By Land and By Sea
By Land and By Sea
S3.E16 - Captain's Log - FMC activity roundup (incl. Peloton vs. Flexport) // Port of Baltimore/NTSB report // USTR Sec301 tariffs
Topic of the Week (5/17/24):
Taking inventory of industry news and catching up on a few things - it's the Captain's Log Edition!
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 Strategiesᵀᴹ)
Let's dive in...
1 - Federal Maritime Commission Final Detention and Demurrage Rule - effective date May 28**
**waiting to see from the U.S. Courts of Appeals for the District of Columbia Circuit if World Shipping Council's petition will delay the effective date)
Reminder: Maritime Transportation Data Initiative (MTDI) Request for Information (RFI) - comments due June 17, 2024
2 - National Shipper Advisory Committee next meeting is May 20.
Email NSAC@fmc.gov to register and receive the link. (This is the federal advisory committee to the FMC.)
3 - Peloton Interactive filed a lawsuit against Flexport at the Federal Maritime Commission. This case seems to be related to store door moves and the FMC's incentive principle for D&D.
4 - FMC Commission Meeting: May 29
FMC's YouTube page (for live stream):
https://www.youtube.com/channel/UCwKTAlGGHIA0xcN3bDt_Uqg
5 - The Fort McHenry Limited Access Channel has reopened to commercial vessels heading toward the Helen Delich Bentley Port of Baltimore (and elsewhere) to an available depth of 45 feet!
And the National Transportation Safety Board initial report of the MV Dali allision has been released:
https://www.ntsb.gov/investigations/Pages/DCA24MM031.aspx
6 - National Maritime Day is this Wednesday, May 22
Maritime Administration (MARAD) live stream:
https://www.youtube.com/watch?v=8O5DTTHT-uQ
7 - The White House Fact Sheet on USTR Section 301 Tariffs:
https://www.whitehouse.gov/briefing-room/statements-releases/2024/05/14/fact-sheet-president-biden-takes-action-to-protect-american-workers-and-businesses-from-chinas-unfair-trade-practices/
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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 or podcast. If you need an attorney, contact an attorney. **
#ByLandAndBySea
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Speaker 1:Thank you, I'm living for what it looks like. It's been a while since we've done a Captain's Log edition. You know a day where we just go through random industry news, take inventory of what's going on out there. So that's what today is the Captain's Log Edition.
Speaker 1:Hi, welcome to, by Land and by Sea, an attorney breaking down the weekend supply chain presented by 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 to 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 to be 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:So usually we go through my top three stories of the week, but today every story is a top story, so let's get right into it. All right, story number one first stop, let's check in on those FMC rulemakings. We've been doing that every week, but I think this week it's worth chatting about again. So the FMC, as we know, the Federal Maritime Commission, is working through three different rulemakings and one request for information. The first rulemaking that we've been talking quite a bit about is the billing practices, the detention to merge billing requirements, invoicing requirements. Now, as we know, this rule will go into effect May 28th, that's in just about what that is, 11 days from now. So last week the Federal Maritime Commission released a press release saying that the OMB, the Office of Management and Budget, approved a portion of the rule right. So we knew it was required by the Paperwork Production Act and the FMC reported or announced that it had been approved by the OMB. And now the entire rule, the entire detention demerge rule, was set to take effect on May 28th.
Speaker 1:Recall that the contents of invoice. So that was the section that we're talking about here. The contents of invoice section required that the OMB, office of Management and Budget review it and approve it before it could be officially effective. That was under the Paperwork Reduction Act. Anytime you're soliciting input or engagement from the industry, you have to have this Paperwork Reduction Act. That's an oversimplification, but that's basically. What was happening here is that OMB had to approve this section contents of invoice. That happened. The OMB approved it. That happened in the FMC made the announcement that OMB had approved it and that the entire rule could go into effect on May 28th. So what also happened? In that press release the FMC said that the commission had issued a correction to the final rule and they said that they were clarifying the final rules application to carrier trucking relationships, which we talked about this last week a little bit.
