trade associations, common carriers, and governmental entities. These
commenters consisted of the following entities:
[[Page 38793]]
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Commenters Entity type
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Agriculture Transportation Coalition Shippers Trade Association.
(AgTC).
American Chemistry Council (ACC)....... Shippers Trade Association.
American Cotton Shippers Association Shippers Trade Association.
(ACSA).
BassTech International (BassTech)...... Shipper.
Consumer Brands Association (CBA)...... Shippers Trade Association.
CMA CGM (America) LLC.................. Carrier.
Dole Ocean Cargo Express, LLC (DOCE)... Carrier.
International Federation of Freight Freight Forwarding Trade
Forwarders Association (FIATA). Association.
International Dairy Foods Association Shippers Trade Association.
(IDFA).
International Fresh Produce Association Shippers Trade Association.
(IFPA).
Lanca Sales, Inc....................... Shipper/Beneficiary Cargo
Owner.
Meat Import Council of America and Shippers Trade Association.
North American Meat Institute (MICA/
NAMI).
National Association of Chemical Shippers Trade Association.
Distributors (NACD).
National Association of Manufacturers Shippers Trade Association.
(NAM).
National Customs Brokers & Forwarders Freight Forwarder, Custom
Association of America, Inc. (NCBFAA). Broker, and Ocean
Transportation (incl'g
Carriers) Trade Association.
National Fisheries Institute (NFI)..... Shippers Trade Association.
Northwest Horticultural Council (NHC).. Shippers Trade Association.
National Industrial Transportation Shippers Trade Association.
League and Institute for Scrap
Recycling Industries, Inc. (NITL/ISRI).
Pacific Merchant Shipping Association Carrier Trade Association.
(PMSA).
Retail Industry Leaders Association Shippers Trade Association.
(RILA).
Tyson Foods (Tyson).................... Shipper.
U.S. Dairy Exporters Council (USDEC)... Shipper Trade Association.
World Shipping Council (WSC)........... Carrier Trade Association.
Members of the House of Representatives Legislative Branch (Federal)--
(Congress). multiple comments.
United States Department of Justice Executive Branch (Federal).
(DOJ).
United States Department of Agriculture Executive Branch (Federal).
(USDA).
------------------------------------------------------------------------
Except as noted, each relevant comment is addressed within the
context of the specific topics raised. These topics are discussed in
detail in the sections that follow.
1. General Comments From Federal Government Commenters
The Commission notes that it received four separate submissions
from Federal commenters. One set of comments was submitted by a group
of seven Members of the House of Representatives--Representative John
Garamendi, Representative Dusty Johnson, Representative Jim Costa,
Representative Adrian Smith, Representative Mike Thompson,
Representative David G. Valadao, and Representative Jimmy Panetta. The
Members made the specific point that ``[o]cean carriers refusing to
accommodate American exports is an unreasonable business practice and,
following passage of the Ocean Shipping Reform Act of 2022, also is now
illegal.'' Congress at 1. It also received one comment jointly
submitted by Senator John Thune, Senator Amy Klobuchar, Senator John
Hoeven, and Senator Tammy Baldwin. The Senators state they have
received reports of ocean carriers refusing certain export cargo,
particularly agricultural cargo, even when vessel space was readily
available, and often opting to carry empty containers instead. Senate
at 1. Also, the Senators urge the Commission to consider whether
additional clarifying language about the magnitude of the
``transportation factors'' might provide useful industry guidance. Id.
The Commission greatly appreciates the comments offered by the
Members and Senators. As the Commission agrees and explained in its
proposal, the categorical refusal to accommodate U.S. exports, without
demonstrating that the refusal is reasonable, would violate 46 U.S.C.
41104(a)(10). 87 FR 57675. Under section 41104(a)(10), an ocean common
carrier's refusal to deal or refusal to negotiate must be unreasonable
to constitute a violation. See 46 U.S.C. 41104(a)(10). By definition,
not all refusals will necessarily violate this provision. Whether a
refusal to deal or a refusal to negotiate falls within the scope of
section 41104(a)(10) depends upon the particular circumstances in a
given case.
In response to various public comments, including those from
Senators Thune, Klobuchar, Hoeven, and Baldwin, the Commission is
proposing new language that relies on both 46 U.S.C. 41104(a)(3) and
(a)(10) to address more comprehensively potential violations related to
refusal to deal or negotiate. The new proposed approach covers a
broader set of conduct, explicitly including those instances where an
ocean common carrier refuses export cargo even when vessel space was
readily available. This SNPRM also revises the definition of
transportation factors and proposes to remove the language initially
referring to scheduling considerations.
The Antitrust Division of the United States Department of Justice
(DOJ) also submitted comments and agreed that reasonableness is
necessarily a case-by-case determination. However, DOJ expressed
concern that the Commission's proposed criteria to prove the statutory
elements of ``refusal to deal'' and ``unreasonable'' would be too
difficult to establish. DOJ also suggested including additional
considerations, such as the parties' prior course of dealings or
whether a carrier, after issuing a refusal, offered the affected
shipper any remedies or assistance. DOJ suggested that information may
be relevant in deciding whether the carrier's refusal was unreasonable.
The Commission adopted DOJ's proposed language on further remedies or
assistance offered to the shipper and added it to the proposed rule in
Sec. 542.1(d)(1). DOJ also believes that it would be critical to
evaluate past business actions in the context of allegations to refuse
the provision of service.
As to DOJ's concern that the proposed standard for establishing the
second and third elements of a prima facie case may set the bar too
high by suggesting that complainants must show an actual refusal to
even entertain their proposal, this SNPRM clarifies that is not a
required showing and emphasizes that
[[Page 38794]]
claims will be evaluated on a case-by-case basis.
As to the elements that the Commission would rely on to make a
determination of reasonableness, the Commission believes that the new
proposed elements form an appropriate basis for determining whether an
ocean common carrier has acted reasonably in refusing to deal with a
particular shipper. Those elements are: (1) whether the ocean common
carrier follows a documented export policy enabling the efficient
movement of export cargo; (2) whether the ocean common carrier engaged
in good-faith negotiations; (3) the existence of legitimate
transportation factors; and (4) any other factors the Commission deems
relevant. These elements, when coupled with the opportunity for the
ocean common carrier to establish that conduct was reasonable, are both
workable and fair by allowing potential claimants to bring complaints
of violations under section 41104(a)(10) and shifting the burden of
production of information to the carrier to justify its actions. And in
evaluating a given case, the Commission's proposed approach in this
SNPRM would provide the information it would need and also enable it to
consider other relevant factors such as prior dealings and mitigation
measures in determining whether a refusal was unreasonable.
Finally, DOJ noted that the terms ``deal'' and ``negotiate'' have
different meanings under the antitrust laws and encouraged the
Commission to define those terms in the Commission's rule. DOJ at 4-5.
It states that the term ``negotiate'' refers to the discussion about a
particular transaction, while ``deal'' typically refers to the
transaction itself--whether it be the provision of goods or services.
DOJ at 5. The goal of prohibiting unreasonable refusal to deal or
negotiate by ocean common carriers with respect to vessel space will be
achieved better by giving the terms their ordinary meanings. That way,
the Commission will be able to address unreasonable refusal to deal or
negotiate with respect to vessel space with more flexibility. That is
consistent with our case-by-case approach which DOJ endorses.
The Secretary of the United States Department of Agriculture (USDA)
submitted a comment and asked the Commission to broaden the definition
of an unreasonable refusal to deal or negotiate, narrow the proposal's
guidance on reasonableness, and encourage specific actions by carriers
to guard against engaging in an unreasonable refusal. USDA suggested
the Commission specify certain actions, such as cancellations without
sufficient notice, perpetual re-bookings, and failure to provide
necessary equipment, in the definition of refusal to deal or negotiate.
USDA at 2. The points that USDA focuses on as potentially unfair or
unjustly discriminatory conduct may be refined at a later date through
another rulemaking or on a case-by-case basis.
USDA also suggested that in considering reasonableness of refusal
to deal or negotiate, ``[t]he Commission should excuse only a few
exceptional circumstances.'' USDA at 2. It urged the Commission to
narrow the language on reasonableness and clarify that the existence of
multiple factors (such as profitability, business development strategy,
or transportation factors) will not absolve problematic practices. USDA
also encouraged ``clearer, more affirmative duties for carriers,
greater specificity with respect to the requirements they need to meet,
and that non-confidential portions of these documents be made available
for shippers and the public to review.'' USDA at 2-3. This SNPRM
includes greater specificity and strives to better delineate each
party's duties when communicating with each other about vessel space
accommodations. The Commission's NPRM included some of the factors USDA
discussed, and it does not absolve problematic practices based upon
just a few factors or certain affirmative actions. Rather, each case
will be considered under the totality of the circumstances to prohibit
all possible unreasonable refusals to deal or negotiate by ocean common
carriers with respect to vessel space accommodations.
2. Inability To Obtain Vessel Space for Export Cargo Despite Having
Previously Negotiated Terms and Conditions
Comments from the Retail Industry Leaders Association (RILA) assert
that an unreasonable refusal to deal or negotiate is not confined to
the negotiation stage under 46 U.S.C 41104(a)(10) but can arise at any
point in the parties' dealings short of the point at which the
shippers' cargo is actually loaded aboard the vessel. As RILA explains:
The ``lived experience'' of U.S. importers during the COVID-19
pandemic has demonstrated that unreasonable refusals to deal or
negotiate can arise not only in the context of negotiating (or
refusing to negotiate) the terms of a service contract before it is
entered into, or of booking (or seeking to book) carriage pursuant
to the common carrier's published tariff before cargo is tendered,
but also during the term of a service contract and even after the
provision of (or failure to provide) the services contemplated.
RILA Comments at 3. RILA urged the Commission to address this issue by
expansively defining unreasonable refusals to deal or negotiate within
the meaning of section 41104(a)(10) to include actions or
communications that ``can arise at any point in parties' dealings with
each other.'' Id.
The Commission understands and concurs with the concern underlying
this suggestion but does not agree that expanding the definition of
unreasonable refusal to deal or negotiate within the meaning of section
41104(a)(10) is the solution. As discussed elsewhere in this proposal,
the Commission proposes defining section 41104(a)(3) and (a)(10) in
tandem as the better solution. Further, as also mentioned in this
discussion, expanding the definition of conduct governed by 46 U.S.C.
41104(a)(10) to include the same conduct prohibited by section
41104(a)(3) would render meaningless (at least in part) the section
41104(a)(3) language prohibiting unreasonable refusals to accept cargo.
That interpretation would violate the canon of statutory construction
against construing the statute in a manner that renders language
superfluous or meaningless.\2\
---------------------------------------------------------------------------
\2\ ``It is `a cardinal principle of statutory construction''
that ``a statute ought, upon the whole, to be so construed that, if
it can be prevented, no clause, sentence, or word shall be
superfluous, void, or insignificant.' '' TRW Inc. v. Andrews, 534
U.S. 19, 31 (2001) quoting Duncan v. Walker, 533 U.S. 167 (2001);
United States v. Menasche, 348 U.S. 528, 538-539, (1955) (``It is
our duty `to give effect, if possible, to every clause and word of a
statute.' '' (quoting Montclair v. Ramsdell, 107 U.S. 147, 152,
(1883)).
