S3.E1 - Captain's Log - FMC Industry Advisory re: Free Tariffs // Panama Canal and Maersk's Land Bridge // Suez Canal and the Red Sea

Topic of the Week (1/12/24):

Welcome back and we're already entering season three! Join us as we catch up on some of the stories we're watching... 

The Maritime Professorᵀᴹ presents By Land and By Sea - an attorney breaking down the week in supply chain

with Lauren Beagen (Founder of The Maritime Professorᵀᴹ and Squall Strategies)

Let's dive in...

1 - The Federal Maritime Commission is still working through three rulemakings. No new movements.

2 - The FMC released an industry advisory announcing that common carriers and conferences must provide public access to tariff publication systems free of charge effective Feb 1, 2024.
https://lnkd.in/eaTMf8VR

3 - Revisiting the White House's Fact Sheet on Supply Chain Resiliency including watching the progress of FLOW: Freight Logistics Optimization Works and the U.S. Department of Transportation's Office of Multimodal Freight Infrastructure and Policy and the U.S. Department of Commerce's Supply Chain Center.

4 - A.P. Moller - Maersk has decided to use a land bridge (via rail) instead of using the Canal de Panamá and just about all containerized cargo is forgoing the Red Sea and therefore the Suez Canal. It's time to start sitting up straight and paying closer attention.

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** As always the guidance here is general and for educational purposes only, it should not be construed to be legal advice and there is no attorney-client privilege created by this video. If you need an attorney, contact an attorney. **

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Transcript

Lauren Beagen: 0:56

We're back. Welcome to season three. Can you believe it? Season three already Of by land and by sea. I feel like I just started this, but here we are, the third year of doing this.

Lauren Beagen: 1:08

Every week, we break down in real people terms what's happening in the world of supply chain. And man, oh man, the global ocean shipping world can't catch a break. Talk about volatile. Let's break down some of the stuff happening out there. Let's shake off the cobwebs of the holidays and look. We're going to talk about whether it's time to sell the farm or not. It's not, but it might be time to start paying more attention, and that's why you tune in here, right? Hi, welcome by land and by sea.

Lauren Beagen: 1:37

An attorney breaking down the weekend supply chain presented by the maritime professor me. Lauren Beagen, founder of The Maritime Professor and Squall Strategies, and I'm your favorite maritime attorney, join me every week as we walk through both ocean transport and surface transport topics in the wild world of supply chain. As always, the guidance here is general and for educational purposes only. It should not be construed to be legal advice and there's no attorney client privilege created by this video. If you need an attorney, contact an attorney. So we usually get into the discussion of the day, but we go through the top three stories of the week. We're catching up from the holidays, so we're just going to hit it with captain's log edition. We're going to be going through showcasing the top stories from the last few weeks and certainly this week, and that's where we'll hit it. I'll sprinkle in some background information, but without further ado, let's get going.

Lauren Beagen: 2:31

Story number one as always, we're watching the federal maritime commission closely for the release of any movement on any of the three open rule makings. We didn't see much over the holidays, right, we didn't. We haven't seen much in a while. Perhaps today's the day I say that every Friday we have a by land and by sea, but but it hasn't happened yet today, remember. Let's just kind of take a count of all that we're watching here. I'm not going to go through all the details that we covered over November and December. There were a few little things here and there that was happening, but we haven't seen the final language and that's what we're waiting on. So we have three open rule makings.

Lauren Beagen: 3:06

We have defining unreasonable or physical dealer negotiate with respect to vessel space accommodations provided by an ocean common carrier. I bet everybody can say that entire title with their eyes closed, not reading off anything. We don't have anything there yet. That was the supplemental notice of proposed rulemaking. It was reopened over the summer. It closed July 2023.

