S4.E8 - Captain's Log Edition (FMC Rule Petitions Update // ILA Update // Comm'r leaving FMC)

Topic of the Week (11/22/24):

We're almost into the holidays so let's do a quick Captain's Log run down of recent stories in supply chain!

⚓ 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 - Federal Maritime Commission - Rulemaking Round-Up

2 - FMC Final Rule Petitions Updates

3 - INTERNATIONAL LONGSHOREMENS ASSOCIATION and UNITED STATES MARITIME ALLIANCE LIMITED Recent Updates

4 - Commissioner Carl Bentzel is departing the FMC for a fantastic opportunity to be President of the National Association of Waterfront Employers (NAWE) and Executive Director of the National Maritime Safety Association 

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#ByLandAndBySea

Chapters

• 0:26 Maritime Attorney Discusses Latest FMC Updates
• 8:53 Legal Battle Over FMC Rulemaking

Transcript

Speaker 1: 0:26

no-transcript. Catwalk to the beat. When you see me coming, make some room. Everywhere I go, I'm in the spotlight. This is a good life I'm living bold. This is what it looks like On the tip to the top of the world. Well, we're just about into the holiday season. Happy early Thanksgiving for all of those of us in the United States.

Speaker 1: 1:03

Next week we're going to be off, so this week I thought we'd do a quick roundup of stories. There's some good ones. It's the Captain's Log Edition. Hi, welcome to, by Land and by Sea, an attorney breaking down the weekend supply chain presented by the Maritime Professor. Me. I'm Lauren Began, founder of the Maritime Professor and Squall Strategies, and I'm your favorite maritime attorney. Join me every week as we walk through both ocean transport and surface transport topics in the wild world of supply chain. As always, the guidance here is general, 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. So usually we say we're going to get into the discussion of the day, we're going to go through the top three stories of the week, but this week every story is a top story, so let's get into it. All right, story number one this is where we've been starting for a while. Let's just check in on the FMC's rulemakings. So, as we know, we have a final rulemaking that has been in effect since May on the defining billing practices of detention and demurrage. Again, that went into effect May 28, 2024. There was a notable development. There was a correction to the final rule issued in the preamble text. A petition filed against this D&D Billing Requirements Final Rule. So what does all that mean? We say this every week, but as of right now that May 28th date that is the effective date this rule is in effect. As of May 28th. There is a petition in front of it, though there is a petition against this rule. It's still moving through the court system. We're going to talk about any updates there in story number two. But again, d&d rule May 28th became an effective date.

Speaker 1: 2:47

Second rule that we've been continuing to watch over the past few years defining unreasonable refusal to deal or negotiate with respect to vessel space accommodations provided by an ocean common carrier. This final rule was issued in July of the summer. It became effective September 23, 2024. So just about two months ago this got a little bit snowed in by the port strike that was happening, but I really really I say this every single week encourage you to go take a look at this rule. This is the defining unreasonable refusal to deal and negotiate with respect to us as base accommodations. So it's defining unreasonable right. Anytime you're defining reasonable unreasonable by an agency, take a look at it. Make sure that it complies with how you do business. This one is effective. This is a real rule. This is a regulation that went into effect September 23rd, two months ago. This also has a petition in front of it. I've been updating us on the different things that are happening with the different petitions. This one has some updates that we're about to cover, but I do want to encourage you check out this rule defining unreasonable if it's a deal to negotiate with respect to vessels-based accommodations. We also have defining unfair or unjustly discriminatory methods out there.

Speaker 1: 4:02

We've been told at some point that this was going to be a standalone rule. We're still waiting on language for a standalone rule. It kind of got folded into the defining unreasonable result to deal and negotiate, but we don't have a standalone on it. We also, at the last FMC meeting, heard that there would be a charge complaints formal rulemaking process, meaning they're going to be creating a full rule on charge complaints. Right now, they have kind of an interim process. They threw it together because, as of when ASRA got signed excuse me, june 16th 2022, they had to, like, come up with that process right off the bat. That process has served them well so far, but now what they're going to be doing in 2025 is turning that into an actual rulemaking as directed by ASRA. So we're going to be doing in 2025 is turning that into an actual rulemaking as directed by ASRA. So we're going to see some of the nuances of statute of limitations. Is this charges just for detention to merge or beyond? So those are going to be some of the issues that they're going to be talking about.