---------------------------------------------------------------------------
RILA further explains that in its experience,\3\ unless shippers
have enforceable service contracts, they ``are unable to protect
themselves from volatile shipping rates and ocean carriers have few
forecasting tools to provide the shipping capacity necessary to serve
their customers.'' Id. at 3. RILA suggests as a partial remedy that the
Commission explicitly announce that the existence of a service contract
does not insulate a common carrier from a claim that it violated 46
U.S.C. 41104(a). This SNPRM should clarify that carriers
[[Page 38795]]
are not immune from 46 U.S.C. 41104(a)'s restrictions because they have
a service contract with the shipper. Although the Commission does have
jurisdiction over 46 U.S.C. 41104(a) violations, breach of contract
claims are not within the Commission's jurisdiction.
---------------------------------------------------------------------------
\3\ RILA also points to concerns identified in the Commission's
Final Report on Fact Finding Investigation 29 in which Commissioner
Rebecca F. Dye emphasized that ``[f]or some time, [she] has been
concerned that the contracts negotiated by many U.S. importers and
exporters lack . . . mutuality of understanding and obligation and
are not enforceable. Without enforceable contracts, shippers are
unable to protect themselves from volatile shipping rates and ocean
carriers have few forecasting tools to provide the shipping capacity
necessary to serve their customers.'' RILA Comments at 3.
---------------------------------------------------------------------------
Other shippers and trade associations expressed similar misgivings
about the proposed scope of 46 U.S.C. 41104(a)(10) and the urgent need
for a solution to refusals that arise past the negotiation stage, i.e.,
after the parties have (or ostensibly have) a contract to transport the
cargo. The U.S. Dairy Export Council (USDEC) termed these concerns
``anti-backsliding considerations'' and explained why these post-
negotiation issues urgently need to be addressed and how these concerns
relate to 46 U.S.C. 41104(a)(10) restrictions on unreasonable refusals
to deal or negotiate. USDEC Comments at 3-4. As it explained:
Negotiations between shippers and carriers are functionally
intended to facilitate the international carriage of goods on an
ocean vessel. The rule should not permit carriers to negotiate for
vessel accommodations, only to have those bookings get rolled,
delayed or cancelled. Disruptions to vessel schedules are
understandable, but should a pattern emerge where negotiated vessel
space accommodations are regularly unreliable, that should raise
questions at the FMC about the intent and purpose of the
negotiations. Compliance on negotiating for vessel space should be
done in good faith and not solely as a means of achieving compliance
without affording the service.
Id. at 4.
The International Dairy Foods Association (IDFA) raised the same
concerns and termed them ``de facto'' unreasonable refusals to deal.
IDFA Comments at 2. IDFA listed multiple examples of de facto
unreasonable refusals to deal, such as:
skipping or cancelling services to certain ports; changing the port
of loading; calling on such ports but not alerting exporters to
their presence; poorly communicating when vessel schedules change;
providing windows for loading that are impractical due to their
short length; blank sailings without providing sufficient notice to
exporters; not pre-positioning containers inland close to export
customers; providing inaccurate and unreliable vessel, shipment and
tracking information; and continually rolling export bookings, which
amounts to an effective denial of service.
Id. at 2-3. IDFA also emphasized the untenable consequence of these de
facto refusals--``a shipping environment where there is no schedule
reliability which harms the competitiveness of U.S. export in oversea
markets.'' Id. IDFA also stated that its members have reported that as
frequently as 90-100% of the time, their bookings have been rolled or
canceled. Id.
IDFA proposed that the Commission address these problems by
declaring the following actions presumptively unreasonable under
section 41104(a)(10): (1) a blank sailing with less than six weeks'
notice; (2) not providing at least 72 hours' notice to load a vessel;
(3) skipping, suspending, or discontinuing services to ports or
changing the port of loading despite export demand at such ports; (4)
not clearly communicating or providing consistent, accurate information
directly to cargo owners when ships come into port or vessel schedules
change; (5) rolling a valid export booking; and (6) refusing a booking
for perishable cargo. Id. at 4 and 7. Most of these actions could not
logically be considered part of the negotiation stage since in most
cases, they would occur after shipper and carrier have negotiated a
deal.
IDFA criticized the proposed rule as inappropriately ``preoccupied
with solving unreasonable refusals to deal in specific negotiation and
discussion contexts,'' which it contends ``is not the heart of the
problem.'' Id. IDFA states that ``[i]n order to address the bulk of the
unreasonable refusal to deal issue, a Commission rule must target the
VOCC [vessel-operating common carriers] policies and procedures that
systematize and operationalize the de facto unreasonable refusal to
deal or negotiate with cargo owners.'' Id. at 7-8. The Commission
acknowledges that these concerns are legitimate and proposes broadening
the scope of this rulemaking to encompass section 41104(a)(3) as the
best solution. The revised rulemaking will globally address
unreasonable refusals prohibited under Section 41104(a) that hamstring
shippers' attempts to transport their cargo to their overseas buyers.
The American Chemistry Council (ACC) raised the same concerns and
pointed out that if the NPRM only covers contract negotiations and
discussions between carriers and shippers, it will ``leave[ ] a gaping
hole that will continue to allow unreasonable conduct by'' ocean common
carriers. ACC Comments at 2. To emphasize that point, it lists numerous
practices ``that amount to an effective refusal to deal that the NPRM
does not appear to address.'' Id. The examples ACC recited include
providing insufficient vessel space allocations; calling on ports but
not alerting exporters to their presence; poorly communicating when
vessel schedules change; providing insufficient windows for loading a
vessel; blank sailings without providing sufficient notice to
exporters; and repeated rolling of export bookings. Id. at 3-4.
The American Cotton Shippers Association (ACSA) highlighted the
same concerns about carriers not loading their containerized export
cargo. ACSA Comment at 6-7. ACSA submitted numbers showing their
calculations and comparisons on warehouse pickup performance in terms
of cotton bales shipped and bales not picked up between August 2019 and
June 2021. Id. at 7. The Commission has not independently verified
ACSA's statistics but notes that they reflect the same general concern
raised by others, namely that unreasonable refusals to deal or
negotiate is only a part of the export problem that OSRA 2022 was meant
to address. See also, Comments from Bass Tech International at 1-2
(noting other ways, besides outright refusal to deal or negotiate, that
common carriers use to avoid providing service and stating that it ``is
critical that the NPRM addresses these types of conduct as well'');
Comments from Members of Congress at 1 (identifying service
cancellations at ports that agricultural exports rely on, like the Port
of Oakland, as concerns to be addressed).
B. Distinguishing Between Negotiation Refusals Under 46 U.S.C.
41104(a)(10) and Execution Refusals Under 46 U.S.C. 41104(a)(3)
Comments from the USDEC highlight the fallacy of presuming that as
a practical matter, it will always be feasible to draw a discernible
line between unreasonable refusals covered by section 41104(a)(10) as
distinguished from those covered by section 41104(a)(3). See USDEC at
2-4. USDEC explained how communications between shippers and carriers
typically flow in the real world. As it explained, shippers' and
carriers' negotiations are not always neatly confined to rates and
general terms of service. Id. Rather, negotiations may cover all
matters related to the shipment, such as the cost of the shipment,
the volume of the shipment (both in terms of total TEU containers as
well as weight), the timing of vessel accommodations, origin and
location of shipments, whether the shipment involves any intermodal
carriage, the inclusion of equipment (containers, reefers, chassis),
among other details.
Id. at 2-3.
What these concerns mean as a practical matter is that discerning
whether a common carrier has unreasonably refused cargo or vessel space
accommodations is not a simple binary question of determining what
prevented the shippers' cargo from
[[Page 38796]]
actually being loaded aboard an outbound vessel. That question may be
bound up with an unbroken series of interactions and communications
that cannot always be neatly separated into the negotiation stage
(covered by 46 U.S.C. 41104(a)(10)) and the execution stage (covered by
46 U.S.C. 41104(a)(3)) of the parties' interactions. Id. at 3-4. USDEC
suggests the Commission address this concern by defining ``whether
negotiation can occur on only limited aspects of this scope, or if it
must encompass all the aspects of a vessel accommodation.'' Id. Instead
of broadening the scope of section 41104(a)(10) as USDEC suggests, the
Commission proposes defining unreasonable refusals covered by section
41104(a)(3) in the same rulemaking. For reasons already discussed, this
proposed approach is superior to a bifurcated rulemaking that defines
the two provisions separately. Further, the Commission proposes to
define what constitute unfair or unjustly discriminatory methods within
the meaning of section 41104(a)(3) in a separate rulemaking pursuant to
section 7(c) of OSRA 2022.
3. Reasonableness Factors
Most commenters addressed the proposed reasonableness factors with
mixed support for the existence of a documented export strategy or
policy and the scope of legitimate transportation factors.
a. Documented Export Policy
The concept of having a documented export policy as stated in Sec.
542.1(b)(2)(i) of the NPRM was generally supported by ACSA, ACC, CBA,
IDFA, USDEC, and DOJ. Nearly all commenters in support provided
additional context for how export strategies should be structured. ACC
commented that the Commission should make it clear that export
strategies should include provisions that facilitate exports, not just
maintain the status quo. ACC at 4-5. ACC also asserted that carriers
should report every year. ACC at 5.
Multiple commenters suggested that a more specific definition of
export strategy should be provided. See CBA at 2, DOJ at 5. IDFA
further recommends mandatory standards for an export strategy and
regulations concerning failure to adhere to such standards. IDFA at 9-
11. USDEC recommended that carrier export strategies be made public.
See USDEC at 3.
PMSA and WSC opposed the proposed export strategy component for a
variety of reasons. WSC stated that including an export strategy is
equivalent to requiring such a strategy and the Commission lacks the
authority to do so. WSC at 3. They further asserted that the Commission
failed to explain how such a document would be relevant and to consider
that they are sensitive business documents. WSC provided additional
information it believed supports its assertion that the Commission
lacks the authority to require such a document. WSC at 4. WSC also
asserted that this proposed requirement will result in the lack of a
document being interpreted as a per se indicator of unreasonableness,
resulting in a disadvantage to the carrier. It further asserted that
the lack of a required ``import strategy'' means that the proposed rule
would not equally apply to both imports and exports, contradicting an
assertion included by the Commission in the preamble. It added that
this criticism should not be interpreted as suggesting that an ``import
strategy'' document should be required. WSC at 7. Finally, it asserted
that the lack of specifics on how the export strategy will be used
further supports WSC's view that such a document should be stricken
from the list of factors and that any information in such a document
would not be able to be made public.
Similarly, PMSA contended that the NPRM ignores imports, and as the
Commission has no authority to require an import or export strategy
from ocean common carriers, it cannot use the existence, or not, of
such a strategy as a factor in the reasonableness analysis. PMSA at 1.
It further contended that only shippers regard cargo as imports or
exports and ocean carriers simply regard freight as cargo, regardless
of the direction of trade.
The Commission notes the concerns of WSC that export strategies are
constantly evolving as the nature of international trade changes and
for this reason does not define an exhaustive list of items that must
be included in an export policy but instead identifies certain elements
that would be helpful in determining reasonableness. If an ocean common
carrier also wanted to provide an import policy to help establish how a
refusal to deal is reasonable, the Commission would consider that
information. And while the Commission will not adopt the IDFA
recommendation that the Commission directly compare a carrier's export
strategy to key performance indicators, the Commission notes that there
are many sources of data on the amount and type of freight that
carriers transport for both imports and exports which provide insight
into whether the carrier's behavior aligns with its purported policy or
strategy.
