By Land and By Sea
By Land and By Sea
S4.E15 - Is the FMC the secret weapon in the Panama Canal discussions?
Topic of the Week (2/14/25):
Is the FMC the backup quarterback for the Panama Canal discussions? The answer isn’t no, and it might just be yes. Let’s talk about it.
⚓ The Maritime Professor® presents By Land and By Sea Podcast 🎙️ – an attorney breaking down the week in supply chain
with Lauren Beagen (Founder of The Maritime Professor® and Squall Strategies®)
Let’s dive in...
🔹 Top Three Stories of the Week:
1️⃣ GAO Report on MARAD Workforce Challenges
📉 MARAD faces staffing shortages with a 12.3% vacancy rate—GAO calls for a workforce strategy to close skill gaps.
2️⃣ FMC Enforcement Action Against Florida NVOCC
⚖️ Double Ace Cargo Inc. fined $50K for repeated violations—now required to self-finance compliance monitoring, a first for the FMC.
3️⃣ Premier Alliance Agreement Taking Effect
🚢 A new vessel-sharing alliance between HMM, ONE, and Yang Ming begins February 9, 2025, following FMC review.
Deep Dive: FMC’s Authority on Panama Canal Issues
Former President Trump referenced "powerful action" regarding Panama. While the Panama Neutrality Treaty is the obvious reference, the FMC has its own authority to act on unfair foreign shipping practices.
▶️ Foreign Shipping Practices Act of 1988 (FSPA):
🔴 Allows the FMC to investigate foreign policies that harm U.S. carriers
🔴 Authorizes port access limits, contract suspensions, and fines up to $1M per voyage
▶️ Section 19 of the Merchant Marine Act of 1920:
🔴 Gives the FMC power to correct unfair shipping conditions—no full investigation needed
The FMC’s role in global shipping is bigger than many realize. Could it play a key role in the Panama Canal discussions? Stay tuned!
🔹 The Maritime Professor® provides training and education for global supply chain professionals. Learn more: www.TheMaritimeProfessor.com
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I got soul coming through, flying free. Skies are blue, all the waves it makes a room. I got soul coming through, won't stop. Feel the beat On top of the world when you see me come. Everywhere I go, I'm in the spotlight. This is a good life. I'm living for it. This is what it looks like. I'm addicted to the world. Is the Federal Maritime Commission the backup quarterback for the Panama Canal discussions? I mean, the answer isn't no, it might just be yes. Let's talk about it a little bit more.
Speaker 1: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 to walk through both ocean transport and surface transport topics in the wild world of supply chain. As always, the guidance here is general and for educational purposes only. It should not be construed to be legal advice and there's no attorney client privilege created by this video or this podcast. If 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? Well, we don't have any new updates on the rulemaking front for the FMC. As you know, we've been watching the petitions. Nothing's really going to happen on that until March-ish timeframe. So, in the interest of repeating myself every week, I've taken it off of our list. So we're going to start with our first story of the week.
Speaker 1:I've taken it off of our list, so we're going to start with our first story of the week, which is the GAO just released a report about the Maritime Administration saying actions are needed to help address workforce challenges. So I'm going to read a little bit from the actual report. They did an executive summary and then I'm going to get my take on it. And I want to be careful here because I didn't actually work at MARAD. I worked over at the Federal Maritime Commission. So obviously I know the Federal Maritime Commission and what it's like to work there, but I have not worked inside MARAD itself. And I want to be fair because I think that there's a big retraction of government workforce these days. So I want to be sensitive because these are kind of scary times for government employees. But all of that said, I do have some thoughts on this report and generally I want to kind of review MARAD staffing compared to FMC staffing. So, as of the like I said, I'm going to read this off of the GAO report language. So what did it say? Why GAO did this study? It said MERIT is tasked with fostering, promoting and developing the US maritime industry to meet the nation's economic and security needs.
Speaker 1:Now I want to kind of stop there. You know that I really point out the difference. The compare and contrast between the Federal Maritime Commission and MARAD really comes down to exactly this first sentence here where it says it's tasked with fostering, promoting and developing the US maritime industry. The FMC is kind of that competition authority, right? They are interested in the fair and efficient movement of goods for the benefit of the US importer, exporter and consumer, whereas MARAD is tasked with fostering, promoting and developing efficient movement of goods for the benefit of the US importer, exporter and consumer, whereas Merit is tasked with fostering, promoting and developing. So you have this kind of like a court system as the FMC where they are regulating the industry and the global ocean freight that comes to the US and then Merit is tasked with the fostering, promoting ocean freight that comes to the US and then MARAD is tasked with the fostering, promoting. So they really are kind of that promotional piece versus that regulatory piece. So I'm just going to go into a little bit more of the history here.
