By Land and By Sea
By Land and By Sea
S4.E5 - FMC Meeting and D&D Petition Update
Topic of the Week (10/25/24):
The FMC held their Commission Meeting this week - let's break down the highlights
The Maritime Professorᵀᴹ presents By Land and By Sea Podcast - 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- FMC Rulemaking Roundup
2 - World Shipping Council's Opening Brief for their Petition challenging the D&D Final Rule
3 – Massachusetts Maritime Academy's (really cool!) Maersk Mc-Kinney Moeller Ship’s Bridge simulator
https://www.maritime.edu/maersk-ships-bridge-simulator-center
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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. **
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Speaker 1:This week, the Federal Maritime Commission held their FMC meeting and if you didn't get a chance to listen in, I'm going to break down some of the notable issues raised. So stick around. Hi, welcome to, by Land and by Sea, an attorney breaking down the weakened supply chain presented by the maritime professor me. I'm Lauren Began, founder of 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 and 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 is no attorney-client privilege created by this video or this podcast. You need an attorney. Contact an attorney.
Speaker 1:So before we get into the discussion of the day. Let's go through my top three stories of the week. All right, story number one this is where we've been starting for a while. There's a lot of kind of rulemaking things happening. Most notably, actually, we have quite a few final rules on the book but, as we've talked about, we have some petitions floating around. So I like to just kind of use this as our recoup time, our let's check back in. So let's check in on those FMC rulemakings Over the past year or two, two years, now, just over two years, the FMC has been working through three rulemakings that they were directed to undertake by the Ocean Ship Reform Act of 2022. And so what were those? We've talked about them on this show quite a bit. We have the billing practices of detention demurrage. That went into effect May 28th 2024.
Speaker 1:Notable developments on this the commission issued a correction to the final rule, the preamble text. They clarified the rules application and non-application to carrier-trucker relationships. Another notable development on this one, the World Shipping Council filed a petition against the detention demerge billing requirements. Final rule this rule. So what does all that mean? Well, we've talked about this quite a bit too. May 28th was the rule's effective date. Right, there was no word otherwise. The entire rule went into effect May 28th.
Speaker 1:What could still happen? This could somehow be modified. There's a petition on this rule and in front of this, rules against this rule at the DC the Court of Appeals for Federal, court of Appeals for the DC Circuit. So I've been watching that, but nothing yet. It's still going through its procedural process in the court system. We have no indication that anything is changing because of that petition yet, but it's up to the court, right? I mean we've yet to see the full back and forth between the two parties, so we still have a ways to go here. But yeah, I mean the rule went into effect May 28, 2024, and it's been out in the wild for quite a while now. This is, oh gosh, five months, almost five months, a couple days short of five months. So it's been out there for a while.
Speaker 1:Second thing that we've been talking quite a bit about is this defining unreasonable refusal to deal or negotiate with respect to vessel space accommodations provided by an ocean common carrier. I keep saying that this rule continues to kind of fly under the radar but is so critically important Anytime you're defining reasonable or unreasonable. That's a tough spot, right, that's a tough thing. We went over this rule in a little bit more detail and some of the concerns that I have with the application of this rule a few weeks ago for one of my episodes. Go back and check that out. But this rule, this defining unreasonable deal and negotiate with respect to vessel space accommodation the final rule was released July 2024 and it went into effect September 23rd 2024. You might recall that at the end of September there was a lot of news and it wasn't about this unreasonable refusal to negotiate. Arguably, this rule kind of got snowed in and perhaps overshadowed by the at the time pending port strike that we now know was an actual port strike.
Speaker 1:So I urge you to go back and take a look at this unreasonable refusal to deal or negotiate with respect to vessels-based accommodations. One to see what it says in there and some of the things that I highlighted in a previous episode, but two so that you can track along with me as we watch this one as well, because there was a petition filed against this rule as well. The petition was filed September 13th, 10 days before the effective date of this rule. There haven't been any substantive updates to the petition on this one. I'm going to continue to watch it periodically.
Speaker 1:But this one. There also hasn't been any mention from the FMC on what happens here. Everything since the petition was filed before the rule went into effect. There was no message from the court, that, certainly nothing that I saw changing any of these effective dates. So, just like the D&D rule, it seems to have gone into effect. Um on on the effective date, which for this one was September 23rd 2024. Uh, so it's been in effect for about a month. So, uh, if you have any sort of dealing or negotiating, uh with respect to vessel space accommodations, take a look at this rule. I mean, arguably that's everybody right. So, uh, take, take a look at this rule. Uh, see how it applies to you, see if you agree with it. I mean the the time for the notice and comment periods are over, um, but certainly the FMC, I can only imagine, wants to stay very involved with how these rules are doing out there in the wild, right. So I think they're keeping a close eye on detention and merge billing. They're also going to be keeping a close eye on this defining unreasonable facility to negotiate.