While WSC is concerned that the lack of an export strategy might be
considered a per se indicator of unreasonableness, that is not the
intent behind the inclusion of this provision. The intent is to provide
carriers with the opportunity to document that their actions align with
a documented export policy. And while both WSC and PMSA comment that no
similar documentation was requested for imports, the Commission notes
that there are few carriers who would need to rely on such a document
to provide evidence that they intend to serve the U.S. markets when
their ships are already visiting U.S. ports. On the other hand, a
cursory glance at the continued decline in containerized exports
carried by some ocean common carriers raises the question about the
carriers' operations concerning export trades. Further, while PMSA
asserts that carriers do not consider exports and imports as separate
types of cargo, there is ample evidence in comments from the public,
including WSC, that they do. See, e.g., CMA CGM at 2; AgTC at 2; RILA
at 2-3. In addition, PMSA's assertion in this regard ignores the
existence of exporters, such as USDEC and NHC. In this SNPRM, the
Commission has newly proposed revisions on the use of export policy to
show what type of information from an existing export policy may be
useful in establishing that a refusal to deal was reasonable. In Sec.
542.1(b)(1), the Commission is proposing a definition of ``documented
export policy.'' Also, the Commission is proposing extensive revisions
to Sec. 542.2(d) by revising the burden shifting framework found in
the NPRM (this framework applies even if it is not included in the
regulatory text) and adding a proposed requirement to have ocean common
carriers follow and submit to the Commission on a yearly basis a
documented export policy. It is noted that it is possible that an
export policy will have different applications in different situations.
An export policy is a long-term document, but it can shed light on what
an individual ocean common carrier's best business practice would
generally be and whether it was adhered to in an individual case. An
export policy can also address import concerns given that the two are
interconnected. Proposing a requirement to submit a documented export
policy to the Commission pursuant to its authority under 46 U.S.C.
40104 is an important part of monitoring the industry for unreasonable
behavior vis-[agrave]-vis exports in an effort to address those
concerns. Also, in Sec. 542.1(d)(1), the Commission identifies what
type of information
[[Page 38797]]
would be required to be included in a documented export policy that
would help the Commission determine whether an ocean common carrier's
conduct in a specific matter aligns with their general policies and
thus acted reasonably.
b. Legitimate Transportation Factors
The proposed inclusion of legitimate business factors as one of the
reasonableness factors was opposed by the majority of commenters. Two
commenters expressed concerns that legitimate business factors would be
used to justify rejecting entire classes of cargo, such as hazardous
materials. NACD at 3 and NITL/ISRI at 9-10. While WSC favored the use
of legitimate business factors, it objected to a reference to the
``character of the cargo'' as vague (87 FR 57677) and suggested
removing it from the final rule (WSC at 11). The Commission clarifies
that this reference is not intended to allow ocean common carriers to
wholesale refuse to deal or negotiate with respect to carriage of
certain categories of cargo, such as hazardous materials. The
Commission further notes that the definition proposed in the regulatory
text does not include ``character of the cargo.'' This SNPRM does
revise the definition of transportation factors to focus the scope more
squarely on vessel operation considerations.
Multiple commenters worried about including profit or revenue as a
legitimate business factor. AgTC cited including revenue factors as
part of transportation factors will create a ``loophole'' for carriers.
AgTC at 4-5. Likewise, several commenters suggested dropping profit and
business decisions or strategies from the list of legitimate factors.
See BassTech at 3; IDFA at 9-11; IFPA at 1; NITL/ISRI at 10. CMA CGM
stated that profitability and legitimate business decisions must be
factors. CMA CGM at 2. WSC suggested adding business decisions to the
regulatory text. In its view, the scope of business decisions would
include past poor performance from the shippers, changing port calls
due to blank sailings or other factors, and balancing import and export
customer needs. WSC at 9-11. Given the thoughtful and varied comments
received on the concept of reasonable business decision-making, this
SNPRM removes the general concept from the definition of
unreasonableness. Information on business decisions relevant to
establishing a reasonable refusal to deal, however, would still be
relevant in the Commission's analysis. The SNPRM does not preclude
considerations that an ocean common carrier can present when
articulating its justification for refusing to deal.
The Commission notes that in its proposed regulatory text at Sec.
542.1(b)(1) of the NPRM, the term ``transportation factors'' would
encompass ``the genuine operational considerations underlying an ocean
common carrier's practical ability to accommodate laden cargo for
import or export, which can include, but are not limited to, vessel
safety and stability, scheduling considerations, and the effect of
blank sailings.'' The Commission notes the disconnect between this
language and language in the preamble that, ``[a]n ocean common carrier
may be viewed as having acted reasonably in exercising its business
discretion to proceed with a certain arrangement over another by taking
into account such factors as profitability and compatibility with its
business development strategy.'' In this SNPRM, at Sec. 542.1(b)(2),
the transportation factors have been changed and the Commission now
proposes to focus those factors on considerations related to vessel
operations. Some relevant business decisions do need to be explained as
part of an export policy. Business decisions that should be explained
as part of an export policy include providing a justification for why a
refusal to deal by an ocean common carrier is reasonable when there was
a blank sailing that affected the ocean common carrier's ability to
take on a shipment to the detriment of the shipper. Also relevant are
business decisions that show that the ocean common carrier offered
alternative remedies or assistance to the shipper after refusing to
deal or negotiate for vessel space accommodations.
The Commission further notes, however, profit and business factors
may be present when engaging in negotiations, but these factors would
have to be considered alongside other factors presented when the
Commission is determining what the true driving factor is for refusing
to deal in a given case and whether that driving factor is reasonable.
FIATA noted a concern with the characterization of ocean common
carriers' operational decisions, particularly with request to canceled
sailings and capacity decisions; namely, that the final rule needed to
provide clarity around when an ocean common carrier's operational
decisions, particularly with respect to canceled sailings and capacity
decisions, will result in a finding of an unreasonable refusal to deal
or negotiate. FIATA at 1. WSC explained that its list of business
decisions includes schedule changes, including canceled sailings. WSC
at 11. The Commission notes the concern from FIATA that since carriers
control capacity, they might strategically alter capacity to refuse to
deal or negotiate. Canceled sailings or schedule changes are typically
driven by decreased demand, port congestion, or changes in service by a
vessel sharing partner. The Commission notes that evidence that an
ocean common carrier changes schedules for other purposes would result
in those changes not being considered a legitimate transportation
factor under Sec. 542.1(b)(2)(iii) of the NPRM. This SNPRM proposes
changes to the transportation factors definition at Sec. 542.1(b)(2)
that addresses these concerns.
ACC and IDFA suggested that shippers' lost sales be considered a
reasonableness factor. ACC at 4; IDFA at 8. As noted elsewhere, the
rule allows the Commission to consider any relevant factor in
determining whether a refusal to deal or negotiate was unreasonable.
The focus of the definition of reasonableness, however, is on the ocean
common carrier's conduct rather than the impact on the shipper.
Generally, however, transportation factors relate to the
characteristics of the vessel, not the status of the shipper.\4\
---------------------------------------------------------------------------
\4\ See, e.g., Credit Practices of Sea-land Serv., Inc., &
Nedlloyd Lijnen, B.V., No. 90-07, 1990 WL 427463 (F.M.C. Dec. 20,
1990); Dep't of Def. v. Matson Navigation Co., 19 F.M.C. 503 (1977).
---------------------------------------------------------------------------
Finally, commenters addressed the key role of contract carriage in
ocean transportation and expressed concerns that the rule will
interfere with contract carriage. DOCE at 5-6, WSC at 14. The
Commission notes that service contracts are key to ocean carriage and
the intent of the rule is not to dictate a return to carriage under
tariff, nor is it intended to interfere with the substance of service
contracts reached between parties. Presumably, an enforceable service
contract would not allow for the type of conduct that the Commission
would be likely to consider an unreasonable refusal to deal or
negotiate, and if a service contract is materially breached, the
parties have remedies that are beyond the Commission's purview. The
Commission also recognizes that, as stated in the preamble, its ``role
is not to ensure all interested parties get the same deal,'' and
understands that ``me too'' contracts were abolished in the Ocean
Shipping Reform Act of 1998. Fully cognizant of the privilege that
private parties may enter into their own service contracts, the
Commission means to clarify here that, regardless of contract status,
an ocean common carrier may not effectively bar a shipper,
[[Page 38798]]
including one without a service contract, from having direct access to
ocean common carriage by failing or refusing unreasonably to deal or
negotiate the terms of such carriage. This can include an ocean common
carrier's failure or refusal to timely provide a rate quotation upon
request or to refuse to provide required ancillary intermodal services,
if available.
3. Elements
Pursuant to OSRA 2022 and Commission precedent, the Commission
proposed that complainants would be required to meet three elements to
establish a violation for unreasonable refusal to deal or negotiate. As
indicated in the NPRM, the elements would apply in cases where the
allegation relates to vessel space accommodations by an ocean common
carrier. As proposed, the elements were derived directly from the
statutory text established in OSRA 1998 and are: (1) the respondent is
an ocean common carrier under the Commission's jurisdiction; (2) the
respondent refuses to deal or negotiate with respect to vessel space
accommodations; and (3) that the refusal is unreasonable. See 87 FR
57679.
Commenters were generally supportive of the proposed elements, see,
e.g., BassTech at 1; MICA/NAMI at 2; NFI at 2, although some specific
comments expressed concerns regarding the impact of the rule in general
and meeting the required elements. As noted earlier, DOJ worried that
satisfying the ``refusal to deal'' and ``unreasonable'' elements would
be difficult. DOJ at 4-5. While NHC viewed the proposal as falling
short of the objective of ensuring the carriage of export containers,
see NHC at 1, most other comments regarding the proposed elements
sought a lengthier or stronger definition of ``refusal'' and
``unreasonable,'' but did not criticize the elements as a whole. See
MICA/NAMI at 3-4; NITL/ISRI at 6-7, 13-14; RILA at 1, 5 (suggesting
additional clarifying language for the proposed regulatory text for 46
CFR 542.1(c)(2)); Tyson at 1. This SNPRM includes changes to the
definition of unreasonable to include a non-exhaustive list of
scenarios of unreasonable conduct and to propose the removal of
business decisions from the definition. Regarding PMSA's concerns that
the elements of the proposed rule may impact individual contract
negotiations addressing price, volume, timing, payment, delivery, prior
experiences, dual commitment contracts and all other factors that are
addressed, see PMSA at 1, the Commission notes that this rule does not
dictate the contractual terms that may be reached between an ocean
common carrier and a shipper.
4. Definitions
As the Commission noted in its preamble discussion for its
proposal, neither the Shipping Act, as amended, nor OSRA 2022 define
the phrase ``vessel space accommodations,'' and this phrase has not
been interpreted in prior Commission matters. Therefore, the Commission
proposed to define ``vessel space accommodations'' generally as space
provided aboard a vessel of an ocean common carrier for laden
containers being imported to, or exported from, the United States. In
this SNPRM, the Commission also clarifies that ``vessel space
services''--i.e., the services necessary to access or book vessel space
accommodations--are included in the definition of ``vessel space
accommodations.'' This definition continues to be based on the common
meaning of the words in the phrase as applied in ocean shipping.
Because the phrase ``refusal to deal or negotiate'' does not lend
itself to a general definition, the Commission proposed using a case-
by-case evaluation. This SNPRM proposes a revised definition of
unreasonableness after further consideration of the comments received.