Speaker 1:But to me that seemed like it was a nod toward the World Shipping Council petition, almost to have the FMC say see, we fixed the problem. And that's what I meant to say. And that's what I meant when I said last week that the FMC could be trying to make the argument that the petition's argument is moot. But just because the FMC is raising that argument doesn't mean that the court will agree right, doesn't mean that the argument is mule. Like I said, the petition is still very much alive and very active and still on the table. When I say active. We're actually still waiting on a few things on the petition.
Speaker 1:So a little bit more about the petition. Last week we did talk about it. We talked about the World Shipping Council's petition. Go, take a listen if you want to hear more. But I want to be very clear here. The petition is still very much on the table, right, even though the FMC, like we just mentioned, seemed to nod in their press release that it's all set now. But the petition is front of the US Court of Appeals for the District of Columbia and they haven't said anything yet, right, they haven't said anything other than the court said that they released the dates that they want things turned in. So this is kind of the first round of procedural due dates and that's not even until May 20th. So that's next week, right, that's next Monday. This includes and part of the things that the court wants the procedural motions, statements of issues to be raised, entry of appearance, right, procedural stuff. So right now the petition is still at the Court of Appeals, right. So this is still yet to be fleshed out on what's going on.
Speaker 1:So what happened? Right? Like I said, last week we talked a little bit more about the petition. But what the petition actually said. I'm going to read it off from what was filed by the World Shipping Council. So it said petitioner, which is the World Shipping Council, challenges the final rule on grounds that it is contrary to statute, including that it exceeds the commission's authority under the Shipping Act and under OSRA. They said Section 7B and they also said and that it is arbitrary, capricious, an abuse of discretion and otherwise contrary to law. Petitioner seeks an order vacating and setting aside the final rule. So that was what was filed with the court.
Speaker 1:We don't have a lot of other information yet. Right Last week I brought up the statement made by the World Shipping Council on their own website, but we don't have a lot more. That's actually within the court and so all this stuff that's happening around is important, but it isn't what's happening in the court. So there's nothing that was actually asserted in that petition, or I shouldn't say there was nothing specifically mentioned in that petition that the FMC has resolved. Right, it was in their statement, that was on their Web site. It wasn't in the court filings. So hopefully on Monday we will get more information on the things that are filed with the court, assuming that the court posts them on Monday. But hopefully we'll get some more information from that. Right, it's probably a step in the right direction that the FMC did that clarification, right? I mean, anytime there's clarification, that's probably going to be a good thing. But that doesn't necessarily change anything. Right, that doesn't necessarily change anything with the petition filed with the World Shipping Council. It has not been withdrawn from any of the indications on the court's filing system on the docketed matter. So everything is still just the same, despite all this other stuff going around. Right, the petition has been filed.
Speaker 1:Okay, so let's take another step back. What does all of this mean? There's a lot kind of going on with this detention to merge rule. What does all of this mean? So, right now, as of right now, may 28th is the rule's effective date. Omb approved the contents of invoice, so the entire rule will go into effect May 28th. That's just under two weeks away. But what could happen in the meantime Hasn't happened yet. But what could happen? The court where the petition was filed could decide to delay the rule's start date based on the filings that are going to happen on Monday. So, as of now, may 17th, today, friday, may 17th, the effective date of the D&D rule is still May 28th. That might change on Monday. I don't know yet. We don't know yet. That might change even after Monday. We still don't know and that's up to the court to decide. So that's what's going on with the D&D rule. I mean that's great right that the OMB approved it. That's great that they approved the Constance of Invoice. So now the entire rule. That's one less thing on the table of things that might happen with this rule in the meantime. So the entire rule goes into effect May 28th. Stay tuned for what else might happen, but the entire rule as of right now goes into effect May 28th. All right, so that's the D&D rule.
Speaker 1:We still have two other rules that we're watching out of. The Federal Maritime Commission, right. So we have the defining unreasonable refusal to deal or negotiate with respect to vessel space accommodations provided by an ocean common carrier. Chairman Dan Maffei, at a recent budget hearing, I believe it was said he expects the final language on this to be coming out in the next few months. Cool, I'll keep watching for it. I haven't seen anything come out there yet. And we're also waiting on the defining unfair and just the discriminatory methods.