Speaker 1:This one, particularly, was the one that Chairman Maffei said was. He said that this was a nuanced rule and I'm forgetting exactly what he said. But he said it's better to get it right than to get it fast. This one only had a six-month turnaround. Turns out that it ended up being two years for the full final rule to come out. But six months, I think was woefully too short for what Congress was trying to get the FMC to do here on this unreasonable physical deal and negotiate. I think I applaud the full commission for taking a little bit longer on this one because it is tricky and I think we see that in the language that they ultimately came out with. Even some of the language that remained in that final rule is tricky, right, and I talked about that further in the past episode where we talked about this rule. But take a look at it. My point is take a look at it. We also still have that defining unfair, unjustly discriminatory methods. I think that this got folded into that defining unreasonable. If we still negotiate, because they do talk about unfair, unjustly discriminatory methods a little bit.
Speaker 1:There there was talk that they wanted to expand this in its own standalone rule, despite some of it getting folded into the unreasonable physical deal and negotiate. We'll see if that still happens. Right, that might be on the 2025 docket, but, speaking of the 2025 docket, we already have an announcement from the FMC saying that they are going to be adding charge complaints, the formal adjudicatory process, because we'll talk about this in a little bit. But, as you know, charge complaints was a creation of Congress under the Ocean Shipping Reform Act that went into effect, but really it just had an interim process. It was effective upon signing June 16th 2022. So they didn't really have a lot of time to understand what it meant, what they were supposed to do, so they kind of put together this interim process, have been taking notes along the way of doing the charge complaints process at the FMC, and now what we're seeing is that in 2025, they are committing to creating a rulemaking process, which is what they were always supposed to do. They were directed to do that, but I mean, you can't instantly do a rulemaking, so they had to have some interim process. So we'll see that in 2025.
Speaker 1:All right, story number two as mentioned, I wanted to come back to the petition filed against the final detention to merge rule, and so I don't want to get too far into this because I think we will probably cover this in its own episode. It's certainly worthy of that. Plus, I always like to be fully fair to any of these uh, these, these um filings, because all we have right now is one side. We don't have the full docket, we don't have the response, we don't have any of that. All we have which is still interesting was the petitioner.
Speaker 1:The World Shipping Council filed their opening brief. They filed their opening brief on October 16th and in there they outlined some of the arguments presented, since they did initiate the matter and they did file the petition. Like I said, I'm likely going to go into this in much more detail during a future episode when we have kind of the full scope of the conversation. But I did want to highlight some of those arguments presented because I think it's important to see what they were basing the petition on, right. I mean, we want to know there was a little bit of messaging when they filed this petition, when the World Shipping Council filed this petition, but still, it's always important to kind of see it fully fleshed out in a filing before the court.
Speaker 1:And I want to just note too the unreasonable refusal to negotiate that second rule that has a petition. We didn't really get a lot of messaging around what the petition was specifically about. I think for the D&D rule we did. We learned a little bit more about motor carrier, trucker and ocean carrier relationship and that direct contractual relationship. There were some comments. There was a posting that happened on the World Shipping Council right around the same time that the petition was filed, so we got a little bit of info on what the petition claim was based on With the unreasonable refusal to deal and negotiate. We really didn't get that same public-facing messaging. So I'm really interested to see what comes out there. But as we know, this has been a few months now, more than a few months, so it might be a few more months until we get any clarity on the petition and the rationale and issues presented for the unreasonable refusal to deal and negotiate.
Speaker 1:But what I'm talking about right now is the detention and demurrage petition that the World Shipping Council filed against the D&D final rules. So the issues presented for review. Again, not going into the details, I'm going to read these verbatim. Break them down a little bit, but read these verbatim so that you know exactly what's in this petition. In the issues presented for review so one they say whether the final rule is contrary to the Ocean Ship Reform Act, because the commission exceeded Congress's limited grant of authority to initiate a rulemaking.
Speaker 1:That quote shall only seek to further clarify reasonable rules and practices related to the assessment of detention demurrage charges to address the issues identified in. And then they bracket it the FMC's 2020 interpretive rule or successor rule. This is still part of the quote, including a determination of which parties may be appropriately billed for any demurrage, detention or other similar per container charges. So that was a quote saying that that's what Congress was directing the FMC to do, and then continuing on with the issues presented, when this is what they're arguing, when the final rule in fact departed from the principles found in the 2020 interpretive rule. So all that saying that they are claiming that the FMC expanded their limited grant of authority to initiate the rulemaking. They were only supposed to seek to further clarify reasonable rules and practices related to the assessment of D&D charges to address the issues identified in the interpretive rule. I mean, we'll see how this one all plays out, right? I want to say and I want to be fair we're not going to dive too far into this, but I mean not a bad argument, right? But however they go on, congress goes on to say including a determination of which parties may be appropriately billed for any demerged detention or other similar per container charges. So okay, so there it is. So there's kind of the wrap up. This will be interesting to see what the FMC says, because I think that they are arguably within their purview. Did they go too far, is the question? That's kind of what they're saying here is that they are saying that the FMC departed from the principles found in that 2020 interpretive rule and departed from the limited grant of authority to initiate the rulemaking. So that's just one.