Speaker 1:1961, they split up. It actually used to be the FMC and MARAD were together in the Federal Maritime Board. They split up because for obvious reasons right, you want promotion and kind of money going out through one side, but you want that regulatory competition authority on the other. You don't necessarily want the same agency sending money out to one side and then calling winners and losers on the other side. So that's the distillation. Let's get back to the GAO report. So MERA is tasked with fostering, promoting and developing the US maritime industry. It also continues to say MERA's wide-ranging responsibilities make workforce planning critically important.
Speaker 1:So when I first saw this report just the existence of this report I thought, oh great, we are finally going to get some sunshine in the fact that we don't have enough mariners in the workforce. That's not what this is about. This is about MARAD, specific employees working at the Maritime Administration, not about maritime mariners, which I will say this references the critically low and high risk list of employees working at MARAD. Of employees working at MARAD, I'm going to expand that and say we have a critically low mariner shortage or mariner levels across the US. So I'm kind of switching this and using this as an opportunity to tell you, if you aren't aware, be aware, mariners in the USS maritime trades is at, I can only imagine historically low levels. It is critically low. We need more mariners out there. But that's not what this is about, so I'm going to let me move my soapbox over for a minute. All right, so let's get back to this report.
Speaker 1:The report examines continuing on the GAO language here. This report examines, one, current workforce challenges MARAD faces. Two, how MARAD is addressing its workforce challenges. And three, the extent to which MARAD has incorporated key workforce planning principles into its strategic workforce plan. So this is kind of a deep dive on MARAD and the Maritime Administration and how their employee staffing levels are. It says GAO reviewed MARAD policies, procedures and documents related to the agency's strategic workforce planning efforts. Gao also interviewed MARAD and Department of Transportation officials and analyzed MARAD data. Again, marad, as you, I'm sure, likely know, marad, the Maritime Administration, is housed within the US Department of Transportation. We talked a few weeks ago about how Sean Duffy is now the new Secretary of Department of Transportation. Marad, the Maritime Administration, sits within that agency, that department, we don't actually have a Maritime Administrator currently. We just had Admiral Phillips, ann Phillips as the outgoing Maritime Administrator. But under this new administration we do not have a new Maritime Administrator as of yet.
Speaker 1:It continues on to say so what did GAO recommend? Gao is making four recommendations, including that MARAT assess critical skills and develop a strategy to address any future skill gaps identified in the forthcoming strategic workforce plan. The Department of Transportation agreed with our recommendations. I'm a little bit. I have a question there. It says the Department of Transportation agreed with our recommendations. This report obviously came out just this week, february 2025. My guess is that the Department of Transportation that agreed with the recommendations here were probably from the previous administration. So we'll see. It's still an interesting review, an interesting exercise in a critical assessment, I guess, of the Maritime Administration and staffing levels.
Speaker 1:So it said, continuing on what GAO found, renewed interest in revitalizing America's maritime industrial base has driven interest in the sufficiency of the workforce at the DOT's Maritime Administration. So it's saying yes, renewed interest in revitalizing America's maritime industrial base. I think that was true for the previous administration. I definitely I know that to be true for the current administration, this new administration under this Trump President, trump, term number two. I've been seeing maritime language all over the place which, as if you know me, I always say look, anytime maritime is being talked about. It's a a good thing to have maritime in the conversation because it shines a light on critical issues like shipbuilding that we have to do, or just the US fleet or, like I said, mariner shortage that we have critical levels of and I keep saying critical, but that's how important all of this is. All right, so continuing on.