Additionally, the proposed definition now includes a non-exhaustive
list of examples of unreasonable conduct.
a. Vessel Accommodations
The Commission received several comments regarding its proposed
``vessel space accommodations'' definition. Comments were generally
supportive, with a few suggestions and critiques. In broad summary, the
comments urged the Commission to broaden its definition of ``vessel
space accommodations'' to include access to vessel space
accommodations, meaning the services to book vessel space, the
equipment to obtain vessel space, and other ancillary services that
would impact exporters' ability to obtain vessel space. While some
comments supported the proposed definition but urged expansion, others
withheld support due to the definition's perceived narrow
interpretation.
First, the National Industrial Transportation League (NITL) and
Institute for Scrap Recycling Industries (ISRI) asked that the
Commission broaden its definition of vessel space accommodation to
include ``vessel services.'' NITL/ISRI at 7. Without the expansion, the
NITL and ISRI contended that the proposed rule ``fails to adhere to the
intent of Congress.'' Id. Similarly, the Agriculture Transportation
Coalition (AgTC) says the rulemaking and the above definition is unable
to ``recognize the various means the carriers decline to carry export
cargo.'' AgTC at 1. While AgTC did not critique the ``vessel space
accommodations'' definition specifically, it deliberately used the
phrase ``export cargo'' instead of ``vessel space accommodations'' when
discussing unreasonable refusals to deal or negotiate. Vessel space
accommodation and export cargo hold different meanings. The Commission
interprets this deliberate use of ``export cargo'' as a suggestion to
revise the vessel space accommodation definition to refer specifically
to ``export cargo.'' As explained elsewhere, this proposed rule applies
to both import and exports. The differences between the ``vessel space
accommodations'' definition and ``cargo space accommodations'' will be
addressed below.
Second, the International Federation of Freight Forwarders
Associations (FIATA) asked the Commission to clearly define vessel
space accommodations to give context to ``operational decisions'' by
ocean common carriers that result in a refusal to deal or negotiate.
FIATA at 1. It listed ``operational decisions'' as common carrier
actions to ``carry out blank sailings, withdraw or reposition capacity,
and impose peak season surcharges.'' Id. BassTech also asked the
Commission to revise the proposed definition of ``vessel space
accommodation.'' BassTech at 1. Although it agreed with the
Commission's proposed definition, it asked the Commission to consider
the processes and practices that would obstruct a shipper from
obtaining vessel space. Id. at 2.
Third, related to the Commission's proposed definition of vessel
space accommodations, the National Customs Brokers & Forwarders
Association of America, Inc. (NCBFAA) suggested that non-vessel-
operating common carriers (NVOCCs) be excluded from the rule because
they do not control vessel space accommodations. NCBFAA at 2-3. It
cited the inability of these entities ``to control vessel space
accommodations.'' Id. at 2. The Commission recognizes the role NVOCCs
play and concur that their exclusion is appropriate as they do not
control vessel space accommodations. Thus, like the proposed rule, this
SNPRM only applies to ocean common carriers.
The Commission notes the potential hardships a narrow reading of
``vessel space accommodations'' would impose on certain industry
members. In the
[[Page 38799]]
Commission's view, services that would impact the actual acquisition of
a ``vessel space'' could also be used by ocean common carriers to
frustrate shippers and amount to an ``unreasonable refusal to deal or
negotiate.'' Therefore, the definition of ``vessel space
accommodations'' necessarily implies that ``vessel space services,''
i.e., the services necessary to access or book vessel space
accommodations, are included. Thus, this SNPRM adds a sentence to the
definition to acknowledge that vessel space services are included.
5. Shifting Burden From Complainant to Ocean Common Carrier
The Commission's initial proposal also set forth a framework for an
ocean common carrier to establish that its efforts to consider an
entity's proposal or efforts at negotiation were done in good faith
based on the criteria above. Once a complainant (or the BEIC) has
established a prima facie case for each of the three elements above,
the ocean common carrier will have the burden of production to show or
justify why its refusal was reasonable. However, the ultimate burden of
persuasion remains with the complainant to show that the refusal to
deal or negotiate was unreasonable. Further, the proposed rule included
a rebuttable presumption of unreasonableness for those situations where
an ocean common carrier categorically excludes U.S. exports shipments.
a. Burden-Shifting
The Commission received various comments with regard to the
proposed burden-shifting regime in the NPRM. Three entities (ACSA,
NACD, NFI) supported the burden-shifting regime laid out in the NPRM
without further comment. ACSA at 10; NACD at 4; NFI at 2. Three
entities (AgTC, CBA, IDFA) commented that the ultimate burden should be
on the ocean common carriers, not the shippers, due to the ocean common
carriers' superior access to real-time data on space availability. AgTC
at 5-6; CBA at 2; IDFA at 3-4. CMA CGM commented that Congress did not
expressly direct the Commission to incorporate a burden-shifting regime
as part of the proposal, as it did with regard to charge complaints.
CMA CGM at 2-3.
Other entities supported the burden-shifting regime, but with
caveats. AgTC and WSC supported the approach but pointed out that the
burden-shifting explanation in the preamble is not in the proposed
regulatory text. AgTC at 5; WSC at 15. BassTech supported the proposal
so long as the carrier's evidence can be challenged (which, as noted
below, would occur in Step 3). BassTech at 3-4. MICA/NAMI suggested
that the Commission should also consider whether the carrier has
actually engaged in good-faith communications and negotiation. MICA/
NAMI at 3. NITL/ISRI strongly supported burden-shifting but did not
want a carrier's self-certification to be given dispositive or outsized
weight (this SNPRM proposes the deletion of the self-certification
provision). NITL/ISRI at 14-15. RILA broadly supported burden-shifting
but asked it to be more closely aligned with the charge complaints
procedure found in 46 U.S.C. 41310(a) and (b). RILA at 1, 4. Several
entities (ACSA, CBA, IDFA) sought the addition of time limits on
carrier responses, especially in cases dealing with refusals of
perishable goods. ACSA at 10-11; CBA at 3; IDFA at 4.
The Commission has given careful consideration to the comments
received on its proposed burden-shifting approach. As a preliminary
matter, the Commission notes that this SNPRM proposes to continue using
the process followed in cases arising under the Administrative
Procedure Act (APA). The initial burden of production is with the
complainant (Step 1). If the complainant can satisfy its initial burden
of producing evidence sufficient to make out a prima facie case of a
violation, the burden then shifts to the respondent to produce evidence
sufficient to rebut the complainant's prima facie case (Step 2). But
the ultimate burden of persuading the Commission always remains with
the complainant (Step 3). See 46 CFR 502.203; 5 U.S.C. 551-559.
Although a given practice could be treated as per se unreasonable, the
occurrence of which would suffice to create a prima facie case of an
unreasonable refusal to deal and trigger the ocean common carrier's
burden to produce evidence that the refusal was not unreasonable and
thus move the case directly to Step 2, the complainant or BEIC would
still have to persuade the Commission in Step 3 that the refusal was
unreasonable.
Congress tasked the Commission with defining whether a particular
action is an unreasonable refusal to deal or negotiate with respect to
vessel space under 46 U.S.C. 41104(a)(10). It did not prescribe a
particular method for the Commission to follow in developing this
definition and it did not proscribe the Commission from using any
particular approach. Thus, the Commission adopts the existing process
for APA cases and notes in proposed Sec. 541.2(k) that the standard is
based ``in accordance with applicable laws'' such as the APA. The
Commission also proposes to include Step 3 so that the full standard is
available in the regulatory text.
As to the additional suggested modifications of the proposed
burden-shifting approach, the Commission does not adopt them at this
time. The Commission believes that the approach laid out in this SNPRM
sufficiently expresses its expectations as to what is required and
provides a reasonable approach that will effectively produce the
information needed to allow the Commission to decide whether a given
matter involves an unreasonable refusal to deal or negotiate.
Regarding the inclusion of specific aspects such as the application
of time limitations in the context of cases involving perishable goods,
the Commission may consider the inclusion of such conditions within a
given case as appropriate but has opted not to mandate such limits
consistent with our case-by-case approach. Regarding suggestions that
the procedure be modified to more closely align with that which
Congress detailed for charge complaints under 46 U.S.C. 40310, the
Commission also does not adopt such an approach because section 40310
on charge complaints does not apply to refusal to deal cases.
Similarly, the evidence produced by the ocean common carrier in making
its case that refusal to deal or negotiate was not unreasonable is
subject to challenge by the opposing party, and all evidence, as in any
contested case, will be subject to scrutiny by the Commission. 5 U.S.C.
556(d).
b. Rebuttable Presumption
A number of commenters responded to the Commission's proposed
rebuttable presumption approach. For the most part, commenters
generally favored the Commission's proposal, with some strongly
favoring it, see ACSA at 5; MICA/NAMI at 2; Tyson at 1, others offering
general support, see NCBFAA at 2; NFI at 2; RILA at 1; and others
offering suggestions along with their support. See NITL/ISRI at 14;
PMSA at 3; WSC at 16. One commenter opposed the approach (and the
proposal as a whole) as being insufficient in protecting exporters from
being denied service whenever there is available cargo space on a
vessel and urged that the proposal be revised to limit exceptions and
clearly define when it is unreasonable for carriers to deny service.
NHC at 1-2.
With respect to those commenters who offered specific suggestions
for the Commission to consider, NITL/ISRI
[[Page 38800]]
suggested that the regulatory text should include language specifying
that a rebuttable presumption of unreasonableness applies in those
cases where an ocean common carrier categorically excludes U.S. exports
from its backhaul trips from the United States. NITL/ISRA at 14. PMSA
offered a number of specific factors for the Commission to use in
establishing a rebuttable presumption of reasonableness: (1) the
presence of Federal, state or local/port policies that advocate the
prioritization of the export of empty containers either through stowage
plans or through the use of sweeper vessels; (2) prior experience with
individual cargo owners who have engaged in unlawful or improper
behavior (e.g., misdeclaration of cargo or shipment of hazardous cargo
that has caused or threatened the safety of a vessel and/or that has
given rise to adverse governmental action, penalties, fines or other
liability); (3) a history of late or nonpayment of services; (4)
whether viable alternatives exist, whether through other VOCCs or via
NVOCCs, Ocean Freight Forwarders or through Shippers' Associations; (5)
the failure to provide contracted amount of cargo or to meet minimum
quantity commitments or a history of falling down (i.e., cancellation
by either party) or making ghost bookings; (6) changes in vessel
rotations due to inland congestion or other factors beyond the
carrier's control; (7) whether the export customer is prepared to pay
prevailing market freight rates for shipments together with all
reasonable charges associated with the destination; and (8) whether the
export destination is one with sufficient infrastructure to handle the
return of equipment (containers, chassis) such that a return shipment
and/or repositioning can be accomplished at a reasonable time and cost.
PMSA at 3.
The WSC suggested that the Commission modify the proposed
regulatory text for the shifting of the burden of production to
emphasize that the burden of persuasion ultimately remains with the
complainant or BEIC:
A complainant (or the BEIC) may seek to establish a violation of
46 U.S.C. 41104(a)(10) by producing sufficient evidence to establish
a prima facie case of a violation. If a complain[ant] (or the BEIC)
establishes a prima facie case of a violation, the burden of
production shifts to the ocean common carrier to rebut the
complainant's [or the BEIC's] evidence and justify that its actions
were reasonable. Once the ocean common carrier has fulfilled its
burden of production, the burden of persuasion rests with the
complainant (or BEIC) to prove its case.