Speaker 1:This is the third rule. The FMC hasn't released independent language on this rule but they have folded in part of it into that. Unreasonable. If we're supposed to negotiate rulemaking, these two rules are definition rules. These are defining these otherwise prohibited activities under the Shipping Act, so unreasonable if it's a deal to negotiate.
Speaker 1:Or unfair, unjustly discriminatory methods. Whenever rulemaking seek to define, pay attention. Right Pay attention and not legal advice, just general good practices. Pay attention because definitions can have unexpected or undue effects and I think that's what Chairman Maffei has often said with the defining unreasonable results to negotiate. He wants to make sure that all of those nuances are kind of thought through, because he said that has been one of the most tricky rulemakings because they need to get it right without accidentally getting it wrong. And so check those out. Certainly we don't have an independent defining unfair, unjust, discriminatory methods rulemaking out, yet we do have defining unreasonable refusal to deal and negotiate.
Speaker 1:That language has come out. It was even reopened for a supplemental notice and proposed rulemaking. That closed last July, so almost a year ago. We're just waiting on the final rule to come out there, right, so now we're just waiting. But go, take a look. Go look at those definitions, see if they kind of jive with what your business practices are, your operations. Just make sure that you're paying attention anytime that there's definitions being created or defined or precision brought around to them. Make sure that they match up with how your operations work in the ocean global shipping world because they can have those effects. Right Definitions the FMC in general likes to provide guardrails where they don't like to get too specific if they don't have to.
Speaker 1:They want the case law to really go into the details and the specificity because there are so many different fact patterns, there's so many different specifics of situations that they can't and don't want to, I think, enter into on a rulemaking. They really want the case law to fill those parts in. But they were asked by Congress to define these two areas right the unreasonable refusal to negotiate and define unfair, unjustly discriminatory methods. And so since they were told, told, asked, told to do that, they have to do that. So just pay attention there. So we're also watching the Maritime Transportation Data Initiative. They have their second request for information out. We covered that a few weeks ago. If you'd like to learn more, go check out that episode. But those comments are due June 17, 2024.
Speaker 1:Request for information number two and again it's kind of talking a little bit about how is data exchanged? What are the sticking points? How do you not get the best information back and forth? Go, take a look at that. They break it out by kind of industry stakeholder group. There's set questions. But I'm sure that they would also appreciate general feedback. But there's set questions in that request for information. So take a look. All right Story number one, right Story number two.
Speaker 1:So what else is happening at the FMC? Quite a few of the stories today are kind of taking inventory of what's happening at the Federal Maritime Commission. There's plenty going on. So next week the National Shipper Advisory Committee, nsac, is holding their public meeting. So this is set for Monday, may 20th Interesting date, although nothing to do with that petition. I just have May 20th and May 28th circling in my head. It's set for May 20th. It's going to be in the afternoon for us East Coasters. If you'd like to listen in, you have to actually register to get the link. So it's NSAC, n-s-a-c at FMCgov. You have to register, request the link. There's going to be a public comment section of the meeting and they from their federal register announcements say that they always actually accept public comments, written public comments. But, yeah, there's an opportunity for live engagement.
Speaker 1:We've talked about this committee plenty of times before, but I always like to make sure that we're all on the same page, right? Not everybody is an every week listener, although you should be. From the FMC's announcement of the meeting, though, here's the background information on NSAC and how they present it. So it says the National Shipper Advisory Committee is a federal advisory committee. It operates under the provisions of the Federal Advisory Committee Act. You may have heard FACA is often the acronym for that Federal Advisory Committee Act for these federal advisory committees.
