Rule2024-16148
Definition of Unreasonable Refusal To Deal or Negotiate With Respect to Vessel Space Accommodations Provided by an Ocean Common Carrier
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 23, 2024
Effective
September 23, 2024
Issuing agencies
Federal Maritime Commission
Abstract
The Federal Maritime Commission (FMC or Commission) is issuing regulations to implement the Ocean Shipping Reform Act of 2022's prohibition against unreasonable refusals of cargo space accommodations when available and unreasonable refusals to deal or negotiate with respect to vessel space accommodations by ocean common carriers. This final rule adopts with changes the supplemental notice of proposed rulemaking published on June 14, 2023. This rule establishes the necessary elements for the FMC to apply Federal law with respect to refusals of cargo space accommodations when available. It also establishes the necessary elements for the FMC to apply Federal law with respect to refusals of vessel space accommodations. This rule applies to complaints brought before the FMC by a private party, as well as enforcement cases brought by the Commission.
Full Text
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<title>Federal Register, Volume 89 Issue 141 (Tuesday, July 23, 2024)</title>
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[Federal Register Volume 89, Number 141 (Tuesday, July 23, 2024)]
[Rules and Regulations]
[Pages 59648-59672]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-16148]
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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: Final rule.
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SUMMARY: The Federal Maritime Commission (FMC or Commission) is issuing
regulations to implement the Ocean Shipping Reform Act of 2022's
prohibition against unreasonable refusals of cargo space accommodations
when available and unreasonable refusals to deal or negotiate with
respect to vessel space accommodations by ocean common carriers. This
final rule adopts with changes the supplemental notice of proposed
rulemaking published on June 14, 2023. This rule establishes the
necessary elements for the FMC to apply Federal law with respect to
refusals of cargo space accommodations when available. It also
establishes the necessary elements for the FMC to apply Federal law
with respect to refusals of vessel space accommodations. This rule
applies to complaints brought before the FMC by a private party, as
well as enforcement cases brought by the Commission.
DATES: This final rule is effective on September 23, 2024, except for
instruction 2 adding Sec. 542.1(j), and instruction 3 adding Sec.
542.99, which are delayed. The Commission will publish a document in
the Federal Register announcing the effective date of those amendments.
ADDRESSES: To view background documents or comments received, you may
use the Federal eRulemaking Portal at <a href="http://www.regulations.gov">www.regulations.gov</a> under Docket
No. FMC-2023-0010.
FOR FURTHER INFORMATION CONTACT: David Eng, Secretary; Phone: (202)
523-5725; Email: <a href="/cdn-cgi/l/email-protection#3d4e585e4f58495c4f447d5b505e135a524b"><span class="__cf_email__" data-cfemail="a2d1c7c1d0c7d6c3d0dbe2c4cfc18cc5cdd4">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
A. Procedural History
The Ocean Shipping Reform Act of 2022 (OSRA 2022), Public Law 117-
146, was enacted on June 16, 2022. OSRA 2022 amended various statutory
provisions contained in part A of subtitle IV of title 46, United
States Code. OSRA 2022 made clear that the categorical refusal by an
ocean common carrier, alone or in conjunction with another person,
directly or indirectly, to accommodate U.S. exports, without
demonstrating that the refusal is reasonable, is a violation of the
Shipping Act. By definition, not all refusals will necessarily be a
violation. Whether a refusal to deal or a refusal to negotiate falls
within the scope of section 41104(a)(10), or a refusal of cargo space
accommodations falls within the scope of section 41104(a)(3), depends
upon the particular circumstances of a given case.
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'' provided by an
ocean common carrier to work in conjunction with 46 U.S.C.
41104(a)(10). In response to this requirement, on September 21, 2022,
the FMC issued a notice of proposed rulemaking (NPRM) that proposed
adding a new part 542 under title 46 of the Code of Federal Regulations
(CFR), which would work in conjunction with 46 U.S.C. 41104(a)(10).\1\
The proposal considered the common carriage roots of 46 U.S.C.
41104(a)(10), as well as the overall competition basis of the
Commission's authority.\2\
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\1\ 87 FR 57674.
\2\ 87 FR 57674, 57676.
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On June 14, 2023, after reviewing the comments received in response
to the NPRM, the Commission issued a revised and expanded supplemental
notice of proposed rulemaking (SNPRM). In addition to addressing OSRA
2022's amendment to 46 U.S.C. 41104(a)(10), the SNPRM also addressed
OSRA 2022's amendment to 46 U.S.C. 41104(a)(3), which prohibits a
common carrier from unreasonably refusing cargo space accommodations
when available. 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 execution
stage, after the parties reached a deal or mutually agreed on service
terms and conditions, then 46 U.S.C. 41104(a)(3) applies. If the
refusal occurred at the negotiation stage, before the parties reached a
deal or mutually agreed on service terms and conditions, then 46 U.S.C.
41104(a)(10) applies. Interpreting these related provisions in a single
rulemaking allows the Commission to delineate the types of refusal
conduct covered by 46 U.S.C. 41104 (a)(3) and (a)(10) and highlight the
differences between them. As discussed in the SNPRM, restricting the
rulemaking to refusals to deal or negotiate under 46 U.S.C.
41104(a)(10) would not address the reliability issues that commenters
on the NPRM 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
[[Page 59649]]
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 what conduct is covered by that provision as
distinguished from 46 U.S.C. 41104(a)(10). Clearly delineating these
distinctions as part of the current rulemaking lessens 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) 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. Additional guidance from the Commission now may help
avoid needless disputes over that issue.
The Commission acknowledges that it has not previously recognized a
temporal distinction between (a)(3) and (a)(10). However, as discussed
in the SNPRM, reading the conduct governed by 46 U.S.C. 41104(a)(10) to
include the same conduct prohibited by 46 U.S.C. 41104(a)(3), as
amended by OSRA 2022, would violate the canon of statutory construction
against construing statutes in a manner that renders language
superfluous or meaningless. Previously, FMC distinguished (a)(3) from
other prohibitions in 41104 based on the shipper's involvement in
protected activity.\3\ OSRA 2022, however, removed the protected entity
and the protected activity language from (a)(3).\4\ Therefore, there
must be some other means of distinguishing the two provisions.
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\3\ See Federal Maritime Commission, Statement of the Commission
on Retaliation (Dec. 28, 2021) (available at <a href="https://www2.fmc.gov/readingroom/docs/21-15/21-15_Policy_Retaliation.pdf/">https://www2.fmc.gov/readingroom/docs/21-15/21-15_Policy_Retaliation.pdf/</a>) (``The
Commission also acknowledges that Sec. 41104(a)(3) should not be
read so expansively that it renders other prohibitions in Chapter
411 of Title 46 superfluous. Section 41104 of Title 46, for
instance, only prohibits specific types of unfair or unjustly
discriminatory conduct. Section 41104(a)(3) prohibits a common
carrier from ``resort[ing] to other unfair or unjustly
discriminatory methods . . . for any other reason.'' The latter does
not swallow the other prohibitions, however, because it is not a
flat prohibition on all unfair or unjustly discriminatory conduct. A
complainant must show that a carrier engaged in prohibited conduct
(refusing cargo space accommodations or other unfair or unjustly
discriminatory methods), with respect to a protected entity
(shipper), because the protected entity engaged in protected
activity (patronizing other carriers, filing a complaint, or other
activities of the same class.'' (internal citations omitted)).
\4\ The protected activity language did remain with the
prohibition on retaliation, now found at 46 U.S.C. 41102(d).
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Consistent with section 7(d) of OSRA 2022, the Commission has
consulted with the Coast Guard regarding this rulemaking. The Coast
Guard offered no objections to the Commission's approach.
B. Scope of the Rule
There are two types of common carriers--vessel-operating common
carriers (VOCCs) and non-vessel-operating common carriers (NVOCCs).\5\
Section 41104 applies generally to both VOCCs and NVOCCs; this rule,
however, only applies to VOCCs. The specific prohibition in 46 U.S.C.
41104(a)(10) that is the subject of this rule applies only to VOCCs
because ``ocean common carrier'' is defined as a vessel-operating
common carrier in the Shipping Act.\6\ Although 46 U.S.C. 41104(a)(3)
and 46 U.S.C. 41104(a)(10) apply to both VOCCs and NVOCCs, this rule
only applies to VOCCs to mirror the scope of the specific prohibition
in 41104(a)(10) added by OSRA 2022.\7\ The limitation in scope of this
rule to VOCCs does not in any way limit the application of 46 U.S.C.
41104(a)(3) or 46 U.S.C. 41104(a)(10). NVOCCs remain legally liable
under 46 U.S.C. 41104(a)(3) and 46 U.S.C. 41104(a)(10) for violations
of the Shipping Act.
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\5\ 46 U.S.C. 40102.
\6\ 46 U.S.C. 40102(18) (definition of ``ocean common
carrier'').
\7\ OSRA 2022 added ``including with respect to vessel space
accommodations provided by an ocean common carrier'' to the general
prohibition imposed on all common carriers to not ``unreasonably
refuse to deal or negotiate.'' Thus, while the general prohibition
of (a)(10) against unreasonably refusing to deal or negotiate
applies to all common carriers, the specific prohibition against
refusing to deal or negotiate ``with respect to vessel space
accommodations'' is limited to acts by ocean common carriers (i.e.,
VOCCs).
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Similarly, 41104 applies generally to roll-on/roll-off cargo, bulk
cargo, and containerized cargo. This rule, however, only applies to
containerized cargo because the sorts of issues that arose around
container availability during the pandemic do not appear to have been
present, or at least not present to the same extent, for roll-on/roll-
off cargo or bulk cargo. While this rule is limited to containerized
cargo, it does not preclude refusal to deal cases arising in the
context of roll-on/roll-off cargo or bulk cargo--the framework in this
rule could be applied to such cases.\8\
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\8\ See 87 FR 57674, 57676, FN 14.
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As noted in the SNPRM, the Commission will address, at a different
time, the statutory requirement in section 7(c) of OSRA 2022 to
complete a rulemaking defining ``unfair or unjustly discriminatory
methods'' in 46 U.S.C. 41104(a)(3).
The common carrier prohibitions in 46 U.S.C. 41104 do not
distinguish between U.S. exports and imports. This rule applies to
both.
C. Challenges Faced by U.S. Exporters
One basis, but not the only one, for some of the OSRA 2022
provisions were the challenges expressed by U.S. exporters trying to
obtain vessel space to ship their products.<SUP>9 10</SUP>
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\9\ OSRA 2022 originated as S.3580 and the bill is partially
summarized as: ``This bill revises requirements governing ocean
shipping to increase the authority of the Federal Maritime
Commission (FMC) to promote the growth and development of U.S.
exports through an ocean transportation system that is competitive,
efficient, and economical.'' See <a href="http://Congress.gov">Congress.gov</a> summary for S. 3580
(<a href="https://www.congress.gov/bill/117th-congress/senate-bill/3580?q=%7B%22search%22%3A%22S.+3580%22%7D&s=4&r=1">https://www.congress.gov/bill/117th-congress/senate-bill/3580?q=%7B%22search%22%3A%22S.+3580%22%7D&s=4&r=1</a>, accessed July 10,
2022).
\10\ The export-focus arguably is also supported by the
amendments to the ``Purposes'' section of the Commission's overall
authority contained in 46 U.S.C. 40101. Specifically, 46 U.S.C.
40101(4) ratified the purpose to ``promote the growth and
development of United States exports through a competitive and
efficient system for the carriage of goods by water.'' Congress
further highlighted issues related to U.S. exports and imports in
section 9 of OSRA 2022. Section 9 created 46 U.S.C. 41110 and the
requirement for ocean common carriers to provide information to the
Commission to enable the Commission to publish quarterly statistics
on total import and export tonnage and the total loaded and empty
20-foot equivalent units (TEUs) per vessel.
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1. Trade Deficit
As discussed in the NPRM, there is a long-running U.S. trade
deficit in goods (approximately $1 trillion in 2023) and an imbalance
of imports and exports moving through U.S. ports in international
trade.\11\
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\11\ United States Bureau of Economic Analysis, available at
https://www.bea.gov/news/blog/2024-02-07/2023-trade-gap-7734-
billion#:~:text=The%20U.S.%20goods%20and%20services,%2456.4%20billion
%20to%20%24288.2%20billion (last visited April 24, 2024).
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VOCCs, particularly those on the major east-west trade lanes
between the United States and Asia and the United States and Europe,
make operational decisions regarding the import and export goods they
carry based on both economic and engineering considerations. Export
loads are, on average, heavier than import loads. This means that ships
that come into U.S. ports largely laden with goods cannot safely load
the same number of laden twenty-foot equivalent units (TEUs) when
leaving the United States for foreign ports. A higher volume of laden
exports will result in a lower vessel utilization rate on the outbound
voyage from the United States, resulting in fewer containers returning
to where the
[[Page 59650]]
equipment is in highest demand. The economics of this trade imbalance
result in very different revenue returns for import and export trades.
U.S. imports feature higher value items on average and the rates that
shippers pay to move these goods are historically higher than the rates
paid to move U.S. exports. For example, the average rate of a 20-foot
dry container moving from Shanghai to the U.S. West Coast was $1,740 in
January 2019, $4,270 in January 2021, $8,130 in January 2022, $1,591 in
January 2023 and $2,845 in January 2024. The corresponding rate for a
20-foot dry container moving from the U.S. West Coast to Shanghai was
$730 in January 2019, $800 in January 2021, $1,220 in January 2022,
$978 in January 2023, and $633 in January 2024.\12\ Further, the inland
destination of import containers is often not located near export
customers, which requires equipment repositioning costs as well as the
opportunity cost of unused equipment.
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\12\ Drewry Container Freight Rate Insight, (last visited April
15, 2024).
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Prior to the pandemic, the ratio of import TEUs to export TEUs
moving through U.S. ports across all trade lanes was over 50 percent;
in April 2019 this ratio was 59 percent.\13\ While containerized
imports (measured in TEUs) increased steadily from May 2020 through
April 2022, imports tapered off in the latter half of 2022 and
containerized exports declined over the same period. There was an
import-export TEU ratio of 45 percent in April 2023. Approximately 1.8
million TEUs of all U.S. imports moved through U.S. ports in April
2023, versus 1.98 million in April 2019. Total U.S. exports fell from
1.2 million TEUs in April 2019 to 803,673 in April 2023.\14\
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\13\ PIERS, S&P Global Market Intelligence, available at <a href="https://www.spglobal.com/marketintelligence/en/mi/products/piers.html?cq_cmp=19414807564&cq_plac=&cq_net=g&cq_pos=&cq_plt=gp&utm_source=google&utm_medium=cpc&utm_campaign=Data_and_Insights_Maritime_GTA_PIERS_TCS_PIERS_Search_Google_PC1132_16&utm_term=pie">https://www.spglobal.com/marketintelligence/en/mi/products/piers.html?cq_cmp=19414807564&cq_plac=&cq_net=g&cq_pos=&cq_plt=gp&utm_source=google&utm_medium=cpc&utm_campaign=Data_and_Insights_Maritime_GTA_PIERS_TCS_PIERS_Search_Google_PC1132_16&utm_term=pie</a> (last
visited April 23, 2024).
\14\ Id.
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Trade on some specific lanes is even more imbalanced. Trade from
Asia to U.S. ports was characterized by an import/export TEU ratio of
39 percent in 2019, 36 percent in 2020, 29 percent in 2021, 28 percent
in 2022, and 33 percent in 2023. As of January 2024, that number sits
at 28 percent. There is no homogeneity among carriers, even within
trade lanes. On the Asia to United States trade lane, among the largest
carriers, the ratio of exports to imports ranged from 27 percent to 52
percent in 2019, from 23 percent to 44 percent in 2021, and from 27
percent to 57 percent in 2023. Some carriers had very stable export to
import ratios throughout the pandemic, though most saw a substantial
drop in both the ratio of exports to imports and the absolute number of
export containers moved, particularly between 2020 and 2021. This
pattern continued into the first quarter of 2022.
2. Operational Decisions
While some export markets have been affected by trade shocks, such
as China's ban on solid waste imports and other items, these trade
shocks do not fully explain the drop in total exports carried; nor do
safety concerns over ship loading. These changes can be best explained
by carrier operational decisions based on equipment availability and
differential revenues from import and export transportation.\15\ Common
carriers stated 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 up to the day of sailing. This contributes to uncertainty for
both the shippers and common carriers.
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\15\ Ana Swanson, Crunch at Ports May Mean Crisis for American
Farms, N.Y. Times (Nov. 14, 2021), <a href="https://www.nytimes.com/2021/11/14/business/economy/farm-exports-supply-chain-ports.html">https://www.nytimes.com/2021/11/14/business/economy/farm-exports-supply-chain-ports.html</a>.
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In addition to the challenges faced by exporters, there have also
been reports of restricted access to equipment and vessel capacity for
U.S. importers, particularly in the Trans-Pacific market. Access to
import vessel space was impacted by congestion, equipment availability,
and VOCC commercial decisions.\16\
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\16\ Peter S. Goodman, American Importers Accuse Shipping Giants
of Profiteering, N.Y. Times (May 4, 2022), <a href="https://www.nytimes.com/2022/05/04/business/shipping-container-shortage.html">https://www.nytimes.com/2022/05/04/business/shipping-container-shortage.html</a>.
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II. Comments
In response to the SNPRM, the Commission received 26 comments from
a variety of interested parties. This included comments from freight
forwarders, customs brokers, ocean transportation intermediaries
(OTIs), chemical manufacturers, importers and exporters and
distributors in a range of industries, vessel-operating common carriers
(VOCCs), shipper trade associations, ocean carrier and marine terminal
operator associations, ocean carrier agreements, shipping industry
associations, agricultural exporter coalitions and one federal agency.
All comments are available in the docket for this action (FMC-2023-
0010) on <a href="http://Regulations.gov">Regulations.gov</a>.
These comments are addressed in the discussion that follows.
III. Discussion of Comments
A. Sec. 542.1(a): Purpose (and Applicability of the Rule)
1. A Common Carrier's Obligation To Engage in Both Imports and Exports
Issue: One comment argued that the Commission's statement in the
NPRM that ocean common carriers should offer service in both inbound
and outbound trade is incorrect and inconsistent with Commission
precedent.\17\ The comment asserted that just because a common carrier
holds itself out as a common carrier in U.S. imports does not mean that
the carrier is obligated to act as a common carrier for U.S. exports.
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\17\ Caribbean Shipowners' Association, FMC Agreement No.
010979/Central America Discussion Agreement, FMC Agreement No.
011075 (FMC-2023-0010-0038) at 3-4.
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FMC response: In the SNPRM, the Commission stated that ``every
ocean common carrier operating in the U.S. market is presumed by the
Commission--barring the submission of further information to the
contrary--to be able to transport both exports and imports.'' \18\
Whether or not an entity is an ocean common carrier is determined on a
case-by-case basis.\19\
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\18\ 88 FR 38789, 38790-91 (emphasis added).
\19\ See e.g., Logfret, Inc., Complainant v. Kirsha, B.V.,
Leendert Johanness Bergwerff A/k/a Hans Bergwerff, and Linda Sieval,
Respondents, 2019 WL 5088014, 11-12 (``The Commission has long
relied on these three factors--holding itself out, assuming
responsibility, and transportation by water--to identify a common
carrier . . . The most essential factor is whether the carrier holds
itself out to accept cargo from whoever offers to the extent of its
ability to carry, and the other relevant factors include the variety
and type of cargo carried, number of shippers, type of solicitation
utilized, regularity of service and port coverage, responsibility of
the carrier towards the cargo, issuance of bills of lading or other
standardized contracts of carriage, and the method of establishing
and charging rates. The absence of solicitation does not determine
that a carrier is not a common carrier. Holding out can also be
demonstrated by a course of conduct. It is sufficient if an entity
`held out, by a course of conduct, that they would accept goods from
whomever offered to the extent of their ability to carry.' Moreover,
`the common carrier status depends on the nature of what the carrier
undertakes or holds itself out to undertake to the general public
rather than on the nature of the arrangements which it may make for
the performance of its undertaken duty.' Addressing the element of
holding out to provide transportation by water between the United
States and a foreign country for compensation, the Commission stated
in Worldwide Relocations (FMC 2012) that an entity may hold out to
the public `by the establishment and maintenance of tariffs, by
advertisement and solicitation, and otherwise.''' (internal
citations omitted)).