Speaker 1:There's five issues here. Number two whether the rule exceeded the FMC statutory authority because the commission lacks authorization to ban a billing practice absent of finding that the practice is unjust and unreasonable, and this they say, is carrier to motor carrier billing in cases of direct contractual agreement. They're saying that they shouldn't be banning a billing practice absent of finding that it's unjust and unreasonable, and I think what we're going to see is that they didn't fully explain why they were banning that right. So issue number three here whether the rule is arbitrary and capricious because it departs from the commission's interpretive principle, which dictates that the reasonableness of D&D demergent detention charges depends on the extent to which they are serving their intended primary purpose as financial incentives to promote freight fluidity and fails to articulate a reasoned explanation for doing so. All right. Number four whether the rule is arbitrary and capricious because it fails to meaningfully respond to crucial comments submitted during the rulemaking process and further fails to appreciate that it constitutes a change in policy. So the World Shipping Council certainly filed comments to this effect, calling to the FMC's attention this motor carrier relationship and certainly probably other things that they're going to be mentioning here. And issue number five, whether the FMC violated the NEPA Act, that's, the National Environmental Policy Act, by failing to issue an environmental impact statement, an EIS, because the FMC underestimated the increased congestion and attendant reduction in air quality that its final rule will cause. Recall that the World Shipping Council did challenge the environmental and NEPA and EIS during the rulemaking, final rulemaking process, and so we'll see that. I just wanted to give you a snapshot glimpse of what the petition said. But, like I said, I want to do full justice and be appropriately fair for all petitions, right, and so I want to wait until the FMC responds. But just so you know, that's what's out there, all right, well, story number three.
Speaker 1:So last week story number three last week, I was at the Massachusetts Maritime Academy on behalf of the Mariner's House, which is, if you're not familiar, it's located in Boston's North End. It's a great service, um, and as part of that meeting, we were graciously given a tour of campus, the mass maritime Academy. Um, including an interactive observation of the Marist McKinney Moller's ships bridge. Um, I posted a video of what it looks like on LinkedIn. Uh, it got such great engagement. But it is just such a cool video. It's a video of passing a Virgin Cruises ship I think it was the Scarlet Lady, but it was from a ship's bridge and I think our simulation vessel was, I think a Coast Guard, you know smaller enforcement vessel or something. But I mean it really felt like we were right next to this large cruise ship going through.
Speaker 1:It's a 360 screen and I mean like totally 360, even like even the door that you walk into. The simulation area seems to disappear as you're in this room. So, as it's explained on the Mass Maritime Academy's website, our full mission bridge simulator creates a mathematical model of a ship that behaves like its real life counterpart. Cadets work together with classmates and experienced licensed mariners to learn specialized skills and teamwork to prepare for situations they will encounter in commercial shipping and navigation. Some of these situations include undocking a tanker in Japan, transiting the Straits of Gibraltar in heavy traffic, handling a ship in heavy weather and returning to our own home port in Buzzards Bay. The goal is to give cadets the skills they need to function as an effective bridge team member.
Speaker 1:I'm telling you that is accurate, but I wish it captured the wow factor right. I mean it is so cool. I mean I even found myself swaying with the movement of the vessel as I'm in this simulation, even though the ground beneath you is not moving at all, it's just the 360 screen. But I mean I found myself like if I were in there all day I probably might have been like you know when you get sore after being out on the water all day because you're swaying so much. I think that I probably would have felt that because, even though the ground beneath me was not moving at all, that larger than life 360 screen was moving and it felt like the ground, the vessel beneath me was moving. It was so wild and I mean what a valuable tool for cadets to use in learning real life applications of vessel handling. I am still jazzed about it. I mean, it was two weeks ago, almost a week and a half ago, that I went and did that, that simulation, and, man, it's cool. If you ever get an opportunity to do that, go go check it out, cause it is, it's so cool, All right.
