S3.E2 - Captain's Log - US ECS, FMC Hearing re: Red Sea, Gemini Collaboration

Topic of the Week (1/19/24):

Stories I'm watching this week: FMC Hearing, US ECS claim, new operational collaboration

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 will host an informal hearing on the Red Sea and Gulf of Aden on February 7 (in person and virtual).

https://www.fmc.gov/fmc-announces-hearing-on-shipping-conditions-in-the-red-sea-2/

3 - A.P. Moller - Maersk and Hapag-Lloyd AG to enter into an operational cooperation called "Gemini Cooperation."
https://www.hapag-lloyd.com/en/company/press/releases/2024/01/maersk-and-hapag-lloyd-are-entering-into-an-operational-cooperat.html 

4 - The US grew by approximately one million square kilometers across seven regions last month - did you notice? This is the extended continental shelf in seven different regions. 
https://www.state.gov/the-us-ecs/
https://www.state.gov/announcement-of-u-s-extended-continental-shelf-outer-limits/

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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. **

#ByLandAndBySea

Transcript

Speaker 1: 0:42

10. Did you know that at the end of 2023, the US expanded its landmass by approximately one million square kilometers spread across seven different regions? That's roughly twice the size of California? Did you even hear about that? Look, it might have been underwater, but look, it's still land. Right, let's jump into it today.

Speaker 1: 1:18

Hi, welcome to, by Land and by Sea, an attorney breaking down the weekend supply chain presented by the Maritime Professor me. I'm Lauren Began, 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 is general and for educational purposes only. It should not be construed with legal advice and there is no attorney-client privilege created by this video or this podcast. If you need an attorney, contact an attorney.

Speaker 1: 1:50

So we've been kind of moving toward just doing captain's logs. We're going to do it again this week. We're just going to be going through all the top stories of the week and so, while we don't have the top three stories of the week, we do have top stories. We have more than three this week, so let's jump into it. So, as always, we're watching story number one we're watching the Federal Maritime Commission with the release of any movement on the three open rule makings and the request for information on the MTDI. We haven't seen a lot going on here, where we're continuing to monitor it, but I did want to report back. So what are the three rule makings that we're watching? We have the defining unreasonable freeze-altitude or negotiate with respect to vessel space accommodations provided by an ocean common carrier. That last closed up July 2023. That was the supplemental notice of proposed rulemaking. Haven't seen anything there A few comments here and there that we've talked about, but nothing from the agency, the Federal Maritime Commission itself. The other rule that we're watching of the second, one of the three is the billing practices of detention and demerge. That closed up December 2022. So that's been over a year now that we've been waiting. Quite a few comments came in on that one, so I always anticipated that that was going to take quite a while. I think they're balancing a few different interests right and we've had some late filed comments that have come in on this one too, particularly from two congressmen from the Transportation and Infrastructure Committee on the House side. So I think that the FMC is still working toward a final language rule for this, but we haven't seen it yet. Nothing new this week.

Speaker 1: 3:26

And the third rule is defining unfair and just the discriminatory methods. We're still waiting on language. The FMC said that they included some of this in that first rulemaking the unreasonable freeze-altitude or negotiate language. Obviously it's not a final rule, that one, but they included some of these elements of the unfair and just the discriminatory methods in that first rulemaking process. But we haven't seen a standalone document come out for this defining unfair and just the discriminatory methods. And also we're watching the request for information out of the Maritime Transportation Data Initiative. There's been talk of potentially another round, another request for information coming building on or potentially being maybe different questions from the last one, but continuing to watch the Maritime Transportation Data Initiative and all the good work that's been happening over there. So I'll keep reporting on it and I'll let you know what I see.

Speaker 1: 4:16

But story number two, speaking of the FMC, there is stuff happening over the FMC. Last week we reported, we talked about the no fee tariff access rule and kind of how that whole regulation is very. Are you still using dial up? Well, you need to use 14,000 KPI. It's a little outdated, right, and that was kind of my point. So we talked about that, but right after we went live, they actually announced that they'd be hosting an informal hearing regarding the Red Sea. So I wasn't able to include it in our conversation last week, but it's here now, right?