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[[Page 59651]]
2. Application of the Rule to NVOCCs
Issue: World Shipping Council (WSC) argued that 46 U.S.C.
41104(a)(3) applies to all common carriers, including NVOCCs, and that
to exempt NVOCCs from application of the Shipping Act, the Commission
would need to first provide an opportunity for a hearing in accordance
with 46 U.S.C. 40103.\20\ WSC further argued that the Commission
creates a competitive advantage for NVOCCs by exempting them from
liability under 46 U.S.C. 41104(a)(3), while at the same time creating
a situation that is ``detrimental to commerce'' by denying the NVOCC's
customer a meaningful remedy for an NVOCC's violation of
41104(a)(3).\21\ WSC stated that this would violate 46 U.S.C.
40103(a)'s standard that the Commission may only grant an exemption if
it finds that the exemption would not result in substantial reduction
in competition or be detrimental to commerce.
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\20\ FMC-2023-0010-0041 at 22.
\21\ Id. at 4, 23-24.
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WSC also asserted that it is important to include NVOCCs within the
scope of the rule as a practical matter as well as a legal matter
because NVOCCs control cargo space accommodations.\22\ WSC argued that
NVOCCs, like VOCCs, can face situations in which the space available to
them is exceeded by customer demand or is limited by safety, weight,
stability, or other operational factors. WSC said that in such a
situation, the NVOCC will have to decide which of its customers'
containers are booked on that vessel and which are not.
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\22\ Id. at 23.
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By contrast, the National Customs Brokers & Forwarders Association
of America, Inc. (NCBFAA) supported the rule's exclusion of NVOCCs.\23\
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\23\ FMC-2023-0010-0057 at 2.
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FMC response: WSC is correct that 46 U.S.C. 41104(a)(3) applies to
both VOCCs and NVOCCs. This rule, however, only applies to VOCCs. The
NPRM was limited to the OSRA 2022 amendments to 46 U.S.C. 41104(a)(10),
which is statutorily limited in scope to VOCCs because the Shipping Act
defines an ``ocean common carrier'' as a vessel-operating common
carrier.\24\ The SNPRM adhered to this exclusion, despite the expansion
of the proposal to also address 46 U.S.C. 41104(a)(3), to mirror the
scope of the affected population of the NPRM. The limitation in scope
of this rule to VOCCs, however, does not in any way limit the scope of
46 U.S.C. 41104(a)(3). NVOCCs are legally liable under 46 U.S.C.
41104(a)(3) for unreasonably refusing cargo space accommodations. For
additional discussion see I, B of this preamble discussing the scope of
this final rule.
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\24\ 87 FR 57674 at FN 4; 46 U.S.C. 40102(18).
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3. Application of the Rule to Vehicle Carriers/Ro-Ro Vessels.
Issue: World Shipping Council (WSC) asked the Commission to clarify
the applicability of the rule to VOCCs that are vehicle carriers.\25\
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\25\ FMC-2023-0010-0041 at 5, FN 5.
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FMC response: This rule does not apply to roll-on/roll-off cargo
(or to bulk cargo). The definitions of ``cargo space accommodations''
and ``vessel space accommodations'' in this rule are limited to
containerized cargo because the sorts of issues that arose around
container availability during the pandemic were not present, or at
least not present to the same extent, for roll-on/roll-off cargo or
bulk cargo vessels. In response to this comment, the FMC has revised
Sec. 542.1(a) to clearly state that part 542 is limited to
containerized cargo. While this rule defines refusal to deal cases with
regards to containerized cargo, it does not preclude refusal to deal
cases to which the statute applies, such as cases arising in the
context of roll-on/roll-off cargo or bulk cargo. See also I, B of this
preamble discussing the scope of this final rule.
B. Sec. 542.1(b): Definitions
1. ``Blank Sailing''
In response to comments on Sec. Sec. 542.1 (e)(1) and (j)(1)(i)
the Commission has added a definition of ``blank sailing'' to Sec.
542.1(b). For additional discussion regarding blank sailing, see the
discussion regarding 46 CFR 542.1(c) and the request to define ``when
available''.
2. ``Cargo Space Accommodations''
(a) Revising the definition to include language regarding whether
cargo space accommodations have been confirmed.
Issue: The National Industrial Transportation League (NITL)
recommended revising the definition of ``cargo space accommodations''
to ``space which has been negotiated for and/or confirmed aboard the
vessel . . .'' \26\ NITL argued that adding ``or confirmed'' would
broaden the definition to instances where space has not been
``negotiated'' between a carrier and a shipper in the traditional
sense--i.e., there have been no ``back and forth'' communications
between the two parties but rather involve a shipper's request for
vessel space under an existing service contract or other arrangements,
and a responsive vessel booking confirmation from the carrier.\27\ NITL
agreed with the Commission that the proposed definition includes
situations where the parties may have an existing relationship and
already mutually agreed on terms and conditions via a booking
confirmation, but that shippers sometimes purchase vessel space without
negotiating after reviewing an ocean carrier's tariff by paying the
rate quoted in the tariff. NITL argued that the proposed definition
does not explicitly contemplate such a situation.\28\
---------------------------------------------------------------------------
\26\ FMC-2023-0010-0045 at 6.
\27\ Id.
\28\ Id.
---------------------------------------------------------------------------
Similarly, the National Association of Chemical Distributors (NACD)
supported the adoption of the definition of ``cargo space
accommodation'' proposed in the SNPRM but expressed concern that this
definition only covered ``negotiated'' vessel space.\29\ NACD noted
that its members have experienced cancelled bookings and unfulfilled
agreements when space is confirmed and urged the Commission to include
confirmed vessel space in this definition.\30\
---------------------------------------------------------------------------
\29\ FMC-2023-0010-0046 at 3.
\30\ Id.
---------------------------------------------------------------------------
FMC response: In response to these comments, the Commission has
added the language ``or confirmed'' to the definition of ``cargo space
accommodations.'' Using the phrase ``or confirmed'' rather than the
phrase ``and/or confirmed'' aligns with the Federal Plain Language
Guidelines' recommendation to avoid the use of slashes to avoid
ambiguity.
(b) Trans-shipment of cargo.
Issue: BassTech International (BassTech) suggested removing the
clause ``from a vessel calling at a U.S. port'' from the last line of
the definition of ``cargo space accommodations''.\31\ BassTech argued
that the services necessary to load or unload cargo at a U.S. port are
also necessary to load and unload cargo to a vessel that might not call
on a U.S. port but from which the cargo may be trans-shipped onto a
vessel that then calls on a U.S. port.\32\
---------------------------------------------------------------------------
\31\ FMC-2023-0010-0055 at 2.
\32\ Id.
---------------------------------------------------------------------------
FMC response: The Commission declines to make this change. This
rulemaking is not intended to address the situation BassTech describes,
nor are changes to the definition of ``cargo space accommodations''
that BassTech suggests likely to resolve the matter. A future
rulemaking could address these considerations, if necessary.
(c) Proposed definition is vague and confusing.
[[Page 59652]]
Issue: Caribbean Shipowners' Association, FMC Agreement No. 010979
and Central America Discussion Agreement, FMC Agreement No. 011075 (the
``Agreements'') said that the phrase ``space which has been negotiated
for'' within the definition of ``cargo space accommodations'' is
``vague and confusing''.\33\ The comment stated that the definition of
``cargo space accommodation'' arguably includes space which was
negotiated for but for which no agreement was reached, and that this is
inconsistent with the Commission's intent to apply 46 U.S.C.
41104(a)(3) to the execution stage. The Agreements argued that the
Commission needs to clarify this definition, and that the clarification
should consider the various ways in which carriers and their customers
reach agreement: through service contract negotiations, through
automated contracting processes, and under tariff rates. As an example,
the Agreements asked whether the parties have ``negotiated for'' space
where a shipper tenders cargo to a carrier under a rate the carrier has
published in its tariff and when that rate was not agreed upon with the
shipper prior to publication.
---------------------------------------------------------------------------
\33\ FMC-2023-0010-0038 at 8-9.
---------------------------------------------------------------------------
FMC response: As noted above, in accordance with other comments,
the Commission has added the phrase ``or confirmed'' to clarify the
definition's scope. This definition remains broad enough to encompass
the various methods by which carriers and the customers reach
agreements, as this rule is intended to regulate unreasonable refusals
to deal rather than whether carriers and their customers reach
agreements by way of contract negotiations, automated contracting
processes, or under tariff rates.
(d) Whether space onboard a vessel has been agreed to when a
booking confirmation is issued.
Issue: In the SNPRM, the Commission asked for comments on whether
space onboard a vessel has been agreed to at the time of issuance of a
booking confirmation.\34\ The National Industrial Transportation League
(NITL) stated that it believes that a booking confirmation does
represent the carrier's commitment and agreement to provide access to
vessel space as reflected in the confirmation, since such confirmations
are issued after the carrier evaluates the specific request for
services.\35\ Similarly, the International Federation of Freight
Forwarders Associations (FIATA) expressed that a booking confirmation
represents the conclusion of a contract to transport the cargo, and
that the booking should be honored such that the shipper is obligated
to deliver the container and the carrier to accept it as agreed to in
the booking confirmation. FIATA noted that this would apply to NVOCCs
as well as beneficial cargo owners (BCOs), since they both rely on
VOCCs to adhere to contracted terms regarding space allocations.\36\
---------------------------------------------------------------------------
\34\ 88 FR 38789, 38803.
\35\ FMC-2023-0010-0045 at 6-7.
\36\ FMC-2023-0010-0056 at 2-3.
---------------------------------------------------------------------------
By contrast, the National Customs Brokers & Forwarders Association
of America, Inc. (NCBFAA) suggested that space accommodations are not
agreed to at the time of a booking confirmation.\37\ NCBFAA stated that
booking confirmations are merely acknowledgments from the ocean carrier
that the shipper's request for carriage has been received. NCBFAA noted
that booking confirmations typically contain language stating that the
confirmation information is subject to change due to vessel space, and
that ocean carriers are understood to take shipment bookings six to
eight weeks prior to the projected departure date, meaning that not all
details are finalized. NCBFAA stated that ocean carriers ultimately
determine whether cargo shall be loaded on a particular vessel
regardless of whether the shipper has received a booking confirmation
and that ocean carriers may ultimately revise the minimum quantity
amount by reducing the volume they will accept. Lastly, NCBFAA stated
that often shippers are provided little to no notice of these reduced
capacities and are given limited recourse. As a result, NCBFAA
concluded that space accommodations are merely requested and not
necessarily treated as agreed to by the ocean carrier at the time of
booking.
---------------------------------------------------------------------------
\37\ FMC-2023-0010-0057 at 1, 4.
---------------------------------------------------------------------------
FMC response: In the SPNRPM, the Commission requested input on
whether vessel space has been agreed to at the time of a booking
confirmation 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.\38\ As such, in these situations, the Commission presumed
that there is some evidence that negotiation for space aboard the
vessel has already occurred. In accordance with the input supplied by
NITL and FIATA, the Commission will continue to maintain the temporal
distinction between 46 U.S.C. 41104(a)(3) and 46 U.S.C. 41104(a)(10)
that the SNPRM expressed: claims under 46 U.S.C. 41104(a)(10) will
generally involve those actions occurring prior to a carrier providing
a shipper with a booking confirmation to carry that shipper's cargo.
When read in conjunction with this provision, to ``unreasonably refuse
cargo space accommodations'' under 46 U.S.C. 41104(a)(3) will involve a
set of acts that occur after a booking has been confirmed.
---------------------------------------------------------------------------
\38\ 88 FR 38789, 38803.
---------------------------------------------------------------------------
Lastly, the Commission notes that the experiences that NCBFAA
describes in its comments are the type of practices that this
regulation is meant to change within the industry in order to establish
fewer cancelled bookings and more certainty.
3. ``Documented Export Policy''
Issue: One commenter requested clarification of the phrase
``practices and procedures'' used in the proposed definition of
``documented export policy.'' \39\ The commenter said that guidance as
to the meaning of this term is needed to better understand what is
necessary to include in a documented export policy as the proposed
Sec. 541.1(j)(1) did not appear to include anything that could be
described as a ``practice or procedure.'' Another commenter suggested
that ``practices and procedures'' be replaced with ``reasonable
practices and procedures'' to emphasize that ocean common carriers may
not unreasonably refuse a class of cargo.\40\
---------------------------------------------------------------------------
\39\ Caribbean Shipowners' Association, FMC Agreement No.
010979/Central America Discussion Agreement, FMC Agreement No.
011075 (FMC-2023-0010-0038) at 9.
\40\ National Association of Chemical Distributors (FMC-2023-
0010-0046) at 4.
---------------------------------------------------------------------------
FMC response: The terms ``practices'' and ``procedures'', as used
in the definition, have their normal and ordinary meaning.\41\ The
information required by paragraph (j)(1)--pricing strategies, services
offered, strategies for equipment provision, and description of markets
served--are clearly practices and procedures as they describe an ocean
common carrier's usual way of doing business. The same is true for the
effect of blank sailings or other schedule disruptions and alternative
remedies in paragraphs (j)(1)(i) and (ii). In this final rule, the
Commission has also added a
[[Page 59653]]
requirement, in (j)(1)(ii), that the documented export policy include
the ocean common carrier's rules and practices for the designation and
use of sweeper vessels.
---------------------------------------------------------------------------
\41\ a. E.g., ``practice.'' <a href="http://Merriam-Webster.com">Merriam-Webster.com</a>. 2024. <a href="https://www.merriam-webster.com">https://www.merriam-webster.com</a> (April 1, 2024) (noun, ``a: actual
performance or application; b: a repeated or customary action; c:
the usual way of doing something''; ``practice.''; Black's Law
Dictionary (11th ed. 2019) (noun, ``4. A customary action or
procedure'').
b. E.g., ``procedure.'' <a href="http://Merriam-Webster.com">Merriam-Webster.com</a>. 2024. <a href="https://www.merriam-webster.com">https://www.merriam-webster.com</a> (April 1, 2024) (noun, ``1a: a particular
way of accomplishing something or of acting; 2a: a series of steps
followed in a definite order; 3a: a traditional or established way
of doing things'').
---------------------------------------------------------------------------
FMC declines to add the qualifier ``reasonable'' to ``practices and
procedures''. Doing so would potentially create a circular analysis as
a primary purpose of requiring ocean common carriers to have a
documented export policy is to help the agency determine whether a
particular refusal was reasonable or unreasonable.
4. ``Sweeper Vessel''
Issue: BassTech International suggested that ``voyage'' be inserted
between ``vessel'' and ``exclusively designated'' to clarify that it is
not a ship but a specific voyage of a ship that is designated as
``sweeper''.\42\ MSC Mediterranean Shipping Company (USA) Inc.\43\ and
World Shipping Council \44\ requested that FMC revise the definition of
``sweeper vessel'' to permit designated sweeper vessels to carry empty
containers so that they can also carry export cargo if they have the
capacity to do so.
---------------------------------------------------------------------------
\42\ FMC-2023-0010-0055 at 2.
\43\ FMC-2023-0010-0036 at 2, 11.
\44\ FMC-2023-0010-0041 at 21-22.
---------------------------------------------------------------------------
FMC response: The FMC declines to revise the definition of
``sweeper vessel''. The definition, however, is not intended, and
should not be used, to prevent carriage of cargo if the vessel has the
capacity to do so--even if the primary purpose of a particular voyage
may be to reposition empty containers. Rather, the definition of a
``sweeper vessel'' proposed in the SNPRM and adopted by this final rule
ensures that if a vessel carries containerized cargo, even one box of
cargo, then the default presumption is that the carriage is undertaken
in common carriage and thus subject to the unreasonable refusal to deal
or negotiate requirements of 46 U.S.C. 41104(a)(3) and (a)(10). An
ocean common carrier should not be excepted from the requirements of 46
U.S.C. 41104(a)(3) and (a)(10) just because they are carrying only a
small amount of cargo. An ocean common carrier likewise cannot avoid
complying with the provisions of this rule by unreasonably designating
a vessel as a ``sweeper vessel'' for only certain legs of an overall
trade route. If a complaint is brought, an ocean common carrier may
present relevant information to the Commission to demonstrate why
designation as a sweeper vessel in the particular case was reasonable.
5. ``Transportation Factors''
(a) Intermodal and landside considerations.
Issue: Some commenters requested that the definition of
``transportation factors'' be expanded to include intermodal
considerations, such as train service on through bills of lading \45\
and landside considerations such as port operations, rail capacity,
scheduling and performance, trucking capacity, and availability of
warehouse dock appointments.\46\
---------------------------------------------------------------------------
\45\ MSC Mediterranean Shipping Company (USA) Inc. (FMC-2023-
0010-0036) at 3 and 5; National Milk Producers Federation/U.S. Dairy
Export Council (FMC-2023-0010-0035) at 2; ZIM Integrated Shipping
Services Ltd. (FMC-2023-0010-0042) at 2.
\46\ ZIM Integrated Shipping Services Ltd. (FMC-2023-0010-0042)
at 2; see also MSC Mediterranean Shipping Company (USA) Inc. (FMC-
2023-0010-0036) at 2, 4-5.
---------------------------------------------------------------------------
FMC response: FMC declines to expand the definition to include
intermodal or landside considerations. As noted in the SNPRM,
``[g]enerally, . . . . transportation factors relate to the
characteristics of the vessel . . . .'' \47\ Because intermodal
considerations and landside considerations do not relate to vessel
characteristics, it would be inappropriate to expand the definition as
requested. FMC notes, however, that such considerations may be
considered by the Commission as ``other factors relevant in determining
whether there was a refusal'' under 46 CFR 542.1(d)(4) and (g)(4).
---------------------------------------------------------------------------
\47\ 88 FR 38789, 38797 (citing 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)).
---------------------------------------------------------------------------
(b) Character of cargo.
Issue: Caribbean Shipowners' Association, FMC Agreement No. 010979
and Central America Discussion Agreement, FMC Agreement No. 011075 (the
``Agreements'') requested that the definition of ``transportation
factors'' be expanded to include more than just vessel-related factors,
and specifically requested that the definition be amended to include
character of the cargo, competition, and cost of providing
services.\48\ As an example of why, the Agreements noted that
foodstuffs may require specialized, food-safe containers, and that
those containers may need to be de-contaminated between loads in order
to carry back-to-back food shipments.\49\ They noted that this may lead
to some carriers opting not to carry foodstuffs on the back half of a
haul in those containers.
---------------------------------------------------------------------------
\48\ FMC-2023-0010-0038 at 10.
\49\ Id.
---------------------------------------------------------------------------
FMC response: FMC declines to expand the definition beyond vessel-
related considerations. As noted in the SNPRM, ``[g]enerally, . . . .
transportation factors relate to the characteristics of the vessel . .
. . '' \50\ FMC notes, however, that such additional considerations as
those raised by the commenters may be considered by the Commission as
``other factors relevant in determining whether there was a refusal''
under 46 CFR 542.1(d)(4) and (g)(4).
---------------------------------------------------------------------------
\50\ 88 FR 38789, 38797 (citing 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)).