Speaker 1:Well, let's get into the meat and potatoes of the day here we're going to be covering. So the FMC this week had their commission hearing. It was October 22nd, so it was two, three days ago I guess. So they had two portions of the meeting and they typically do this. They have a portion that's open to the public, which they had update on enforcement. They had updates on status of OSHA, shimmer Reform Act of 2022, charge complaints and they had an update on the FMC's IT program. So information technology, I mean all their computer systems and everything. They also had those same agenda items, but they had a close to the public portion and usually that's when they get into um kind of otherwise um, it can't be discussed, maybe it's for business purposes or there's some sort of private element to it. There are qualifiers that they have to hit. They can't just willy nilly close it to the it and then update on the information technology.
Speaker 1:I think that there were pieces that were probably non-public for maybe cybersecurity purposes. But there's, there's certainly they need to have rationale, they can't just close it for no reason. And so, yeah, that that's how they work, right, you do the public screening and you do the public piece and actually all the people who actually show up in person are asked to leave, and then just the staff, the commission staff, the full staff, is allowed to stay for that close to the public section. So the first part was a staff update on enforcement, and so this was given by the director of BEIC. So this is the Bureau of Enforcement, investigations and Compliance, and I actually thought that this might be a good time to kind of do an overview of BEIC, like what's included in this bureau. It used to be the Bureau of Enforcement, now it is the Bureau of Enforcement, investigations and Compliance. What they did was they basically kind of reshuffled some of the other bureaus and offices and put them into this one consolidated, I wouldn't even say larger. It just kind of was a reshuffle of what was already there.
Speaker 1:So the Office of Enforcement obviously is the prosecutorial arm of the of the commission. Right, it's the Office of Enforcement so what it says on the Web site under the direction and management of the office of enforcement so what it says on the website under the direction and management of the office director, attorneys participate as trial counsel in formal commission proceedings and work closely with the office of investigations in pursuing potential violations of the shipping act and commission regulations. Attorneys also navigate excuse me, attorneys also negotiate settlements and informal compromises of civil penalties and may act as investigative officers in formal fact-finding investigations initiated under the Shipping Act. So of course, right, that's the Office of Enforcement Office of Investigations that was referenced there. Fmc investigators in the Office of Investigations focus on potential violations of the Shipping Act and commission regulations. Of Investigations focus on potential violations of the Shipping Act and Commission regulations. Fmc investigators are located in New York, new Jersey, miami, houston and LA Long Beach regions. Individuals or entities wishing to report violations of the Shipping Act and Commission regulations are urged to contact BEIC at fmcgov or may directly contact investigators in their area.
Speaker 1:So I want to stop a little bit. So this Office of Investigations used to be just simply kind of referred to as the area reps, and I think that they still are maintaining that area rep nature, kind of those regional offices, if you will, but they're limited, right. They have New York, new Jersey, they have Miami, they have Houston and LA Long Beach, so they're kind of in like, I guess, right quadrants of the country. But now they have expanded their role. I guess I would say They've always kind of had an investigatory element, even though they were supposed to be kind of like the I mean, they were the area rep, right, so they were the kind of the local rep, the connection to the FMC. But now they have a more expanded role and the Bureau of BEIC and the Office of Enforcement can now use the Office of Investigations the former area reps in probably a larger role and maybe a more targeted way as part of their investigations. They were always able to kind of call upon the area reps, but now it's a little bit more commemorated in this investigatory role.
Speaker 1:And then, to round it out, right, the Office of Compliance. So the Office of Compliance administers the Vessel Operating Common Carrier, non-vessel Operating Common Carrier and Ocean Freight Forwarding Review Audit Program and the Ocean Transportation Intermediaries Compliance Program. The office also administers the internal review process for non-compliant OTIs and conducts preliminary review of requests for enforcement action. The Office of Compliance provides research and analytical assistance for cases under the Shipping Act and other statutes. So that's I wanted to make sure, like I always do, that we're all kind of on the same page. So that's what BEIC is. It used to be the Bureau of Enforcement, kind of as the main arm. Now they're all collectively part of this BEIC.
Speaker 1:So the staff update or the director update, I should say and I'm not going to go through everything that everybody said, but one thing that really stood out to me is he said look, we have six investigators and a $1.5 trillion a year industry. That was actually later corrected by Commissioner Bensel to say 1.5 is a limited view. His point might be more accurate to say that we have six investigators to $6 trillion of economic activity that the FMC regulates. So they regulate that with these six investigators. They also mentioned that they're looking to hire more investigators. But the point being, per every trillion dollars of economic activity that's regulated by the FMC, there is one investigator. But look like I said, they used to be the area reps. They are planning to hire more investigators, as they said. So they've expanded their role.