Speaker 1: 4:48

So what happened? Right, the Federal Maritime Commission last week announced that they're going to be holding an informal public hearing. So the informal public hearing is going to be on February 7th, so just under a month from now and at that hearing they really want to dive into Red Sea and Gulf of Aden. So they're going to be examining how conditions in the Red Sea and the Gulf of Aden regions are impacting commercial shipping and global supply chains. There's obvious implications, right. We've seen some of these rerouting of some of the vessels, but what does that look like for the shipping public? What does that look like actually for the VOCC side of things? So that's what they want to really flesh out, right?

Speaker 1: 5:25

The hearing is going to allow stakeholders in the supply chain kind of generally to communicate with the Commission directly on how operations have been disrupted by the attacks. This is right off of their announcement. How operations have been disrupted by attacks on commercial shipping emanating from Yemen has taken in response to these events and the resulting effects? Right, they want to hear what's going on. Give us a snapshot. They're also going to be trying to gather information and identify any new issues related to the disruptions and they mention in the announcement that they're going to be talking about things such as implementing some of the implementation of the contingency fees and surcharges in the area and certainly the disruptions that are subject to the Commission's statutes. They're really interested in learning more about the surcharges and fees. They've seen that kind of in a few different ways that they've announced. They also announced industry advisories regarding the Red Sea and some of these surcharges and fees, essentially saying the shipping act rules still apply and the FMC is essentially saying we're still watching, right, we're still watching what's happening here. They want to say we're paying attention and they really want to remain active. I think during all of this, they took a little criticism. During the kind of 2021 COVID congestion time, they took a little criticism, for I think that they were being active, but maybe they weren't being as publicly facing active, but the criticism was that they weren't as active during the D&D surcharges time.

Speaker 1: 6:51

I think that this hearing is a good thing right. It's increasing the engagement with the industry in a public-facing way, but also not only lip service. They are actually interested, as they always are, but I think they're actually interested in hearing directly from the shippers, not just ad hoc here and there, but they want to say look, here's a hearing, here's an opening. We want you to share your information. They're asking for interested parties who want to request to be considered right, because they can't have everybody raise their hand and call on everybody all at the same time. If you want to request to be considered as a participant and participants have to be present in person at this hearing if you want to share information and comments, you can also do that through a written submission. You can submit your interest in appearing in person or just your general comments or written submission. They're accepting those up until January 31st.

Speaker 1: 7:42

Again, this hearing is going to be February 7th. They're going to have panels and participants announced at a later date and they're intending to include representatives of both VOCCs, vessel Operating Common Carriers and shippers. Again, if you want to participate, you have to be there in person. They are going to be live streaming it out, but the participants and the participation and the kind of commentary has to be in person so you'll be able to watch it. The actual hearing itself is going to be over the surface transportation board. Fmc has been doing a few of their larger hearings over there. I think their hearing room is under construction. I don't know if it's completed yet, but it might just be a larger room as well. So it's going to be over the surface transportation board hearing room, but it will be live streamed. So I'll make sure to post once we get some information on that. But they're going to be releasing more information, but that just came out last Friday.

Speaker 1: 8:33

I think that this is going to be good. I've seen mixed reactions about the hearing already. I don't know. I'm not so negative about it. I think that this is good. It's an informal hearing. I think that they really want to help illuminate the problems and the solutions that are being introduced. They really want to have this open conversation. I don't see that as being a bad thing. There's certain things that the FMC is able to do to monitor, to ensure the fair and efficient movement of goods right through their the shipping act, which gives them their statutory authority, and I think that this falls within their realm. So I think that this hearing on the Red Sea is a good thing, and I think it's good timing, right, this is pretty quick in terms of government action. So things started happening at the turn of the new year and here we are the end of January. We're hearing about a hearing taking place on February 7th, so I think this is a good thing, all right.