Speaker 1:It said the committee was established on January 1st 2021, when the NDAA the National Defense Authorization Act for fiscal year 2021 became law. The committee provides information, insight and expertise pertaining to conditions in the ocean freight delivery system to the commission. Specifically, the committee advises the FMC, the Federal Maritime Commission, on policies relating to the competitiveness, reliability, integrity and fairness of the international ocean freight delivery system. Continuing on, it says the committee will receive an update from each of its subcommittees. The committee may receive proposals for recommendations to the Federal Maritime Commission and may vote on these recommendations. Any proposed recommendations will be available for the public to view in advance of the meeting on the NSAC's website and then they list the website. The committee will also take public comment in the meeting. So, like the background says here, this is the federal advisory committee to the FMC, meaning it's the avenue for private industry to engage with the FMC on a regular basis and provide recommendations and input on the federal agency and what they're doing.
Speaker 1:I think federal advisory committees are so important, right, and I think that the FMC specifically does a good job of taking the federal advisory committee recommendations into consideration. Right, they respond to each one. Did you hear that? They respond to each one of these recommendations? And they actually house those recommendations on a landing page on the FMC's website, so they're so easy to go check out. Take a look at all the different recommendations that have been listed before that have been submitted to the FMC, and then I mean not immediately, but then you can look at the response that the FMC gives to those recommendations. It's not an immediate response, right, it's not like the next day. They have to certainly be looking through the recommendations and thoughtfully considering them, but that's what they do. They respond to those recommendations, and I just love that level of engagement from the agency itself. So take a look. Hopefully I'll see you online on Monday with the NSAC committee meeting.
Speaker 1:Story number three more FMC news. This one I didn't report on last week and I had fully intended to. So Peloton, yes, the at-home workout hit their height during COVID. Peloton filed a lawsuit against Flexport at the FMC. Certainly two big names in their respective industries, right? So I always need to mention this. Right that we only have one side of the story. We've brought up a lot of the complaints as they're filed with some of these big names. Right, we've had Samsung, we've had just a whole bunch of Bed Bath Beyond some really big names filing lawsuits at the FMC, and whenever I report on those, I always make sure to say look, this is just the complaint, it's not both sides of the story. So this is just the complaint. Again, here we only have one side of the story. This is Peloton's complaint being filed.
Speaker 1:But essentially, let's go over what they're asserting. Right, they're asserting that Flexport promised a store door transportation, and so we've talked about the store door thing before. It's previously come up in the Samsung line of cases. But so what they say in the filing here is store door transportation is also commonly referred to as carrier haulage because, in addition to the ocean transportation, the common carrier of the ocean transportation is also responsible for the inland movement of the container from the arrival port to the named place of delivery via rail and or truck drayage. That's in the complaint, that's what the petitioner, that's what Peloton is saying here, or complainant, I should say that's what Peloton. The complainant is saying that they thought that they had store-door transportation, as defined here, with Flexport and Flexport is that the common carrier. They are the NVOCC non-vessel operating common carrier.
Speaker 1:So, continuing to read from the complaint, in the store-door shipments, flexport was responsible for arranging and paying for all aspects of the inland movement of the Peloton containers, including the provision of chassis, and for ensuring the Peloton containers were removed from US Marine and intermodal terminals, delivered to the final designated inland destination and the empty containers were returned to the carrier designated return locations. They continue on in the complaint to say Flexport arranged for the inland transportation of the Peloton containers from port of arrival to the final inland place of delivery by subcontracting with motor carriers and railroads. They continue on beginning in 2020 and continuing through 2023, peloton paid thousands of individual D&D detention to merge and other related charges in connection with Flexport store door transportation of Peloton containers which were improperly invoiced by Flexport, in violation of the shipping act. These are the allegations, right, these are simply allegations, but these are the allegations from Peloton to Flexport and this is just Peloton side of things. So they continue on to say from 2020 to 2023,port repeatedly and chronic, chronically failed to properly perform its inland transportation obligations, including, but not limited to, failing to timely remove peloton containers from us marine and intermodal terminals, failing to timely deliver peloton containers to their designated inland locations and failing to timely return the empty containers within the applicable free time periods. They say, because Flexport's failure to properly perform its inland transportation obligations, peloton ultimately engaged a third-party logistics provider to manage the inland intermodal transportation of certain Peloton containers. So they're kind of saying, look, they thought Flexport was taking care of this. Because they weren't. And I remember at the time that there was a backlog and certainly there were a lot of people buying Pelotons during this 2020 to 2023 time period. But I remember it hit the news right that Pelotons were so delayed, perhaps related to this. They don't go on to say that or not, that I saw, but they say they went on and found their own, another third-party logistics provider to manage the inland part, which part of this allegation is that they thought Flexport was doing that.