Speaker 1:But the point that the director was trying to make here is that the BEIC Bureau depends on the industry to help inform them when things are going wrong, to make them aware of information that they can then act on. They also. I mean, the director was very fair in his and measured in his presentation here, saying we don't just take your word for it, we're going to investigate. And even though they only have the six investigators, that's not to say that they don't have more staff. Those are the investigators that are out in the field, right, they have staff on hand to research, right, and to get into some of these issues Woefully lacking for the scope of the industry that they cover, but they do have the ability to still look into this. So, the point being that they were saying they depend on the industry to really make them aware. They are dependent on people to make this office aware of charges being imposed upon them so that they can do investigative efforts. Or I mean not just charges right, that was kind of the nature of the conversation there but just violations of the Shipping Act generally.
Speaker 1:He also brought up, which I thought was kind of an interesting thought because, while they are perhaps woefully under-investigatory number of people in the Office of Investigations, he also said that just the budget for enforcement staff costs. He mentioned Albertsons and the merger case and it was actually a three-week trial and he said not only does the FMC not have the line item budget for enforcement staff to kind of do all the work that's associated with a trial of that magnitude, but the FMC itself, even the commissioners, don't have the bandwidth to host a three-week trial. It would just be a significant run on resources. That we've talked about this many times that the FMC runs a pretty lean operation with only 120, 130, maybe upwards of 150 employees total total, and so I mean even that 150 employees to a $6 trillion economic activity industry is a wild comparison. So I thought that that was a really interesting discussion and presentation During the Q&A. So there's always usually a Q&A opportunity for the commissioners to kind of respond and ask questions.
Speaker 1:Chairman Maffei really showed his seriousness in instances of retaliation and one of the things that he said is that retaliation is the closest he believes you can get to a mortal sin, which to me just really indicated that the messaging that's been coming out recently is certainly something that they are taking seriously right and that's sorry, I should say. The messaging that the FMC has been releasing in some of their press releases, certainly the recent one about retaliation they must be getting some pretty serious accusations, and so I really again appreciate the director of BEIC going back and saying just because somebody told us about it doesn't mean we're taking their word for it. We are being very fair in our assessment and want to make sure that we are running down any and all claims. But then he did say look, fear of retaliation is real out there, but we need to know information in order to bring a case, and so I think that was the essence of trying to encourage the industry and certainly anybody listening here to if there are wrongdoings out there, or perceived wrongdoings, let the Bureau of Enforcement, investigations and Compliance know, so that way they can look into it. We've talked about the different ways that you can bring complaints to the FMC and filing or reporting a violation. You don't stay connected to that, and so this fear of retaliation can kind of drop off of that, because it's like a see something, say something moment, right, where you can report a violation but they don't necessarily report back to you on how it's going. What did the violation ultimately end with? It's up to you to watch that. You're just turning the information over. And so that was the point here from the director saying, look, we need to know the information in order to bring a case, but then he also said activities will be taken extraordinarily serious by his measured I just keep saying measured I think that was the right way to describe his approach is that we are going to be looking into it.
Speaker 1:To be fair, commissioner Dye had a really great reaction to the update, saying that she strongly supported the work of the Bureau of Enforcement, investigations and Compliance and that she appreciated the looking into the surcharges that were part of the strike negotiations postponement. She said that she recently sat on a virtual question and answer with I think it was a shipping group and she said that the industry is concerned about whether or not surcharges that have been suspended because of the interim agreement, whether they can be re-implemented. And a further question on that is does the 30-day period still apply? No-transcript, but that if the cargo is already on the water, it's an interesting thing because it removes that ability to be be discerning, to be discerning right or make that decision which then kind of goes back to this does the 30-day period still apply if it's been presented, suspended and then re-implemented? She also brought up force majeure, if it's appropriate under the circumstances, and saying that that was one of the questions on the Q&A too. This was in response to the enforcement office's presentation, but not necessarily questions for him.
Speaker 1:I think that this was more directed toward perhaps the chairman and the rest of the commissioners saying, look, this might be something that's worthy of tackling sooner rather than later. And she actually went on to say Commissioner Dye went on to say that she encourages a public statement on this as soon as possible because the industry is concerned. So I think that would be. It'll be an interesting thing to see how they present. They're going to have to make some decisions, I guess I would say on or interpretive decisions on how 30 day periods work and if a charge has been presented and I haven't looked into it, to kind of look at it myself. But interesting, interesting question, right, interesting question.
Speaker 1:Um, chairman muffet went on to uh, I mean all the commissioners went on to talk about the enforcement sector, uh, here. But muffet also said that enforcement was a top priority since he became chairman for him and on enforcement matters. This was an interesting thing that he said. On enforcement matters. He said this is one of the most united commissions probably in the history of the federal maritime commission. And then he said, if not federal commissions as a whole. So all that to say, I mean enforcement is a big thing for all of the commissioners.
