Daniel Maffei, appointed chairman of the Federal Maritime Commission (FMC), told industry figures last week that it is time for the US Government to review its shipping laws and regulations given the fundamental changes that the industry has seen since the 1980’s.
Speaking at a National Customs Brokers & Forwarders Association of America, Inc., (NCBFAA) meeting last week, Maffei said that the major provisions of America’s shipping laws date back to 1984, while the Shipping Reform Act is almost 23 years old.
So if you ask me, if it’s time for my former colleagues in Congress to have that discussion and that has been my consistent position since coming to the FMC five years ago.
Maffei pointed out that shipping has changed significantly since these laws were enacted. “We have gone from more than two dozen major carriers to about nine with no large container line is based in the U.S., and the capacity of the world’s largest container ship has tripled. We now face an unprecedented import boom with no immediate end in sight.”
In the context of the post-pandemic boom, the US regulator has appeared to be behind the curve as detention & demurrage charges have come under scrutiny and claims by exporters of denial of service as carriers have sought to return boxes to Asia as rapidly as possible to take advantage of the soaring freight rates.
“The fact that this volume is unprecedented and unexpected does not mean these issues are acceptable, but it does mean that solving them is likely to require systemic solutions that cannot be implemented quickly. These include infrastructure improvements, rethinking labour and resource allocation, changes in governmental regulation – and perhaps even changes in the shipping laws,” confirmed Maffei.
In April, the FMC issued its Final Rule on Detention & Demurrage, but reports from shippers and others made it clear, said Maffei, that many carriers and terminals were not observing the new regulation.
“This was no surprise to me since, at the time of the rule’s issuance, I praised the rule but also pointed out that several things were necessary for it to be truly effective – including FMC enforcement measures,” said Maffei, in what amounts to an admission that the FMC lacks the teeth to enforce its own regulation.
The commissioner did, however, point out that the FMC had increased its monitoring activity, it was also investigating issues at the country’s ports and intermodal transhipment points.
“Sometimes, we act as a convener to bring stakeholders together. Sometimes, we provide ‘friendly reminders’ of the provisions of the Shipping Act,” explained the commissioner.
Lastly, the FMC has launched a formal investigation into what Maffei calls, “issues at the San Pedro Bay and at New York/New Jersey involving detention demurrage charges, requirements placed on container returns and lack of containers being made available for export.”
The Fact-Finding 29 investigation has yet to formally report its findings, but it is thought the FMC may ask for some charges to be repaid and Maffei said he hoped that the investigation itself may deter any unethical practice.
He added, “I must be honest – formal complaints filed by shippers and NVOCCs would be a powerful incentive for the industry to curb abuses of detention and demurrage charges. But, understanding the fear of retaliation and concern about legal costs, the FMC must also consider robust enforcement measures.”
In conclusion of his speech, Maffei also warned that “The ocean freight transportation system is complex, intermodal, international and interconnected in such a way that an incident a half-world away can have global ripple effects.”
Such integration of global trade makes re-writing regulations “in reaction to the current crisis is not wise.”
He pointed to the massive increases in net profits currently being reported by shipping lines and said it may be tempting to think that the carriers should no longer enjoy the right to form alliances.
“However, in the long run, getting rid of alliances might force more mergers and more bankruptcies resulting in far less competition on price than we have today,” argued Maffei.
He concluded by saying, “I do believe better solutions to move more cargo more efficiently through the system are out there, but they are most likely to be found if all of the stakeholders in the system work together to find the long-term solutions that can benefit everyone.”