---------------------------------------------------------------------------
(c) Disruptions in carrier networks.
Issue: Two commenters also requested that the definition of
``transportation factors'' be amended to expressly incorporate
disruptions in carriers' networks.\51\
---------------------------------------------------------------------------
\51\ MSC Mediterranean Shipping Company (USA) Inc. (FMC-2023-
0010-0036) at 3; World Shipping Council (FMC-2023-0010-0041) at 9.
---------------------------------------------------------------------------
FMC response: FMC declines to expand the definition to include
disruptions in carriers' networks. As noted in the SNPRM,
``[g]enerally, . . . . transportation factors relate to the
characteristics of the vessel . . . . '' \52\ Because disruptions to
carriers' networks do not relate to vessel characteristics, it would be
inappropriate to expand the definition as requested. FMC notes,
however, that such considerations can be considered by the Commission
as ``other factors relevant in determining whether there was a
refusal'' under 46 CFR 542.1 (d)(4) and (g)(4).
---------------------------------------------------------------------------
\52\ 88 FR 38789, 38797 (citing 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)).
---------------------------------------------------------------------------
(d) Foreseeability.
Issue: Some commenters said that the Commission should narrow the
scope of the definition of ``transportation factors'' to differentiate
between factors that are reasonably foreseeable to the carrier under
the circumstances and those that are not reasonably foreseeable.\53\ In
particular, the Retail Industry Leaders Association (RILA) argued that
in the majority of circumstances, these factors are reasonably
foreseeable and the carrier has a responsibility to its customers to
forecast and plan for those factors. RILA stated that the regulation's
failure to distinguish between foreseeable and unforeseeable events
allows the carriers to make a general assertion, such as ``port
congestion,''
[[Page 59654]]
and advance that as a legitimate transportation factor.\54\ Other
commenters raising this issue made the same arguments.\55\ By contrast,
Caribbean Shipowners' Association, FMC Agreement No. 010979/Central
America Discussion Agreement, FMC Agreement No. 011075 (the
``Agreements'') said that the definition should include factors within
the control of the vessel operator.\56\ In particular, the Agreements
argued that there are numerous operational situations in which a
carrier makes a conscious decision to change its vessel operations in
some way, such as to omit a scheduled port of call, or to change the
order in which it calls at particular ports for reasons such as weather
or because of port closures.\57\ The Agreements argued that under
proposed Sec. 542.1(e), with the definition of ``transportation
factors'' in the SNPRM, many decisions of this type could be considered
unreasonable and that the Commission should make clear that it will
consider the impact of any such decision on other customers, ports, and
the supply chain as a whole when assessing reasonableness.\58\
---------------------------------------------------------------------------
\53\ Retail Industry Leaders Association (FMC-2023-0010-0049) at
4; American Chemistry Council/National Association of Manufacturers/
American Association of Exporters and Importers (FMC-2023-0010-0050)
at 4; International Dairy Foods Association (FMC-2023-0010-0053) at
2-3.
\54\ FMC-2023-0010-0049 at 4.
\55\ American Chemistry Council/National Association of
Manufacturers/American Association of Exporters and Importers (FMC-
2023-0010-0050) at 4; International Dairy Foods Association (FMC-
2023-0010-0053) at 2-3.
\56\ FMC-2023-0010-0038 at 11.
\57\ Id.
\58\ Id.
---------------------------------------------------------------------------
FMC response: The Commission agrees that it would be beneficial to
clarify that the definition of ``transportation factors'' is not
intended to include factors that are reasonably foreseeable by a vessel
operator and has amended the regulation accordingly. We also agree with
the statement that ``[i]f a transportation factor is reasonably
foreseeable by the carrier, then the carrier has a responsibility to
its customers to find alternative pathways to deliver the cargo and
otherwise mitigate the negative impacts of that factor.'' \59\ FMC has
modified the definition accordingly in this final rule.
---------------------------------------------------------------------------
\59\ American Chemistry Council/National Association of
Manufacturers/American Association of Exporters and Importers (FMC-
2023-0010-0050) at 4.
---------------------------------------------------------------------------
In addition, the Commission believes the Agreements are
misinterpreting the proposal. The Commission understands the ever-
changing shipping landscape and that it can be affected by a number of
items. This rule does not automatically punish a carrier for making
decisions in response to changing conditions. To the contrary, the
Commission's examination of cases involving a refusal to deal or
negotiate may examine all factors that led a carrier to make that
decision, in order to determine whether the decision was reasonable.
(e) Contractual obligations.
Issue: Caribbean Shipowners' Association, FMC Agreement No. 010979
and Central America Discussion Agreement, FMC Agreement No. 011075
asserted that the definition of ``transportation factors'' is unduly
narrow and should be amended to account for carriers' minimum service
commitments made pursuant to its service contracts.\60\
---------------------------------------------------------------------------
\60\ FMC-2023-0010-0038 at 12.
---------------------------------------------------------------------------
FMC response: Another commenter raised this concern in its input
regarding the non-binding considerations when evaluating unreasonable
conduct of Sec. 542.1(d). The Commission has addressed this issue
under that subsection.
6. ``Unreasonable''
(a) Proposed definition is too vague and subjective.
Issue: Several commenters asserted that the FMC's proposed
definition of ``unreasonable'' in the SNPRM was too vague and
subjective and were concerned that any conduct could fit into the
definition.\61\ Some of these commenters said that the agency had
failed to explain a ``rational connection between the facts found and
the choice made'' and that therefore promulgation of the proposed
definition into the CFR would be arbitrary and capricious and therefore
violate the Administrative Procedure Act (APA).\62\
---------------------------------------------------------------------------
\61\ MSC Mediterranean Shipping Company (USA) Inc. (FMC-2023-
0010-0036) at 3; The National Industrial Transportation League (FMC-
2023-0010-0045) at 5; National Association of Chemical Distributors
(FMC-2023-0010-0046) at 3; Pacific Merchant Shipping Association
(FMC-2023-0010-0054) at 1; MAERSK A/S (FMC-2023-0010-0039) at 4; CMA
CGM (America) LLC (FMC-2023-0010-0043) at 3; World Shipping Council
(FMC-2023-0010-0041) at 3; and OOCL (USA) Inc. (FMC-2023-0010-0052)
at 2.
\62\ MSC Mediterranean Shipping Company (USA) Inc. (FMC-2023-
0010-0036) at 3; National Industrial Transportation League (FMC-
2023-0010-0045) at 5; National Association of Chemical Distributors
(FMC-2023-0010-0046) at 3; Pacific Merchant Shipping Association
(FMC-2023-0010-0054) at 1; MAERSK A/S (FMC-2023-0010-0039) at 4; CMA
CGM (America) LLC (FMC-2023-0010-0043) at 3.
---------------------------------------------------------------------------
FMC response: FMC disagrees with commenters that the rule's
definition of ``unreasonable'' is too vague and therefore contrary to
law. Although commenters referenced the APA, these assertions are
better categorized as a Fifth Amendment, Due Process concern. Most of
the cases dealing with the Vagueness Doctrine construe statutes as
opposed to regulations; however, the same legal principles apply to
both.\63\ Due Process does not require mathematical precision; rather,
it requires only ``boundaries sufficiently distinct for judges and
juries fairly to administer the law''.\64\ Fair notice requirements
apply to civil statutes and regulations when penalties or drastic
sanctions are at stake; \65\ however, courts demand less precision of
statutes and regulations that impose only civil penalties because the
consequences are less severe.\66\
---------------------------------------------------------------------------
\63\ Bokum Res. Corp. v. New Mexico Water Quality Control
Comm'n, 1979-NMSC-090, 12, 93 N.M. 546, 549, 603 P.2d 285, 288.
\64\ E.g. Roth v. United States, 354 U.S. 476, 491 (1957); see
also Ward v. Rock Against Racism, 491 U.S. 781, 794 (1989)
(``perfect clarity and precise guidance have never been required
even of regulations that restrict expressive activity'').
\65\ Albert C. Lin, Refining Fair Notice Doctrine: What Notice
is Required of Civil Regulations?, 55 Baylor L. Rev. 991, 995 (Fall
2003) (internal citations omitted).
\66\ 16B Am. Jur. 2d Constitutional Law Sec. 962.
---------------------------------------------------------------------------
Paragraphs (a)(3) and (10) of 46 U.S.C. 41104 prohibit ocean common
carriers from ``unreasonably'' refusing cargo space accommodations or
refusing to deal or negotiate with respect to vessel space
accommodations in specified conditions. Neither OSRA 2022, nor previous
amendments to the Shipping Act, define the term ``unreasonable''.
Section 7 of OSRA 2022 mandated the FMC to issue a rulemaking
``defining unreasonable refusal to deal or negotiate with respect to
vessel space under [46 U.S.C. 41104(a)(10)].'' \67\ FMC was therefore
required to develop a definition of the term as part of meeting this
mandate.
---------------------------------------------------------------------------
\67\ Section 7, paragraph (d), Public Law 117-146 (June 16,
2022).
---------------------------------------------------------------------------
The power delegated by Congress to an agency generally does not
include the inherent authority to decide whether a particular statute
(or regulation) that the agency is charged with enforcing is
constitutional.\68\ Therefore, the FMC must assume as a starting
premise that the legal standard set by Congress of unreasonableness in
46 U.S.C. 41104(a) (3) and (10) is legally valid. Additionally,
``reasonable'', the inverse of ``unreasonable'', is a familiar legal
standard.\69\ Indeed, ``reasonable and
[[Page 59655]]
prudent'' standard statutes are ubiquitous throughout the United States
and have been uniformly upheld against constitutional challenges.\70\
Because the underlying conduct--unreasonable refusal--is not
unconstitutionally vague, neither is the FMC's implementing regulation
defining the term.\71\
---------------------------------------------------------------------------
\68\ See Motor and Equipment Mfrs. Ass'n, Inc. v. EPA, 627 F.2d
1095 n.42 (D.C. Cir. 1979) (``administrative agencies generally have
no jurisdiction to consider the constitutionality of their organic
statutes''); Am. Jur. 2d Admin. Law Sec. 68 (May 2023 update)
(``The power delegated by the legislature to an agency generally
does not include the inherent authority to decide whether a
particular statute or regulation that the agency is charged with
enforcing is constitutional.'').
\69\ United States v. Leal-Matos, No. CR 21-150 (SCC), 2022 WL
476094, at 1 (D.P.R. Feb. 15, 2022) (citing United States v. Hunter,
663 F.3d 1136, 1142 (10th Cir. 2011) (``[I]dentical or very similar
`reasonable and prudent' standard statutes are ubiquitous throughout
the United States and have been uniformly upheld against
constitutional challenges.''); cf. United States v. Phillipos, 849
F.3d 464, 477 (1st Cir. 2017) (holding that ``materiality'' is not
vague merely because it ``is not mathematically precise'' and noting
that it is a familiar standard in the law). Its imprecision ``simply
build[s] in needed flexibility while incorporating a comprehensible,
normative standard easily understood by the ordinary [person].''
Hunter, 663 F.3d at 1142; see also Roth v. United States, 354 U.S.
476, 491 (1957) (explaining that due process requires only
``boundaries sufficiently distinct for judges and juries fairly to
administer the law'').
\70\ United States v. Leal-Matos, No. CR 21-150 (SCC), 2022 WL
476094, at *1 (D.P.R. Feb. 15, 2022) (internal citations omitted).
\71\ Paredes v. Garland, No. CV 20-1255 (EGS), 2023 WL 8648830,
at *16 (D.D.C. Dec. 14, 2023) (``Here, the underlying conduct
proscribed by statute that rendered Mr. [ ] Paredes inadmissible was
his commission of a `crime involving moral turpitude,' . . . a term
which the Supreme Court has already analyzed and determined is not
unconstitutionally vague, . . . Accordingly, since the underlying
conduct--the grounds of inadmissibility themselves--are not
unconstitutionally vague, neither can it be determined that the
guiding standard in [the regulation] is unconstitutionally vague. .
. .'').
---------------------------------------------------------------------------
The definition of ``unreasonable'' proposed in the SNRPM, and
adopted in this final rule, is not arbitrary or capricious under the
APA. As discussed in depth in the NRPM reasonableness is necessarily a
case-by-case determination.\72\ The definition of ``unreasonable''
proposed in the SNPRM and adopted by this final rule takes that into
account, while providing an overarching definition, in line with the
purposes of OSRA 2022 and the Shipping Act, as amended, as a whole,
that is applicable in both 46 U.S.C. 41104(a)(3) and 41104(a)(10)
claims.\73\ Furthermore, FMC has provided notice and opportunity to
comment on both the original NPRM and, later, in the SNPRM, regarding
the best interpretation of the term ``unreasonable'', and how, in
future enforcement, FMC intends to evaluate unreasonable behavior with
respect to refusal of cargo space accommodations and refusal to
negotiate with respect to vessel space accommodations. The promulgation
of this rule through notice-and-comment procedures reduces vagueness
concerns by providing fair notice of the definition of ``unreasonable''
and elements for a claim under 46 U.S.C. 41104(a)(3) and 41104(a)(10).
---------------------------------------------------------------------------
\72\ 87 FR 57674, 57676-77 (Sept. 21, 2022).
\73\ 88 FR 38789, 38803-04 (June 14, 2023).
---------------------------------------------------------------------------
(b) Meaning of ``meaningfully access''.
Issue: Two commenters requested guidance on how the Commission will
interpret the phrase ``meaningfully access'' in the definition of
``unreasonable''.\74\ One of the commenters noted that clarification of
the term ``would be helpful especially in the context of the spot
market and common carriage arrangements.'' \75\
---------------------------------------------------------------------------
\74\ The National Industrial Transportation League (FMC-2023-
0010-0045) at 5; National Association of Chemical Distributors (FMC-
2023-0010-0046) at 3.
\75\ The National Industrial Transportation League (FMC-2023-
0010-0045) at 5.
---------------------------------------------------------------------------
FMC response: FMC declines to define the phrase ``meaningfully
access'' at this time. Determinations of what ``meaningfully access''
means are better decided on a case-by-case basis.
(c) Suggested changes.
Issue: The National Industrial Transportation League (NITL) and
BassTech International suggested including ``from the ocean common
carrier'' at the end of the definition of ``unreasonable'' to clarify
that a carrier cannot escape liability for an ``unreasonable refusal''
by asserting that alternative market choices and service options from
other carriers were available.\76\
---------------------------------------------------------------------------
\76\ Id. at 5; BassTech International (FMC-2023-0010-0055) at 2.
---------------------------------------------------------------------------
World Shipping Council (WSC) and MSC Mediterranean Shipping Company
(USA) Inc. (MSC) asserted that in accordance with Commission precedent,
the regulatory text should be amended to clarify that the appropriate
standard for interpreting conduct under (a)(3) and (a)(10) is one of
commercial reasonableness.\77\
---------------------------------------------------------------------------
\77\ MSC Mediterranean Shipping Company (USA) Inc. (FMC-2023-
0010-0036) at 2 and 3-4; World Shipping Council (FMC-2023-0010-0041)
at 6-7.
---------------------------------------------------------------------------
FMC response: FMC agrees with NITL and BassTech and has added the
suggested language, ``from the ocean common carrier'' at the end of the
definition. FMC declines to amend the rule, in the definition of
``unreasonable'', or elsewhere, to re-frame the standard as whether it
was ``commercially unreasonable'' as requested by WSC and MSC. As
discussed in the SNPRM, ``profit and business factors may be present in
negotiations [or execution], but these factors . . . 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.'' \78\ The
Commission re-emphasizes that the rule allows the Commission to
consider any relevant factor in determining whether a refusal to deal
or negotiate was unreasonable.
---------------------------------------------------------------------------
\78\ 88 FR 38789, 38797.
---------------------------------------------------------------------------
7. ``Vessel Space Accommodations''
FMC did not receive any comments that expressed concern regarding
the proposed definition of ``vessel space accommodations''. The agency
is implementing the definition in this final rule without change from
the SNPRM.
8. Proposed Additional Definition
Issue: The Retail Industry Leaders Association (RILA) and the
International Dairy Foods Association (IDFA) requested that FMC amend
46 CFR 542.1(b) to add a definition of ``legitimate,'' as is used in
Sec. Sec. 542.1 (d)(3) and (g)(3) when it modifies ``transportation
factors.'' \79\ According to the commenters, lack of a definition could
lead to a wide variety of interpretations and substantial
disagreements. The commenters proposed that the term be defined as ``a
transportation factor that was not reasonably foreseeable by an ocean
common carrier under the circumstances.'' \80\
---------------------------------------------------------------------------
\79\ Retail Industry Leaders Association (FMC-2023-0010-0049) at
4; International Dairy Foods Association (FMC-2023-0010-0053) at 3.
\80\ Id.
---------------------------------------------------------------------------
FMC response: The Commission declines to define ``legitimate'' as
part of this rulemaking. The agency believes that changes made to the
definition ``transportation factors'' in this final rule to address
similar concerns about foreseeability sufficiently address these
commenters' concerns.
C. Sec. 542.1(c): Elements for Claims for Unreasonable Refusal of
Cargo Space Accommodations Under 46 U.S.C. 41104(a)(3)
1. Revising the Proposed Rule To Strengthen Carrier Obligations To
Ensure That Cargo Accommodations Remain Available
Issue: The International Dairy Foods Association (IDFA) argued that
an ocean common carrier's refusal of cargo space is the crux of the
problem faced by shippers, especially small and medium-sized shippers,
because ocean carriers effectively control shippers' access to their
existing and potential customers in overseas markets.\81\ IDFA stated
that carriers' failure to honor the terms of a contract and provide the
cargo space that has been contracted for has negative repercussions for
U.S. dairy exporters who, in some cases, have been forced to absorb the
high cost of air freighting
[[Page 59656]]
their goods to their customers in order to meet their contract
deadlines, or risk losing those customers to suppliers in other
markets.\82\ To help address this issue, IDFA recommends that the
Commission strengthen the regulatory text to clarify that an ocean
carrier needs to be proactive in ensuring that cargo space is available
when it has been contracted for.\83\
---------------------------------------------------------------------------
\81\ FMC-2023-0010-0053 at 3.
\82\ Id.
\83\ Id.
---------------------------------------------------------------------------
Specifically, IDFA points to the second element for a successful
claim under Sec. 542.1(c)--namely, that ``[t]he respondent refuses or
refused cargo space accommodations when available.'' IDFA argued that
it cannot be the case that a carrier, facing reasonably foreseeable
factors, can take no action to ensure that cargo space that has been
contracted for is available to its customers, and then be allowed to
assert that cargo space accommodations are not ``available.'' IDFA
argued that such an interpretation would unfairly absolve a carrier
from its commitments to a shipper.
IDFA also argued that the carrier has exclusive control of
information regarding space availability, and that as such, it is
unfair for a private party or the Commission to bear the burden of
proving that space was available before the reasonableness discussion
under Sec. 541.2(c)(3) can begin. IDFA argued that the Commission
should revise Sec. 541.2(c) to address this issue by inserting a
provision to clarify that the Commission's determination of whether
cargo space accommodations were ``available'' for purposes of Sec.
542.1(c)(2) will not be determined solely on a carrier's assertion of
unavailability, but that the Commission will also base its
determination on: (1) whether availability issues were reasonably
foreseeable under the circumstances; and (2) if so, what actions, if
any, the carrier took to ensure that the cargo space the shipper had
contracted for would be available or, in the alternative, to find other
cargo space accommodations.