Speaker 1: 4:59

Excuse me, with the Trump presidency, though, what we saw his last term was that, for every new rule that comes up to needed to be repealed, and so it was this one up, two back, and so what that means is that the FMC tends to run pretty lean anyways. Right, we talked about this the last episode, where we talked about some of the changes that might happen with a new Republican presidency and with a new Trump presidency, the FMC tends to run lean anyways. They run lean in budget, they run lean in operations and employees right. They only have about anywhere from 120 has been some of their low numbers recently to. They're trying to get up to 140, 150. 150 people, that's not many people. So then that also means that they have a lean budget. But they also run fairly lean and regulatory initiatives, which means that they're rules right, the rules that the agency actually puts out. So if there is a one rule forward, two rules back. Look, we already have charge complaints on the docket for 2025. So that means that two rules may have to be repealed. We might see some of these newer rules repealed.

Speaker 1: 6:08

I'm not exactly. I don't think the D&D rule is going anywhere, because we went from wild, wild west bar napkin invoicing to or at least allowable bar napkin invoicing to. Now there's some parameters, there's 20 invoice requirements. I think that those parameters are a good thing. I think that we're hearing mixed reviews on how it's finding its way into the actual industry, but I think I wouldn't expect the D&D rule to be fully repealed.

Speaker 1: 6:35

This unreasonable refusal to deal and negotiate. I don't know, I'm not exactly sure. It's a little bit. There's some growing pains, there's some adoption pains. There's this petition that has some pretty good arguments in it and I think that it and I only say this unreasonable physical deal and negotiate, because it was a tricky rule from the get-go right and the FMC was supposed to get it done in six months. It took them two years because they said it was better to get it right than get it fast. Chairman Mayfay said that at one point, and so I think that they always acknowledge that this was going to be a nuanced, tricky rule and I think the petition is good because it encourages further discussion on the topic.

Speaker 1: 7:18

But what that means is that we also are. It might find itself, because it's a little bit controversial right, because it's a little bit nuanced, because it enters into these non-binding considerations or factors, is kind of a strange thing. It might find itself. I guess all I'm trying to say is I wouldn't be totally surprised if this became one of the repealed regulations. Say is, I wouldn't be totally surprised if this became one of the repealed regulation. I mean, so much work for a recently published rule to then be repealed. But we'll see, we'll see. That's not a true prediction. It's just saying look if we're going to have to have some things repealed. They're already running in pretty lean. They already had to repeal things during Trump presidency the first time around. I don't know if that's going to be a rule this time around. I don't know if that's going to be guidance, that one rule means two back. We'll see. But if that happens, I don't know. We'll just start to think about some of the rules that the FMC has released that might be required to be repealed because we already have charge complaints as a kind of must do for 2025. All right.

Speaker 1: 8:24

Story number two we're going to check in on the petitions again. So the D&D petition. As I was kind of alluding to the D&D petition, on October 16th we saw that the World Shipping Council filed their opening brief and it outlined some of the arguments presented since they initiated this matter and filed the petition. So I wanted to highlight their arguments, but also I never want to go too far in depth on here until we get the full picture right. These are just the World Shipping Council's arguments for the petition, but we don't have the FMC response yet.