Speaker 1:It said, the renewed interest in revitalizing America's maritime industrial base has driven interest in the sufficiency of the workforce, while MARAD's budget grew by approximately 314% from fiscal years 2015 through 2024. So a 10-year period the MARAD budget grew by 314%, 2015 to 2024. And I'm stopping there, and that's a big number anyways. But look again, the sister agency to this is the Federal Maritime Commission. They've stayed at about 30 to 35, maybe million dollars as their entire budget during that same time period. I don't have the hard numbers on that, but I do know that their budget in 2017 was about $32, maybe $34 million and in the most recent budget hearings that the FMC had, I mean we were looking at maybe 40 million. So we really were certainly not looking at the FMC growing by 314%. I'm just, I don't know. That was a very shocking thing to me, that that's how much it grew. But GAO was right here. There is a renewed interest in revitalizing America's maritime industrial base and, to be fair, that budget also included infrastructure dollars and so or I'm assuming it did I wouldn't assume that 314% would be entirely working. Perhaps this is a little bit of an unfair number, but the budget grew by approximately 314%. They dole out grants, right, they issue grants, and so if that 314% is also coming from grants, it's a little bit of a misleading statement here, whereas the FMC does not give out grant money. All right.
Speaker 1:So, continuing on, as of September 2024, marad has 12.3% vacancy rate. So they said 116 vacancies out of 941 authorized full-time positions. Those numbers are shocking, too right, and not shocking in a negative connotation and again, I want to be careful here but not shocking in a negative connotation, but I just had no idea. 941 authorized positions, and perhaps maybe that's the baseline, and the real story here is that the FMC is woefully understaffed. But look, 116 vacancies. I've said this so many times. The FMC only has about 120 to 130 people total throughout the entire agency, so the entire agency of the FMC, is the number of vacancies out of authorized full-time positions that MARAD is down. It just I mean, my only point that I'm making here is it just doesn't match. And perhaps they have. They certainly serve different roles, but I'm just, I'm just the numbers right. I'm just the numbers right. The 941 authorized full-time positions compared to FMC's 130 authorized full-time positions. Maybe that means FMC needs a boost up. Maybe according to the GAO report, it says that actually MARAD needs to fill those 116 vacancies. So maybe all of this is true, but I'm just the compare and contrast is what I'm doing here today. In addition, it continues to say Merritt separated 235 more employees than hired over the last 10 years. So they actually their their net right? Was they separated 235 more employees than hired? There's a lot of turnover.
Speaker 1:According to merit officials, these vacancies have made it increasingly difficult to accomplish their mission. Furthermore, the number of retirement eligible staff is projected to increase from 24% in 2024, so it was retirement eligible staff to 43% by calendar year 2029. And I'm going to stop there, and this is why I think that perhaps this information and this data might be a little bit outdated because, as we all know, right now the US federal employee workforce is going through a opportunity for a buyout. I guess is how I would phrase it. If you're maybe interested in retirement or if you're interested in perhaps leaving, there is a offer being made and I believe that it's it's federal agency wide, I mean across all federal employees that there are terms that you can leave and get a little bit extra. I think it's you continue your pay through September. I mean, look at the specific details on this. But I say that because this is talking about retirement eligible staff increasing from 24% to 43%. I think that maybe a good chunk of those may have or may be looking at that buyout option. So all of this data this 941 authorized full-time positions and this 116 vacancies I can imagine the vacancies number is going to be increasing should these buyouts be taken advantage of.
Speaker 1:But the compare and contrast right, I want to keep coming back to that. That is what has me really interested in this report the compare and contrast. I knew that Marriott had significantly more people. I didn't know that they had 800 more people. I mean 941 authorized full-time positions. Fmc has, I think, 130. Maybe we're getting up to 140 authorized full-time positions. That's a significant difference and I don't want it's not a value-based judgment. I'm just putting it out there. It says as of September 2024, like I said, marriott had a 12.3% vacancy rate, that's 116 vacancies out of 941 authorized positions.
Speaker 1:So it actually has an image in the GAO report that goes through kind of the different areas that they are understaffed. So one of the major ones is the US Merchant Marine Academy. So remember, marad is not just the desks that sit over in Navy Yard in DC, but it is the outside areas too. And so US Merchant Marine Academy. So one of the maritime academies, the Federal Maritime Academy for merchant mariners that are graduating out, these cadets that are graduating out, they have 264 staff. They are short 35 staff and two SES. So that's Senior Executive Service members. So usually kind of the upper level management is SES. So 264 staff, they're short to 35 staff.
Speaker 1:There's no comparison to the FMC, right? They don't run an academy. The Office of the Maritime Administrator five staff, two short. You know that's probably about right. Office of the Chief Counsel 34 staff with two staff short. So the Office of the General Counsel, which is equivalent to the Office of Chief Counsel here at the FMC is probably 10, maybe 15 attorneys. I mean maybe 34 attorneys or 34 staff, I should say, in the Office of Chief Counsel. Not a value-based judgment. Again, just a comparison 34 attorneys in the chief counsel's office with two shorts, and you're looking at the FMC that is regulating and part of all of these, this increased case law that's coming up, but dockets galore. I mean you have the administrative law judges that start the process of the FMC, but it's 34 to 10, maybe 15. Just again, not value-based judgment, just a comparative contrast. I'm not going to go through all of these different offices but just so that you know. I mean the comparison doesn't exactly match up.