WSC at 16. The Commission is proposing to include similar language in
Sec. 541.2(k)(3).
Regarding the specific suggestion offered by the NITL/ISRA, the
Commission notes that the regulatory text proposed in this SNPRM is
sufficient to cover those situations where an unreasonable refusal to
carry U.S. exports occurs. The inclusion of the specific example of a
carrier's exclusion of U.S. exports from a backhaul trip is unnecessary
given the criteria for evaluating whether an ocean common carrier's
action is unreasonable. While PMSA's specific examples are illustrative
of the types of factors that the Commission may consider when
evaluating a specific claim, including these examples within the
regulatory text is also unnecessary for similar reasons. However, the
Commission notes that this rulemaking does not restrict the ability of
ocean common carriers to reposition empty containers, including through
use of sweeper vessels. As for the WSC's suggested rewriting of the
proposed regulatory text for the shifting of the burden of production,
the Commission is proposing language that shows that the burden of
persuasion lies with the complainant within the regulatory text.
6. Certification
The proposed rule also sought to include a mechanism for an ocean
common carrier to justify its actions through means of a certification.
Although the proposal did not require a certification for this purpose,
the Commission indicated that it was considering whether to make
certification by a U.S.-based compliance officer mandatory. The
Commission also noted that any justification must be directly relevant
and specific to the case at hand and further noted that information or
data supporting generalized propositions would not be helpful in
determinations of reasonableness for a specific case. Instead, a
certification should document the ocean common carrier's decision in a
specific matter, the good faith consideration of an entity's proposal
or request to negotiate, and the specific criteria considered by the
ocean common carrier to reach its decision. The Commission explained
that certification in this context meant that an appropriate U.S.-based
representative of the ocean common carrier attests that the decision
and supporting evidence is correct and complete. An appropriate
representative can include the ocean common carrier's U.S.-based
compliance officer. As explained above, however, certification by a
compliance officer that a refusal to deal was not unreasonable, and the
evidence underlying the certification, are elements that the Commission
will consider in the context of deciding the case. The Commission will
receive evidence that is relevant and will give it the appropriate
weight. Certification by a compliance officer would be but one factor;
it does not automatically end the case in favor of the ocean common
carrier.
Some commenters supported the proposed certification. See BassTech
at 3-4 (supported so long as the certification can still be disputed),
DOJ at 5; MICA/NAMI at 2; NCBFAA at 2; NFI at 2; Tyson at 1 (supporting
MICA/NAMI comments). Others raised concerns. See NACD at 4 (indicating
that while it did not oppose the use of an optional certification by
carriers it harbored concern over that certification being given undue
weight in determining reasonableness); NITL/ISRI at 15 (expressing
concern over undue weight being afforded to carrier decisions when
evaluating reasonableness under the proposed certification approach);
WSC at 15-16 (suggesting that (1) the proposed certification method be
only one of a variety of permissible ways for an ocean common carrier
to demonstrate reasonableness, (2) ocean common carriers who do not
certify not be prejudiced, (3) the Commission explain the probative
value of certifying, and (4) the Commission explain why it is
considering making certification by a U.S.-based compliance officer
necessary). Still other commenters expressly opposed allowing any self-
certification by carriers. See IDFA at 10-11 (opposing carrier self-
certification and suggesting that certification be continuous and
overseen by an independent third party), NHC at 1-2 (generally critical
of the proposal in its entirety).
After carefully considering these comments, the Commission has
decided not to adopt a mandatory requirement that the certification be
made by a U.S.-based compliance officer. Although self-certification
could have provided some useful information, a robust and mandatory
self-certification approach would require a more holistic and costly
approach and the Commission finds it is not necessary at this time.
7. Other Issues
Finally, the Commission received a number of comments that did not
fall within the categories already discussed. These comments covered a
broad range of topics ranging from simply offering
[[Page 38801]]
the commenter's expertise through further individualized discussions to
help better understand the Commission's proposal (e.g., Lanca at 1) to
more in-depth suggestions falling outside the immediate scope of the
proposal (e.g., Tyson at 1-2 (suggesting that the Commission require
carriers to provide accurate forecasting and updated information to
ensure that shippers can position their shipments at port terminals
within agreed-upon time windows, supporting greater transparency with
respect to vessel capacity, loading timeframes, and vessel schedule
changes that would impact contracted delivery times, and urging the
Commission consider how it plans to address forthcoming changes to
import rotation and the impact of these changes on port congestion)).
Some of these issues are under consideration in the Maritime
Transportation Data System project. See <a href="https://www.fmc.gov/fmc-maritime-transportation-data-initiative/">https://www.fmc.gov/fmc-maritime-transportation-data-initiative/</a>.
AgTC and IDFA both commented that the proposal failed to deal with
``de facto unreasonable refusals to deal'' that are not the product of
negotiations, but rather are dropped on the shipper by the carrier at
the last minute. AgTC at 3; IDFA at 2-3. FIATA suggested that the
Commission should address whether the rule applies to shipments of
foreign cargo as long as there are some U.S. shipments involved in the
same service contract. FIATA at 2. BassTech appreciated that the status
of the shipper is not a legitimate transportation factor sufficient to
refuse a booking but expressed concern that a shipper's status could
nevertheless be grounds for a refusal based on a reasonable business
decision (i.e., especially with regard to hazardous cargo). BassTech at
3. ACC believed that the proposed rule failed to consider the negative
effect on the exporter of a refused booking. ACC at 2. CBA argued that
there should be a national data portal or similar information
technology infrastructure to allow all parties to have access to all
the relevant booking and space-availability data. CBA at 3. CMA CGM
commented that ``me too'' contracts were abolished in 1998 and parties
must continue to be free to contract as they wish. CMA CGM at 2.
MICA/NAMI noted that difficulties in getting perishable cargo
shipped has led to the loss of business for U.S. suppliers and enabled
in-roads by competitors in Europe and Australia. MICA/NAMI at 2. They
cited to export data showing blank sailings rose as chilled beef and
pork exports to high-value markets declined. MICA/NAMI at 2. MICA/NAMI
also pointed to insufficient information shared by ocean common
carriers regarding vessel schedules and space availability as factors
complicating the ability of shippers to identify alternate routes or
means of transportation for their products. MICA/NAMI at 3. MICA/NAMI
further noted that ocean common carriers often cancel meat and poultry
export bookings up to the sailing date with no warning to shippers and
that its member experiences with ``failures to deal or negotiate'' on
detention and demurrage fees posed a major problem. MICA/NAMI at 3.
They also urged that ``[i]n cases where a carrier may be holding cargo
until an invoice is paid regardless of its validity, the lack of a
clear channel of communication to challenge the billing statement is
unconscionable and should be addressed by the FMC'' as part of this
(and other) rulemakings. MICA/NAMI at 3.
As indicated elsewhere, this supplemental proposal addresses the
criteria that the Commission will consider in evaluating whether there
has been a refusal to deal or negotiate, which will occur on an
individualized basis. The Commission appreciates the additional
feedback provided regarding the field experiences shared by MICA/NAMI
members. These experiences will be considered as appropriate within the
context of a given case. Also, some proposals may be outside the scope
of this rule and/or better addressed by other Commission initiatives
such as the Demurrage and Detention Billing Requirement rule,
Commission's Docket No. 22-04, other future rulemakings or the Maritime
Transportation Data System project.
NAM observed that ocean common carriers own and operate the ships
(and often, the containers) used in ocean transit and noted that any
enforcement measures should be directed towards those parties
responsible for schedules and operational disruption. NAM at 2. NAM
also generally noted that disruptions to the supply chain have a ripple
effect and indicated that ``[e]stablishing minimum notification
thresholds for ocean common carriers as they plan strategic equipment
movement and port calls would ease burdens for all shipping partners
and enhance system-wide transportation supply chain reliability.'' NAM
at 2. NAM also noted that the prominence of blank sailings and a rising
propensity/apparent partiality of ocean common carriers to accept empty
containers for profitability goals are linked to economic viability and
competitiveness for U.S. manufacturers and encouraged the Commission to
consider these factors in this rulemaking. NAM at 2-3.
The Commission acknowledges the disruptions noted by NAM and
appreciates the concerns it raised with respect to the impacts these
disruptions have on the overall supply chain. With respect to the
factors noted by NAM regarding the evaluation of blank sailings, the
Commission notes that the causes of blank sailings may vary, ranging
from inclement weather, force majeure events, port congestion, vessel
mechanical failure and a steep decline in demand. As a result, an
individual ocean common carrier may not necessarily have control over
the causes leading to blank sailings. While the impacts of these
actions often lead to cascading negative impacts, the Commission's
focus in the context of this rule is to address instances where ocean
common carriers fail to mitigate the impacts flowing from blank
sailings and other similar actions instead of actively working with the
shipper to get alternative accommodations for the freight. In its
evaluations, the Commission anticipates that it will consider the
relevant facts present in an individual situation to determine whether
those actions by an ocean common carrier fall within the scope of the
definition being set out as part of this SNPRM.
NCBFAA suggested that NVOCCs be excluded from the scope of the rule
and described the supportive role that NVOCCs play in helping their
customers navigate the complex ocean shipping industry by securing
competitive pricing and favorable transportation routes by using the
unique industry experience and relationships NVOCC have developed with
ocean common carriers. NCBFAA at 2. NCBFAA emphasized that NVOCCs,
unlike ocean common carriers, do not control vessel space
accommodations. NCBFAA at 2-3. This SNPRM continues to restrict its
application to VOCCs and does not include NVOCCs at this time. The
Commission agrees that NVOCCs, unlike ocean common carriers, do not
control vessel space accommodations.
NFI noted its members continue to face carrier-related shipping
issues, including unpredictable dwell times; exponential increases in
demurrage and other port-related costs; unfair and discriminatory
commercial practices against shippers by oceangoing carriers and
NVOCCs; shortages of containers, chassis, and labor; dramatically
higher tariff/contract rates for oceangoing freight; and limited cold
storage availability. NFI at 2.
The Commission acknowledges the presence of the issues noted by NFI
but also notes that issues centering on
[[Page 38802]]
container, chassis, and labor shortages are, in many cases, not
carrier-related in origin. This SNPRM may not necessarily directly
resolve each of these issues, but the Commission acknowledges that
shippers face significant stresses stemming from supply chain
congestion and also notes that these factors fall outside the scope of
the Commission's task in defining what constitutes an unreasonable
refusal to deal or refusal to negotiate.
NITL/ISRI asserted that blank sailing decisions must be reasonable
to justify refusals to deal or negotiate, such as being based on a
legitimate need to right-size supply based on demand rather than an
action to reduce capacity to artificially inflate prices. NITL/ISRI at
11.
As noted previously, blank sailings may be attributed to a variety
of causes that may fall outside of an ocean common carrier's control.
The Commission notes that an ocean common carrier's refusal to deal or
negotiate within a blank sailing context must also be weighed against
an ocean common carrier's efforts to mitigate the impacts on its
customers when a blank sailing (or other similarly adverse outcome due
to vessel schedule changes, including timing and port calls) occurs.