Speaker 1: 8:53

So the issues presented for review what the World Shipping Council said is that whether the final rule is contrary to the Ocean Shipping Reform Act, because the commission exceeded Congress's limited grant of authority to initiate a rulemaking. That's one of their arguments. Whether the rule exceeds the FMC's statutory authority given by Congress. Because the commission lacks authority to ban a billing practice, absent of finding that that practice is unjust and unreasonable. That goes to that carrier motor carrier billing relationship that remember the direct contractual relationship. The motor carriers were eliminated from that. Now the World Shipping Council is saying look, you exceeded your authority because you're banning that billing practice.

Speaker 1: 9:32

The third argument is whether the rule is arbitrary and capricious. Kind of just a general. Is this an arbitrary rule? Four, whether the rule is arbitrary and capricious because it fails to meaningfully respond to crucial comments submitted during the rulemaking process. And five, whether the FMC violated the National Environmental Policy Act need put by failing to issue an environmental impact statement. They had raised that at some point during the D&D process too, so that we've already talked about.

Speaker 1: 9:58

The only new thing happening on this petition is that the previously discussed request for additional time remember we talked about that a few weeks ago to file a brief from the FMC. They filed it as an unopposed motion. That was granted, so now we're going to see some movement in December and January. So stay tuned. This is the petition on the detention and demurrage rulemaking that was filed in the US Court of Appeals for the DC Circuit. So the other rule recently released.

Speaker 1: 10:23

This unreasonable refusal to negotiate with respect to vessel space accommodations also has a petition in front of it. I've said for a while I always expected a petition on this one. It just seemed to move a little too far into operational discussions for it to go unchecked. And I see the petition as kind of a checking of the parameters and the jurisdictional limits of the FMC, which the conversation is a good one, right? I think that the conversation should happen, especially on these nuanced things, and the petition is kind of the venue for that conversation. Like I said, I've just always wanted to see a continued dialogue.

Speaker 1: 10:59

So what's the update here? So, previously reported, the petition was filed on September 18th. We went through the normal back and forth of procedural filings and then we did see that we had a filing from the FMC, a motion to dismiss the case for lack of standing, which essentially means that if the party cannot show direct harm, the party does not have the right to be appearing before the court. So that's what's standing right Like. Is this the right party to bring this argument? Well, the new update is that World Shipping Council filed a response to this FMC motion to dismiss. That was filed on November 12th.

Speaker 1: 11:29

So the World Shipping Council states that they are a non-profit trade association representing the liner shipping industry, with its membership comprised of operators of container ships and row-row roll-on roll-off, including vehicle carriers. Information relating to World Shipping Council's membership is available on its publicly available website as well as through World Shipping Council's agreements filed with the FMC. World Shipping Council members operate approximately 90% of the world's liner vessel services, including more than 5,000 ocean-going vessels, with approximately 1,500 vessels making 27,000 calls at US ports on an annual basis. That's all from their filing. They're kind of just establishing look, our members are the ones here. We are representing a big, significant portion of all the ocean carriers out there and liner vessel services. So like, that's us and these are our members.

Speaker 1: 12:17

But the filing goes into some of the back and forth arguments regarding documented export strategies, requirements and transportation factors considered by the FMC and the rule. But really the important part here right, because this was a motion to dismiss lack of standing the World Shipping Council says a couple pages in. Nevertheless, the administrative record is clear that World Shipping Council, as the primary global trade association representing the interests of ocean common carriers, has associational standing to bring this matter because its members are the object of the action at issue. They're saying there's nobody else, there's no other associations that are better suited than the World Shipping Council here to represent the interests of all of these members that are the object of the action at issue. They're saying so. They actually cite three different cases where representational standing was sufficient when the members were the object of the action at issue they go through, and one that was really interesting is the American Trucking Association versus FMCSA, so the Federal Motor Carrier Safety Administration.

Speaker 1: 13:18

But essentially all of these were saying standing when the complainant is the object of the action at issue or the association has an obvious interest in challenging the rulemaking impacts the members. So the FMC actually already responded to this. It said the claim is contrary to precedent, which requires the council to present evidence of concrete and particularized harm from the rule. The council has not met that burden. The council fails to show harm arising from any sufficiently imminent threat of enforcement based on what it objects to about the rule, which imposes no immediate obligations or burdens on its carrier members, but which simply provides the standards under which the FMC will evaluate future refusal to deal claims. In any case, even an ocean carrier could establish standing to challenge the rule. Now the council has not provided the evidence needed for representational standing here. I mean this is just a snippet of the FMC's response.