Speaker 1:For the rest of it, um one that I actually think that we have the associate administrator for strategic C-LIFT, um, that's something that has 306 staff. They're short, 79 staff. I think C-LIFT is a big deal and I think that this next administration is going to see C-LIFT as strategic C-LIFT as something that's important, um and something that should be appropriately staffed and and um part of the, the kind of strategy, right. I've said this before, but it seems as though the theme that we're running with here is that maritime security is national security. I think that we've seen that through some of these strategic appointments and some of the Kelly Waltz bill, right, that's what I'm thinking of. It's Congressman Waltz from Florida became the national security advisor to the White House. He introduced that bill. That's now the Ships Act, right, which talks about shipbuilding. It talks about growing the US flag fleet. It talks about mariner attraction and retention. So all of those things I think are big theme issues that are happening or will continue to happen under this administration.
Speaker 1:I'm going to yeah, no. I think that that kind of sums it up right and my, like I said, it's a compare and contrast. It's just to show, probably I guess my point is how small the FMC is and how lean it has run for at least the past 10, 15, almost 20 years. So something to keep in mind. You know I often talk about all the different things that the FMC is doing. They are running with a very lean staff. They're probably half attorneys, half economists, or maybe I should say they probably have as many economists as they have attorneys. The attorneys aren't just in the general counsel's office, they are usually attorneys, are a part of each commissioner's office, and then they also have attorneys in the Bureau of Enforcement, investigations and Compliance, so there are quite a few attorneys. But Bureau of Trade and Analysis right, those are economists, so it's a really interesting agency. And compared to this larger cabinet level agency or cabinet level office within or agency within a cabinet level agency right, department of Transportation is a cabinet-level agency and then MARAD being within there Just interesting to compare and contrast.
Speaker 1:All right, that was only story number one. Story number two so the FMC released a press release this week actually talking about NVOCC. So Non-Vessel Operating Common Carrier. So it says Florida NVOCC agrees to pay civil penalties and conduct ongoing self-finance monitoring. So I want to bring this up because I wanted to kind of highlight some of the things that the Bureau of Enforcement, investigations and Compliance does beyond just watching surcharges and being part of the charge complaint process and all the things that we typically talk about process and all the things that we typically talk about. So a Florida-based non-vessel operating common carrier, nvocc, has paid $165,000 in civil penalties and agreed to accept a self-financed, independent monitoring of their business practices as part of two separate compromise agreements reached with the FMC over the past 18 months.
Speaker 1:So Double Ace Cargo Incorporated reached a compromise agreement with the FMC in June 2023, where it paid $115,000 in civil penalties to resolve allegations of violating the Shipping Act. So it's 46 USC 41104A11. The violation was of the statute for transporting shipments on behalf of entities that were not licensed NVOCCs, did not have bonds and did not publish tariffs. So take a look at that. Obviously, nvoccs are responsible for making sure right that things are in order, and so part of that, the violation here was violating the law by transporting shipments on behalf of entities that were not licensed NBOCCs, did not have bonds and did not publish tariffs. You can actually go check. The FMC has a list of OTIs, ocean Transportation and Meteorites. So that's, freight forwarders or NBOCCs and those that are licensed are listed there. So in case you want to make sure that you're following up and working with licensed NBOCCs or bonded companies, go check the list at the FMC.
Speaker 1:Continuing on in this press release, it says in reviewing and accepting the June 2023 compromise, the commission ordered its Bureau of Enforcement Investigations and Compliance to re-examine the conduct of AAIS after six months to ensure it was complying with its relevant statutory and regulatory obligations. It says a second investigation was completed in early 2024. So that first one, it said, was 2023. Now we're looking at early 2024 and a compromise agreement was reached wherein double A's paid $50,000 in civil penalties to resolve alleged violations of another shipping act violation 46 USC 411-04A11. So actually the same statute. It says by transporting shipments on behalf of entities that were not licensed, nboccs, did not have bonds and did not publish tariffs.