FMC response: In response to this comment and others received in
response to the SNPRM, the Commission has added language to the
definition of ``transportation factors'' in Sec. 542.1(b) to address
whether the factors at issue were reasonably foreseeable by the
carrier. The Commission has also added language to the definition of
``unreasonable'' in Sec. 542.1(b) to clarify that it means conduct
that unduly restricts the ability of shippers to meaningfully access
ocean carriage service ``from that ocean common carrier.'' The
Commission believes this language is broad enough that, if a refusal to
deal case is brought before the Commission, the Commission can examine
what actions the carrier took to ensure that cargo space the shipper
had contracted for would be available or, in the alternative, to find
other cargo space accommodations.
2. Meaning of the Phrase ``When Available'' Under 46 U.S.C. 41104(a)(3)
and 46 CFR 542.1(c)(2) in Association With Blank Sailings
Issue: Both MSC Mediterranean Shipping Company (USA) Inc., (MSC)
\84\ and World Shipping Council (WSC) \85\ requested that the
Commission provide an interpretation of the phrase ``when available''
as it appears in 46 U.S.C. 41104(a)(3) and 46 CFR 542.1(c)(2). These
commenters assert that ``when available'' is an important qualifier
because it narrows when the Commission can say a carrier has
unreasonably refused cargo space accommodations to occasions on which
the space can reasonably be considered available. These commenters also
asserted that the meaning of ``when available'' is directly relevant to
the Commission's treatment of blank sailings, which the Commission
discusses in the context of the proposed export policy requirement and
in the example in proposed Sec. 542.1(e)(1).
---------------------------------------------------------------------------
\84\ FMC-2023-0010-0036 at 2 and 9.
\85\ FMC-2023-0010-0041 at 4, 17-18.
---------------------------------------------------------------------------
Next, these commenters argue that by not addressing the meaning of
the statutory phrase ``when available,'' the Commission ignores the
point that when a vessel call is cancelled or delayed, by definition,
there is no space available on that vessel on its originally scheduled
call date. The commenters further argue that under a statutory
provision that is limited to situations in which vessel space is
available, it is logically incoherent to impose regulations that apply
to situations in which the vessel is not even present. The statutory
language indicates that Congress only intended to address the situation
that arises when a vessel is at the port and has useable space, but the
carrier unreasonably denies loading of cargo. The commenters argue that
instead of following this mandate, the Commission has ignored the
``when available'' limitation, and in so doing, has opened up an almost
limitless universe of possible Shipping Act claims never contemplated
or authorized by OSRA 2022.\86\
---------------------------------------------------------------------------
\86\ E.g., FMC-2023-0010-0036 at 9.
---------------------------------------------------------------------------
Lastly, the commenters argue that the Commission cannot ignore
``when available'' in defining what it means to be an unreasonable
refusal to provide cargo space, because, under the ``whole text'' canon
of statutory interpretation, the Commission must consider all
instructions given by Congress. Because OSRA requires the Commission to
define ``unfair or unjustly discriminatory methods'' and ``unreasonable
refusal [of] cargo space accommodations when available'' is a
subcategory of those methods, the Commission must consider ``when
available'' when defining this element.\87\
---------------------------------------------------------------------------
\87\ Id.
---------------------------------------------------------------------------
FMC response: The Commission declines to add a definition of ``when
available.'' Determinations of what ``when available'' means are
necessarily made based on the individual set of facts and circumstances
of each case. This is consistent with the Commission's case-by-case
approach, which was explained in both the NPRM and the SNPRM.
D. Sec. 542.1(d): Non-Binding Considerations When Evaluating
Unreasonable Conduct Under 46 U.S.C. 41104(a)(3)
1. Business Decisions
Issue: The SNPRM removed ``business decisions'' as an explicit
factor that the Commission would be required to consider in determining
whether there was an unreasonable refusal to deal.\88\ However, the
preamble to the SNPRM made clear that the change would still allow the
Commission to consider any relevant factor in determining whether a
refusal to deal or negotiate was unreasonable.\89\ A number of comments
advocated for reincorporating business decisions explicitly back into
the regulatory text in the final rule.\90\
---------------------------------------------------------------------------
\88\ See 87 FR 57674, 57679 NPRM-draft 46 CFR 542.1(b)(2)(ii)
(``Whether the ocean common carrier engaged in good-faith
negotiations, and made business decisions that were subsequently
applied in a fair and consistent manner'').
\89\ 88 FR 38789, 38797.
\90\ E.g., MSC Mediterranean Shipping Company (USA) Inc. (FMC-
2023-0010-0036) at 2, 4; World Shipping Council (FMC-2023-0010-0041)
at 3, 7-8.
---------------------------------------------------------------------------
MSC Mediterranean Shipping Company, (USA) Inc. (MSC) and World
Shipping Council (WSC) argued that by expressly removing business
decisions from the regulatory text, the Commission is effectively
saying, despite its assurances in the SNPRM's preamble, that business
factors will no longer be considered in evaluating reasonableness.\91\
They assert that the explanation the Commission offered for
[[Page 59657]]
this removal--that business factors are too important to be included in
the regulation--is directly contrary to the Commission's claim that all
legitimate factors will be considered.\92\ As a result, they argued
that FMC must explicitly reincorporate business decisions into the list
of factors to be considered by the Commission when adjudicating a
claim.\93\ WSC argued that removing business decisions from the
regulatory text is a conscious and systematic refusal by the Commission
to consider what it has itself identified as an important part of the
analysis, and thus constitutes a failure to consider a critical part of
the issue under the Administrative Procedure Act (APA), 5 U.S.C.
706.\94\
---------------------------------------------------------------------------
\91\ MSC Mediterranean Shipping Company (USA) Inc. (FMC-2023-
0010-0036) at 4; World Shipping Council (FMC-2023-0010-0041) at 3,
7-8.
\92\ Id.
\93\ MSC Mediterranean Shipping Company (USA) Inc. (FMC-2023-
0010-0036) at 2, 4.
\94\ FMC-2023-0010-0041 at 3.
---------------------------------------------------------------------------
Hapag-Lloyd (America) LLC (Hapag-Lloyd) argued that business
factors are necessary considerations to ensure the safety of personnel
and the operational success of a voyage.\95\ It stated that a carrier's
non-vessel-based personnel and operations can have a direct impact on
the operational success of a voyage and the safety of all personnel
involved. Hapag-Lloyd argued that customer conduct can become
disruptive in other ways, including customer harassment or misconduct
towards an ocean carrier's employees, which can have detrimental
effects on the well-being of the workforce and the overall work
environment.
---------------------------------------------------------------------------
\95\ FMC-2023-0010-0040 at 2-4.
---------------------------------------------------------------------------
Hapag-Lloyd disagrees with the Commission's reluctance to use
profitability as a factor for determining reasonableness, given that it
is a for-profit company, and profit is important to ensuring a
competitive and sustainable service. Hapag-Lloyd asserted that
customers' consistent fraudulent behavior and non-payment for services
can affect the company's bottom line, and that in such instances, an
ocean carrier should be allowed to refuse dealing with the offending
customers.\96\
---------------------------------------------------------------------------
\96\ Id. at 2-4.
---------------------------------------------------------------------------
ZIM Integrated Shipping Services Ltd. (ZIM) argued that removal of
business decisions from the factors goes against Commission regulations
and precedent. In particular, ZIM argued that Commission regulations
define ocean common carriers as ``hold[ing] [themselves] out to the
general public to provide transportation by water of passengers or
cargo between the United States and a foreign country for
compensation.'' \97\ Furthermore, citing Docking & Lease Agreement By &
Between City of Portland, ME & Scotia Princess Cruises, Ltd., ZIM
argued that the Commission recognized that decisions ``connected to a
legitimate business decision or motivated by legitimate transportation
factors'' are presumptively reasonable.\98\
---------------------------------------------------------------------------
\97\ FMC-2023-0010-0042 at 2 (citing 46 CFR 515.2(e) (emphasis
in the original)).
\98\ FMC-2023-0010-0042 at 2 (citing Docking & Lease Agreement
By & Between City of Portland, ME & Scotia Princess Cruises, Ltd.,
30 S.R.R. 377, 379 (F.M.C. 2004) (emphasis in original)).
---------------------------------------------------------------------------
In addition, ZIM argued that while the Commission's focus on the
potential for business decisions to overwhelm the rest of the factors
may be legitimate, it does not justify disregarding critical factors in
the equation or eliminate the duty to determine if a refusal to deal
was in violation of the Shipping Act. Instead, it requires the finder
of fact to consider the various operational factors within the
carrier's control, as well as factors such as profit, cargo type,
customer balance and other factors that fall within the definition of
legitimate business factors.\99\
---------------------------------------------------------------------------
\99\ FMC-2023-0010-0042 at 3.
---------------------------------------------------------------------------
CMA CGM argued that exporters and importers would be penalized by
the Commission's failure to recognize carriers' legitimate business
considerations as ``legitimate transportation factors,'' because it is
not viable for carriers to offer services to customers who present
risks such as non-payment, mis-declaring cargo, improperly packaging
hazardous cargo and/or causing ``fall down'' by placing bookings for
vessel space which they failed to fulfill. CMA CGM asserts that
continued service to customers, as well as the viability of the supply
chain, depends on carriers being able to exercise legitimate business
discretion.
OOCL argued that while it is clear that business decisions are
being removed under the premise that these would become a core factor
for carriers to refuse space or equipment to support customer's ability
to ship cargo, this bears no resemblance to the ability of any business
to effectively manage its operations. OOCL argued that business factors
will always be part of any consideration--and should remain so in any
free market economy.\100\
---------------------------------------------------------------------------
\100\ FMC-2023-0010-0052 at 2.
---------------------------------------------------------------------------
FMC response: The Commission declines to explicitly re-insert
business decisions into the regulatory text. The rule, however,
explicitly allows the Commission to consider any relevant factor in
determining whether a refusal to deal or negotiate was
unreasonable.\101\ This includes non-transportation factors, such as
business decisions (which includes profit considerations). The
Commission has made clear that information on business decisions
relevant to establishing a reasonable refusal to deal would still be
relevant to the Commission's analysis.\102\ Therefore, the Commission
has not refused to consider an important part of the analysis. The
Commission, however, must look at the totality of circumstances
relevant to each case to determine whether or not an ocean common
carrier has acted unreasonably. For this reason, the Commission has
removed business factors from being specifically listed as a
requirement the Commission must consider to something that the
Commission ``may'' consider, and is not precluded from doing so.
---------------------------------------------------------------------------
\101\ Final rule at Sec. Sec. 542.1 (d)(4) and (g)(4).
\102\ E.g., 88 FR 38789, 38797.
---------------------------------------------------------------------------
(a) Internal inconsistency within the regulation.
Issue: Caribbean Shipowners' Association, FMC Agreement No. 010979/
Central America Discussion Agreement, FMC Agreement No. 011075 (the
``Agreements'') noted that one element the rule would require to be
included in a documented export policy is pricing strategies, and that
the Commission indicated that certain business decisions should be
justified in the documented export policy.\103\ At the same time, the
Commission has proposed excluding legitimate business factors from the
reasonableness factors. The Agreements argue that these two positions
are inconsistent. In addition, the Agreements question the veracity of
the Commission's informal statement that business decisions would still
be relevant to its analysis of reasonableness is of no comfort to the
Agreements, given the position taken by the Commission in its brief in
Evergreen v. United States.\104\ There, the Agreements assert, the
Commission argued it is not required to consider factors that are not
expressly included in the regulations. As a result, the Agreements
argue that if legitimate business considerations will be considered,
the regulations should so state.\105\
---------------------------------------------------------------------------
\103\ FMC-2023-0010-0038 at 5 (citing 88 FR 38789, 38797).
\104\ FMC-2023-0010-0038 at 5 (citing Evergreen v. United
States, (D.C. Cir. 2023) Case No. 23-1052 Brief for Respondents
Federal Maritime Commission and United States, Docket. No. 2005698
at 10).
\105\ FMC-2023-0010-0038 at 5.
---------------------------------------------------------------------------
FMC response: One reason the Commission is requiring a documented
export policy is to determine whether a carrier's decisions adhere to
that policy.
[[Page 59658]]
The degree of divergence from that policy will be one factor that the
Commission may consider in a refusal to deal or negotiate case. In
doing so, the Commission is not making any statements on pricing
strategy as a business factor. As such, requiring pricing strategy to
be part of the documented export policy is consistent with removing
business factors from being explicitly stated in the rule.
The key difference is between regulations that state that the
Commission must do something, and situations in which the Commission is
not precluded from doing something.\106\ In the present matter, the
Commission has removed business factors from being specifically listed
as a requirement the Commission must consider under transportation
factors. The Commission is moving them from a position that it ``must''
consider these factors to a position that the Commission ``may''
consider them and is not precluded from doing so. As such, we find no
inconsistency in this position.
---------------------------------------------------------------------------
\106\ See Evergreen v. United States, (D.C. Cir. 2023) Case No.
23-1052 Brief for Respondents Federal Maritime Commission and United
States, Docket. No. 2005698 at 10 (comparing 46 CFR 545.5(c)(1) with
46 CFR 545.5(c)(2)(iii), 545.5(d), and 545.5(e), and citing 85 FR
29638, 29641 (May 18, 2020)).
---------------------------------------------------------------------------
(b) Parties' prior dealings as a consideration when evaluating
unreasonable conduct.
Issue: Retail Industry Leaders Association (RILA) argued that the
parties' prior course of dealings should be explicitly added to the
final rule as a consideration for the Commission in evaluating
unreasonable conduct. RILA argued that it is ``critical to evaluate
past business actions in the context of allegations to refuse the
provision of service.'' \107\ Hapag-Lloyd (America) LLC (Hapag-Lloyd)
made similar arguments against the Commission's removal of legitimate
business factors, as discussed above.\108\
---------------------------------------------------------------------------
\107\ FMC-2023-0010-0049 at 2.
\108\ FMC-2023-0010-0040 at 2-4.
---------------------------------------------------------------------------
FMC response: The Commission declines to explicitly add this factor
into the regulatory text of the final rule. However, the Commission
maintains that in the course of deciding these matters on a case-by-
case basis, the parties' prior relationship and conduct may be one of
the factors it examines in determining whether an ocean common
carrier's conduct is unreasonable. In these cases, the Commission will
continue to examine the totality of the circumstances and is not
precluded from examining the parties' prior dealings simply because
this factor is not explicitly stated as a consideration in the final
rule. As noted in the SNPRM, it would be impossible for the Commission
to predict every situation. As such, maintaining the flexibility of a
case-by-case determination in these situations remains the Commission's
best path.
(c) Cargo perishability as a nonbinding consideration in evaluating
unreasonable conduct under Sec. Sec. 542.1 (d) and (g).
Issue: The Retail Industry Leaders Association (RILA) recommends
adding whether the goods at issue are perishable as a non-binding
consideration when evaluating whether carrier conduct is unreasonable
under Sec. Sec. 542.1(d) and (g) of the final rule.\109\ This would
include goods such as food and medical products. Citing the SNPRM's
preamble, RILA noted that the Commission recognized that the goods'
perishability could be a factor in determining unreasonable conduct but
decided not to put specific time limits on these, opting instead for
analyzing them on a case-by-case basis.\110\ RILA argued that
perishability is a factor that has a bearing on the reasonableness
analysis in specific circumstances, thereby requiring expedited
decision-making on cargo movement in those cases. As a result, RILA
argued that the Commission should include perishability as a factor in
the regulatory text.
---------------------------------------------------------------------------
\109\ FMC-2023-0010-0049 at 3.
\110\ Id. (citing 88 FR 38789, 38799).
---------------------------------------------------------------------------
Similarly, the International Dairy Foods Association (IDFA) argued
that the Commission should add the consideration of whether the goods
are perishable to the list of considerations of Sec. 542.1(d), and
also cites to the same SNPRM language that RILA cited.\111\ IDFA argued
that the longer it takes for perishable goods to reach their ultimate
destination, the less valuable those goods become, as shelf life
dwindles and eventually expires. Such goods are also more expensive to
maintain in storage than most non-perishable goods. As a result, IDFA
argued that the Commission should insert perishability into the list of
non-binding considerations to be evaluated ``as appropriate'' as part
of its ``case-by-case approach'' to determining whether the conduct of
an ocean common carrier is unreasonable.
---------------------------------------------------------------------------
\111\ FMC-2023-0010-0053 at 4-5.
---------------------------------------------------------------------------
FMC response: The Commission declines to make this change.
Consistent with the approach articulated in the SNPRM, the Commission
will continue to make decisions on a case-by-case basis. The
perishability of the goods, and the time pressure that this adds to
getting the goods to their final destination, can remain one factor
that the Commission may examine in the course of deciding each case
that comes before it. This allows the Commission to retain flexibility
in its decision-making, while also examining the totality of the
circumstances in each case.
(d) Safety and the carriage of hazardous or dangerous goods.
Issue: Some VOCCs argue that the rule should account for
considerations within the vessel operator's control that also serve
legitimate purposes, such as safety. ZIM Integrated Shipping Services
(ZIM) argued that refusing to accept and carry a particular class of
Dangerous Goods because of a prior commitment to carry incompatible
cargoes or the absence of equipment necessary for those cargoes are
both elements that fall within a carrier's control. ZIM also argued
that a carrier's calculation of vessel stability or compliance with
safety regulations may require refusal to load a consignment, and that
each of these decisions should be presumed to be reasonable.\112\
Similarly, CMA CGM (America) LLC argued that it is not viable for
carriers to offer services to customers who present risks such as mis-
declaring cargo or improperly packaging hazardous cargo, because it
could result in violations of regulatory requirements and significant
safety risks for vessels, crew, and cargo. Rather, such circumstances,
present valid customer-centric considerations that are entirely
reasonable.\113\
---------------------------------------------------------------------------
\112\ FMC-2023-0010-0042 at 2.
\113\ FMC-2023-0010-0043 at 2.
---------------------------------------------------------------------------
On the other side of the argument, another commenter, whose members
produce and export a wide variety of chemicals, polymers, and related
products, asks the Commission to add the consideration of whether the
goods are properly tendered hazardous cargo to Sec. Sec. 542.1(d) and
542.1(g).\114\ These commenters argue that including this factor in the
list of non-binding considerations would be an appropriate part of the
Commission's case by-case approach to determining whether an ocean
common carrier's conduct is unreasonable, and would act as a deterrent
against carriers that unreasonably refuse to transport such cargo.
---------------------------------------------------------------------------
\114\ American Chemistry Council/National Association of
Manufacturers/American Association of Exporters and Importers (FMC-
2023-0010-0050) at 5.
---------------------------------------------------------------------------
[[Page 59659]]
FMC response: The definition of ``transportation factors'' in Sec.
542.1(b) includes vessel safety. A carrier can reasonably refuse
hazardous cargo if there is a legitimate safety concern. This includes
there being a real safety risk presented by the specific cargo load on
a particular vessel (in particular weather conditions, for example).
However, in accordance with 46 U.S.C. 41104(a) (4)(B) and (5), a
carrier cannot categorically deny all hazardous materials.
(e) Carriers must be able to meet their obligations under minimum
quantity commitments.
Issue: OOCL USA, Inc. (OOCL) argued that as part of the service
contract negotiation, the parties agree to a minimum quantity
commitment.\115\ This is a commitment from the carriers to support and
fulfill the agreement--with an understanding that the shipping party
operates under the same consideration. OOCL argued that in cases where
contracts are implemented and shipments cover the entire period of the
contracts, carriers need to ensure space is available to allow the
carrier to fulfill its obligation. To this end, carriers ensure that an
allocation is reserved to protects carriers' ability to support both
U.S. and foreign exporters. OOCL argued that this could mean that space
appears to be available when a shipper tries to book cargo, but the
carrier may not actually have that space available as part of its legal
obligation under its contractual agreement. OOCL argued that if the
carrier undermines this legal obligation it could be subject to
complaints before the Commission, as well as legal action related to
breach of contract, but that there is nothing in the SNPRM that
indicates how the Commission would classify this situation if a
complaint were raised.