Speaker 1:But I want to stop on this, because wasn't I just talking about how it seemed like the language coming out of the commission was getting a little more pointed right? I guess usually there's at least one who wants to walk back super strong language and it's usually right for a whole host of different reasons why you might want to tone down super strong language, especially coming out of an agency. But it seems as a whole, the full cadre of FMC commissioners are taking their mandate to protect US importers and exporters very seriously, as they should right, and seeking to ensure that they do just that right Protect. However, I think it remains to be seen if they're being and I want to be cautious with how I say this right, but I think it remains to be seen if they're being entirely fair. And I really want to be careful because I'm not necessarily suggesting that they're not being fair. That's not necessarily what I'm saying here. I'm just saying that it remains to be seen if they're being fair to the entire ecosystem of the supply chain, right? I mean, yes, I agree that shippers have had some rough punches the past few years, right, certainly, since COVID congestion. But we also can't entirely vilify the ocean carrier's role in the ecosystem. Look, they're faced with their own challenges, and I'm not necessarily trying to protect them either, I'm just.
Speaker 1:I think that it's important to look at the whole spectrum, right? Ocean carriers are faced with their own challenges, not least of which are purely operational. They have droughts in the Panama Canal that limited the transits of the Panama Canal major route, and then they had violence in the Red Sea, which then also has pretty much curtailed the ability to go through the Red Sea. And then, on top of that, we really don't talk about this much, but there's increased environmental regulatory requirements, which is not a statement on whether they should or should not be in place, but rather looking at it from a purely operational standpoint. It just means that it might contribute to the costs associated with running vessels generally. All of these contributing factors cost money.
Speaker 1:And, look, I know to talk about ocean carriers not having a lot of money is such a wild thing right now because we are in such a strange period of time. But I keep saying, nobody was more surprised than the ocean carriers at the time. Right, and look, for a long time it was thought that this industry was too big to fail. But then we saw the bankruptcy of a major ocean carrier company, hanjin. They were number seven in the world at the time and I think that the ocean carriers need to be careful too, and they saw that as kind of a cautionary tale. Look, less ocean carriers serving the industry certainly could mean less capacity, and if there's less capacity, as we know, rates go up right. So look, yes, ocean carriers have enjoyed some nice profits in recent years, but I cannot say this more, I've said it a million times already Nobody was more surprised than that by the ocean carriers themselves. Those extreme profits were, I mean, truly an anomaly, and a lot of them reinvested that money back into the industry to buy vessels, and we're still seeing some jump ups in their profits. But, I mean, it's a volatile thing still. The pendulum is still swinging back and forth. And look, because they were able to buy these vessels, that allowed them to enter more vessels into the market that were more efficient and, yes, more environmentally friendly. And look, I really I'm not trying to take any position here Are their hands totally clean? Look, we'll see.
Speaker 1:Right, the right and wrong of it all is going to play out in the litany of cases at the FMC and I think over the next, I think we're going to start to see cases start dropping. In the next six months and certainly by the spring and the summer we're going to see some pretty good case law starting to shape some of the definition of the otherwise guardrail approach that the FMC takes. And, look, we're going to have the litany of cases and then we're likely going to have appeals in federal court of those cases. But all of that has already begun, right, further shaping the regulatory framework and its interpretation. But all I'm saying is we just need to be careful casting broad brushstrokes here. Right, and I mean maybe why I'm saying that is also because of the recent and ongoing ILA-US Maritime Alliance discussions on that new master contract.
Speaker 1:The messaging quickly went, quickly went from an oversimplified US workforce versus foreign companies and, as we all know, it's not that simple. Right, it would be inappropriate to forget that US-based ports and terminals were also caught in it. Right, I mean, they were part of the whole process and part of the whole discussion here, but they weren't part of the messaging of those being affected. And the ILA workers are not the only workers attached to a port or terminal. There are plenty of non-ILA US port workers that, given a long-term strike, would undoubtedly suffer as well, not to mention the hard-working drayage providers. You know the truckers that move the goods to and from the port that through the years, have had to endure exceedingly long wait times, and most don't get paid by the hour, by the way. So if, look, if the goods aren't moving in the port, then they certainly start to stop outside the port too, and all of the supporting industries that rely on the efficient movement of the goods into and out of the port suffer too.
Speaker 1:Look, I guess I felt pretty strongly about this, but this isn't a comment on the individual subtext throughout this, right Throughout this entire soapbox, but rather a comment that nothing in this industry is black and white, and I think we're all working towards solutions that ultimately move the industry in a positive direction. That includes moving cargo faster and more efficiently, because it impacts everybody, including the end consumer. While perhaps hawkish on enforcement these days, is still ensuring fairness and neutrality in its approach to conflicts. That's important and I think that they are. I think that they are. I truly believe that they are.