Speaker 1:They also say Flexport improperly charged a Peloton D&D charges on the carriage of goods arranged by Flexport, despite the carriage of goods being on store door terms. So, like we were saying, they thought that it was going to go all the way from store to door. Despite continuing on, despite Flexport's responsibility for arranging and maintaining the inland transportation, including timely removal and return of Peloton containers. And they keep saying timely removal and return, because that's really what the detention to merge is hinging on right, continuing on, and I'm almost done here, but I do think that reading right off the complaint is important. Continuing on.
Speaker 1:It says upon information and belief, flexport categorically assessed these D&D charges against Peloton and Peloton containers without first undertaking an evaluation as to whether Flexport was responsible for the charges or whether its acts or omissions were a cause or contributing factor to the charges. So they're saying, look, they were passing them on to Peloton under this store door situation where Peloton understood that Flexport was going to be taking care of all that inland stuff. And so what? The allegation here is that, look, flexport maybe had an opportunity or a reason to send some of these things to Peloton. But they're saying, look, flexport was, just as they said, categorically assessing these D&D charges against Peloton, not even looking to see did Flexport mess up on the timely removal or return of the containers? So that's kind of the hinge of the argument inside that piece.
Speaker 1:Last two parts from the complaint Flexport assessed these D&D charges against Peloton and Peloton containers in circumstances where Peloton was not the party responsible to pick up, move or return the containers. And then they say Flexport assessed these D&D charges against Peloton and Peloton containers in circumstances where charging Peloton D&D charges did not incentivize the pickup of the cargo or primarily function to promote cargo fluidity. So they're saying, look, flexport had control of the pickup, move and return of the containers. They're saying, look, peloton was not in control. Right, they were not the party responsible for that. And additionally, peloton could not have incentivized the pickup of the cargo or primarily function to promote the cargo fluidity because they didn't have control of it. They couldn't impact that. Does this all sound familiar? This is a similar argument to the Samsung cases that were recently filed that we covered here, right? Similar general facts of this store-door movement right.
Speaker 1:And the argument hinging on the incentivization principle, saying that the complainant right, the one filing the lawsuit is asserting that they understood that they were under a store door arrangement and therefore had no control over the movement of the goods. And so right. Part of the incentivization principle is that you can only charge the detention or demurrage if it actually is incentivizing the movement of the goods. And the FMC has sometimes brought up that on days that port yards are closed, there's no charge that you could assess that would incentivize the movement of goods on that closed day, because it's an impossibility that anybody could pick up that day. I mean, that is also under appeal. That's the Evergreen case. That's under appeal as well.
Speaker 1:But previously the FMC has released a news, a press release on that, saying kind of like look the incentiv. Others in there are saying look, we had no control over the movement of the goods and so how can we be in charge of incentivizing the movement? Or how can we be in charge of going to pick them up when we were in control of them, in control of them. And so you charging us this charge in no way is incentivizing us to pick it up, because they're not ours to pick up, even though they ultimately were Peloton containers. They had hired Flexport to do these movements for them and that's that store door thing. It gets a little confusing but I hope that you're kind of following along with that and that's the arguments being made here, right, I'm just trying to oversimplify and translate kind of what I understand is happening here. So that's what Peloton was saying. Right, therefore they had no reason to be assessed the detention demerits charges because they could not control the movement of the cargo and therefore there was no incentivization of the movement of the cargo. And again, this is general, very simplified overview.