---------------------------------------------------------------------------
\115\ FMC-2023-0010-0052 at 2.
---------------------------------------------------------------------------
FMC response: This rulemaking is not intended to interfere with the
parties' contractual obligations. If a minimum quantity commitment
pursuant to a service contract is a factor in a carrier's decision to
allocate vessel or cargo space, the carrier may raise that argument
before the Commission if a complaint is filed. The Commission may then
consider this factor in deciding the case. As noted in the NPRM and
SNPRM, the Commission will consider these cases on a case-by-case
basis, and we continue to adhere to that position in this final rule.
(f) Carriers must be able to consider a number of factors when
accepting cargo bookings.
Issue: OOCL argued that vessel space is not the only factor in a
carrier's decision to accept a cargo booking, and that many other
factors play a role in the decision. One example that OOCL noted is if
a customer were looking to move cargo to a port that was not directly
serviced by the ocean common carrier, there may be limitations or gaps
in services between the carrier's port of discharge and the port to
which the customer wants its cargo delivered even if the carrier has
adequate space aboard the intended vessel. OOCL also argued that most
carriers look at ``round trip'' movement of cargo to ensure effective
support of all customers in moving cargo.\116\
---------------------------------------------------------------------------
\116\ Id.
---------------------------------------------------------------------------
FMC response: This rulemaking is not intended to cover every factor
that affects the ocean borne carriage of goods. The examples of
unreasonable conduct listed in the rule are just that--examples. In
examining complaints of unreasonable refusals to deal, the Commission
will be looking at the totality of the circumstances surrounding a
complaint on a case-by-case basis.
(g) Carrier retaliation as a factor in evaluating unreasonable
conduct under Sec. Sec. 542.1(d) and (g).
Issue: In a joint comment submitted by the American Chemistry
Council (ACC), the National Association of Manufacturers (NAM), and the
American Association of Exporters and Importers (AAEI), these entities
argue that the Commission should amend Sec. Sec. 542.1(d) and (g) to
take into account whether the carrier's conduct was preceded by the
shipper raising concerns about a carrier's performance on a
contract.\117\ ACC, NAM and AAEI argue that, based on the circumstances
of a particular case, the Commission may be able to infer from the
nature and timing of a carrier's conduct that there is a link between
the shipper communicating their concerns and the alleged unreasonable
conduct by the carrier.
---------------------------------------------------------------------------
\117\ FMC-2023-0010-0050 at 4.
---------------------------------------------------------------------------
FMC response: The Commission declines to make this change. The
timing of the conduct may not, by itself, indicate that it is
unreasonable. Instead, the Commission would need to examine the timing
of the conduct in the context of the rest of the factors presented by
the case to determine whether it contributes to a determination that
the carrier's conduct was unreasonable.
2. Expressly Excluding Certain Classes of Cargo
Issue: The American Cotton Shippers Association (ACSA) argued that
the rule should expressly state that excluding certain classes or types
of cargo, such as a specific type of agricultural commodity, may
constitute an unreasonable refusal to deal or negotiate in the absence
of a demonstration that such refusal is reasonable.\118\ The ACSA
believes this should apply regardless of whether the VOCC's conduct is
at the negotiation stage or the execution stage, and that it should
apply even where other U.S. exports may be accepted by the carrier. The
ACSA also stated that the Commission should consider whether such
categorial exclusions constitute ``unfair or unjustly discriminatory
methods.''
---------------------------------------------------------------------------
\118\ FMC-2023-0010-0047 at 5.
---------------------------------------------------------------------------
FMC response: Sections 41104(a)(4)(B) and 41104(a)(5) of title 46
of the United States Code prohibit common carriers from engaging in any
unfair or unjustly discriminatory practice regarding cargo
classification. This includes refusing to carry certain classes of
goods, such as agricultural goods. Additionally, as noted in the SNPRM,
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.
E. Sec. 542.1(e): Non-Binding Examples of Unreasonable Conduct Under
46 U.S.C. 41104(a)(3)
1. Sec. 542.1(e)(1) Blank Sailings/Insufficient Notice of Scheduling
Changes
(a) Whether blank sailings are commercially reasonable.
Issue: MSC requested that the Commission provide clarification as
to whether blank sailings are commercially reasonable, and to update
the text of Sec. 542.1(c)(2) accordingly.\119\
---------------------------------------------------------------------------
\119\ FMC-2023-0010-0036 at 2.
---------------------------------------------------------------------------
FMC response: The Commission declines to make this change. While
there may be instances in which legitimate transportation factors
necessitate a blank sailing, the Commission is unwilling to make a
general finding that blank sailings will always be reasonable in every
single case. Instead, the Commission will adhere to deciding
reasonableness on the case-by-case basis put forth in both the NPRM and
SNPRM.
(b) Advance notice.
Issue: MSC Mediterranean Shipping Company (USA) Inc. (MSC) argued
that the Commission's use of lack of advance notice or insufficient
advance notice as an example of unreasonable conduct under 46 U.S.C.
41104(a)(3) is an improper attempt to rewrite service
[[Page 59660]]
contracts and should be withdrawn.\120\ MSC agrees with the
Commission's statement, in the preamble of the SNPRM, that blank
sailings are reasonable when they are based upon decreased demand, port
congestion, weather, force majeure, vessel mechanical failure, or
changes in service by a vessel sharing partner. MSC argued, however,
that the Commission's example of ``blank sailing or schedule changes
with no advance notice or with insufficient advance notice'' as an
example of unreasonable conduct under 46 U.S.C 41104(a)(3) goes against
the standard of commercial reasonableness. MSC argued that in most
cases, a service contract or a carrier's tariff offering does not
guarantee that a booking will be loaded on a particular ship or sailing
and it is therefore reasonable not to give notice that a given
container will not go on a given vessel. As a result, MSC argued that
the Commission's proposal amounts to it rewriting the service contract
or the carrier's tariff, and the Commission's rewrite is asymmetrical
because it provides strict liability against carriers but no
corresponding responsibility on the part of shippers or remedy for
carriers. Lastly, MSC argued that if the Commission implements the rule
as proposed, it must explain what provisions of the Shipping Act
authorizes it to place Shipping Act liability on a carrier whenever it
misses a scheduled port call without giving ``sufficient,'' but
undefined, notice.\121\ World Shipping Council (WSC) also objects to
this advance notice provision for the same reasons.\122\
---------------------------------------------------------------------------
\120\ Id. at 2, 10.
\121\ Id. at 10.
\122\ FMC-2023-0010-0041 at 18-19.
---------------------------------------------------------------------------
Similarly, OOCL (USA) Inc. (OOCL) argued against blank sailings
being an example of an unreasonable refusal to deal.\123\ OOCL stated
that it is inconceivable that a business does not have the ability to
make best use of its assets to ensure service continuity and capability
to supply services based on demand. OOCL further noted that there is no
definition as to what would be construed as lack of advance notice or
insufficient advance notice, and therefore argued that this provision
should be removed. OOCL also argued that even under service contract
terms, there is no guarantee made that cargo will be shipped on any
specific vessel--only that the carrier will commit to shipping its
minimum quantity commitment (MQC) within the period of the contract.
Similarly, OOCL argued that the Bill of Lading's terms also provide
that there is no guarantee that cargo will ship on any specific vessel,
and that while the company tries to ensure that all cargo is loaded
onto the intended and booked vessel, extenuating issues outside of the
carrier's control could impact that capability. Lastly, OOCL stated
that, in all cases where blank sailings are involved, OOCL always
offers alternative options to accommodate the shipper's requirements
and there is no attempt to refuse to deal.
---------------------------------------------------------------------------
\123\ FMC-2023-0010-0052 at 4-5.
---------------------------------------------------------------------------
FMC response: The Commission declines to remove lack of or
insufficient advance notice of blank sailings or schedule changes as a
non-binding example of unreasonable conduct. Contrary to OOCL's
comments, blank sailings themselves are not being deemed unreasonable
here; it is the lack of advance notice or insufficient notice that is
relevant to the reasonableness analysis. The Commission recognizes that
blank sailings or schedule changes may be reasonable depending on the
circumstances, but is of the opinion that the lack of adequate notice
cannot be justified by legitimate transportation factors. Carriers'
ability to communicate with its customers is not hindered by the type
of events that might cause a blank sailing or a schedule change.
Shippers are impacted by these changes and deserve notice when they
take place in order to make their own business decisions regarding
their cargo. The Commission also declines to specifically define how
much notice is required--that, too, depends on the circumstances,
including when the carrier itself determines that a blank sailing or
schedule change is necessary, and how much time elapses between that
determination and the notice it gives the shippers. Whether the carrier
offers alternative options to accommodate the shipper's requirements
when a blank sailing occurs, as OOCL stated it does, will be another
factor that the Commission can consider when examining a refusal to
deal case in front of it.
2. Sec. 542.1(e)(2) Vessel Capacity Limitations Not Justified by
Legitimate Transportation Factors
The Commission did not receive any negative comments on this
specific section of the rule. As such, we are adopting the language
from the SNPRM in the final rule.
3. Sec. 542.1(e)(3) Alerting Shippers With Confirmed Bookings
Issue: Caribbean Shipowners' Association, FMC Agreement No. 010979/
Central America Discussion Agreement, FMC Agreement No. 011075 (the
``Agreements'') suggested that the Commission clarify what types of
events VOCCs need to notify or alert shippers with confirmed bookings
of in 46 CFR 542.1(e)(3).\124\ In addition, the National Industrial
Transportation League (NITL) suggested that Commission add the word
``timely'' before the phrase ``alert or notify shippers.'' \125\ NITL
argued that this change is necessary because shippers need adequate
notice from ocean carriers so they can ship on time, and that giving a
shipper a booking confirmation one day before the vessel sails is akin
to a constructive refusal to provide cargo space.\126\
---------------------------------------------------------------------------
\124\ FMC-2023-0010-0038 at 12-13.
\125\ FMC-2023-0010-0045 at 9.
\126\ Id.
---------------------------------------------------------------------------
FMC response: The Commission has added language to 46 CFR
541.1(e)(3) to clarify the paragraph. This provision now reads:
``failing to alert or notify shippers with confirmed bookings of any
other changes to the sailing that will affect when their cargo arrives
at its destination port.'' The Commission declines to add the word
``timely,'' as what it means to be ``timely'' can vary according to
circumstances and must be evaluated on a case-by-case basis. Paragraph
(e)(3) is a non-binding example. Exclusion of the word ``timely'' does
not preclude complainants from presenting evidence that notice was not
adequate, including for reasons of timing.
4. Sec. 542.1(e)(4) Insufficient Loading Time
(a) Removing insufficient time for vessel loading as an example of
unreasonable ocean carrier conduct from the rule.
Issue: MSC Mediterranean Shipping Company (USA) Inc. (MSC) argued
that the Commission's use of scheduling insufficient time for vessel
loading so that cargo is constructively refused as a non-binding
example of unreasonable conduct in Sec. 542.1(e)(4) is improperly
directed at ocean carriers. MSC argued that vessel loading times are
controlled by maritime terminal operations and ports, not ocean
carriers, and that as such, the Commission should withdraw this
provision.\127\ Similarly, OOCL (USA) Inc. (OOCL) argued that
scheduling of ``insufficient time'' for vessel loading, is not a valid
carrier issue. OOCL stated that in almost all cases where vessels do
not allow ``sufficient'' time, it is because of port operations or port
requirements that determine when vessels can berth and when they need
to vacate that berth. OOCL argued that carriers do not purposely depart
early and leave cargo
[[Page 59661]]
behind, and that when this happens it is because the port has asked the
vessel operator to leave. As such, OOCL also requested that this
provision be removed.\128\ World Shipping Council (WSC) made the same
arguments regarding this provision.\129\
---------------------------------------------------------------------------
\127\ FMC-2023-0010-0036 at 3.
\128\ FMC-2023-0010-0052 at 5.
\129\ FMC-2023-0010-0041 at 19.
---------------------------------------------------------------------------
FMC response: The Commission declines to remove this provision from
the rule. While factors such as port congestion may play a role in when
a vessel gets a berth and can begin loading and unloading containers,
it is the VOCC that determines its initial schedule of which ports it
will visit on which days. Thus, the VOCC sets a certain amount of time
in each port, a decision that contributes to whether there is
sufficient time to load cargo onto the vessel. As such, it remains the
VOCC's responsibility in the first instance to schedule sufficient time
to load cargo. Such considerations can be reviewed by the Commission as
``other factors relevant in determining whether there was a refusal''
under 46 CFR 542.1(d)(4) and (g)(4).
(b) Distinguishing between vessel loading time and cargo loading
time.
Issue: The National Industrial Transportation League (NITL) argued
that the Commission should replace the words ``vessel loading'' in
Sec. 542.1(e)(4) with ``container loading and tender of cargo.'' \130\
NITL expressed concern that this subsection was focused on vessel
loading, as vessel loading is what occurs when the ocean carrier loads
the vessel. According to NITL, container loading is what happens when
shippers load the container at their facility and then tender the
container to the carrier. Shippers need sufficient time to load and
transport containers to the port where they will be loaded onto the
vessels.
---------------------------------------------------------------------------
\130\ FMC-2023-0010-0045 at 10.
---------------------------------------------------------------------------
Similarly, BassTech International (BassTech) argued that Sec.
542.1(e)(4) should be amended by inserting ``cargo tendering or''
between ``time for'' and ``vessel loading.'' BassTech argued that when
shippers refer to the impediment of ``inadequate loading times,'' they
are usually referring to the limited time provided by the ocean common
carriers for the shipper to collect an empty container, bring it to
their facility to load the container with their cargo, and then tender
the laden container to the carrier.\131\ BassTech noted that the
``insufficient time'' of Sec. 542.1(e)(4) is meant to address the
problematic timelines surrounding cargo receiving dates that inhibit
shippers from tendering laden containers to the carriers, and suggests
the additional language at issue to identify cargo loading time as
distinct from vessel loading time.
---------------------------------------------------------------------------
\131\ FMC-2023-0010-0055 at 2.
---------------------------------------------------------------------------
FMC response: In accordance with these comments, the Commission has
added the phrase ``cargo tendering'' to Sec. 542.1(e)(4), such that
this subsection will now read ``scheduling insufficient time for cargo
tendering or vessel loading so that cargo is constructively refused.''
As BassTech noted, Sec. 542.1(e) focuses on conduct by the VOCC that
is unreasonable with respect to cargo accommodations and Sec.
542.1(e)(4) looks to ensure sufficient time for loading laden
containers onto the vessel. Adding the phrase ``cargo tendering,''
while also retaining the phrase ``vessel loading'', ensures sufficient
time for shippers to load and return their containers to the vessel for
loading instead of limiting this provision to circumstances where the
carrier may be the one loading the cargo onto the vessel.
5. Sec. 542.1(e)(5) Inaccurate or Unreliable Vessel Information
The Retail Industry Leaders Association (RILA) and the
International Dairy Foods Association (IDFA) supported the inclusion of
the provision of inaccurate or unreliable vessel information as a non-
binding example of unreasonable conduct under 46 U.S.C. 41104(a)(3).
Both commenters noted that the American Society for Testing and
Materials (ASTM International) and other organizations who develop
standards are working to develop standards on the sharing and use of
digital information in the supply chain. RILA also noted the related
work of Commissioner Bentzel with the Maritime Transportation Data
Initiative.\132\
---------------------------------------------------------------------------
\132\ RILA (FMC-2023-0010-0049) at 4; IDFA (FMC-2023-0010-0053)
at 5.
---------------------------------------------------------------------------
The Commission has decided to retain this factor as part of its
analysis.
6. Sec. 542.1(e)(6) Categorical or Systematic Exclusion of Exports
Issue: The International Dairy Foods Association (IDFA) supported
the inclusion of the concept of systematically excluding exports in
providing cargo space accommodations section. IDFA said that in its
experience, ``de facto exclusionary tactics are more likely to be
employed by carriers than employing a categorical prohibition, which
would be easier to spot.'' \133\
---------------------------------------------------------------------------
\133\ FMC-2023-0010-0053 at 5.
---------------------------------------------------------------------------
Conversely, CMA CGM argued that carriers must have discretion to
carry, or not carry, any particular product.\134\ The company argued
that it should not be required to export categories of goods that go
against its policies, and that it should be able to exercise
independent business discretion to refuse certain shipments without
concerns that these decisions will be deemed unreasonable.
---------------------------------------------------------------------------
\134\ FMC-2023-0010-0043 at 2-3.
---------------------------------------------------------------------------
FMC response: Common carriers are prohibited from unfairly or
unjustly discriminating against a commodity group or type of shipment
under 46 U.S.C. 41104(a)(4)(B) and (a)(5). The example in subsection
(e)(6) was not intended to mirror the prohibitions in these provisions.
Rather, the example is intended to reference the wholesale refusal by a
VOCC of all exports. This confusion appears to result from our use of
``categorical'' in the example. Our use of the term in this example was
not intended to refer to categories of commodities, but rather to the
de facto, absolute exclusion of all exports by a VOCC. In response to
this question, FMC has revised the example to read: ``The de facto,
absolute, or systematic exclusion of exports in providing cargo space
accommodations.'' The Commission notes that it may consider an unfair
or unjustly discriminatory practice, such as the unfair or unjust
discrimination against a commodity group, as ``any other factor'' in
accordance with 46 CFR 542.1(d)(4) and (g)(4) in determining whether
there was an unreasonable refusal under 46 U.S.C. 41104(a)(3) or
(a)(10).
7. Sec. 542.1(e)(7) Any Other Conduct the Commission Finds
Unreasonable
Issue: Caribbean Shipowners' Association, FMC Agreement No. 010979
and Central America Discussion Agreement, FMC Agreement No. 011075 (the
Agreements'') objected to the proposed Sec. 542.1(e)(7) because it is
not a true example.\135\ They said that it would instead be preferrable
to state the intent that this is a non-exhaustive list more
explicitly.\136\
---------------------------------------------------------------------------
\135\ FMC-2023-0010-0038 at 12; information on the Maritime
Transportation Data Initiative is available at <a href="https://www.fmc.gov/fmc-maritime-transportation-data-initiative/">https://www.fmc.gov/fmc-maritime-transportation-data-initiative/</a>.
\136\ FMC-2023-0010-0038 at 12.
---------------------------------------------------------------------------
FMC response: In response to these comments, the Commission has
removed proposed Sec. 542.1(e)(7) from the final rule. The commenter
correctly pointed out that this subsection of the regulatory text did
not actually provide an example of unreasonable conduct. No additional
revisions were made as the header for the paragraph clearly designates
these as ``non-binding examples''.
[[Page 59662]]
8. Requests for Additional Examples
Issue: The International Dairy Foods Association (IDFA) proposed
the inclusion of an additional example in paragraph (e): ``Not
providing contracted-for cargo space accommodations where a shipper has
raised frequent and urgent concerns with the carrier's documented
failure to perform on the contract and/or threatened to litigate
against the carrier for alleged non-performance and/or switch service
providers due to the carrier's failure to perform.'' \137\ According to
the commenter, it is unlikely that there will be future situations
where retaliatory conduct is documented by carriers, so the Commission
needs to focus on retaliation through the lens of unreasonable conduct
``whether one can prove retaliation through incriminating email traffic
or not''.\138\
---------------------------------------------------------------------------
\137\ FMC-2023-0010-0053 at 6.
\138\ Id.
---------------------------------------------------------------------------
FMC response: FMC declines to add this as a specific example in the
regulation. However, we do note that this is an important issue and is
something that can be considered by the agency under Sec. 542.1(d)(4).
FMC emphasizes the lists of examples in the rules are non-binding
examples.