Speaker 1: 9:27

Story number three a major announcement happened this week. I hope you caught it. Mayor Skinhub Igloyde announced that they are going to be entering into an operational cooperation. All right, so what does that mean? Right, there's been a lot of reporting on it. It's only actually a few days ago that they reported this, but what they said is that they signed an agreement for a new long-term operational collaboration. That's what they're calling it the operational collaboration. It's going to be called Gemini Cooperation. That's kind of a cool name, right. We have the Alliance, the Alliance, we have Ocean Alliance, we have 2M and now we're going to be having this Gemini Cooperation.

Speaker 1: 10:03

And I caution, we're going to talk about this in a minute, but I caution looping it in with the other alliances just yet but some information about the Gemini Cooperation. It's said to start February 2025. So we have about a year and, according to their announcement, the ambition is to deliver a flexible and interconnected ocean network with industry-leading reliability. So, like I said, I wanted to kind of talk about this. It seems to suggest that this is a new global ocean alliance, but I'm only cautious to go there yet because I haven't seen the agreement file with the FMC. And that's not to say that that means anything. Right, that doesn't necessarily mean anything, one that maybe I just can't find it.

Speaker 1: 10:45

As you may know, agreements are kept in the agreements library on the FMC's website. It can be publicly accessed on the FMC's website. It doesn't necessarily say anything that I can't find it, but I can't find any language on this. And it's an operational collaboration, is how they identify this. So I can't confirm. All this basically means is that I can't confirm the details of this operational collaboration. So usually when I talk about any sort of alliances or anything that's on these agreements, I actually go into the agreements library in the FMC's on the FMC's website and pull up the actual text of the agreements. I want to make sure that it's accurate. I want to make sure that it's the actual information from the horse's mouth. So, in lieu of actually not being able to find this agreement and perhaps it's not an agreement that needs to be filed. I'm still learning about what this collaboration is, but so, in lieu of that, I've pulled from the Hoppegloid website the announcement and basically what it's saying is this is a new cooperation between Hoppegloid and Marisk and it's going to comprise a fleet pool of around 290 vessels with combined capacity of 3.4 million TEUs, marisk deploying about 60% and Hoppegloid deploying about 40%.

Speaker 1: 11:57

I want to stop there. When we've talked about some of these vessel sharing agreements and these alliances before, I think one misunderstanding is, even though they represent two, especially in the instance of 2M right, we talked about them a lot these two large companies and 2M will end January 2025. That's kind of how everybody talked about the alliances recently coming to mind. It was about a year ago. They announced that they would be concluding 2M alliance at the end of January, in 2025 of January. So one of the misunderstandings, I think, is that it's not necessarily the entire fleet that's part of these vessel sharing agreements, and so that's why when people start saying, especially for 2M, they were saying, oh, it's getting too big. It's getting too big, not necessarily right, the fleet pool, the actual vessels that are in this, that agreement might not be the entire fleet, so I just wanted to make a little note of that, because I think that's a misunderstanding that sometimes happens for the alliances.

Speaker 1: 12:58

So, getting back to this cooperative, this operational cooperation, the two companies have set they've mentioned an ambitious target. This is off of their announcement delivering schedule reliability of above 90% once the network is fully phased in. This has drawn a few critiques, saying that both companies currently are in the 70-ish percent schedule reliability. So I love to see it right. You want to see schedule reliability, certainly in support of this announcement saying that they are going to be targeting a 90% reliability. That's great, right, that's great. As well as improved service quality, customers will also benefit from improved transit times and many major port-to-port corridors and access to some of the world's best connected ocean hubs Cool, that sounds great. It also said in the announcement that the resultant piece of this is that Hoppeg-Lloyd is going to be leaving the Alliance, or THE Alliance, at the end of January 2025. And so, like I said, january 2023, Merisk and MSC announced that the 2M Alliance would be ceasing the agreement, and so January 2025 is when we see 2M breaking up and January 2025 is when we see Hoppeg-Lloyd leaving the Alliance, and so it's this February 2025 that the Gemini cooperation begins, it kicks off.