Speaker 1:So Peloton ultimately is making some requests here and I'm going to read from the filing saying complainant respectfully requests that respondent so Flexport be required to answer the charges in this complaint and that after a hearing the FMC issue an order. And they have four different requests here. One an order ordering the respondent cease and desist from the unlawful conduct. So ordering that respondent cease and desist from the unlawful conduct. So I mean that's saying look, stop doing this sliding through of D&D charges under store door movements, right, I mean that's kind of what that seems to be signaling. Number two requiring respondent to pay complainant reparations for the unlawful conduct described above, along with interest and complainant's attorney's fees and costs Requiring. Number three, requiring respondent's payment of any other amounts that the FMC deems appropriate. And number four, providing complainant such other and further relief that the FMC deems is just improper.
Speaker 1:These are going to be a really interesting collection of cases on these store door movements and the assessment of D&D charges. They're in right and the passing along of those charges, especially as it interfaces with the incentive principle. Right, because it's the store door hinged with the argument of the incentive principle saying there's an impossibility of incentivizing the ultimate owner of the cargo but not who the owner of the cargo was saying look, I thought that this was going to be covered under a store door movement. I didn't know that I was supposed to be interceding to make sure that those containers got off the yard because I had hired somebody to do that for me. We'll see. These are some pretty interesting things. I mean, between the minimum quantity commitment collection of cases and then now the store door incentivization principle, we have some kind of themed cases that are coming before the FMC that are going to be making some pretty important decisions.
Speaker 1:Well, I hope they do. I hope that these collection of cases find some clarity in these gray areas and force the FMC's hand in really making some clarifying remarks. Because, like I said, the FMC, when they do the rulemakings, really prefer to have that guardrail provision to them, that they want to stay on the outsides and they want the specifics to really be defined through case law. Well, now, here we go. Now we have cases being filed. This is where the FMC, the rubber meets the road, as it were. That the FMC will probably be. Hopefully, the legal procedural stuff keeps going forward and everything is fine there. But the FMC will probably be required to have a discussion on the subject matter of these cases, right On the minimum quantity commitments in one regard and the enforceability, potentially, of service contracts. And then the other side would be the store door incentivization principles related to D&D charges. Cool stuff, right? I mean, this is like this is niche-y and this is very nerdy, but this is cool, all right.
Speaker 1:Story number four. So what else is happening? Fmc again, they announced that they were going to be having their next commission meeting on May 29th, so that's one day after the detention demurrage rules to set and to go into effect. So May 29th on the agenda they have two different portions, as they usually do, right, they have an open to the public portion and a closed to the public portion. So on the open part, they're going to be doing a staff update on BCL, so the Bureau of Certification and Licensing Programs, about the OTI, ocean Transportation, intermediary and passenger vessel operators, so BVOs. They're also going to be doing a staff update on the Vessel Operating Common Carrier Audit Program, so that's the VOCC, which will also flow into the closed section. They will continue that discussion of the VOCC audit program. Not surprisingly right, especially some of those audit programs, there's some protected information that is better served under the closed to the public section. If you want to see that hearing, it's going to be live streamed on the FMC's YouTube channel. Yes, they have a YouTube channel. It's actually pretty interesting. You can check out the MTDI here, the MTDI weekly stakeholder engagement. You can check out the old FMC hearing recordings. You can check out the National Shipper Advisory Committee recordings on there and you can see live streamed the FMC hearings themselves.
Speaker 1:All right, story number five, continuing on the Port of Baltimore is reopened. Well, let me clarify that it never actually closed, to be clear. But here we have. The Coast Guard captain of the port has officially reopened the Fort McHenry limited access channel to an available depth of 45 feet for commercial vessel traffic, daily from 8 pm to 6 am. So there's certain parameters for vessels using the channel. Notably, deep draft vessels are going to require a Maryland pilot and two tug escort and they must secure authorization by the Coast Guard, among other requirements. Right, check the announcement for more information there. But this is great because, similarly announced, the Port of Baltimore said that this means that cruise ships are going to be returning on May 25th. Royal Caribbean's vision of the seas is going to be departing the Port of Baltimore on a five-night cruise from Baltimore to Bermuda. This is such a great show of resilience and resolve to get this channel back open. Like I said, the port itself never actually closed, right, but at some point without vessel traffic, and certainly commercial vessel traffic, that can severely affect the ability of the port to continue operations. Luckily, things are moving forward.