F. Sec. 542.1(f): Elements for Claims Under 46 U.S.C. 41104(a)(10)
In response to the SNPRM, the Commission received no comments
regarding Sec. 541.2(f), which sets out the elements necessary to
establish a successful private party or enforcement claim under 46
U.S.C. 41104(a)(10). These elements will be included in the final rule
as proposed.
G. Sec. 542.1(g): Non-Binding Considerations When Evaluating
Unreasonable Conduct Under 46 U.S.C. 41104(a)(10)
Many of the comments the Commission received regarding the non-
binding considerations when evaluating unreasonable conduct explicitly
stated that they applied to both sections 542.1(d) and 541.2(g). The
comments that did not cite to either section contained arguments
applicable to both sections. As a result, all of these comments are
analyzed above, in the section for Sec. 542.1(d).
H. Sec. 542.1(h): Non-Binding Examples of Unreasonable Conduct Under
46 U.S.C. 41104(a)(10)
1. Sec. 542.1(h)(1): Quotes Above Current Market Rates
(a) Commission's authority to promulgate this requirement.
Issue: Mediterranean Shipping Company (USA) Inc. (MSC) and World
Shipping Council (WSC) argue that the Commission has no authority to
regulate prices, and the proposal to use ``so far above current market
rates'' as a standard is vague and unworkable.\139\ OOCL (USA) Inc.
(OOCL) also argued that the Commission does not regulate rates, and
that this provision eliminates the carrier's and shipper's ability to
negotiate, which is part of the basis of a free market economy.\140\
OOCL further argued that this provision is vague and provides no basis
to determine whether the quoted rates exceed the required rate from the
customer or the market, which is problematic in a market where rates
fluctuate wildly due to external forces.\141\ The Pacific Merchant
Shipping Association (PMSA) also argued that the Commission has no
authority to set rates or determine whether a rate is ``so high'' that
it is unreasonable.\142\ PMSA further noted that the Commission has not
explained how it would apply any such analysis, which it is required to
do.\143\
---------------------------------------------------------------------------
\139\ MSC Mediterranean Shipping Company (USA) Inc. (FMC-2023-
0010-0036) at 3, 10-11; World Shipping Council (FMC-2023-0010-0041)
at 19-20.
\140\ FMC-2023-0010-0052 at 6.
\141\ Id.
\142\ FMC-2023-0010-0054 at 2.
\143\ Id.
---------------------------------------------------------------------------
FMC response: In response, the Commission emphasizes that this is a
non-binding example rather than a bright line rule. In addition, the
Commission is not regulating or setting specific rates with this
provision. It is simply providing a comparison point between rates a
carrier offers in negotiation, and rates that the rest of the market is
charging for that space. Contrary to the commenters' assertions, the
Commission is letting the market work here because it is allowing the
market to set the rates and is then examining whether the rates that
any carrier puts forth in negotiations is so far above those market
rates as to be unreasonable. While the Commission declines to set a
bright line to determine how far above the market rate is unreasonable,
it disagrees with the commenters that this makes for a vague rule. Some
leeway in prices offered during negotiations is permissible and even
encouraged by the market itself. As such, the Commission will retain
this factor as written in the final rule. With regards to the
assertions of vagueness, see the discussion concerning the definition
of ``unreasonable''.
(b) Shipper's significantly below-market rate proposal.
Issue: Caribbean Shipowners' Association, FMC Agreement No. 010979/
Central America Discussion Agreement, FMC Agreement No. 011075 argued
that proposed Sec. 542.1(h)(1) should be revised to make clear that a
carrier does not engage in unreasonable conduct when it rejects a
customer proposal that is so low that it cannot be considered a real
offer or an attempt at good faith negotiations.\144\
---------------------------------------------------------------------------
\144\ FMC-2023-0010-0038 at 13.
---------------------------------------------------------------------------
FMC response: The FMC declines to make the requested change. In
parallel to the language of 46 U.S.C. 41104, the focus on the
definition of reasonableness in this rule, and the related non-binding
examples, is on the conduct of the ocean common carrier, rather than
the conduct of, or impact on, the shipper. However, the rule does not
prohibit the Commission from considering any relevant evidence.
2. Sec. 542.1(h)(2): Categorically or Systematically Excluding Exports
The Commission received no comments on this regulatory text. As
such, the Commission adopts this language without further changes in
the final rule. However, for the same reasons discussed in relation to
subsection (e)(6), the Commission has revised the example to read:
``The de facto, absolute, or systematic exclusion of exports in
providing vessel space accommodations.''
3. Sec. 542.1(h)(3): Any Other Unreasonable Conduct
Issue: Caribbean Shipowners' Association, FMC Agreement No. 010979
and Central America Discussion Agreement, FMC Agreement No. 011075 (the
``Agreements'') objected to the proposed Sec. 542.1(h)(3) because it
is not a true example.\145\ They said that it would instead be
preferrable to state the intent that this is a non-exhaustive list more
explicitly.
---------------------------------------------------------------------------
\145\ Id. at 12.
---------------------------------------------------------------------------
FMC response: In response to this comment the Commission has
removed proposed Sec. 542.1(h)(3) from the final rule. The commenter
correctly pointed out that this subsection of the regulatory text did
not actually provide an example. No additional revisions were made as
the header for the paragraph clearly designates these as ``non-binding
examples''.
[[Page 59663]]
I. Sec. 542.1(i): Use of Sweeper Vessels
Issue: MSC Mediterranean Shipping Company USA, Inc. (MSC) and World
Shipping Council (WSC) requested that the Commission amend the
regulatory text of paragraph (i) to include the SNPRM preamble's
language that nothing in the rule is meant to restrict the ability of
ocean common carriers to reposition empty containers.\146\
---------------------------------------------------------------------------
\146\ MSC Mediterranean Shipping Company USA, Inc. (FMC-2023-
0010-0036 at 2-3); World Shipping Council (FMC-2023-0010-0041 at
22); 88 FR 38789, 38790 (``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
repositing of empty containers can include the use of sweeper
vessel.'').
---------------------------------------------------------------------------
FMC response: FMC has amended the regulatory text as requested.
However, as noted in the discussion above regarding the definition of
``sweeper vessel,'' the Commission's position is that an ocean common
carrier carrying even a single container of cargo should meet the same
standards under 46 U.S.C. 41104(a) (3) and (10) as a vessel fully
loaded with containerized cargo. Therefore, the Commission has also
amended the regulatory text to make it clear that the designation of a
sweeper is subject to Commission review to determine whether the
designation results in an unreasonable refusal of ocean carriage
services.
J. Sec. 542.1(j): Documented Export Policy
1. Confidentiality
Issue: The Commission stated in the SNPRM that documented export
policies filed by ocean common carriers would remain confidential.\147\
Some commenters argued that instead these reports should be made
public, either in whole or in a redacted version.\148\ Other commenters
stated that if documented export policies are required, the regulations
should state expressly that such policies are confidential and exempt
from disclosure under the Freedom of Information Act.\149\
---------------------------------------------------------------------------
\147\ 88 FR 38789, 38805 (June 14, 2023).
\148\ American Chemistry Council/National Association of
Manufacturers/American Association of Exporters and Importers (FMC-
2023-0010-0050) at 6; The National Industrial Transportation League
(FMC-2023-0010-0045) at 7; Retail Industry Leaders Association (FMC-
2023-0010-0049) at 6; U.S. Dairy Export Council/National Milk
Producers Federation (FMC-2023-0010-0035) at 4.
\149\ Caribbean Shipowners' Association, FMC Agreement No.
010979/Central America Discussion Agreement, FMC Agreement No.
011075 (FMC-2023-0010-0038) at 6; see also MSC Mediterranean
Shipping Company (USA) Inc. (FMC-2023-0010-0036) at 4.
---------------------------------------------------------------------------
FMC response: The documented export policies filed with the
Commission shall remain confidential in accordance with 46 U.S.C.
40306. With certain limited exceptions, section 40306 prohibits the
disclosure of information and documents filed with the FMC. In response
to comments received, the Commission has amended the regulatory text to
clearly state that documented export policies and information therein
is not disclosable, in whole or in part, including in response to
requests under the Freedom of Information Act. This provision is
located at 46 CFR 542.2(j)(3) in the final rule. As noted in the SNPRM,
aggregate data may be provided by the Commission in annual reports
submitted to Congress or compiled for other purposes but will not
reveal confidential information provided by or about individual
carriers.
2. The Commission's Legal Authority To Impose the Obligation
Issue: Several commenters asserted that there is no authority in
OSRA 2022 or elsewhere in the Shipping Act to impose a requirement on
ocean common carriers to file a documented export policy with the FMC,
or for the FMC to use such a document as a factor in determining
whether an ocean common carrier has acted unreasonably.\150\ Commenters
asserted that 46 U.S.C. 40104 only provides FMC authority to collect
information or an accounting of events that have already taken place
and does not authorize ``the Commission to direct the development and
submission of a forward-looking policy or strategy aiming document.''
\151\
---------------------------------------------------------------------------
\150\ MSC Mediterranean Shipping Company (USA) Inc. (FMC-2023-
0010-0036) at 3, 5-8; ZIM American Integrated Shipping Services Co.
LLC (FMC-2023-0010-0042) 3-4; World Shipping Council (FMC-2023-0010-
0041) at 3, 10-11.
\151\ Id.
---------------------------------------------------------------------------
Commenters also asserted that the FMC's active involvement in the
day to day operations of ocean carriers as contemplated by the rule
contravenes the Shipping Act's stated purpose to establish a non-
discriminatory regulatory process for common carriage of goods by water
in the foreign commerce of the United Sates with a minimum of
government intervention and regulatory costs (46 U.S.C. 40101(1)).\152\
---------------------------------------------------------------------------
\152\ Id.
---------------------------------------------------------------------------
World Shipping Council (WSC) asserted that the proposed requirement
for ocean common carriers to file documented export policies was in
violation of the Paperwork Reduction Act (PRA), 44 U.S.C. 3501-3521,
``because the Commission has failed to show how its proposal to require
an export policy will have any utility to the agency, either in
benchmarking unreasonable action, or for use in litigation.'' \153\
---------------------------------------------------------------------------
\153\ World Shipping Council (FMC-2023-0010-0041) at 16; see
also Mediterranean Shipping Company (USA) Inc. (MSC) (FMC-2023-0010-
0036) at 3 (arguing that the use of confidential export policy in
litigation has no precedential value for carriers, shippers, or
finders of fact because the basis of the decision will be
confidential).
---------------------------------------------------------------------------
Finally, one commenter argued that the regulation, as proposed, is
too broad and should be more narrowly tailored to reduce unnecessary
burden.\154\ This commenter argued that not all carriers should be
required to file a documented export policy because concerns about
refusals to provide export cargo space does not apply to all trade
routes.\155\
---------------------------------------------------------------------------
\154\ Caribbean Shipowners' Association, FMC Agreement No.
010979/Central America Discussion Agreement, FMC Agreement No.
011075 (FMC-2023-0010-0038) at 2-3.
\155\ Id.
---------------------------------------------------------------------------
FMC response: Section 40104 of title 46 of the United States Code
provides the FMC with clear authority to require ocean common carriers
to file documented export policies as directed by this final rule. The
statute unambiguously states on its face that the agency may require a
common carrier to file with the Commission a periodical, special
report, or memorandum of facts and transactions related to the business
of the common carrier.\156\ An ocean common carrier's general policies
concerning their export operations are facts related to the business of
the common carrier. Contrary to the commenters' assertions, the statute
does not restrict the Commission to only gathering information about
past actions. In accordance with 46 U.S.C. 40104(a)(3), this rule is
limited in scope to fulfill its objective and provides a reasonable
period for respondents to respond based upon their capabilities and
scope of the order. In accordance with 44 U.S.C. 3508 and implementing
guidance from the Office of Management and Budget, the Commission has
explained the purpose, need, and practical utility of the collection of
this information. These reports are an important part of monitoring the
industry for unreasonable behavior vis-[aacute]-vis exports. The
information provided will help the Commission determine whether an
ocean common carrier's conduct in a specific matter aligns with their
general policies and whether the ocean common carrier thus acted
reasonably. Requiring common carriers to submit this information does
not involve the Commission in the day-to-day operations of ocean common
carriers
[[Page 59664]]
and does not impose unnecessary or unreasonable burdens on carriers.
---------------------------------------------------------------------------
\156\ 46 U.S.C. 40104(a)(1).
---------------------------------------------------------------------------
The commenter is correct that not all trade routes currently
demonstrate the same concerns about refusals to provide export services
on vessels departing from the United States. However, the shipping
industry is a dynamic one that is constantly responding to changing
conditions; as such, it is reasonable to assume that these conditions,
which are present today on some routes, may present on different trade
routes in the future. In drafting this rule, the Commission is
considering not only present conditions, but those that may
realistically develop in the future. Having this information from all
carriers allows the Commission to monitor all trade routes and engage
in enforcement actions as issues are identified in a particular route.
3. Import Policy
Issue: Two commenters suggested that the Commission should also
require a documented import policy as import policies cannot be de-
coupled from export policies.\157\ In a similar vein, another commenter
noted that the ocean transportation system is one continuous loop, with
no separate import and export systems.\158\ Other commenters, while
they do not advocate for an import policy, would not object to the
requirement.\159\
---------------------------------------------------------------------------
\157\ Retail Industry Leaders Association (FMC-2023-0010-0049)
at 5; North American Meat Institute (FMC-2023-0010-0037) at 2-3.
\158\ MSC Mediterranean Shipping Company (USA) Inc. (FMC-2023-
0010-0036) at 6.
\159\ American Chemistry Council/National Association of
Manufacturers/American Association of Exporters and Importers (FMC-
2023-0010-0050) at 7.
---------------------------------------------------------------------------
FMC response: At this time, the Commission declines to mandate that
ocean common carriers file a documented import policy. While there have
been reports of restricted access to equipment and vessel capacity for
U.S. importers, particularly in the Trans-Pacific market, 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.\160\ As noted in the SNPRM, if an ocean common
carrier wants to provide an import policy to help establish how a
refusal is reasonable, the Commission would consider that
information.\161\
---------------------------------------------------------------------------
\160\ 88 FR 38789, 38790 and 38796.
\161\ 88 FR 38789, 38796.
---------------------------------------------------------------------------
4. Miscellaneous Concerns
(a) Deviating from a Documented Export Policy.
Issue: One commenter said that if an export policy is required to
be filed, the Commission should explicitly recognize that a deviation
from that policy is not necessarily unreasonable or a violation of the
Shipping Act.\162\ The mere following of a documented export policy by
a carrier should not justify the carrier's refusal to accept cargo on a
vessel.\163\ Another commenter said that the text should be amended to
add ``with deviations as may be appropriate'' to enable efficient
movement of export cargo.\164\
---------------------------------------------------------------------------
\162\ Caribbean Shipowners' Association, FMC Agreement No.
010979/Central America Discussion Agreement, FMC Agreement No.
011075 (FMC-2023-0010-0038) at 6.
\163\ The National Industrial Transportation League (FMC-2023-
0010-0045) at 9.
\164\ BassTech International (FMC-2023-0010-0055) at 2.
---------------------------------------------------------------------------
FMC response: In response to these comments, the Commission has
amended Sec. 542.1(j) to state that the ocean common carrier must file
the document with the Commission, not that the ocean common carrier
must follow the document. This change aligns with the Commission's
intent, as articulated in Sec. 542.1 (d)(1) and (g)(1) that whether
the ocean common carrier followed a documented export policy is one,
non-binding consideration that the Commission may consider in
determining whether unreasonable conduct has occurred.
(b) Timely movement of cargo.
Issue: One commenter suggested that the text of the export policy
considerations could be clarified by requiring ``the timely and
efficient movement of export cargo.'' \165\
---------------------------------------------------------------------------
\165\ The National Industrial Transportation League (FMC-2023-
0010-0045) at 9.
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FMC response: The Commission agrees and has incorporated the
suggestion into the regulatory text. The original proposed language was
written to mirror 46 U.S.C. 40104, which includes the descriptor
``efficient'', but not ``timely''. While section 40104 does not include
``timely'', its inclusion here comports with the goals of the OSRA 2022
generally. Many exports, particularly agricultural exports, must be
loaded and transported to their destinations in a timely manner in
order for exporters to fulfill contract obligations.
(c) Stagnant document in a dynamic market.
Issue: Some commenters expressed concern with the documented export
policy being a stagnant document when the commercial reality is that an
ocean common carrier's export strategy is constantly evolving,
adjusting to market realities. Commenters also said that being bound to
a stagnant policy would stifle innovation and negatively impact
customers.\166\
---------------------------------------------------------------------------
\166\ Hapag-Lloyd (America) LLC (FMC-2023-0010-0040) at 5; CMA
CGM (America) LLC (FMC-2023-0010-0043) at 1-2.
---------------------------------------------------------------------------
FMC response: The Commission acknowledged in the SNPRM that export
strategies are constantly evolving as the nature of international trade
changes.\167\ For this reason the rule 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.\168\ The documented export strategy is intended to be a
long-term document,\169\ and therefore the Commission is only requiring
that it be filed once a year. If an ocean common carrier, however,
believes that it is necessary to do so, they may file an amended or
revised report anytime throughout the year. The Commission may also
revisit, in the future, whether it should require documented export
policy reports to be filed more frequently.
---------------------------------------------------------------------------
\167\ 88 FR 38789, 38796.
\168\ Id.
\169\ Id.
---------------------------------------------------------------------------
(d) Narrowly tailoring the requirements of the documented export
policy.
Issue: One commenter said that Sec. 542.1(j)(1) appears to be
overly broad, requiring information not essential to implementation of
the rule.\170\
---------------------------------------------------------------------------
\170\ Agriculture Transportation Coalition (FMC-2023-0010-0048)
at 4.
---------------------------------------------------------------------------
FMC response: FMC disagrees with the commenter's assertion that the
requirements in Sec. 542.1(j)(1) are overly broad. FMC has determined,
based on its subject-matter expertise and role as regulator, the key
information necessary for the Commission to have to monitor the
industry for unreasonable conduct. According to comments received on
the NPRM, many of the elements of the documented export policy are
elements that ocean common carriers already include or monitor as part
of export strategies. As such, providing this information to the
Commission should not pose an unreasonable burden on VOCCs.
Furthermore, as noted elsewhere in this preamble, one reason the
Commission is requiring the documented export policy is to determine
the extent to which ocean common carriers comply with their own
policies. To the extent that a VOCC's conduct diverges from its own
policies, the Commission may take that into account in determining
whether an unreasonable refusal has taken place.
[[Page 59665]]
5. Suggested Changes to the Text Wording
(a) Clarifying the export policy to show that it covers exports
from the United States.
Issue: One commenter argued that the export policy requirement
should add ``U.S.'' to show that the document is not intended to
include a carrier's export policies and practices from other countries
to the United States.\171\
---------------------------------------------------------------------------
\171\ BassTech International (FMC-2023-0010-0055) at 2.
---------------------------------------------------------------------------
FMC response: The Commission declines to adopt this change. The
definition of documented export policy in paragraph (b) makes clear
that this document pertains to practices and procedures for U.S.
outbound services.
(b) Requiring the suggested elements of the documented export
policy.
Issue: The American Chemistry Council, National Association of
Manufacturers and American Association of Exporters and Importers
argued that the regulatory text should be revised to require carriers
to submit the information contained in the proposed Sec.
542.1(j)(1)(i)-(ii).\172\
---------------------------------------------------------------------------
\172\ FMC-2023-0010-0050 at 6.