Speaker 1: 14:19

So when 2M announced their breakup, it was anticipated that there might be some follow-on shifts to other alliances. And here we are right. Here's some shifting. They're not necessarily beholden to the agreements that are on file with the FMC, meaning that it's not like they can't change it. They have to submit amendments to those agreements, but that's fine. They made these terms of these agreements and so long as they're submitting these amendments in due course, they can do just that. There really isn't specific regulatory requirements on the content of these agreements. Certainly, the filing of the agreements is part of the Shipping Act requirements, but the actual specifics within those agreements it's certainly on these Vessel Sharing Agreements, the content that we're talking about, the ceasing of operations, that sort of thing can be amended. The parties can be amended, as we're seeing. So the Alliance, hoppeg-lloyd will be leaving the Alliance. For this announcement.

Speaker 1: 15:13

I'm going to keep watching this. But look, I noted this a few different times. But they call this the operational cooperation, so not necessarily an operational agreement or a Vessel Sharing Agreement, although that's kind of what they're talking about in this announcement. They do say that they've signed an agreement and they say, at least in this announcement I guess what I'm honing in on is the word usage here and they don't necessarily call it a new alliance. I don't see that they're not necessarily calling it a global ocean shipping alliance either, or a global Vessel Sharing Agreement. Maybe that doesn't matter, maybe that doesn't matter that those aren't the words, but they've specifically used the term cooperative, operational cooperation. I'm just noting that, I guess. So as a trained lawyer, I'm trained to notice words, and so I'm interested in learning more about this. I did go back in the Alliance. Thg Alliance doesn't have an amendment yet that shows the intention of Hoppeg-Lloyd leaving, but that doesn't necessarily mean anything yet either. I'm going to keep watching. I like to see the actual text, and it'll be interesting to see if this finds its way into the agreements library. Certainly the amendment to the alliance will make it in, but I don't know. I'm interested to see. I've seen this reported as the new alliance or a new alliance, a new Vessel Sharing Global Alliance, but I'm just not exactly sure how to classify this until we get a little bit more clarity on the announcement. And so this is brand new, right this hot off the presses, so we'll keep watching this, all right.

Speaker 1: 16:51

Well, story number four. This is what we started off with the big teaser for the whole podcast here, the whole episode. Today, december 19th, the State Department released geographic coordinates defining the outer limits of the US Continental Shelf. And so, if you're not familiar, the US Continental Shelf, or all Continental Shelfs, is essentially that it's a Shelf that extends beyond the, I guess, above water continent and goes underwater, so it's the subsoil or the subsea areas. It's extending the claim in areas beyond 200 nautical miles from the coast, and this is often times known as the extended continental shelf. So this gets very technical, this gets very termy, but I think that this is important to mention. This is obviously not necessarily supply chain related, but it is maritime related and this is the maritime professor, so of course I'm going to mention it. So the continental shelf, like I said, is kind of the extension of a country's land territory under the sea.

Speaker 1: 17:50

I'm going to be pulling some of this information right off of their announcement. They have both a fact sheet and a press release and again, this happened the end of December well, mid-december, really, december 19th that they made this announcement, and so what this new claim is is. The US extended continental shelf area is approximately 1 million square kilometers, spread across seven different regions, and the regions that they were targeting is the Arctic, the Atlantic on the east coast, the Bering Sea, the Pacific, the US west coast, the Mariana Islands and two areas in the Gulf of Mexico Collectively, this is about twice the size of California that the US has has established geographical coordinates on, thereby defining the outer limits of the US continental shelf. So it's unknown exactly what's in these areas, right, so it's going to be marine resource rich, but I think that we're still learning what exactly this means. But it's important to lay these claims, just in case, right, we want to know what this land is that we have that we're able to make these claims on. So, certainly there's corals and crabs, but there's potential for subsea oil, potentially, right, manganese nodules. I've even heard of diamonds before. So this creates the opportunity in these areas for more by making this claim, by establishing the limits of the US extended continental shelf.