Through this SNPRM, the Commission is setting forth the criteria that
will be applied to determine whether a given refusal to deal or
negotiate satisfies the condition of being unreasonable. Such a
determination will necessarily include a consideration of the
mitigating steps taken by an ocean common carrier to work with its
shipper customers. The Commission will monitor these activities and act
accordingly. Any future refinements to the Commission's regulations may
be considered, if appropriate.
PMSA asserted that the proposal ignored imports even though imports
are part of the overall network. PMSA at 1. It added that the proposal
also did not mention the roles of shipper associations, NVOCCs, and
ocean freight forwarders. PMSA asserted that these entities can
collectively combine their bargaining power and provide export-related
support to individual shippers and their respective roles should factor
into any export policy or inquiry. PMSA at 2.
The September 2022 proposal specifically noted that the current
statutory framework does not distinguish between U.S. exports or
imports and that it would apply to both. See 87 FR 57674. The
Commission recognizes that imports are an inherent component of the
overall shipping network and the application of this rule to both
imports and exports reflects that recognition. As to the roles of those
entities who are not VOCCs, the Commission notes that while this SNPRM
would apply only to VOCCs, the roles of other entities who play a role
in potential Shipping Act violations would be addressed in the context
of the appropriate statutory provisions applicable to those violations,
such as those provided under 46 U.S.C. 41102 and 41104, and the
Commission will evaluate those violations as appropriate.
RILA urged the Commission to strengthen the language of its
proposal, particularly with respect to its applicability to conduct
occurring in the context of an existing service contract relationship
to help ensure that the rule addresses the concerns and real-world
experiences of U.S. importers and exporters. RILA at 1. RILA also
emphasized that the Commission should account for the circumstances and
criteria relevant to U.S. importers in addition to exporters. RILA at
2. It noted that many U.S. importer plans were disrupted when VOCC
contract partners abruptly stopped providing cargo space for which
importers had contracted, thereby forcing them onto the spot market and
its accompanying higher rates. RILA at 2.
The Commission assumes that in those instances where a service
contract already exists between an ocean common carrier and a shipper,
a refusal to deal or negotiate would be addressed within the context of
the provisions of the agreement made between those parties and the
remedies afforded when there is a breach of contract. However, it is
possible that there are circumstances in which a contract is silent on
what to do if there is a refusal to deal or negotiate within the bounds
of the contractual relationship. The Commission is interested in
comments identifying those situations where a contract does not address
how a refusal to deal with respect to vessel accommodations would be
remedied.
In addition to the issues noted earlier, Tyson stated that the
proposed rule would enable the Commission to ensure carriers are
``providing a sound business rationale for either failing to accept a
booking request or failing to fulfill an existing booking agreement.''
Tyson at 2. It added that changes are needed ``to ensure the flow of
information is balanced and allows each party, both carriers and
shippers, to have fair and informed discussions regarding vessel
space.'' Tyson at 2.
The Commission acknowledges the importance of ensuring that a
sufficient information flow exists between ocean common carriers and
shippers regarding vessel space, but this particular issue falls
outside the scope of this rulemaking.
USDEC indicated that the regulations that the Commission adopts
must emphasize consistency and to this end, suggested that the
Commission establish a ``consistency test'' to help it assess whether a
carrier is deviating from its past practices with respect to
negotiating for vessel accommodations. USDEC at 3. It also suggested
that the Commission consider what information a shipper should retain
to substantiate a violation under whatever regulation is adopted. USDEC
at 3. In its view, the adopted regulations should result in increasing
a shipper's ability ``to effectively seek and secure vessel space
accommodations in a competitive marketplace.'' USDEC at 3. With respect
to the scope of negotiation, USDEC suggested that the Commission
outline ``whether negotiation can occur on only limited aspects'' or
all aspects of vessel accommodation such as the shipment's cost,
volume, origin or location, and the involvement of intermodal carriage.
USDEC at 3-4. USDEC suggested that the Commission consider adopting
``anti-backsliding'' provisions as part of its rule to ensure that
carriers negotiate in good faith and to prevent carriers from engaging
in a pattern of rolling, delaying, or cancelling shipper bookings.
USDEC at 4. Additionally, USDEC asserted that the Commission should
consider the impacts to shippers from a failure to negotiate on vessel
accommodations within the context of potential enforcement actions and
penalties for violations, impacts such as those on potential lost
sales, diminished product values, additional shipping costs, and
increased administrative costs. USDEC at 4-5. USDEC added that
penalties imposed by the Commission should operate as a deterrent to
willful or negligent violations of the regulations and be sizable
enough to encourage corrective action by the carrier. USDEC at 5.
The Commission agrees that its rules should be applied consistently
after a careful consideration of the facts presented in a given case.
Regarding the types of information that a shipper should retain to
substantiate a potential violation, each shipper should retain those
materials that it believes clearly demonstrates that the violation
being alleged has occurred. This information may differ based on the
specific circumstances involved and may involve items such as (but not
limited to) the documenting of attempts to reach an ocean common
carrier and, if available, written communications indicating a refusal
by an ocean
[[Page 38803]]
common carrier. The scope of any negotiation will depend on the
individual circumstances that present themselves and the Commission
will evaluate those circumstances as they appear in a given case as
appropriate. Consideration of an anti-backsliding provision to ensure
that ocean common carriers negotiate in good faith and do not engage in
a pattern of disrupting shipper bookings, along with the setting of
appropriate penalties for violations, are issues falling outside the
scope of this specific rulemaking but may be considered in the context
of other rulemakings as well as enforcement actions taken by the
Commission.
III. Proposed Changes to the NPRM
The Commission is modifying aspects of the NPRM in this SNPRM after
evaluating the proposed rule in light of the comments received. The
SNPRM proposes to modify the definition of transportation factors to
focus on vessel operation considerations. The SNPRM proposes a revision
of the definition of the term unreasonable as well as includes a non-
exhaustive list of examples of unreasonable conduct. This change is
intended to provide a better idea of what types of conduct that
Commission believes would generally be considered unreasonable. The
Commission proposes to clarify that vessel space services were already
included in the definition of vessel space accommodations and add a
definition for cargo space accommodations as well. It also includes new
text discussing the relationship between 46 U.S.C. 41104(a)(3) and
(a)(10) and the elements required to establish violations of those
provisions. Also, many comments expressed concerns about how business
decisions would affect the overall analysis and thus this SNPRM changes
how business decisions will be considered. This SNPRM then revises the
voluntary export policy documentation language and proposes that ocean
common carriers submit a documented export policy to the Commission
once per year. It also revises the burden shifting framework to clarify
that it applies even if it was not included in the rule and notes that
the ultimate burden of persuasion lies with the complainant or BEIC.
Finally, this SNPRM proposes to remove the voluntary certification
provision as it is not necessary.
A. Section 542.1(b)--Definitions
In Sec. 542.1(b), this SNPRM proposes a new definition of ``cargo
space accommodations,'' ``documented export policy,'' and ``sweeper
vessel.'' It also proposes to modify the definitions for
``transportation factors'' and ``unreasonable,'' and ``vessel space
accommodations.'' After careful consideration of the comments, these
proposed definitions now provide more clarification and specificity to
allow parties to identify unreasonable refusal to deal more easily.
The proposed definition of ``cargo space accommodations,'' like the
definition of ``vessel space accommodations'' has not been interpreted
in prior Commission matters. The two definitions are similar because
both terms are part of concepts aimed at preventing similar conduct at
different points of a shipping transaction. Because the term ``cargo
space accommodations'' concerns situations where the parties have an
existing relationship and/or already mutually agreed on terms and
conditions via a booking confirmation, it is presumed that there is
some evidence that negotiation for space aboard the vessel has already
occurred. The Commission is interested in comments addressing if, in
fact, that space has been agreed to at the time of a booking
confirmation.
The new proposed definition of ``vessel space accommodations''
means space that is available aboard a vessel. Since 46 U.S.C.
41104(a)(10) prohibits unreasonable refusals during the negotiation
stage--when the parties do not have an existing relationship and/or are
initiating negotiations over terms and conditions of service, it is
presumed that space has not yet been provided but that it may be
available.
Both definitions, ``cargo space accommodations'' and ``vessel space
accommodations'' should also include the concept of vessel space
services. The Commission proposes to include in these definitions a
reference to the services necessary to access or book vessel space
accommodations. As some comments pointed out and is discussed above,
services that would impact the actual acquisition of a ``vessel space''
could also be used by ocean common carriers to frustrate shippers and
amount to an ``unreasonable refusal to deal or negotiate.'' Thus, an
unreasonable refusal to deal over the related services should also be
included in the definition. These services could include for example, a
shipper's access to a representative or a booking portal for vessel
space, in summary any service impacting a shipper's ability to confirm
its booking. It could also include services involving operational
decisions that would impact a shipper's already-confirmed booking for
purposes of the definition of ``cargo space accommodations.''
The Commission is also proposing a new definition of ``documented
export policy.'' This proposed definition uses the term ``policy''
instead of ``strategy'' to better describe the type of information the
Commission seeks. The proposal is intended to identify that the export
policy must be in the form of a report and it must detail practices and
procedures for U.S. outbound services. Pursuant to its authority in 46
U.S.C. 40104, the Commission seeks to require ocean common carriers to
provide this information to the Commission on a yearly basis. It will
use this information to monitor the industry for any unreasonable
behavior with respect to refusals to deal or negotiate.
This SNPRM newly proposes a definition for ``sweeper vessel.''
After reviewing the public comments, the Commission wanted to note that
the use of sweeper vessels is a legitimate practice that is critical to
the efficiency of our transportation system. This new definition,
however, does specify that a sweeper vessel must be one exclusively
designated for that purpose, i.e., a carrier that does not want to take
exports cannot designate a vessel as a sweeper vessel in order to avoid
certain shipments.
In the ``transportation factors'' definition, this SNPRM proposes
to focus the definition on ``vessel operation considerations'' rather
than the broader ``genuine operational considerations'' phrase that
included factors other than those related to the safe operation of the
vessel. For that reason, this SNPRM also proposes to remove the phrase
``the effect of blank sailings'' since this factor is not directly
related to vessel safety or operational needs. Given the focus on
operational considerations, the proposed definition now also includes
``weather-related scheduling considerations'' to ensure that scheduling
within the control of the ocean common carrier is not used as a factor.
The Commission also seeks to clarify with this SNPRM that
transportation factors are not a way for a carrier to refuse to carry
entire classes of cargo such as properly tendered hazardous cargo,
heavier products or inland shipments. Instead, legitimate
transportation factors must exist, be outside the vessel operators'
control and relate to the facts of a specific transaction or vessel.
The Commission also seeks to revise the definition of the term
``unreasonable'' by proposing an overarching definition that applies in
both 46 U.S.C. 41104(a)(3) and 41104(a)(10) claims. In later sections
of
[[Page 38804]]
the rule, the SNPRM proposes revised factors and examples of
unreasonable conduct that are non-binding and illustrate the type of
conduct that Commission will consider unreasonable. The new proposed
definition of the term ``unreasonable'' is ocean common carrier conduct
that unduly restricts the ability of shippers to access ocean carriage
services. The Commission believes this definition better aligns with
the purpose of OSRA 2022 and the Shipping Act, as amended, as a whole.
B. Section 542.1(c) Through (e)--Claims Under 46 U.S.C. 41104(a)(3)
The Commission proposes adding new Sec. 542.1(c) through (e) to
define how a shipper can address unreasonable conduct by ocean common
carriers that prevents shippers from obtaining space aboard vessels,
when available, for their cargo pursuant to 46 U.S.C. 41104(a)(3).