---------------------------------------------------------------------------
FMC response: The Commission declines to make this change. As
discussed in the SNPRM, the Commission is aware that export strategies
are constantly evolving as the nature of international trade changes
and for this reason has not defined an exhaustive list of items that
must be included in an export policy, but in addition to certain
mandatory elements, has identified certain elements that would be
helpful in determining reasonableness.
K. Sec. 542.1(k): Shifting the Burden of Production
1. Clarifying the Burden Shifting Process To Explicitly State That It
Is the Burden of Production That Shifts, Not the Burden of Proof
Issue: MSC Mediterranean Shipping Company (USA) Inc. (MSC) argued
that the Commission's intent with respect to the respective burdens of
the parties in the adjudication process is clear, but that the wording
of the regulation is not. Citing the language of the SNPRM, MSC stated
the Commission made clear in the preamble that the burden that shifts
to the carrier is the burden of production, not the ultimate burden of
persuasion. In order to make the final rule consistent with the
Commission's intent and with the header in Sec. 542.1(k), MSC
requested that the Commission insert the words ``of production'' in
Sec. 542.2(k)(2) between ``burden'' and ``shifts.'' \173\ World
Shipping Council (WSC) made the same arguments.\174\
---------------------------------------------------------------------------
\173\ FMC-2023-0010-0036 at 3, 11.
\174\ FMC-2023-0010-0041 at 20-21.
---------------------------------------------------------------------------
FMC response: The Commission declines to make this change. The
burden-shifting regime was discussed at length in the SNPRM.\175\ After
reexamining this discussion in light of these comments, the Commission
believes it remains a strong system whose goals and parameters were
well-expressed in the SNPRM. The shifting of the burden of production,
whether that uses the words ``production of evidence,'' as the SNPRM
does, or the ``burden of proof'' for which MSC and WSC advocate, has
the same meaning in this context. Changing the language will not
clarify or change the process.
---------------------------------------------------------------------------
\175\ 88 FR 38799.
---------------------------------------------------------------------------
2. The Current Language Is a Deterrent to Small- and Medium-Sized
Shippers
Issue: The North American Meat Institute (NAMI) cautions against
the adoption of Sec. 542.1(k)(3), which places the ultimate burden of
persuasion on the complainant or the Commission's Bureau of
Enforcement, Investigations, and Compliance. NAMI believes that it is
clear that a complainant would have to set forth a prima facie case of
a violation and supports the burden shift to the ocean common carrier
to justify its actions were reasonable. Nonetheless, NAMI remains
concerned that the language specifying the ultimate burden of
persuasion will preclude small- and medium-sized shippers from availing
themselves of the protections provided in this rule.\176\
---------------------------------------------------------------------------
\176\ FMC-2023-0010-0037 at 4.
---------------------------------------------------------------------------
FMC response: The Commission declines to make this change. As noted
in the SNPRM, the process spelled out in Sec. 541.2(l) is the process
that is followed in cases arising under the Administrative Procedure
Act (APA). While the Commission recognizes and appreciates that this
process might present more of a burden for small- and medium-sized
shippers than for large shippers, it also noted that the Commission's
Bureau of Enforcement, Investigations, and Compliance may also bring a
case for a violation under this section. As such, there are multiple
avenues for complaints to be brought before the Commission under this
section.
3. Setting Forth a Prima Facie Case
(a) Meaning of ``prima facie case'' is vague.
Issue: MSC Mediterranean Shipping Company (USA) Inc. (MSC) argued
that the use of ``prima facie case'' is so vague that any conduct could
fit into the Commission's definition of unreasonableness. MSC argued
that the Commission should revise the description of when a shipper or
the Bureau of Enforcement, Investigations, and Compliance (BEIC) has
set forth a prima facie case to provide clarity and regulatory
certainty to carriers, shippers, and finders of fact as to what actions
the Commission believes constitute reasonable or unreasonable behavior.
MSC \177\ and World Shipping Council (WSC) \178\ also argue that
the Commission should revise the text to make clear that the standard
for reasonable behavior is one of commercial reasonableness, as
consistent with Commission's precedent.
---------------------------------------------------------------------------
\177\ FMC-2023-0010-0036 at 2.
\178\ FMC-2023-0010-0041 at 6-7.
---------------------------------------------------------------------------
FMC response: The Commission declines to make these changes. The
term ``unreasonable'' is defined in Sec. 542.1(b). Sections 542.1(c)
and (f) set forth the discrete elements necessary to establish
successful claims under 46 U.S.C. 41104(a)(3) and (a)(10),
respectively. Sections 542.1(e) and (h) provide examples of
unreasonable conduct and sections 542.1(d) and (h) list considerations
when evaluating unreasonable conduct. These sections provide
significant insight into what the Commission believes constitutes
unreasonable conduct, as well as a clear roadmap to establishing a
prima facie case. The Commission's reasons for not incorporating the
``commercial reasonableness'' standard for which MSC advocates has been
discussed in earlier sections of this preamble.
(b) Carrier response to a prima facie claim.
Issue: Maersk A/S (Maersk) argued that the Commission should
consider that, if in response to a shipper's prime facie case, the
ocean carrier provides evidence that the ocean carrier either provided
an opportunity for a two-way commitment (with respect to 46 U.S.C.
41104(a)(10)) or entered into a contract with a two-way commitment
(with respect to 46 U.S.C. 41104(a)(3)), then that fact in itself
should shift the burden of persuasion to the shipper. In this scenario,
Maersk argued that it should then be up to the shipper to make a case
as to why its refusal was unreasonable in light of opportunities it
failed to take or contractual remedies that it failed to pursue.\179\
---------------------------------------------------------------------------
\179\ FMC-2023-0010-0039 at 4.
---------------------------------------------------------------------------
FMC response: The Commission declines to make this change, as it
adds an extra, and unnecessary, step to the process. If it allows this
step, the
[[Page 59666]]
Commission can readily predict a scenario where the burden continually
shifts back and forth, allowing each party to present an ever-
increasing amount of evidence. This is contrary to the streamlined
process that the Commission has proposed. Under Sec. 542.1(l), the
ocean common carrier may present evidence it deems necessary to justify
its actions as reasonable, including evidence of a two-way commitment
and evidence of opportunities or contractual remedies it believes the
shipper failed to take. In accordance with this process, and mindful of
the burden of persuasion that remains in Sec. 542.1(l)(3), the
Commission will consider this evidence when formulating its decision in
each case.
(c) Documents created by carriers.
Issue: Malmo Limited (Malmo) argued that carriers' self-created
documents supporting its basis for refusing to deal or negotiate should
be reviewed with skepticism, as giving them weight would encourage
carriers to document its pretexts and not the true reasons for cutting
off a shipper. Malmo stated that the last thing the Commission should
do is provide a roadmap for carriers on how to avoid liability by
creating pretext evidence ``to justify that its actions were
reasonable.'' As an example, Malmo stated that a carrier, knowing that
it planned to refuse to deal or negotiate with a shipper, could create
evidence by sending internal emails with self-serving pretexts, or
communicating to the shipper supposed legitimate reasons for not
dealing when, in reality, the carrier had no such justifications. As
such, Malmo argued that these communications should be given less
weight than a complainant's prima facie evidence establishing a
violation.\180\
---------------------------------------------------------------------------
\180\ FMC-2023-0010-0044 at 1-2.
---------------------------------------------------------------------------
FMC response: In creating the standards established in Sec.
542.1(l), the Commission has been mindful of creating a scheme that is
not weighted towards one side or the other. The system must allow a
carrier to present evidence on its own behalf to rebut a claim of
unreasonable refusal to deal, and a presumption that carrier-created
documents are pretexts would undermine that the fair approach of the
final rule. The Commission will weigh all of the evidence presented and
decide each case on a case-by-case basis.
L. Miscellaneous Comments
1. Penalties/Reparations
Issue: Malmo Limited (Malmo) argued that an overlooked issue in the
rule is the massive damage that an unreasonable refusal to deal or
negotiate can inflict on a shipper. Malmo argued that this harm needs
to be properly redressed by the Commission, and that when a carrier
cuts off a shipper during negotiations, the last deal terms discussed
should be held against the carrier when determining appropriate
reparations.\181\ In support of this, Malmo noted that carriers receive
an advantage when refusing to deal in that they cause uncertainty with
respect to the shipper's damages because the deal or negotiation often
is not finalized in a written agreement before the unlawful refusal
takes place.\182\ Citing further Commission precedent and Supreme Court
case law, Malmo argued that uncertainty caused by a carrier should not
be held against the complainant.\183\
---------------------------------------------------------------------------
\181\ Id. at 2.
\182\ Id.
\183\ Id. at 3 (citing California Shipping Line, Inc. v.
Yangming Marine Transport Corp., FMC Docket No. 88-15, 25 S.R.R.
1213, 1990 WL 427466, at 23 (Oct. 19, 1990) (citing Bigelow v. RKO
Radio Pictures, 327 U.S. 251, 264-65 (1946)).
---------------------------------------------------------------------------
As such, Malmo argued that the rule should implement reparations
that are not limited by the uncertainty caused by the timing of a
carriers' unlawful conduct. Instead, reparations should be based on the
last deal terms discussed by the parties before the illegal refusal to
deal. If not implemented, the carriers will have a strong incentive to
refuse to deal before final deal terms are fully executed.\184\
---------------------------------------------------------------------------
\184\ Id. at 4.
---------------------------------------------------------------------------
FMC response: The Commission declines to make this change.
Violations under 46 U.S.C. 41104(a)(3) already carry the possibility of
up to double reparations under 46 U.S.C. 41305(c). The Commission will
address the issue of penalties or reparations for refusal to deal in
each case as necessary. The Commission recognizes that penalties for
unreasonable refusal to deal may be appropriate, depending on the
circumstances of each case. Given that the Commission is maintaining
its posture on deciding each complaint on a case-by-case basis,
however, the Commission declines to mandate penalties in the rule.
2. The Relationship Between the Prohibition on a Refusal to Deal and
Breach of Service Contracts
Issue: In the SNPRM, the Commission assumed 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 and the remedies
afforded when there is a breach of contract. Noting, however, that it
is possible for a contract to be silent in such situations, the
Commission requested comments identifying how those situations would be
remedied.\185\
---------------------------------------------------------------------------
\185\ 88 FR 38789, 38802.
---------------------------------------------------------------------------
In response, BassTech International (BassTech) stated that while it
is not impossible for a service contract to be silent on this issue, it
seems odd that it would not address the remedies for failure of a party
to honor their obligations, which is something that is typically
addressed through liquidated damages. BassTech noted that this became
problematic during the demand surge of recent years, because liquidated
damages did little to remedy a shipper's inability to access space that
had been committed under a service contract given the enormous
increases in freight rates during that time. This dynamic made payment
of liquidated damages less of a deterrent for the offender and less
compensatory for the aggrieved. BassTech argued that while that
situation could hardly have been predicted or written into a service
contract, ocean common carriers are unlikely to agree to future
contract provisions that allow regulations to prevail over specific
contract terms. As a result, BassTech argued that, given shippers'
inferior negotiating power with respect to carriers, it would help to
have some guardrails to prevent pressure on shippers to agree to
service contract terms that excuse the carrier from their regulatory
obligations, such as refusal to deal.\186\
---------------------------------------------------------------------------
\186\ FMC-2023-0010-0055 at 5.
---------------------------------------------------------------------------
The National Industrial Transportation League (NITL) argued that a
carrier should not be able to operate contrary to the Shipping Act
notwithstanding the existence of a service contract. In other words, a
shipper should not lose access to claims arising under the Shipping Act
if a carrier may be in violation of the Act simply because it
negotiated a contract with the carrier.\187\ Similarly, the National
Association of Chemical Distributors (NACD) argued that although
contract breaches are reserved for the courts, under the Shipping Act,
where a contract is silent on remedies and a carrier's conduct
constitutes an unreasonable refusal to deal, both remedies should be
available for an aggrieved shipper.\188\
---------------------------------------------------------------------------
\187\ FMC-2023-0010-0045 at 10-11.
\188\ FMC-2023-0010-0046 at 5.
---------------------------------------------------------------------------
By contrast, Caribbean Shipowners' Association, FMC Agreement No.
010979/Central America Discussion Agreement, FMC Agreement No. 011075
(the ``Agreements'') argue that the
[[Page 59667]]
Commission fails to address the relationship between 46 U.S.C.
41104(a)(3) and 46 U.S.C. 40502(f), the latter of which provides that
the exclusive remedy for breach of a service contract is an action in
an appropriate court.\189\ The Agreements argued that under the
proposed rule, if a carrier refuses to provide space to a customer with
whom it has entered into a service contract, the carrier is potentially
in violation of 41104(a)(3) as well as being in breach of a service
contract. The Agreements state that if the rule is adopted as proposed,
the line between Shipping Act claims and breach of contract claims will
be blurred even further.
---------------------------------------------------------------------------
\189\ FMC-2023-0010-0038 at 6-8.
---------------------------------------------------------------------------
The National Customs Brokers & Forwarders Association of America,
Inc. (NCBFAA) stated that its service contracts contain shortfall (or
``dead freight'') provisions to penalize either the shipper or the
ocean carrier for nonperformance of the service contract, as well as
arbitration provisions to address any unresolved disputes.\190\ NCBFAA
noted, however, that shippers dealing with ocean carriers in these
scenarios are typically obliged to accept any remedies offered and do
not have any specific remedies or avenue for relief with respect to an
ocean carrier's refusal to deal or negotiate with respect to vessel
space accommodations. Given that service contracts do not specifically
provide for disputes regarding vessel space, NCBFAA requested the
Commission consider whether current regulations may be further revised
to afford greater protections to shippers.
---------------------------------------------------------------------------
\190\ FMC-2023-0010-0057 at 3.
---------------------------------------------------------------------------
FMC response: The Commission's request for comments on this issue
arose out of comments asking the Commission to strengthen the rule's
protections against refusals to deal in the context of existing service
contract relationships, as a way of addressing conduct that is already
occurring in the industry.\191\ Given that it seems possible for
contracts to remain silent on remedies for refusal to deal, and that
there are some situations where a contract's specified remedies do not
have the intended effects of remedying the breach or deterring
behavior, the Commission reiterates its position that regardless of
contract status, an ocean common carrier may not effectively bar a
shipper, including one without a service contract, from having direct
access to ocean common carriage by unreasonably refusing to deal or
negotiate the terms of such carriage. This is consistent with the
position the Commission took in the SNPRM.\192\ As also stated in the
SNPRM, the Commission remains ``[f]ully cognizant of the privilege that
private parties may enter into their own service contracts,'' \193\ and
nothing in this rule prevents parties from entering service contracts.
---------------------------------------------------------------------------
\191\ 88 FR 38789, 38802.
\192\ Id. at 38797-38798.
\193\ Id. at 38797.
---------------------------------------------------------------------------
3. This Rule Should Be Narrowly Tailored To Target Unusual Behavior
That Is Contrary to Traditional Market Practices
Issue: Maersk A/S (Maersk) supported the Commission's objective of
addressing systemic, chronic, or outlying ocean carrier policies that
unreasonably restrict space, but opposes resetting the efficient
commercial market for vessel space and equipment.\194\ Maersk argued
that the Commission needs to narrowly tailor this rule to target
unusual positions that are contrary to traditional market practices--a
good example of which is the SNPRM's example of an ocean carrier that
only transports loaded imports, refuses all loaded exports, and uses
its vessels departing U.S. ports solely to reposition empty containers.
Maersk argued that if the Commission issues a final regulation that is
too ambiguous and broad, it could jeopardize the market mechanisms that
have, for decades, made containerization a boon for U.S. importers and
exporters in terms of reduced transportation costs and diversity of
services. Maersk opines that the final rule should not transform the
Shipping Act into a loaded gun pointed at carriers for each difficult
negotiation with individual customers about vessel space in a tight
market. Maersk noted that no comments submitted to OSRA 2022's
legislative record or this rule's proceedings identified shipper-ocean
carrier contract practices as unreasonable and the root cause of
shipper capacity problems.
---------------------------------------------------------------------------
\194\ FMC-2023-0010-0039 at 2-3.
---------------------------------------------------------------------------
FMC response: The Commission initiated this rulemaking for one of
the same reasons that OSRA 2022 was passed: to counteract the specified
problem in the market of American exporters being shut out of cargo
accommodations and vessel space by carriers' refusal to deal. To this
end, the SNPRM noted that ``the focus of the definition of
reasonableness, however, is on the ocean common carrier's conduct
rather than the impact on the shipper.'' \195\ This is a problem that
had become chronic, systemic, and widespread. Through the extended
process of an NPRM, SNPRM, and this final rule, the Commission has
adjusted this rule so that it is as narrowly tailored as possible to
address this issue. As such, the Commission disagrees with Maersk's
assessment that this rule is a broadly construed attack on ocean common
carriers.
---------------------------------------------------------------------------
\195\ 88 FR 38789, 38797.
---------------------------------------------------------------------------
4. Freight Forwarders
Issue: International Federation of Freight Forwarders Associations
(FIATA) recognizes that the Commission's focus for this rule is
eliminating impediments to accessing space on vessels, but noted that
many shippers, especially small and medium-sized enterprises (SMEs) or
those exporting or importing cargo, often seek the services of
specialized freight forwarders. FIATA argued that to uphold the
intention of this rulemaking, the Commission should add ``shippers and/
or their authorized representatives'' to the regulatory text to ensure
that the authorized representatives of shippers, or a forwarder acting
in their own name, such as an NVOCC, all have the same rights accorded
to beneficial cargo owners (BCOs) to secure access to vessel and cargo
space and related services defined in this rulemaking.\196\
---------------------------------------------------------------------------
\196\ FMC-2023-0010-0056 at 2.
---------------------------------------------------------------------------
FMC response: The Commission declines to make this change. First,
as noted in the NPRM and expanded upon in the SNPRM, this rule does not
apply to NVOCCs.\197\ Secondly, as noted in response to other comments
above, this rule focuses on the behavior of the ocean common carrier
rather than shipper. Nothing in this rule prevents a freight forwarder
from acting on behalf of a shipper or bringing a claim against a
shipper for refusal to deal.
---------------------------------------------------------------------------
\197\ 87 FR 57674 at n. 4; 88 FR 38789, 38798.
---------------------------------------------------------------------------
5. Preference Cargo
Issue: USA Maritime and the U.S. Department of Defense's United
States Transportation Command both expressed concern that the SNPRM had
not adequately accounted for U.S. cargo preference requirements.\198\
Cargo preference is a framework of U.S. laws, regulations, and policies
that require the use of U.S.-flag vessels in the movement of cargo that
is owned, procured, furnished, or financed by the U.S. Government.\199\
It also includes cargo that is being shipped under an
[[Page 59668]]
agreement of the U.S. Government, or as part of a Government
program.\200\
---------------------------------------------------------------------------
\198\ USA Maritime (FMC-2023-0010-0034) at 2-3; Department of
Defense, United States Transportation Command (FMC-2023-0010-0059)
at 2-3.
\199\ See <a href="https://www.maritime.dot.gov/ports/cargo-preference/cargo-preference">https://www.maritime.dot.gov/ports/cargo-preference/cargo-preference</a> (last visited April 4, 2024).
\200\ Id.
---------------------------------------------------------------------------
FMC response: The Commission recognizes and appreciates the
importance of this issue, and the importance of cargo preference,
particularly to national security and U.S. military activities.
However, the Commission cannot exempt preference cargo from Shipping
Act requirements by this final rule. While 46 U.S.C. 40103 allows
exemptions to the Shipping Act by Commission order or regulation, FMC
regulations (46 CFR 502.92) require a formal petition to be filed with
the Commission and notification in the Federal Register to give the
opportunity for public comment.\201\ The Commission is open to
considering a petition for exemption for preference cargo filed in
accordance with 46 CFR 502.92.