Lauren Beagen: 3:27

This one is. This one is is interesting. If you haven't looked at it yet, I encourage you to look at the docket here because they the FMC is defining some terms. I think that it's worth the industry paying attention on, because some of these definitions, if not applied in a precise way, I think could have some accidental overlap into other areas. And so defining unreasonable or feasible to deal and negotiate with respect to vessel space accommodations inherently in there is a reasonableness definition, and I just always get a little nervous when general terms like reasonableness are created by definition. So go take a look at it. That's all I'm saying. Go take a look at it, check out what the FMC has put out in their last supplemental notice of proposed rulemaking. The next round is probably going to be a final rule. I don't know, maybe we're gonna have another supplemental notice of proposed rulemaking, but I think we're moving toward a final rule track on that. So if there's anything else you have to say, it looks like there's certainly still accepting late filed comments. So if there's something burning, send it over, see what happens, but pay attention to this one. Even if you don't think that you have anything to do with unreasonable or feasible to deal or negotiate with respect to vessel space accommodations, take a look at it. Take a look at the definitions. The other rule.

Lauren Beagen: 4:48

The second rule that we're watching is billing practices of detention to merge. This one has the attention of the industry. I get more comments and questions on detention to merge, billing practices rulemaking. This one last closed up December 2022. So that was a year ago and a month, so 13 months ago. This one closed up. This one had 180 some comments filed on it. They're still probably going through, but this one, as we highlighted this fall, had a late filed comment from TNI Transportation and Infrastructure Member Congressman Jake Ockincloss from Massachusetts and Brian Babin from Texas that this one was calling into question some of the application of the incentive principle as it relates to reasonableness of demerge and detention charges. That's what the congressmen were saying. They think that this essentially shouldn't be applied to the MTOs as they think that the FMC is kind of applying it. So I think that we're going to get into a larger discussion of incentive principle because of this.

Lauren Beagen: 5:46

So what does this mean for the final rule of detention to merge billing practices rule? I'm not sure. It's been, like I said, 13 months since the comments closed up on this. Would there be a supplemental notice of proposed rulemaking? Another bite at the apple to submit comments? Perhaps I'm gonna be interested to see what they say at the next commission meeting. If they're gonna talk about this, if they're gonna talk about some of their plans. Perhaps we'll get some final language at the next commission meeting. We'll see Gonna keep watching it.

Lauren Beagen: 6:16

But this is it's getting interesting. I think the longer it takes, the more complicated it could get. So at some point they just need to create a final rule, move forward and say we're gonna figure it out in case law or we're gonna figure it out with supplemental modifications to the rulemaking or digging in on some of these smaller issues, but we gotta get something in the books here. So we'll see if we go final language on the next one. That's where they intended to go. I think they had intended to have a final rulemaking out by now, but they certainly have to take into consideration their committee, the Transportation Infrastructure Committee of the House. They have to take those comments into consideration.

Lauren Beagen: 6:54

The third rulemaking that we're watching is defining unfair on just the discriminatory methods. The FMC has said that they included some of that in their unreasonable physical to deal and negotiate Texts that they're putting out there in the supplemental notice of proposed rulemaking, that first rulemaking. They're saying that they kind of covered this third one by the first one. But we're still waiting on direct language for defining unfair on just the discriminatory methods as a standalone rulemaking. We haven't seen anything as a standalone rulemaking, doesn't even have a docket yet, so still waiting on that.

Lauren Beagen: 7:25

The other thing that we're watching is the request for information. This was the maritime transportation data initiative had an rfi request for information. There's been a talk of a Another rfi round coming. We haven't seen anything yet there. But I'll keep watching. I'm just gonna keep watching all this stuff. I'll let you know when I see any movement. I'll let you know if anything kind of peaks my interest or if there's anything interesting happening. But that that's where we're at. I'm gonna keep watching it into 2024. Remember, this was all Created by the ocean shipping format of 2022, right, so that was signed June 16th of 2022.

Lauren Beagen: 7:59

The FMC had actually already started work on the tension to merge rulemaking in the spring of 2022, where they had released an advance notice of proposed rulemaking, so an a, n prm. They had kind of sent some questions out to the industry saying we want to dive into dnd. What do you think? Congress came around with Osra and said, hey, you should do a rulemaking on detention to merge. And the FMC was like Thanks, we're doing so, we're already doing it. But then they obviously took into consideration what Congress passed, folded that into their next round of the tension to merge rulemaking, and now here we are waiting on the final language. So that's where kind of all of this started the rulemaking's, the additional rulemaking's, so where I'm gonna keep watching it to see.