Speaker 1:So this was $50,000 as part of the second compromise agreement and in addition to the payment of a financial penalty, aa's agreed to accept and pay for an independent monitor for a 12-month period ending May 2025. So the independent monitor is providing monthly reports about AA's business practices and shipping agreements directly to the FMC's BEIC director, that's, the Bureau of Enforcement, investigations and Compliance. So this is interesting. They are having. It was a self-monitoring and then they moved over to an independent monitor that's going to be then providing monthly reports back to the FMC. Seems a little bit of like creativity in monitoring because, as I keep saying, the FMC the positive way of saying it is a very lean agency, but really they don't have a lot of people.
Speaker 1:So, continuing on, in this press release it says the choice of the independent monitor was reviewed and approved by BEIC. Double Ace is bearing all financial costs for the independent monitor, requiring that a regulated entity accept and pay for ongoing monitoring by an independent company. Reporting directly to BEIC is new to previous compromise agreements. Like I said, this is a creative solution. This arrangement allows BEIC to continue assessing the compliance and integrity of a company accused of wrongdoing, while preserving the resources of the Bureau to conduct investigations of other companies. So exactly that. That's how I see it too, that the Bureau the Bureau of Investigation excuse me, enforcement, investigations and Compliance got creative here, preserved the resources, the manpower of the Bureau itself, but is still able to monitor this company. I mean, that's pretty smart, or an efficient use of resources right, continuing on almost finishing up here. Resources right, continuing on almost finishing up here. Regulated entities are reminded that self-reporting violations is viewed favorably by the commission and can help to mitigate consequences of non-compliant activity. Self-reporting violations is viewed favorably by the commission. All right.
Speaker 1:Penalty payments are deposited into the general fund of the United States. That's important, did you hear me? Penalty payments are deposited into the general fund of the United States. That's important, did you hear me? Penalty payments are deposited into the general funds of the United States. The Federal Maritime Commission will receive no portion of the financial penalties collected. That's true pretty much all the time the FMC, when they assess civil penalties, does not collect that money. So we've seen some significant civil penalties assessed over NVOCCs, voccs over the past few years and certainly since the COVID congestion years. That goes to the general fund that does not get specifically allocated to the FMC directly, so that $32 to $40 million budget stays there. So remember a few years ago we had a couple million dollars come through in some of these civil penalties. The FMC didn't get a 5% raise because of that. So if anything, it kind of makes the FMC even more independent in its review, because the civil penalties they're assessing are not to help fund the agency. They really are to correct the violations that are happening under the Shipping Act. So just an interesting point they always well mostly they usually write that the penalty payments are deposited into the general fund. That's important to note because it's saying we don't get this money. Maybe the FMC should, but they don't. They don't right now and so, short of a change with Congress, the FMC doesn't collect that money. So story number two keep moving along.
Speaker 1:Story number three the Premier Alliance took effect. So this was another press release out of the FMC it was, I believe, last week where it said the Premier Alliance Agreement took effect February 9th 2025. So this Premier Alliance allows Hyundai Merchant Marine Ocean Network Express Yang Ming Joint Service Agreement to share vessels in the trades between the US and Asia, middle East and Europe. The agreement was originally filed at the Commission October 28th 2024, and the Commission issued a request for additional information on November 5 to collect the data necessary for completing an economic analysis of the competitive effects of the agreement. The RFAI, which is the request for additional information process, included a 15-day public comment period, which generated filings by two industry trade associations. The information provided by the Premier Alliance agreement was deemed by the commission as responsive on December 26th. The law provides the commission a maximum of 45 days to review a newly filed agreement or the responses to an RFAI before the agreement automatically goes into effect.
Speaker 1:One thing that I want to point out here. We talk about it every time we talk about agreements the FMC does not approve agreements submitted to them. They don't approve them. They just either can stop them or it automatically goes into effect. And when I say stop them, they can't just tell the filer of the agreement denied. They can't deny them in-house. The only way they can stop them is filing an injunction in federal court on this. So they would have to file a lawsuit against the agreement and go prove their case which, as we know, is manpower right, that's resources. So they have to be pretty dang sure that they have it right if they're going to go and say we think that this is anti-competitive, we think that this is a violation of the Shipping Act, we think that this is perhaps monopolistic, and here's why.