Section 542.1(c) proposes the elements of a claim. These elements are
similar to those for a 46 U.S.C. 41104(a)(10) claim under Sec.
542.1(f) given that both claims aim to prevent similar conduct at
different points of a shipping transaction. As previously stated above,
46 U.S.C. 41104(a)(3) claims focus on those refusals that occur at the
execution stage, after the parties reached a deal or mutually agreed on
service terms and conditions via a booking confirmation subject to
section 41104(a)(3).
Section 542.1(d) proposes a list of factors that the Commission may
choose to consider in evaluating whether a particular ocean common
carrier's conduct was unreasonable. Like in a claim under 46 U.S.C.
41104(a)(10), the factors mentioned would help establish an ocean
common carrier's bona fide attempts and interest in fulfilling its
previously made commitment to a shipper to take its cargo. Provision of
a documented export policy includes a good faith effort in mitigating
the impact of the refusal as well as evidence that the refusal was
based on legitimate transportation factors. These are all
considerations the Commission could rely on to make a reasonableness
finding.
In Sec. 542.1(e), the Commission proposes a non-binding and non-
exhaustive list of examples to show the type of conduct it could
consider unreasonable pursuant to 46 U.S.C. 41104(a)(3). The examples
listed are the types of situations that could signal that an ocean
common carrier was not sincere in attempting to fulfill the previously
agreed-to service terms and conditions.
The example in Sec. 542.1(e)(4) identifies an issue raised in the
comments. See, e.g., Bass Tech at 1; IDFA at 2. The imposition by ocean
common carriers of time restrictions on when a vessel can be loaded
that are impracticably short thereby denies a shipper actual access to
cargo space accommodations that have ostensibly been provided. As
discussed, the focus of the rule is on eliminating impediments to
access. The Commission may view carrier-imposed time constraints as
unreasonable if they unduly deprive a shipper acting in good faith of
access to cargo space.
Finally, the Commission believes it should keep open the
opportunity to consider any other interactions or communications with
the shipper as well as other conduct that the Commission finds
unreasonable in any given case. Thus, the proposed list is considered
non-exhaustive and only provides examples of conduct that could be
considered unreasonable. The decision will be made on a case-by-case
basis.
C. Section 542.1(f) Through (h)--Claims Under 46 U.S.C 41104(a)(10)
The Commission proposes adding new Sec. 542.1(f) through (h) to
define how a shipper can address unreasonable conduct by ocean common
carriers that refuses to deal or negotiate with shippers regarding
vessel space accommodations pursuant to 46 U.S.C. 41104(a)(10). Section
542.1(f) contains the elements of a claim. These elements are the same
as those proposed in the NPRM.
Section 542.1(g) proposes a list of factors that the Commission may
choose to consider in evaluating whether a particular ocean common
carrier's conduct was unreasonable. The factors in this section are
those that were proposed in Sec. 542.1(b)(2)(i) through (iv) of the
NPRM except that business decisions are no longer a factor to be
explicitly considered. The Commission decided with the help of the
public comments that there is the potential for business decisions to
overwhelm the rest of the factors and thus it decided to remove that
language from the proposed rule. In this SNPRM, the provision of a
documented export policy, good faith effort showing an interest and
ability in mitigating the impact of the refusal and evidence that the
refusal was based on legitimate transportation factors are all
considerations the Commission could rely on to make a reasonableness
finding. The list is not exhaustive as other facts the Commission finds
relevant could be considered. The factors in Sec. 542.1(g) are the
same as those proposed in Sec. 542.1(d).
In 46 CFR 542.1(h), the Commission proposes a non-binding and non-
exhaustive list of examples to show the type of conduct it could
consider unreasonable pursuant to 46 U.S.C. 41104(a)(10). The examples
listed are the types of situations that could signal that an ocean
common carrier was not sincere in attempting to fulfill the previously
agreed-to service terms and conditions.
The various proposed scenarios the Commission finds involve
unreasonable conduct by ocean common carriers. These include: (1)
quoting rates that are so far above market as to render the quote not a
serious negotiation; (2) categorically or systematically excluding
exports in providing vessel space accommodations, and (3) any other
interactions or communications with the shipper or other conduct the
Commission finds unreasonable.
The SNPRM rule proposes that quoting rates that are so far above
market as to render the quote not a serious negotiation is unreasonable
conduct. An ocean common carrier would be required to consider in good
faith a shipper's effort at negotiation. Consideration in good faith
includes, among other things, quotes that are within reasonable market
rates. See, e.g., NITL/ISRI at 13-14. If in response to a shipper's
request for vessel space accommodations the carrier quotes rates far
above market (or insists on other terms, such as unrealistic quantity
demands), it will likely be regarded under the SNPRM as an unreasonable
refusal to deal or negotiate under 46 U.S.C. 41104(a)(10).
Finally, the Commission believes it should keep open the
opportunity to consider any other interactions or communications with
the shipper as well as other conduct generally the Commission finds
unreasonable in any given case. Thus, the proposed list is considered
non-exhaustive and just provides examples of conduct that could be
considered unreasonable. The decision will be made on a case-by-case
basis.
1. Section 542.1(i)--Use of Sweeper Vessels
In Sec. 542.1(i), the Commission is proposing that the use of
sweeper vessels is a legitimate practice that is critical to the
efficiency of our transportation system. Along with the proposed
definition, this paragraph serves as a reminder that a sweeper vessel
must be one designated for that purpose. This provision is proposed to
prevent ocean common carriers from using ad hoc designations of vessels
as
[[Page 38805]]
sweeper vessels to avoid having to take certain export shipments.
2. Section 542.1(j)--Documented Export Policy
This SNPRM modifies the voluntary documented export policy found in
the NPRM and now proposes a requirement that ocean common carriers
follow and submit to the Commission on a yearly basis a documented
export policy. Proposing a requirement to submit a documented export
policy to the Commission pursuant to its authority under 46 U.S.C.
40104 is an important part of monitoring the industry for unreasonable
behavior vis-[agrave]-vis exports in an effort to address those
concerns. Also, in Sec. 542.1(j)(1), the Commission identifies what
type of information it seeks to have included in a documented export
policy that would help the Commission determine whether an ocean common
carrier's conduct in a specific matter aligns with their general
policies and that the ocean common carrier thus acted reasonably. The
yearly requirement would provide an appropriate but not overly
burdensome time frame on which to report updates to the policy relative
to changes in the industry. The proposed report documenting an ocean
common carrier's export policy would remain confidential. Aggregate
data may be provided in annual reports submitted to Congress or
compiled for other purposes but will not reveal confidential
information provided by or about individual carriers.
Although the Commission is not proposing in this SNPRM a voluntary
export policy, it is interested in receiving comments on this
alternative. The Commission believes the new proposed requirement to
submit the export policy to the Commission on a yearly basis will
enhance its ability to monitor the industry for prohibited actions but
would also consider a voluntary approach. Maintenance of a voluntary
documented export policy would allow ocean common carriers to maintain
and provide a documented export policy showing how it developed and
applied business decisions in a fair and consistent manner in the
instance of a claim before the Commission. The documented export policy
could also address situations, such as schedule disruptions (due to
blank sailings or other conditions) on the ability to take on
shipments. Carriers may also address the alternative remedies or
assistance it will make available to a shipper who is refused vessel
space accommodations. Developing this type of detailed information and
providing it during the burden shifting process could assist the
Commission's analysis when deciding whether the ocean common carrier's
conduct was reasonable. The Commission seeks comments on these two
approaches.
3. Proposed language in the NPRM Removed in This SNPRM
The Commission is proposing revisions to Sec. 542.1(d) of the NPRM
by moving the burden shifting framework to Sec. 542.1(k) and
clarifying certain issues raised in the comments. Various commenters
pointed out that this is the existing process under the APA. The new
proposed section emphasizes that the burden shifting framework is not
unique to this proposed rule and remains a legal requirement whether it
appears in the SNPRM or not. Also, this SNPRM proposes including in
Sec. 542.1(k)(3) that the ultimate burden of persuading the Commission
remains with the complainant (or BEIC). This language is responsive to
comments received recommending this language be included.
The Commission also proposes to remove the self-certification by
ocean common carrier provision in Sec. 542.1(d) of the original
proposed rule. Numerous commenters raised concerns about this voluntary
provision and that they would be given undue weight in the Commission's
analysis. Some commenters supported the provision if it was part of a
more robust process including an independent evaluation of the
information forming the basis of the certification. Although self-
certification could have provided some useful information, a robust and
mandatory self-certification approach addressing some of these concerns
would require a more holistic and costly approach and the Commission
finds it is not necessary at this time.
The Commission seeks comment and supporting information regarding
all the proposed changes in this SNPRM.
IV. Public Participation
How do I prepare and submit comments?
Your comments must be written and in English. You may submit your
comments electronically through the Federal Rulemaking Portal at
<a href="http://www.regulations.gov">www.regulations.gov</a>. To submit comments on that site, search Docket No.
FMC-2023-0010 and follow the instructions provided.
How do I submit confidential business information?
The Commission will provide confidential treatment for identified
confidential information to the extent allowed by law. If your comments
contain confidential information, you must submit the following by mail
to the address listed above under ADDRESSES:
<bullet> A transmittal letter requesting confidential treatment
that identifies the specific information in the comments for which
protection is sought and demonstrates that the information is a trade
secret or other confidential research, development, or commercial
information.
<bullet> A confidential copy of your comments, consisting of the
complete filing with a cover page marked ``Confidential-Restricted,''
and the confidential material clearly marked on each page. You should
submit the confidential copy to the Commission by mail.
<bullet> A public version of your comments with the confidential
information excluded. The public version must state ``Public Version--
confidential materials excluded'' on the cover page and on each
affected page and must clearly indicate any information withheld. You
may submit the public version to the Commission by email or mail.
How can I read comments submitted by other people?
You may read the comments received on this SNPRM at
<a href="http://www.regulations.gov">www.regulations.gov</a> by searching Docket No. FMC-2023-0010, Definition
of Unreasonable Refusal to Deal or Negotiate with Respect to Vessel
Space Accommodations Provided by an Ocean Common Carrier.
V. Rulemaking Analyses
A. Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601-612, provides that
whenever an agency publishes a notice of proposed rulemaking under the
Administrative Procedure Act (APA), 5 U.S.C. 553, the agency must
prepare and make available for public comment a regulatory flexibility
analysis describing the impact of the rule on small entities, unless
the head of the agency certifies that the rulemaking will not have a
significant economic impact on a substantial number of small entities.
5 U.S.C. 603-605. As the head of the agency, the Chairman, by voting to
approve this SNPRM, is certifying that it will not have a significant
economic impact on a substantial number of small entities.
B. National Environmental Policy Act
The Commission's regulations categorically exclude certain
rulemakings from any requirement to
[[Page 38806]]
prepare an environmental assessment or an environmental impact
statement because they do not increase or decrease air, water or noise
pollution or the use of fossil fuels, recyclables, or energy. 46 CFR
504.4. This SNPRM describes the Commission's criteria to determine
whether an ocean common carrier has engaged in an unreasonable refusal
to deal with respect to vessel space accommodations under 46 U.S.C.