Speaker 1: 19:13

So the Department of State led this effort. They created the US extended continental shelf task force, which was an interagency body of US government composed of 14 different agencies, so it was a big collective effort. Data collection had been going on since 2003. And so part of the data collection was depth, shape, geographical characteristics of the seabed and subsoil. So this was all kind of part of an in accordance with customary international law, as reflected in the customary international law of the 1982 United Nations Convention on the Law of the Sea and the scientific and technical guidelines of the Commission on the Limits of the Continental Shelf, which is a creation under UNCLOS, the United Nations Convention on the Law of the Sea. Now you might have heard of UNCLOS before United Nations Convention on the Law of the Sea. The US has signed it but has not ratified it, so we're not necessarily a party to it, but we have announced or made made the. We consider it to be customary international law, as the United States, and so this is done in accordance with UNCLOS and and the scientific and technical guidelines there.

Speaker 1: 20:18

So it can be a little confusing though if you casually follow UNCLOS. I'm an UNCLOS nerd, I like following it, I actually teach it. I teach a law class on law of the sea, but this can be a little bit confusing. So this extended continental shelf is not necessarily an extension of the water column, it is the subsoil or the seabed, it's that under undersea stuff. So yes, the claim actually does overlap with some neighboring countries too. That's okay. That's actually going to be ironed out in the future.

Speaker 1: 20:50

With the establishment of maritime boundaries UNCLOS mostly United Nations Convention on Law of the Sea the language actually mostly deflects to maritime boundary disputes and prefers that the countries determine those delimitations through agreements. And so we do have a few different overlapping areas with this extended and ECS, this extended continental shelf claim, and so those areas that still need to be ironed out are Canada, the Bahamas and Japan. But we've already established some maritime boundaries with neighbors and those include Cuba, mexico and Russia. So we've done some work on this previously. This is going to be interesting to see what happens here.

Speaker 1: 21:30

A few other little nuances is we've created the geographical coordinates. We've released the geographical coordinates defining our outer limits. Nobody needs to approve these, they're put out there. This is what we've determined to be our extended continental shelf area. There is the scientific and technical guidelines of the commission on the limits of the continental shelf, the CLCS. They will probably review this and determine if they are in agreement with what the US has asserted as the claim. But they don't necessarily approve or deny. There might be some modification that the US will, with the feedback, I'll say, from the CLCS. This is US claim. So by determining the limits of the ECS, we're determining what is already ours. We're just determining the limits of it, and so it's nuanced right.

Speaker 1: 22:31

But I just wanted to make sure to mention that this is cool. I think you should follow this. I have not seen a lot of information or press coverage of this. This is a big deal We've determined now. I mean, this is the Arctic right. This is kind of the Russian planting of the flag Didn't have as much to do as a technical feat, but that wasn't necessarily claiming the area. This is how you claim the area by finding the data and by determining the actual extent of the continental shelf through the scientific and legal analysis and then stating your claims with the geographic coordinates. That's where we're at. This is really cool. Take a look at this. Lean in a little bit on this extent of continental shelf stuff. Look, that's it for today. Just a few quick kits of stories that I'm following.

Speaker 1: 23:19

As always, the guidance here is general and 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 have specific legal questions, feel free to reach out to me at my legal company, skoll 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 want to listen to these episodes on demand, or if you missed any previous episodes, check it out on the podcast by Landon by Sea. If you prefer to see the video, they live on my YouTube page by Landon by Sea, presented by the Maritime Professor. While you're at it, check out the website themaritimeprofessorcom. Until next week. This is Lauren Began, the Maritime Professor, and you've just listened to by Landon by Sea. See you next time.