Speaker 1:I also want to mention and just briefly here, the NTSB report. So the NTSB did the report. They did the investigation into what happened with the MV Dali Elysian with the Francis Scott Key Bridge. They released their interim report this week and it seems to point to electrical systems being the problem. I'm going to pause before I go too deeply on kind of reporting on this, and I'm not an expert on the mechanical level of a vessel, so I want to wait and see kind of how the industry reacts to this report. It's just the interim report. It was just released from this March 26th incident March 26th, right? I mean it's only May 17th, less than two months later. And here we are. We have the channel open to commercial traffic 45 feet. I mean we have cruise ships coming back. The vessels that were stuck on the inside have now been able to leave. I mean this is really fast. Like I said, this is really a testament to resilience and resolve of the port. So go check out the NTSB report, though it is pretty interesting. Like I said, I want to wait a little bit here. I don't want to get ahead of anybody and I certainly want to make sure that I allow the operational mechanical experts to weigh in on this and I'll probably report on their interpretation of the NTSB report. But it is available, Go check it out.
Speaker 1:National Maritime Day is this week and how appropriate that we are celebrating National Maritime Day as the Port of Baltimore is finding its footing again From the MARAD's website. So the Maritime Administration, which is a agency of the Department of Transportation. They post on their website kind of the impetus what National Maritime Day is so each year on May 22nd this is from the MARAD website. Each year on May 22nd, our country celebrates National Maritime Day. The US has always been and will always be a great maritime nation, from our origins as 13 British colonies, through every period of peace and conflict, since the Merchant Marine has been a pillar in this country's foundation of prosperity and security economy and strengthen our ties with trading partners around the world, all while supporting our military forces by shipping troops and supplies wherever they need to go. 91 years ago I'm continuing to read off the Marriott's website 91 years ago, congress declared National Maritime Day to commemorate the American steamship Savannah's voyage from the United States to England, marking the first successful crossing of the Atlantic Ocean with steam propulsion. During World War II, more than 250,000 members of the American Merchant Marine served their country, with more than 6,700 giving their lives, hundreds being detained as prisoners of war and more than 800 US merchant ships being sunk or damaged. Maritime Day is a time-honored tradition that recognized one of our country's most important industries. Each year, ceremonies and celebrations throughout the country recognize National Maritime Day and the people our maritime nation depends on. So you can tune into the National Maritime Day celebration, which is held at Department of Transportation headquarters through a YouTube page, right Through their YouTube page. I'm going to link the YouTube page in the show notes here. But this is an exciting day for the entire industry and I like the things that Marriott hits on when they make their announcement and their commemoration National Maritime Day. So that'll be coming up this week. Take a minute to think about it and really the magnitude and the importance of being a maritime strength and having maritime strength as a nation. All right, story number seven One last story that's still developing.
Speaker 1:This is about the movement on the Section 301 investigation at the United States Trade Representative's Office. This is the USTR. We've talked about the USTR investigation on the Section 301, but this week the White House weighed in and they announced that, in response to China's unfair trade practices and to counteract the resulting harms, today President Biden is directing his trade representative to increase tariffs under Section 301 of the Trade Act of 1974 on $18 billion of imports from China to protect American workers and businesses. That was right off of the fact sheet that was released May 14th, just this week. Now that seems like a good thing at first blush, right, the argument is from so many that there are unfair trade practices that China's engaging in, so we have to counteract them. Right, but this came up previously under the Trump administration tariffs on imports from China and one of the major oversights, I guess I guess I'll call it an oversight, but it was ultimately corrected before being implemented was the tariff being assessed on ship-to-shore cranes.