41104(a)(10), and the elements necessary for a successful claim under
that section. This rulemaking thus falls within the categorical
exclusion for matters related solely to the issue of Commission
jurisdiction and the exclusion for investigatory and adjudicatory
proceedings to ascertain past violations of the Shipping Act. See 46
CFR 504.4(a)(20), (22). Therefore, no environmental assessment or
environmental impact statement is required.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (PRA)
requires an agency to seek and receive approval from the Office of
Management and Budget (OMB) before collecting information from the
public.\5\ The agency must submit collections of information in
proposed rules to OMB in conjunction with the publication of the notice
of proposed rulemaking.\6\ As defined in 5 CFR 1320.3(c), ``collection
of information'' comprises reporting, recordkeeping, monitoring,
posting, labeling, and other similar actions. An agency may not collect
or sponsor the collection of information, nor may it impose an
information collection requirement, unless it displays a currently
valid OMB control number.
---------------------------------------------------------------------------
\5\ 44 U.S.C. 3507.
\6\ 5 CFR 1320.11.
---------------------------------------------------------------------------
This action contains new information collection requirements. The
title and description of the information collection, a description of
those who must collect the information, and an estimate of the total
annual burden follow. The estimates cover the time for reviewing
instructions, searching existing sources of information, gathering and
maintaining the information needed, and completing and reviewing the
collection.
Title: Documented Export Policy.
OMB Control Number: None assigned yet.
Summary of the Collection of Information: This SNPRM proposes a
requirement that ocean common carriers create and maintain a documented
export policy they submit to the Commission on a yearly basis.
Need and Proposed Use of Information: Proposing a requirement to
submit a report documenting an ocean common carrier's export policy to
the Commission pursuant to its authority under 46 U.S.C. 40104 is an
important part of monitoring the industry for unreasonable behavior
vis-[agrave]-vis exports. Also, in proposed Sec. 542.1(j)(1), the
Commission identifies what type of information it seeks to have
included in a documented export policy that would help the Commission
determine whether an ocean common carrier's conduct in a specific
matter aligns with their general policies and that the ocean common
carrier thus acted reasonably. The yearly requirement would provide an
appropriate but not overly burdensome time frame on which to report
updates to the policy relative to changes in the industry. An ocean
common carrier can update their policy more frequently than once per
year if it chooses to do so. The proposed reporting by individual ocean
common carriers would remain confidential but, in practice, the
Commission would provide aggregate descriptions and potentially best
practices that do not contain individual carrier-level information but
do provide information to the public and Congress (via annual report or
other documents available to the public).
Frequency: This SNPRM proposes that respondents will file a
documented export policy meeting the requirements in Sec. 541.2(j)
once per calendar year.
Type of Respondents: Ocean common carriers.
Number of Annual Respondents: The Commission anticipates an annual
respondent universe of 140 ocean common carriers.
Estimated Time per Response: The Commission estimates 40 hours of
burden for developing, documenting, and submitting an export policy
using the parameters in proposed Sec. 541.2(j) for the first year,
assuming that no such policy already exists. For annual updates, the
estimated burden would be 5 hours including review and revisions of the
existing policy and submitting it electronically.
Total Annual Burden: The Commission estimates the total person-hour
burden at 5,600 hours for initial filing and 700 hours thereafter.
Comments are invited on:
<bullet> Whether the collection of information will have practical
utility;
<bullet> Whether the Commission's estimate for the burden of the
information collection is accurate;
<bullet> Ways to enhance the quality, utility, and clarity of the
information to be collected;
<bullet> Ways to minimize the burden of the collection of
information on respondents, including the use of automated collection
techniques or other forms of information technology.
Please submit any comments, identified by the docket number in the
heading of this document, by the methods described in the ADDRESSES
section of this document.
D. Regulation Identifier Number
The Commission assigns a regulation identifier number (RIN) to each
regulatory action listed in the Unified Agenda of Federal Regulatory
and Deregulatory Actions (Unified Agenda). The Regulatory Information
Service Center publishes the Unified Agenda in April and October of
each year. You may use the RIN contained in the heading at the
beginning of this document to find this action in the Unified Agenda,
available at <a href="https://www.reginfo.gov/public/do/eAgendaMain">https://www.reginfo.gov/public/do/eAgendaMain</a>.
List of Subjects in 46 CFR Part 542
Administrative practice and procedure, Non-vessel-operating common
carriers, Ocean common carrier, Refusal to deal or negotiate, Vessel-
operating common carriers, Vessel space accommodations.
0
For the reasons set forth in the preamble, the Federal Maritime
Commission proposes to add 46 CFR part 542 to read as follows:
PART 542--COMMON CARRIER PROHIBITIONS
Sec.
542.1 Definition of unreasonable refusal of cargo space
accommodations when available and unreasonable refusal to deal or
negotiate with respect to vessel space provided by an ocean common
carrier.
542.2 [Reserved]
Authority: 5 U.S.C. 553; and 46 U.S.C. 46105, 40307, 40501-
40503, 40901-40904, 41101-41106.
Sec. 542.1 Definition of unreasonable refusal of cargo space
accommodations when available and unreasonable refusal to deal or
negotiate with respect to vessel space provided by an ocean common
carrier.
(a) Purpose. This part establishes the elements and definitions
necessary for the Federal Maritime Commission (Commission) to apply 46
U.S.C. 41104(a)(3) with respect to refusals of cargo space
accommodations when available and to apply 46 U.S.C. 41104(a)(10) with
respect to refusals of vessel space accommodations provided by an ocean
common carrier. This part applies to complaints brought before the
[[Page 38807]]
Commission by a private party and enforcement cases brought by the
Commission.
(b) Definitions. For the purposes of this section:
(1) Cargo space accommodations means space which has been
negotiated for aboard the vessel of an ocean common carrier for laden
containers being imported to or exported from the United States. Cargo
space accommodations includes the services necessary to access and load
or unload cargo from a vessel calling at a U.S. port.
(2) Documented export policy means a written report produced by an
ocean common carrier that details the ocean common carrier's practices
and procedures for U.S. outbound services.
(3) Sweeper vessel means a vessel exclusively designated to load
and move empty containers from a U.S. port for the purpose of
transporting them to another designated location.
(4) Transportation factors means factors that encompass the vessel
operation considerations underlying an ocean common carrier's ability
to accommodate laden cargo for import or export, which can include, but
are not limited to, vessel safety and stability, weather-related
scheduling considerations, and other factors related to vessel
operation outside the vessel operators' control.
(5) Unreasonable means ocean common carrier conduct that unduly
restricts the ability of shippers to meaningfully access ocean carriage
services.
(6) Vessel space accommodations means space available aboard a
vessel of an ocean common carrier for laden containers being imported
to or exported from the United States. Vessel space accommodations also
includes the services necessary to access or book vessel space
accommodations.
(c) Elements for claims. The following elements are necessary to
establish a successful private party or enforcement claim under 46
U.S.C. 41104(a)(3):
(1) The respondent must be an ocean common carrier as defined in 46
U.S.C. 40102;
(2) The respondent refuses or refused cargo space accommodations
when available; and
(3) The ocean common carrier's conduct is unreasonable.
(d) Non-binding considerations when evaluating unreasonable
conduct. In evaluating the reasonableness of an ocean common carrier's
refusal to provide cargo space accommodations, the Commission may
consider the following factors:
(1) Whether the ocean common carrier followed a documented export
policy that enables the efficient movement of export cargo;
(2) Whether the ocean common carrier made a good faith effort to
mitigate the impact of a refusal;
(3) Whether the refusal was based on legitimate transportation
factors; and
(4) Any other factors relevant in determining whether there was a
refusal in that particular case.
(e) Non-binding examples of unreasonable conduct. The following are
examples of the kinds of conduct that may be considered unreasonable
under 46 U.S.C. 41104(a)(3) when linked to a refusal to provide cargo
space accommodations:
(1) Blank sailings or schedule changes with no advance notice or
with insufficient advance notice;
(2) Vessel capacity limitations not justified by legitimate
transportation factors;
(3) Failing to alert or notify shippers with confirmed bookings;
(4) Scheduling insufficient time for vessel loading so that cargo
is constructively refused;
(5) Providing inaccurate or unreliable vessel information;
(6) Categorically or systematically excluding exports in providing
cargo space accommodations; or
(7) Any other conduct the Commission finds unreasonable.
(f) Elements for claims. The following elements are necessary to
establish a successful private party or enforcement claim under 46
U.S.C. 41104(a)(10):
(1) The respondent must be an ocean common carrier as defined in 46
U.S.C. 40102;
(2) The respondent refuses or refused to deal or negotiate with
respect to vessel space accommodations; and
(3) The ocean common carrier's conduct is unreasonable.
(g) Non-binding considerations when evaluating unreasonable
conduct. In evaluating the reasonableness of an ocean common carrier's
refusal to deal or negotiate with respect to vessel space
accommodations, the Commission may consider the following factors:
(1) Whether the ocean common carrier followed a documented export
policy that enables the efficient movement of export cargo;
(2) Whether the ocean common carrier engaged in good-faith
negotiations;
(3) Whether the refusal was based on legitimate transportation
factors; and
(4) Any other factors relevant in determining whether there was a
refusal in that particular case.
(h) Non-binding examples of unreasonable conduct. The following are
examples of the kinds of conduct that may be considered unreasonable
under 46 U.S.C. 41104(a)(10) when linked to a refusal to deal or
negotiate:
(1) Quoting rates that are so far above current market rates they
cannot be considered a real offer or an attempt at engaging in good
faith negotiations;
(2) Categorically or systematically excluding exports in providing
vessel space accommodations; and
(3) Any other interactions or communications with the shipper or
other conduct the Commission finds unreasonable.
(i) Use of sweeper vessels. Nothing in this part precludes ocean
common carriers from using sweeper vessels previously designated for
that purpose to reposition empty containers.
(j) Documented export policy. Ocean common carriers must follow a
documented export policy that enables the efficient movement of export
cargo.
(1) A documented export policy must be submitted once per calendar
year and include, in a manner prescribed by the Commission, pricing
strategies, services offered, strategies for equipment provision, and
descriptions of markets served. Updates may be submitted more than once
per year if the ocean common carrier chooses to do so. Other topics a
documented export policy should also address, if applicable, include:
(i) The effect of blank sailings or other schedule disruptions on
the ocean common carrier's ability to accept shipments; and
(ii) The alternative remedies or assistance the ocean common
carrier would make available to a shipper to whom it refused vessel
space accommodations.
(2) A documented export policy required to be filed by this part
must be submitted to: Director, Bureau of Trade Analysis, Federal
Maritime Commission, <a href="/cdn-cgi/l/email-protection#13766b637c6167637c7f7a706a53757e703d747c65"><span class="__cf_email__" data-cfemail="c9acb1b9a6bbbdb9a6a5a0aab089afa4aae7aea6bf">[email protected]</span></a>.
(k) Shifting the burden of production. In accordance with
applicable laws, the following standard applies:
[[Page 38808]]
(1) The burden to establish a violation of this part is with the
complainant or Bureau of Enforcement, Investigations, and Compliance.
(2) Once a complainant sets forth a prima facie case of a
violation, the burden shifts to the ocean common carrier to justify
that its action were reasonable.
(3) The ultimate burden of persuading the Commission remains with
the complainant or Bureau of Enforcement, Investigations, and
Compliance.
Sec. 542.2 [Reserved]
By the Commission.
William Cody,
Secretary.
[FR Doc. 2023-12744 Filed 6-12-23; 4:15 pm]
BILLING CODE 6730-02-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.