Lauren Beagen: 8:41

Everything was supposed to be closed up. The first one making was supposed to be closed up within six months. That became a little bit more complicated, be a new one. So Chairman buffet at the time said it's better to get it right then get it fast. All of the rulemaking's were supposed to be closed up within one year. We are now a year and a half past. That are a year and a half past the signing. So We'll see, we'll see what's happening. I they are still working on it. They certainly haven't let it gone stagnant, but we are past that line. But I'll keep watching. All right.

Lauren Beagen: 9:14

Story number two speaking of the FMC, they quietly announced an industry advisory last week regarding tariffs and access to tariffs and I just wanted to bring it to your attention and kind of, I guess, explain it a little bit. So the FMC announced that, pursuant to the rulemaking finalized on January 2nd 2024 so they were back at work January 2nd that common carriers and conferences so conferences are kind of a mostly outdated construct, but. But common carriers and conferences must provide public access to their tariff publication systems. And here's the change free of charge, effective February 1 2024. So tariffs already have a requirement to be and and this is from the language unless otherwise exempted, all common carriers and conferences shall this is the language keep open for public inspection in automated tariff systems tariff showing all rates, charges, classifications, rules and practices between all points or ports on their own routes and on any through transportation route that has been established.

Lauren Beagen: 10:11

So there it is in in section 520, 520.3 a, a, presumption of public inspection, meaning openly available right, and it kind of it kind of presumes will only available should probably mean free, but it didn't necessarily, because if you look a little bit further into section 520. You're going to see section 520.9, access to tariffs, and this is where the modification was happening. But if you look at a 520.9 a, methods to access, the language that's in the regulation right now says carriers and conferences shall provide access to their published tariff via a personal computer. Okay, a1, dial up connection via public switch telephone networks. A2, the internet, parentheses, web by, and then the subcategories is web browser or telnet session. This is oddly specific and also is it starting to feel a little outdated? So keeping going down section 520.9. B is dial up connection via PST and saying the subsection here the connection option requires the tariffs provide A minimum of 14.4 kilobits per second. Modem capable of receiving incoming calls, smart terminal capability for VT-100 terminal or terminal emulation access and telephone line quality for data transmission. The last part of this the modem may be included in a collection bank of modems as long as all modems in the bank meet the minimum speed.

Lauren Beagen: 11:52

This feels very outdated. They're talking about dial-up internet, okay. So now you're kind of understanding the regulation and where this regulation was and why the FMC might have been looking at this and why the FMC might have allowed for a cost recovery by anybody who needed to be publishing these tariffs, the conferences or the ocean common carriers. So I mean, talk about outdated, right. So that's what I wanted to kind of highlight here is that this is kind of an outdated section and this gives those people who needed to, the companies who needed to have this public access to this tariff, a little bit of a nod in that, look, it used to cost money to publish these things on the internet. I mean, for the most part now it doesn't, right? You can just put it on a website. Minimal, right. It might be minimal, but compared to what it used to cost, and this is more than 20 years old, right. So exactly what's changing here?

Lauren Beagen: 12:53

The commission amended its regulations to remove the option to charge a fee for tariff access currently found in that same section 520.9. It was subsection E3. So it used to say carriers and conferences may assess a reasonable fee for access to their tariff publication systems and such fees shall not be discriminatory. And so basically that's what it was was saying look, it might cost money. We don't want this to be delimiting on your ability to provide public access to your tariff and your tariff publication systems. And so that's what it used to say is, you can charge kind of small fee and it can't be discriminatory. Now it doesn't right. That's what got eliminated. They eliminated that section saying carriers and conferences may assess a reasonable fee and they eliminated that.