Speaker 1:So, yes, the cranes that are at ports and move the cargo boxes from vessels to shore, right ship to shore, they're pretty much only made in China and many are on order around the country for US ports. So the question is if the cranes, most of which have been ordered years in advance, arrive after the implementation date of these tariffs, these announced tariffs or proposed tariffs some have said that they may even go into effect with as little as 90 days notice. So we're waiting on the Federal Register announcement that will have kind of more complete information on this. But if these cranes potentially arrive after the implementation dates, then these cranes might be subject to a 10, 20, 25% surcharge in the form of this tariff 25% on a multi-million dollar purchase of these cranes, and usually there's more than one, I mean sometimes just one, but more than one crane being purchased. It's not a small fee, right, it's a big deal.
Speaker 1:So under the Trump administration, the ship-to-shore cranes were ultimately taken off the list entirely, not even exempted, but simply completely removed, and perhaps that's why it was forgotten, I guess, or overlooked, or maybe the historical information wasn't necessarily there to remove them again this time. But this can potentially be a big deal and might need some correcting quickly here, right? So sure, if we tell the ports that they should buy American, right, these ship-to-shore cranes don't really exist as they understand it in the US market, and without them, without ship-to-shore cranes, things derail quickly, right? As you know, 90% of everything moves by ocean transit, and if ports don't have cranes that can accommodate the vessels in both speed and size right, a lot of these orders are for larger cranes then that's going to impact the end user, and the end user is the American consumer. So, and actually I should quickly note they weren't necessarily forgotten, right? Or maybe that's why I kind of paused and said maybe the discussion that happened around them being removed wasn't necessarily available, because they were specifically listed in the White House announcement. So they listed a few commodities and ship to shore cranes was on there and I'm going to read off the fact sheet from the White House.
Speaker 1:So it said the tariff rate on ship to shore cranes will increase from 0% to 25% in 2024. Let me say in 2024, which, like I said, I've heard that 90 days might be at play here. I mean we're already in May. So, like they said, in 2024, which, like I said, I've heard that 90 days might be at play here, I mean we're already in May. So, like they said, in 2024, this will be happening, said the administration. It says will increase, said the administration continues to deliver for the American people by rebuilding the United States industrial capacity to produce port cranes with trusted partners. A 25% tariff rate on ship-to-shore cranes will help protect US manufacturers from China's unfair trade practices that have led to excessive concentration in the market.
Speaker 1:Port cranes are essential pieces of infrastructure that enable the continuous movement and flow of critical goods to, from and within the United States, and the administration is taking action to mitigate risks that could disrupt American supply chain. This action also builds off of ongoing work to invest in US port infrastructure through the President's Investing in America agenda. This port security initiative includes bringing port crane manufacturing capabilities back to the United States to support US supply chain security and encourages ports across the country and around the world to use trusted vendors when sourcing cranes or other heavy equipment. So this is an interesting little piece because they're saying, look, we are investing in port crane manufacturing back in the United States. I mean, as I understand it, I really don't think that there's a comparable US crane manufacturer. I've heard of some small crane manufacturers that potentially edge into this, but as far as I understand it, at least for the fixed arm shipped to shore cranes, it's not available in the US. And so that's great that we are investing in it, because I think that that's important. But if it's not available yet and if in 90 days there's going to be a multi-million dollar additional charge on these cranes because they just didn't get here in time for this tariff that was just announced, that's going to have some major, major, major impacts for these ports.
Speaker 1:Look, I don't know. This is what I'm reading. I just want to report it out A little bit of my own perception in there, but I'm going to keep watching this. I'm open to see what happens here. I'm open to see maybe if there's further justification for why these 25% tariffs were specifically attached to ship to short cranes. But I'm going to keep watching this. Changing and charging on things that have to do with the supply chain can have knock-on effects that'll ultimately end with the end consumers. So I'm going to keep watching it.
Speaker 1:But, as always, the guidance here is general and for educational purposes only. 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 and 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 out the podcast by Landon Bysie. If you prefer to see the video, they live on the YouTube page by Landon Bysie, presented by the Maritime Professor. Check out the website at MaritimeProfessorcom. Until next week, this is Lauren Began, the Maritime Professor, and you've just listened to by Land and by Sea. See you next time.