Speaker 1: 14:10

So look, I don't want to go too far into the legalese of the back and forth and what they're saying here, but essentially the argument is whether or not the World Shipping Council has standing, meaning do they have the right to bring this petition kind of the argument here, or should it have come from the individual members? There's some decent arguments on both sides, but my gut is that this might fall to the World Shipping Council side saying that the court might say that they have standing and that the merits of the petition should actually be discussed like the actual subject matter, like this should be talked about, not just on standing but on the actual rule at issue. We're not even really into the meat of the arguments yet right in the rulemaking, but we're going to see what the court says. And look, this also isn't an all or nothing. There are some specific issues being brought up, like I was saying, the export policy document, for example, and the transportation factors argument the court might splice and dice. They might say look, world Shipping Council has standing on the export policy document side, but perhaps maybe where it gets specific into transportation factors, maybe they don't have standing. I don't know if that's how it's going to go. My guess, my guess totally a guess is that it's unlikely that they'll toss this entire case saying that World Shipping Council doesn't have standing. I think that they want to. This is the rule. I think that they want to get into some of the merits of the case. So I don't think that this is going to be totally eliminated, but we'll see.

Speaker 1: 15:26

We'll see no-transcript opening statement where they assured us that neither full nor semi-automation would be on the table. They claim their focus was on modernization, not automation. Again, I'm reading the ILA statement here. It continues to say the ILA has always supported modernization when it leads to increased volumes and efficiency. For over 13 years our position has been clear we embrace technologies that improve safety and efficiency, but only when a human being remains at the helm. Automation, whether full or semi, replaces jobs and erodes historical work functions we've fought hard to protect. Continuing on with the statement, studies within our industry confirm that what we've long known no machine or algorithm can outperform the productivity of a skilled human workforce.

Speaker 1: 16:39

Despite this, employers and certain media outlets perpetuate the false narrative that the ILA is stonewalling technological progress. This couldn't be further from the truth. So, of course, right, what we're seeing here. This is a statement that came out on the Facebook page. We saw this leading up to the actual port strike happening October 1. We're going to probably continue to see back and forth messages from ILA, almost positionalizing and doing kind of an informal negotiation through their posts now saying, look, we're not against technology. That's the message being asserted out there.

Speaker 1: 17:17

I don't think any. I don't know. I think that we're well, we're yet to see what, who's saying what. I think that we're yet to see who's saying what. I think that it is pretty clear that the ILA is trying to protect jobs that have a human element to them, because once you lose them, you lose them. But I don't think that we as a nation can continue on without some sort of technological advances, right. So where we end up here is going to be really interesting to see.

Speaker 1: 17:45

But the other thing that I found really interesting is that it seems like they're gaining international support, or at least that's the piece that Harold Daggett and the ILA Facebook page is pushing. Harold Daggett, in one of his earlier YouTube videos, said that they would be taking the world as a collective force of maritime workers, and what they're showing on their Facebook page is that they're having support from New Zealand. I believe they even had Somalia on there. They have a few different countries that are saying we support the ILA as an international maritime workforce. So what does all this mean for January 15th? Right now I mean honestly, right now it feels like not much. It's terrible that negotiations have broke down, but we are only at November 22nd. We have eons between January 15th. That doesn't mean nothing should be happening. I hope the new administration is paying attention to this and will engage early and hopefully at least get them back to the negotiating table and start working all of the angles here. But I expect a lot more back and forth between now and then. So I'm going to keep watching this and I'll let you know what I see.