Lauren Beagen: 13:37

There was some discussion in the docket about the justification for charging a minimal fee and wallet partially hinged on the outdated nature. There was also some talk about reasonable charge for access tariffs, but the FMC kind of dispelled that in the final rule language, basically saying it didn't find any of the arguments large enough to say that it was debilitating, the amount that was being charged by some of these tariff publishing companies wasn't debilitating to the member or the person who was filing the commenter, and that they said they didn't find the argument compelling enough. I think is the language that they used or making that argument that this was debilitating, that now they weren't able to publicly publish that tariff because of how much they have to pay this third party tariff publishing system. So I don't know, this is this. I think it really relates more to the outdatedness of the section. Right, they're talking about dial up internet and how it used to cost potentially prohibitive amounts of money, and so the FMC at the time said okay, you can pass a reasonable fee on to the users, but it still needs to be considered publicly available. Now they're saying look, it doesn't cost that much, it's, it's, unless we got comments saying that it was prohibitive, and that's what they're saying in this final rule. We didn't get comments that said it was prohibitive to publish it in a free and fairly available and freely available way. They're eliminating that section.

Lauren Beagen: 15:08

The rule also amended a few other things that I wanted to bring to your attention. I'm not going to go too far into it, but I did want to bring it to your attention just so that you know that it was in this rule, because I think the attention on this rule was about the free nature of tariff publishing, but I wanted you to notice that there was also. There were also a few other things that were referenced in this rule, and so they relate. The rule also talked about cross referencing tariffs. I talked about charges passed through by NVOCC's to NVOCC's, by VOCC's, and it also talked about co loaded cargo. So while it's important to review the rule, if you have anything to do with the publishing of tariffs and they're now requirements for free access, it's also important to take a look at this rule if you have anything to do with these other categories within the rule. It gets a little nuanced, so that's why I chose not to kind of go into it too far today. But I wanted you to know. Cross referencing tariffs, charges passed through by to NVOCC's by VOCC's and co loaded cargo are the other topics that are covered in this rulemaking. Take a look at it. But that I wanted to give you that kind of background. Look, it wasn't so much as they were trying to take away the ability to charge. It was that you're required to have these tariffs publicly available, and now you're required to have them freely and publicly available, all right.

Lauren Beagen: 16:25

So story number three at the end of November, the White House made a bunch of announcements about the supply chain and initiatives that the Biden administration had undertaken or plans to undertake still during his tenure. Again, as we're shaking off the holiday cobwebs, I wanted to kind of bring some of these back to top of mind as things that we're watching in 2024. So the creation on the Council of Supply Chain Resilience so this is a Council co-chaired by the National Security Advisor and National Economic Advisor and is basically including, I mean, all cabinet members. It looks like you have Secretaries of Agriculture, commerce, defense, energy, health and Human Services. I mean the list is quite lengthy here, so go back and check the overall fact sheet. I think is what they called this announcement. They also are in this announcement talking about using the Defense Production Act to make more essential medicines in America and mitigate drug shortages. As it relates to supply chain, they're also talking about in this announcement a new cross-governmental supply chain data sharing capabilities. So this is the Department of Commerce's new first of its kind is what the announcement said Supply Chain Center, which is integrating industry expertise and data analytics to develop innovative supply chain risk assessment tools and is coordinating deep dive analyses on select critical supply chains to drive targeted actions to increase resilience. And I think that's going to be the name of the game throughout. What the administration is looking for is this supply chain resilience and the health of the supply chain, so that we don't get into a situation in 2021 where we had this just massive COVID congestion backup. We want to create a little bit more. It sounds like future proofing of these supply chains through some of these initiatives.

Lauren Beagen: 18:09

Another one that they mentioned is the Department of Transportation's freight logistics optimization works Flow. We've talked about Flow a few different times before. They were making a big announcement and push for that in kind of that Thanksgiving holiday, christmas time Watch Flow. I think Flow is really interesting. I think it's a pretty cool effort. It's continuing to mature. As they said in the announcement, it's a public-private partnership that brings together US supply chain stakeholders to create, as they're saying, a shared common picture of supply chain networks and facilitate a more reliable flow of goods. And it announced a milestone saying that participants are beginning to utilize Flow data to inform their logistics decision making, helping to avoid bottlenecks, shorten lead times for customers and enable a more resilient and globally competitive freight network.