Speaker 1:But messaging also matters and I think I might just still be hung up, I guess, on the Gemini Cooperation press release out of the FMC. So remember, this happened early September. It was September 9th, when the commission announced that the Gemini Cooperation would take effect after an initial review period and a request for additional information, and then the lapsing of the 45-day review period. So, while the announcement out of the FMC wasn't too eyebrow-raising, I guess at the time it was the statement that Chairman Maffei's office released around the same time right, it was certainly the same day and it was strongly worded, and it's still sitting with me, I guess. So the message I mean I'm going to read this verbatim the Gemini cooperation agreement will take effect today by the operation of law.
Speaker 1:Nonetheless, I have questions and concerns about whether the Gemini cooperation agreement filed with the FMC has or will result in an anti-competitive consequence, consequences that violate the shipping act. I'm going to pause there because he says he has concerns about whether this agreement filed with the FMC has or will result in anti-competitive consequences. So I mean, if it already has anti-competitive consequences, right, that then then there should, then there should have been injunction filed against it, and then maybe will. I think what he's kind of trying to point to is that they still need more time, and that's what he says. Right, the very next paragraph says I'm going to quote again that said, current law does not provide the commission with any additional time to further evaluate the proposed agreement and no viable way to stop it from taking effect at this time. And so right, he's basically kind of signaling to Congress look, we don't approve or deny this right, we only have the time allotted to us. They had 45 days from the initial filing and then they had 45 days from a request for additional information, and if they don't file an injunction in federal court in that time, the agreement automatically goes into effect. Okay, now I'm going to go back to quoting his. This is the last paragraph.
Speaker 1:It was the short, short announcement, but he goes on to say so, while the agreement does take effect, I have joined my colleagues in ordering FMC staff to engage in immediate and ongoing rigorous monitoring of the Gemini cooperation agreement to ensure that it doesn't illegally impact US importers, exporters, covered service providers and consumers. So I don't necessarily disagree, but also. I mean that's kind of a shot across the bow, right, saying we're ordering the FMC staff to engage in immediate and ongoing rigorous monitoring. Well, that's their job anyways. Right, they are always going to be immediately and ongoing monitoring agreements that come into effect that are under the FMC regulatory jurisdiction.
Speaker 1:But, I right, do you see what I mean? It's not totally sitting well, and I think it's just because it is the office of the chairman and certainly there is a qualifier at the bottom that says of the announcement this is just my opinion, this does not reflect on the whole commission, but it is still the office of the chairman and they're saying, I mean, look, reading this, if Gemini Cooperation has nothing to be afraid of and they're not doing anything wrong, okay, cool. I mean, like they weren't stopped, right, there was no injunction filed against it, it wasn't signaled to have anti-competitive effect and so it wasn't, like I said, stopped. But the messaging, right, the messaging is certainly stronger than we've seen in a while. And, like I said, I think that this was also a jab at the limited authority that the FMC has to stop these agreements from entering into force. Right, because the FMC can't approve or deny agreements. We've talked about that before on here. They can't approve or deny agreements.
Speaker 1:So if an agreement is filed with the FMC, they don't get a stamp of approval and they don't have the ability to stop it in-house. Rather, they have to file an injunction in federal court to stop it. They have to file a complaint, a case, an injunction in court to stop it and complete with their rationale, right, all the things that are associated with filing a case. So they would have to file an injunction in federal court to stop it, and they probably don't have the resources, the manpower right now to do that. If it was a question of, well, maybe it might be worthy of an injunction, maybe not, we'll see how it goes. They probably don't have the resources to do that. And maybe that's what's happening here is that they're saying we probably would have tried it if we had better resources or another way to slow it down or stop it or find another way.
Speaker 1:But then the flip side of that is it's private industry and this is government involvement, right, and so that was part of the intention here, I think, is allowing agreements to go into effect after 45-day periods and really you get a 90-day period because you can have two 45 day periods. In those 90 days, are you able to research, dive into, really truly understand what the agreement proposes and then determine if it's being anti-competitive? Um, and, and if there isn't any good findings, then you allow it to go into effect, because at any point you can stop it, right, if it is deemed to be anti-competitive. We were just going to report about the hearing today. Look, I'm going to. I guess I'll step off my soapbox for now. But I mean, it's all about fairness, right. And look, if I'm being honest, isn't the whole podcast a soapbox generally? But to me it's all about fairness, right, it's all about kind of just making sure that things are, and probably because the enforcement director was so measured in his approach that really struck a good chord with me that I don't know everything's kind of mixing around in here, and so it's, it's I. I just wanted to bring up some of those ideas, all right, what else happened in the meeting, right? Like, let's, let's, let's conclude this, because there was some other good stuff there.