Speaker 1: 18:52

The fourth story of today. It's kind of a sad story. Commissioner Carl Bensel is leaving the FMC, so in our last by Land and by Sea episode, we talked about a change, how the change of the political party in the administration going from a Democrat, president Biden, now to President-elect Trump, a Republican, and how that will result in a need from a change of the FMC to go from three to two, which is three Democrats to two Republicans, to move over to three Republicans to two Democrats. Remember, the three Democrats were Chairman Dan Maffei, who will be relinquishing that chairman title and becoming a commissioner. So Chairman Dan Maffei, commissioner Carl Bensel and Commissioner Carl Max Vekic, those are the three Dems. And then the two Republicans were Commissioner Dye and Commissioner Sola. Now we have our answer on who's going to be leaving. It's sad, but but it's. It's great news for Commissioner Carl Bensel leaving.

Speaker 1: 19:45

It's sad, but it's great news for Commissioner Carl Bensel. You know he was moving through his renomination and confirmation hearing and it seemed as though he was well supported, but he hadn't quite received his final approval yet, at least as far as I had heard, and perhaps that's part of what happened here, right, perhaps that informed his decision. I mean, you know, moreover, perhaps he just saw a fantastic opportunity, which is what this is, which is really what this is, and he jumped at it. So Commissioner Carl Bensel announced that as of December 16th he will assume the role of president at the National Association of Waterfront Employers, nawi, and the executive director of the National Maritime Safety Association, nmsa. So Commissioner Carl Bensel has been an asset, an asset to the FMC and really to all initiatives that he's been part of, and one of his legacies at the FMC will truly be his successful, large-scale, industry-wide facilitation of the discussion of data transparency and reliability in the maritime sector and maritime transportation right. So this was the Maritime Transportation Data Initiative, the MTDI initiative. He hosted and facilitated such an important discussion that you know he's written some reports on it. He's saying that he's going to be probably finalizing the report. I think he said in his announcement. But look, he has done such a great job that I hope this conversation continues and hopefully the FMC is where it continues, right, we'll see.

Speaker 1: 21:04

It seems that the other commissioners have been engaged in the discussion. Certainly, at the recent American Association of Port Authorities we saw Commissioner Max Beckich on a panel about data. So I mean it's still out there, they're still engaging in these discussions and it also seems like the National Shipper Advisory Committee right, the Federal Advisory Committee to the FMC has been engaged in the discussion as well, right through their public comments and at their meetings. Follow along to the NSAC meetings if you're at all interested. It's really really interesting conversations there, but there's certainly a desire by the industry to have reliable and transparent data, and so hopefully this conversation continues. I think the FMC was a great spot for that conversation to happen, because of the fair and efficient movement of goods and data, you know should have some fairness and reliability to it and so. But in the meantime, we wish Commissioner Carl Bensel well. We didn't interview with him a few months back, go check that out but we wish him all the success in his new role and he will undoubtedly be a true asset to the organization of NOWI and NMSA.

Speaker 1: 22:04

But look, that's it for today. We'll be back with more in two weeks after Thanksgiving, with more to report on, more to break down. This is a wild world of supply chain and I don't think we're going to be taking a break for the holidays. I won't be here for Thanksgiving doing an episode, but the wild world of supply chain doesn't stop.

Speaker 1: 22:21

So, as always, the guidance here is general, for educational purposes. It should not be construed to be legal advice directly related to your matter. If you need an attorney, contact an attorney, but if you have specific legal questions, feel free to reach out to me at my legal companies called Strategies. Otherwise, for the non-legal questions, the e-learning and the general industry information and insights, come find me at the Maritime Professor. If you like these videos, let me know, comment, like and share. If you want to listen to these episodes on demand, or if you missed any previous episodes, check out the podcast by Landon Bicey. If you prefer to see the video, they live on my YouTube page by Landon Bicey, presented by the Maritime Professor. And, while you're at it, check out the website MaritimeProfessorcom. So until next week, this is Lauren Began, the Maritime Professor, and you've just See you next time.