Lauren Beagen: 18:55

The earlier warnings of supply chain disruptions. I think that this is going to be something interesting to watch. I think that Flow it's just an interesting overall initiative Going down the rest of the fact sheet and I'm kind of hopping around here, but there was a new resilience center and tabletop exercise for supply chain disruptions. That's going to be with the Department of Homeland Security and the launch of a new supply chain resilience center which the announcement said will be dedicated to ensuring the resilience of supply chains for critical infrastructure needed to deliver essential services to the American people. Again, it looks like they're tying some of the security side of things. They're tying it to drug shortages and that sort of thing, but they're kind of going in on content-based supply chain resiliency as well as general overall supply chain resiliency.

Lauren Beagen: 19:47

We talked about this and a few different times we've talked about the launch of the DOT multimodal freight office as part of the bipartisan infrastructure law. We talked about implementation DOT launched and we've been watching and waiting for it for a while. This office of multimodal freight infrastructure and policy that is where Flow is kind of being run through. It said the continued advancement of the Flow initiative in partnership with the Bureau of Transportation Statistics. We also will see. The office will be responsible for maintaining and improving the condition and performance of the nation's multimodal freight network, including through the development of the National Multimodal Freight Network review of state freight plans. It looks like it's not necessarily a standalone office. It looks like it's actually housed under the office of the Undersecretary for Policy, and they named the Deputy Assistant Secretary for Multimodal Policy as Alison Dane Camden.

Lauren Beagen: 20:45

I think that we're going to see a lot of great things coming out of this office. I'm certainly going to be watching to see what happens. Flow is one of the initiatives, like I said within it, but some of these other things that they've been tasked with I think are going to be hopefully helpful for the overall US supply chain resilience and kind of future proofing. Another thing that we're watching is the supply chain data and analytics summit. There isn't a lot of information out there yet, but what this overall fact sheet from the White House said is that there is an aim to have a supply chain data and analytics summit sometime in 2024. They said that the key aim of the summit will be to invite expert input into supply chain risk assessment models and tools. As I learn more, I'll keep following this, but this one, I think this will be interesting. There were two previous summits held and I think that this one is going to be like it says it's going to be talking more about the data and analytics side of things. So let's keep watching. But I wanted to bring this fact sheet back up top of mind so that you know what the White House and the administration is looking to continue movement on in the supply chain realm in 2024.

Lauren Beagen: 21:52

So story number four we're already hitting a lot of stuff, right. So story number four is the Panama Canal. It's still here, it's still in the news. Certainly, the Red Sea has come top of mind with the Suez Canal, but the Panama Canal is still around. We've been reporting on it since last spring and although in the fall I kind of kept everyone in the loop on the different decisions that the canal authority was deciding due to the drought, one of those was that they were going to be dropping their vessel transits from 36 to 18. Now I've been hearing that they're going to be upping that to 20 vessel transits starting February 1st. But actually just yesterday Merisk has decided to take matters into their own hands and announce that they would be embarking on a land bridge, kind of foregoing the Panama Canal entirely and using rail to take the cargo across that same route.

Lauren Beagen: 22:41

I kept saying through the fall especially, and through kind of early winter, that this isn't a red alert moment yet. I still don't think it is, but I do think that this, paired with the Red Sea troubles, it's time to start paying attention and perhaps start planning your contingency plans for congestion. It's been forecasted that the operational routing problems of the blocking or the inability to transit freely both the Panama Canal and the Suez Canal might lead to equipment imbalances is what I've been reading. I'm not sure if it will or if it won't. That's ultimately for you and your company to decide if that's something that you are going to be making any changes because of.

Lauren Beagen: 23:21

But these stressors on the ocean shipping system, I mean, I don't see quick fixes right, they certainly haven't been quick fixed yet and they don't seem to be going away in short order either. And the longer the system is stressed, the worse it really is for everybody, right? So time is often, as they say, equals money, right, time equals money. And these are going to take a little bit longer to get to places if the two main canals that help these vessels avoid the extra long trips around South America and the Horn of Africa are unavailable for the sufficient transit. So I'm sure you've been watching the Red Sea. It continues to be a problem for commercial containerized vessels, with the attacks from the Houtti militants on vessels traversing the Red Sea.