---------------------------------------------------------------------------
\201\ 46 CFR 502.92.
---------------------------------------------------------------------------
IV. Summary of Final Rule and Changes From SNPRM
This final rule 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 considers the common
carriage roots in the Shipping Act, as well as the overall competition
basis of the Commission's authority. Future cases that allege
violations of 46 U.S.C. 41104(a)(3) or (a)(10) will be factually driven
and determined on a case-by-case basis. The framework established by
this final rule is taken from Commission precedent on refusal to deal
cases generally and on suggestions offered by commenters on the NPRM
and SNPRM. This rule ensures that shippers can readily discern when a
carrier has acted outside the bounds of reasonableness and know what
type of claim, 46 U.S.C. 41104(a)(3) or 46 U.S.C. 41104(a)(10), to
bring before the Commission.
A. Sec. 542.1(a) Purpose
While 46 U.S.C. 41104 applies generally to both VOCCs and NVOCCs,
this rule only applies to VOCCs. The specific prohibition in 46 U.S.C.
41104(a)(10) that is the subject of this rule applies only to VOCCs
because ``ocean common carrier'' is defined as a vessel-operating
common carrier in the Shipping Act.\202\ Although section 41104(a)(3)
applies to both VOCCs and NVOCCs, this rule only applies to VOCCs to
mirror the scope of the affected population of the NPRM. Importantly,
however, this rule does not limit the application of 46 U.S.C.
41104(a)(3) or the rest of 46 U.S.C. 41104(a)(10) to VOCCs. Rather,
NVOCCs remain legally liable under 41104(a)(3) and 41104(a)(10) for
violations of the Shipping Act.
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\202\ 46 U.S.C. 40102(18).
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Similarly, section 41104 applies generally to roll-on/roll-off
cargo, bulk cargo, and containerized cargo. This rule, however, only
applies to containerized cargo because the issues arising from
container availability during the pandemic were not present, or at
least not present to the same extent, for roll-on/roll-off cargo or
bulk cargo vessels. While this rule is limited to containerized cargo,
it does not preclude refusal to deal claims arising in the context of
roll-on/roll-off cargo or bulk cargo. FMC has amended Sec. 542.1(a) to
clarify that the rule is limited in scope to containerized cargo.
B. Sec. 542.1(b) Definitions
This paragraph sets out terms defined for part 542. FMC has: (1)
added a definition of the term ``blank sailing''; and (2) amended the
definitions of ``cargo space accommodations, ``sweeper vessel'',
``transportation factors'', ``unreasonable'' and ``vessel space
accommodations''. The paragraphing structure has also been amended to
allow for easier amendment in the future if needed.
FMC has revised the definition of ``cargo space accommodations'' by
changing ``negotiated for'' to ``negotiated for or confirmed''. This
change broadens the definition to instances where space has not been
``negotiated'' between a carrier and a shipper in the traditional
sense--i.e., there have been no ``back and forth'' communications
between the two parties, but rather involve a shipper's request for
vessel space under an existing service contract or other arrangements,
and a responsive vessel booking confirmation from the carrier.
FMC has amended the definition of ``transportation factors'' by
adding ``and not reasonably foreseeable'' to the end of the definition
to clarify that the term is not intended to include factors that are
reasonably foreseeable by a vessel operator and has amended the
regulation accordingly. If a transportation factor is reasonably
foreseeable by the carrier, then the carrier has a responsibility to
its customers to find alternative pathways to deliver the cargo and
otherwise mitigate the negative impacts of that factor. Transportation
factors are not justifications for a carrier to refuse to carry entire
classes of cargo, like properly tendered hazardous cargo, heavier
products, or inland shipments. Instead, legitimate transportation
factors must exist and be outside the vessel operator's control.\203\
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\203\ 88 FR 38789, 38803.
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FMC has amended the definition of ``unreasonable'' by adding ``from
that ocean common carrier'' at the end of the definition to clarify
that the purpose of paragraph (b) is to mean conduct that unduly
restricts the ability of shippers to meaningfully access ocean carriage
services from the ocean common carrier.
FMC has amended the definition of ``vessel space accommodations''
by changing ``necessary to access or book vessel space accommodations''
to ``necessary to book or access vessel space accommodations''. This is
a technical correction that reflects that booking occurs before access.
C. Sec. 542.1(c) Elements for Claim Under 46 U.S.C. 41104(a)(3)
Paragraph (c) sets out the elements of a claim under 46 U.S.C.
41104(a)(3) for the unreasonable refusal of cargo space accommodations
when available. Section 41104(a)(3) claims focus on those refusals that
occur at the execution stage, after the parties have reached a deal or
mutually agreed on service terms and conditions via a booking
confirmation.
FMC has amended the paragraph by adding ``with respect to refusals
of cargo space accommodations when available'' at the end of the
introductory sentence. This change clarifies the scope of the rule and
aligns Sec. 542.1(c) with Sec. 542.1(a). Section 41104(a)(3)'s
prohibition on unfair or unjustly discriminatory methods will be
addressed in a separate rulemaking.
D. Sec. 542.1(d) Non-Binding Considerations When Evaluating
Unreasonable Conduct Under 46 U.S.C. 41104(a)(3)
Paragraph (d) sets out a list of non-binding factors the Commission
may consider in evaluating whether a particular ocean common carrier's
conduct was unreasonable under 46 U.S.C. 41104(a)(3). The factors
listed may help to establish an ocean common carrier's bona fide
attempts and interest in fulfilling its previously made commitment to a
shipper to take its cargo. The list, however, is not exhaustive.
FMC has amended paragraphs (d)(1) and (d)(4) from the SNPRM
proposal. FMC has amended paragraph (d)(1) by changing ``the efficient
movement of export cargo'' to ``the timely and efficient movement of
export cargo''. While section 40104 does not include
[[Page 59669]]
``timely'', its inclusion here comports with the goals of the OSRA 2022
generally. Many exports, particularly agricultural exports, must be
loaded and transported to their destinations in a timely manner in
order for exporters to fulfill contract obligations. Additionally, FMC
has re-written paragraph (d)(4), to simplify the language and better
conform with Plain Language. No substantive change is intended by the
re-write.
E. Sec. 542.1(e) Non-Binding Examples of Unreasonable Conduct Under 46
U.S.C. 41104(a)(3)
Paragraph (e) sets out non-binding 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. The list is
not exhaustive.
FMC has amended examples (3), (4), and (6) and removed proposed
example (7). In paragraph (e)(3) FMC has added to the end: ``of any
other changes to the sailing that will affect when their cargo arrives
at its destination port''. This change was added in response to a
request for clarification of what a carrier needed to alert or notify
shippers about. In paragraph (e)(4) FMC has changed ``for vessel
loading'' to ``for cargo tendering or vessel loading''. Adding the
phrase ``cargo tendering,'' while also retaining the phrase ``vessel
loading'', ensures that sufficient time instead of narrowing this
provision to circumstances where the carrier may be the one loading the
cargo onto the vessel. FMC has revised the example in subsection (e)(6)
to read: ``The de facto, absolute, or systematic exclusion of exports
in providing cargo space accommodations'' in order to remove ambiguity
regarding the term ``categorically.'' FMC has also removed proposed
paragraph (e)(7) as it was not a true example.
F. Sec. 542.1(f) Elements for Claim Under 46 U.S.C. 41104(a)(10)
Paragraph (f) sets out the elements of a claim under 46 U.S.C.
41104(a)(10) for the unreasonable refusal to deal or negotiate with
respect to vessel space accommodations when available. Section
41104(a)(10) claims focus on those refusals that occur at the
negotiation stage.
FMC has amended paragraph (f) by adding ``with respect to refusals
of vessel space accommodations provided by an ocean common carrier to
the end of the introductory sentence to clarify its scope and aligns
Sec. 542.1(f) with Sec. 542.1(a). This rule is focused on the OSRA
2022 amendment to 46 U.S.C. 41104(a)(10) related to vessel space
accommodations provided by an ocean common carrier. Although this rule
does not extend to claims outside of those related to vessel space
accommodation refusals, as noted in the NPRM, the framework of this
rule may be applicable in non-vessel-space accommodation cases
involving 46 U.S.C. 41104(a)(10).
G. Sec. 542.1(g) Non-Binding Considerations When Evaluating
Unreasonable Conduct Under 46 U.S.C. 41104(a)(10)
Paragraph (g) sets out a list of non-binding factors the Commission
may consider in evaluating whether a particular ocean common carrier's
conduct was unreasonable under 46 U.S.C. 41104(a)(10). This list is not
exhaustive.
FMC has amended paragraphs (g)(1) and (g)(4). FMC has amended
paragraph (g)(1) by changing ``the efficient movement of export cargo''
to ``the timely and efficient movement of export cargo''. The inclusion
of the word ``timely'' comports with the goals of OSRA 2022. Many
exports, particularly agricultural exports, must be loaded and
transported to their destinations in a timely manner in order for
exporters to fulfill contract obligations. FMC has re-written paragraph
(g)(4), to simplify the language and better conform with Plain
Language. No substantive change is intended by the re-write of (g)(4).
The Commission highlights that investigations into good faith
negotiations may include an inquiry into whether or not good customer
service was provided by a carrier. It can be unreasonable for an ocean
common carrier to fail to provide a meaningful way for customers to
contact the carrier or fail to timely provide a rate quotation upon
request.
H. Sec. 542.1(h) Non-Binding Examples of Unreasonable Conduct Under 46
U.S.C. 41104(a)(10)
Paragraph (h) sets out non-binding examples of the kinds of conduct
that may be considered unreasonable under 46 U.S.C. 41104(a)(10)
concerning the refusal of vessel space accommodations. The list is not
exhaustive.
FMC has made a technical amendment to (h)(1) by replacing ``real
offer'' with ``good faith'' offer. FMC believes that the changed
wording better captures the true meaning of the example and is better
aligned with concepts known by the legal and corporate communities.
FMC has revised the example in subsection (h)(2) to read: ``The de
facto, absolute, or systematic exclusion of exports in providing vessel
space accommodations'' in order to remove ambiguity regarding the term
``categorically.''
FMC has removed proposed example (h)(3) as this was not a true
example.
I. Sec. 542.1(i) Use of Sweeper Vessels
Along with the definition of sweeper vessel, this paragraph allows
the use of a sweeper vessel that has been previously designated for
that purpose. The Commission also amended the regulatory text in Sec.
542.1(i) to state that the designation of a vessel as a sweeper vessel
is subject to Commission review to determine whether the designation
results in an unreasonable refusal of ocean carriage services.
J. Sec. 542.1(j) Documented Export Policy
The Commission amended Sec. 542.1(j) to state that the ocean
common carrier must file the document with the Commission, not that the
ocean common carrier must follow the document. This change aligns with
the Commission's intent that whether the ocean common carrier followed
a documented export policy is a non-binding consideration that the
Commission may consider in determining whether unreasonable conduct has
occurred. In addition to using documented export policies to determine
whether an ocean common carrier's conduct in a specific matter aligns
with their general policies, and thus whether the ocean common carrier
acted reasonably, the policies will be used by the Commission to
monitor the industry for the unreasonable behavior vis-[agrave]-vis
exports.
The Commission also added the words ``timely and'' before the word
``efficient.'' This inclusion comports with the goals of the OSRA 2022
generally. Many exports, particularly agricultural exports, must be
loaded and transported to their destinations in a timely manner in
order for exporters to fulfill contract obligations.
The Commission also rephrased 542.1(j)(1) to place this provision
in the active tense rather than the passive tense. This is a technical
amendment that does not make a substantive change to the regulation.
In association with the amendments to Sec. 542.1(i) regarding the
Commission's review of sweeper vessel designations, the Commission
added Sec. 542.1(j)(ii) to state that one topic that the documented
export policy should address, if applicable, is the ocean common
carrier's rules and practices for the designation and use of sweeper
vessels.
The Commission also added Sec. 541.2(j)(3), to clarify that the
[[Page 59670]]
documented export policies required to be filed with the Commission, in
accordance with 46 U.S.C. 40306, will remain confidential except as may
be relevant to an administrative or judicial proceeding. In accordance
with the statute, the information may also be disclosed to either House
of Congress, or to a duly authorized committee or subcommittee of
Congress.
K. Sec. 542.1(k) Shifting the Burden of Production
The Commission has made technical and clarifying edits to paragraph
(k), which describes the burden of production. One, the Commission
amended Sec. 542.1(k) (1) and (3) to add the words ``the
Commission's'' before ``Bureau of Enforcement, Investigations and
Compliance.'' This is a technical amendment to clarify that the Bureau
is part of the Commission. Two, the Commission has amended (k)(1) to
clarify, as discussed in the preamble to the SNPRM, that this paragraph
addresses the initial burden to establish a prima facie case of a
violation. Finally, the Commission has amended (k)(3) to clarify that
the ultimate burden of persuasion is always with the complainant or the
Bureau of Enforcement, Investigations and Compliance, as also discussed
in the preamble to the SNPRM.
VI. Rulemaking Analyses
A. Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601-612, provides that
whenever an agency is required to publish 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 an
initial regulatory flexibility analysis (IRFA) describing the impact of
the proposed 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.
The Commission initiated the rulemaking to fulfill 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.
The final rule defines terms related to what is unreasonable refusal by
ocean common carriers and also requires submission of a documented
export policy. Like the NPRM and SNPRM, the final rule also applies
only to vessel-operating common carriers (VOCCs) who would bear the
associated costs of implementation.
VOCCs fall under the Deep Sea Freight Transportation category in
the North American Industrial Classification System, and the U.S. Small
Business Administration (SBA) defines small entities in this category
as having fewer than 1,050 employees. The Commission generally presumes
that VOCCs do not qualify as small entities under these SBA guidelines.
The Commission did not receive comments following publication of the
NPRM or SNPRM contrary to this presumption.
For these reasons, the Chairman of the Federal Maritime Commission
certifies that this rule will not have a significant economic impact on
a substantial number of small entities.
B. Congressional Review Act
The rule is not a ``major rule'' as defined by the Congressional
Review Act (5 U.S.C. 801 et seq.) The rule will not result in: (1) An
annual effect on the economy of $100,000,000 or more; (2) a major
increase in costs or prices; or (3) significant adverse effects on
competition, employment, investment, productivity, innovation, or the
ability of U.S.-based companies to compete with foreign based
companies. 5 U.S.C. 804(2).
C. National Environmental Policy Act
The Commission's regulations categorically exclude certain
rulemakings from any requirement to 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 final rule 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), or engaged in unreasonable
refusal of cargo space accommodations when available under 46 U.S.C.
41104(a)(3), and the elements necessary for a successful claim under
those provisions. 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) and (22). Therefore, no environmental assessment or
environmental impact statement is required.
D. Paperwork Reduction Act
This final rule calls for a collection of information under the
Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520). As defined
in 5 CFR 1320.3(c), ``collection of information'' comprises reporting,
recordkeeping, monitoring, posting, labeling, and other, similar
actions. In compliance with the PRA, the Commission submitted the
proposed information collection to the Office of Management and Budget
(OMB). Notice of the information collections was published in the
Federal Register and public comments were invited.\204\ No comments
were received directly on the burden estimate. However, a small number
of commenters noted that the SNPRM burden estimate did not take into
account the possibility that some vessel operating common carriers
(VOCCs) might voluntarily update and submit written export policies
more than once a year. While the Commission does not anticipate that
many ocean carriers will do so, the burden calculations have been
slightly updated for this final rule.
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\204\ 88 FR 38789, 38806.
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The title and description of the information collections, a
description of those who must collect the information, and an estimate
of the total annual burden follow. The estimate covers the time for
reviewing instructions, searching existing sources of data, gathering
and maintaining the data needed, and completing and reviewing the
collection.
Title: 46 CFR Part 542--Common Carrier Prohibitions
Summary of the Collection of Information: Section 542.1(j) of title
46 Code of Federal Regulations, by this final rule, requires that VOCCs
must submit a documented export policy once per year which is to
include pricing strategies, services offered, strategies of equipment
provision, and descriptions of markets served. The FMC has authority to
require this collection under 46 U.S.C. 40104.
Need for Information: The report will allow the Commission to
monitor the industry for unreasonable behavior prohibited by 46 U.S.C.
41104(a) (3) and (10). This in will allow the Commission to meet two
key purposes of the Shipping Act: (1) ``ensur[ing] an efficient,
competitive, and economical transportation system in the ocean commerce
of the United States'' (46 U.S.C. 40101(2)); and (2) ``promot[ing] the
growth and development of United States exports through a competitive
and efficient system for the carriage of
[[Page 59671]]
goods by water in the foreign commerce of the United States, and by
placing greater reliance on the marketplace'' (46 U.S.C. 40101(4)).
Frequency: The regulation requires VOCCs to submit a documented
export policy once per year. However, there is no prohibition against
carriers updating these export policies and submitting more frequently
if they voluntarily elect to do so. The Commission estimates that ten
percent of VOCCs will submit documented export policies twice per year,
and an additional five percent of VOCCs will submit three times per
year.
Types of Respondents: This requirement applies only to VOCCs.
Number of Annual Respondents: The Commission anticipates an annual
respondent universe of 140 VOCCs.
Estimated Time per Response: The Commission estimates 40 hours of
burden for developing, documenting, and submitting an export policy
using the parameters in Sec. 542.1(j) for the first year, assuming
that no such policy already exists. For updates, whether annual as
required or more frequently as desired by the VOCC, 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 (140 carriers x 40 hours).
Additionally in the first year, the Commission estimates an additional
burden of 70 hours for the ten percent of carriers that will submit
policies a second time (14 carriers x 5 hours), plus an additional 70
hours for the carriers that will submit a third updated policy per year
(7 carriers x 5 hours x 2 submissions). The annual burden thereafter is
estimated to be 840 hours ((140 carriers x 5 hours) + (14 carriers x 5
hours) + (7 carriers x 5 hours x 2 submissions)).
The Commission estimates the total financial burden to be
$783,048.00 for the initial provision of the required export policy,
and then an additional $234,914.40 per year for updates, including
carriers that may choose to update and provide their export policies on
a more frequent basis.
As required by the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)), we have submitted a copy of this rule to OMB for its review
of the collection of information. Before the Commission may enforce the
collection of information requirements in this rule, OMB must approve
FMC's request to collect this information. You need not respond to a
collection of information unless it displays a currently valid control
number from OMB.
E. Executive Order 12988 (Civil Justice Reform)
This rule meets the applicable standards in E.O. 12988, ``Civil
Justice Reform,'' (61 FR 4729, Feb. 7, 1996) to minimize litigation,
eliminate ambiguity, and reduce burden.
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.
For the reasons set forth in the preamble, the Federal Maritime
Commission amends title 46 of the CFR by adding part 542 to read as
follows:
0
1. Add 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.
542.2-542.99 [Reserved]
Authority: 5 U.S.C. 553; and 46 U.S.C. 40104, 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 for containerized cargo and to apply 46
U.S.C. 41104(a)(10) with respect to refusals of vessel space
accommodations provided by an ocean common carrier with respect to
containerized cargo. This part applies to complaints brought before the
Commission by a private party and enforcement cases brought by the
Commission.
(b) Definitions. For the purposes of this section:
Blank sailing means a sailing skipping one or more specific port(s)
while still traversing the rest of the scheduled route or the entire
sailing being canceled.
Cargo space accommodations means space which has been negotiated
for or confirmed 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.
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.
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.
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 operator's control and not reasonably
foreseeable.
Unreasonable means ocean common carrier conduct that unduly
restricts the ability of shippers to meaningfully access ocean carriage
services from that ocean common carrier.
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 book or access 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) with respect to refusals of cargo space
accommodations when available:
(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 ac
[…truncated; see source link]Indexed from Federal Register on July 23, 2024.
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