Speaker 1:Um, there was an update from the acting deputy director of of Bureau of Enforcement, investigations and Compliance on charge complaints process and from the numbers, because the numbers are always interesting when they come out with this. So, from when charge complaints started, june 16, 2022, through September 30th 2024, so the end of last month they had 602 submissions received. They had 300 assigned for investigation and then they had 208 voluntarily resolved by refund or waiver of charge. They had 41 that had no evidence of a violation and they had 29 that were closed for either no invoice not appropriate for charge complaints, a duplicate email or closed per the complainant request or perhaps not enough information by the complainant. One thing that they did mention, too, is that if they were turned away from the charge complaints process, they were reminded of all the other options that they still had, because if you were turned away from a charge complaints process for whatever reason maybe you don't have enough, it's not the right venue for it, or whatever you can still go and do all the normal things. I mean you can still report a violation, you can still file a complaint at the FMC, like file a lawsuit at the FMC. You can still do the informal mediation process through the Office of Consumer Affairs and Dispute Resolution. So those are still available.
Speaker 1:But this is just a recap of charge complaints, right? So pretty interesting the 208 charge complaints that they found to have been either waived or refunded. Of the 208, the total charges that were refunded or waived thus far was 3,282,928.77. That's pretty good. That's pretty good, I mean, for a federal agency trying to help and and certainly a hawkish enforcement agency, right? Um, I think that's fair to say. You know one question.
Speaker 1:So they went through their commissioner Q&A and one thing that I thought was a really interesting question was from Commissioner Bensel and he asked if the time bar for refund was the same as reparations and basically he said is there a statute of limitations on refund that's associated with charge complaints? So that question went over to the Office of the General Counsel. Chris Huey responded to that and said that that would be something that would be discussed in the rulemaking process and, as we know I mentioned at the very top of it during this presentation, during this hearing, they mentioned or the meeting, they mentioned that in 2025, they intended to do a rulemaking on the formal process, formal judicatory process, of claim charge complaints. But they said, look, in the interim there was no statutory, there was no mention of statutory limitations on refund versus the otherwise limitation on three years of claimants seeking reparations. So essentially, chris Huey, the general counsel said this is a tricky question of statutory interpretation. So we kind of methodically went through, but also know that this is going to be more fully discussed. It sounds like in the rulemaking. But he said look, is there a statutory, is there statute of limitation? On charge complaints, he said 40301 has a statute of limitations in order to seek reparations and so it's limited to reparations. And so he said that it was important to distinguish that they'll need. So, excuse me, let me just pull my thoughts together here. So, excuse me, let me just pull my thoughts together here.
Speaker 1:Three are statute of limitations and reparations. If you're just seeking a commission finding and you're not seeking reparations, there's no statute of limitations on that, created under OSRA 22,. So Ocean Shipper Informed after 2022,. It says there does not seem to be similar language about a period of time on which a shipper can seek a refund, and he says it's notable. He said with that distinction in mind, it's refund versus reparations. He said with that distinction in mind, in the absence of any periods stated in that section, it may be that there is no time bar for bringing a claim under the charge complaints process for a refund, but that's going to be something that the agency will have to explore in the rulemaking process. So all that to kind of shorthand, say, reparations under the statute has a three-year term limit or statute of limitations limit. He's saying that that's reparations. But refund, which is a different term, is used in OSRA 22 in the charge complaint section, and that's a different word, obviously, than reparations. And he said that might be something that will have to be interested to see if people weigh in on that and if they want a statute of limitations for being able to file a charge complaint on. I mean, for the most part we've seen detention emerge. How long can you go past that moment and file that charge complaint? Yeah, that'll be an interesting conversation.
Speaker 1:I think in the rulemaking, like I said, it was also mentioned that in 2025 is when the FMC will initiate that rulemaking establishing a permanent procedure for charge complaints. So overall it was a really interesting hearing. I was hoping to hear a little more mention of the petitions facing the rulemakings the final rulemakings, right, the D&D rulemaking and the unreasonable result to deal and negotiate or at least perhaps, maybe a mention or a reassurance that, while they maybe can't say anything about the pending litigation, in the meantime everything was just going to proceed status quo, right. Nothing has changed, no modifications to the effective date. They didn't say that right. And we're well past the D&D rulemaking effective date. We're just a month past the unreasonable physical to negotiate rulemaking, but I would have liked to have seen perhaps just a mention of it. But still, an interesting hearing. Right, they always are Well.
Speaker 1:So, as always, the guidance here is general, 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, small Strategies. I cannot say that enough. The guidance here is general and for educational purposes. It should not be construed to be legal advice directly related to your matter. So otherwise, for the non-legal questions, the e-learning and general industry information and insights, come find me at the Meritan 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 Bisey. If you prefer to see the video, they live on my YouTube page by Landon Bisey, presented by the Maritime Professor. While you're at it. Check out the website themaritimeprofessorcom. So until next week, this is.