Lauren Beagen: 24:00

Since the new year, we've had a lot of experts in the field giving daily reports on the Red Sea. There's some nuances there, so I'm not going to go too far into details here. I'd be remiss if I didn't mention the Red Sea and the impacts that it is having on the Suez Canal. If you haven't been paying attention, it's time to start paying attention to that. This is going to be, as I've read, directly affecting Asia to Europe and vice versa, but it is going to have a knock on effect for the rest of the ocean shipping, as we've always seen.

Lauren Beagen: 24:27

It is one large global ocean shipping ecosystem and, like I said, there's been some forecasting that this might impact operational shortages and create imbalances of equipment within the overall ecosystem. Look, we've had a few days where commercial container ocean carriers tried the Red Sea again, but at least for now, it appears that all major commercial cargo movements have really ceased in that area, Except for a few, and even so, I'm reading that even some of the few commercial vessel movements that have been happening are actually signaling through, I believe, is AIS data. They say all Chinese crew or they're signaling no connection to Israel. It's interesting, right? This is very interesting. This is very nuanced. I don't want to do an injustice by not covering it appropriately, but I do want to call your attention to it.

Lauren Beagen: 25:20

The Panama Canal continues to be a problem because of the drought that's happening in the region. Unless they get a lot of rain, that's not going to change anytime soon and the Houti militants that are affecting and impacting the Red Sea so that the vessels can't transit. The area going through the Suez continues to be a problem and will continue to delay the vessels. I mean, that's a no-go right now. It feels like for most, although it seems that there's maybe some strange exceptions, some exceptions happening in the area. The Panama Canal at least still has some vessel transit, but with the vessel number reduction. Previously it was a draft reduction, now it is a vessel number reduction. So that makes it more impactful to, I'd say, containerized cargo than previously, because containerized cargo doesn't pull the same draft as some of these bulk carriers do, and so, while the draft seemed to have more impact on the bulk carriers, the vessel numbers transiting through, I think, creates that potential for the container cargo movement to be a little bit more impacted. A lot going on right.

Lauren Beagen: 26:31

This was just to help you kind of shake off the cobwebs, like I said, from the holiday. We're gonna continue to watch all of this. I'm gonna try to make sense of it all. Like I said, there's a lot of experts out there that are diving into even daily updates on the Red Sea, so continue to watch them. I'm gonna pull anything that I think is particularly notable or something that you should be watching or something that needs a little bit of translating. Please let me know if there's anything during season three that you want me to hit a little bit more. Do you enjoy these captain's log additions better than diving deeper into some of these issues? Should I keep the deeper dives for really interesting things or, I guess, suggested questions that you have? I'll keep going pretty much how we've gone before. I'm gonna try to introduce a few more interviews throughout this new year and this new season, but look, that's it for today. Keep it tuned here for all of your industry highlights from the week and the little sprinkler of their background information that I like to bring in.

Lauren Beagen: 27:30

As always, though, the guidance here is general. For educational purposes. It should not be construed to be legal advice directly related to your matter. If you need an attorney, contact an attorney, but if you do have specific legal questions, feel free to reach out to meet my legal company, Squall Strategies. Otherwise, for the non-legal questions, the e-learning, the general industry information and insights, come find me at the Maritime Professor. If you like these videos, let me know, comment, like and share. If you wanna listen to these episodes on demand, or if you missed any previous episodes, check out the podcast By Land and By Sea and if you prefer to see the video, they live on my YouTube page By Land and By Sea, presented by the Maritime Professor. While you're at it, check out the website TheMaritimeProfessor. com. There's gonna be some new stuff happening in 2024 over there, so definitely get on our email list. So until next week. This is Lauren Beagen, the Maritime Professor, and you've just listened to By Land and By Sea. See you next time.