Speaker 1:So really, if an agreement gets filed at the FMC, it's likely to be automatically in effect after the initial 45-day period and then they can have a request for information and additional information. And that's where you get that additional 45 days. So really like 90 ish, a hundred days, cause they say they they need, they need to determine that the responses were responsive to the request for additional information. So there's, there's a little wiggle room on. It's not exactly 90 days, but I mean that's not a lot of time. So the FMC, as soon as an agreement is filed, especially on some of these big ones, is like all hands on deck. Let's review this. So, just in case you didn't know, they're not automatically rubber stamped, they are not automatically approved and they can't even be denied in-house in-house.
Speaker 1:The benefit of all of this, though, means that the law itself is more favorable to private business doing innovative private business things. If it's something that is an agreement that can be filed to enjoy limited antitrust immunity under the Shipping Act, then kind of the default it feels is that go ahead, try it. If it's anti-competitive, the FMC will attempt to stop it. But they can attempt to stop it at any point, whether it's when it gets filed or when it's in effect. Once it automatically goes into effect, it doesn't mean that that ability of the FMC to file an injunction against it is changed in any way way. Basically, what happens is whenever it's anti-competitive and the fmc reviews and determines that they can go after it. So initially, once it's already in place, they continue to monitor and that's the essence of the fmc's job. Right, they are the competition authority for global ocean shipping. That relates back to the us uh ports and us commerce, so they're going to keep watching it. So I mean, if anything, it further solidifies the FMC's very important role in the fair and efficient movement of goods across global ocean shipping.
Speaker 1:Just as a little refresh, so the alliance reshuffle. We saw some shuffling happening in 2025. So 2M alliance has now kind of broken off. Msc has gone off, maersk has now joined with Hoppag-Lloyd under the Gemini cooperation. That was already approved. That was already. The agreement has gone into effect. I should say the alliance, or THE, the High Efficiency Alliance, which was Hoppag-Lloyd, o&e, yang Ming and Hyundai Merchant Marine, has now become this that we're talking about, the Premier Alliance, which is O&E, yang Ming and Hyundai Merchant Marine, and then the Ocean Alliance remains, right CMA, cgm, costco, ocl and Evergreen. So we are a little bit shifted around. I think the Gemini cooperation will be one to watch in 2025 to see how that hub and spoke model works and the increased reliability that they are promoting for there. But I think this is going to be a really interesting one to watch. So everything is in place, everything has become effective of the reshuffle here and we'll see how it all plays out.
Speaker 1:All right, so let's get into the meat and potatoes of the day. Those were a lot of stories that we went through, but let's switch over and let's talk about Panama Canal. So the Federal Maritime Commission might just hold the authority that powerful action President Trump is referring to with respect to Panama. So what is that powerful action Trump is referring to? Well, obviously right, he's talking about that treaty concerning the permanent neutrality and operation of the Panama Canal. That's often discussed in the mainstream media. But one thing that I really haven't seen hit the mainstream media is anything about the Federal Maritime Commission and their authorities. So they actually have the authority to issue corrective action on unfavorable conditions to shipping and foreign trade. Do you know that it's actually two major authorities that you probably didn't even know were there? So unless you listen to this podcast, then you definitely know.
Speaker 1:So we have the Foreign Shipping Practices Act of 1988 and Section 19 of the Merchant Marine Act of 1920. So under the Foreign Shipping Practices Act, it grants the FMC authority to investigate laws, rules, regs, policies or practices of a foreign government that adversely affect the operations of US carriers and does not exist for foreign carriers of that country. So kind of an imbalance, an unfair imbalance, I guess I would say. It also allows the FMC to take actions to offset the adverse conditions. They can do that by limiting access to and from US ports, suspending foreign carrier tariffs and service contracts, suspending rights to operate under agreements filed with the FMC, and or the FMC could assess a fee of up to a million dollars per voyage. So they can do this to respond to foreign government policies or shipping practices that create unfavorable conditions for US carriers, exporters and importers.
Speaker 1:So I'm going to go through kind of the actual language of what the Foreign Shipping Practices Act says here, just as we always do, because I like to kind of help illuminate so that you can walk through yourself, because I really encourage you to look up these statutes and see Foreign Shipping Practices Act in Section 19 of 1920. So it says the FMC shall investigate whether any laws, rules, regs, policy or practices of a foreign government or practices of a foreign carrier or other person providing maritime or maritime-related services in a foreign country. It's kind of all-encompassing. So the foreign government, a foreign carrier or persons providing maritime or maritime-related services in a foreign country, and it says result in the existence of conditions that adversely affect the operations of US carriers in US ocean-borne trade and do not exist for foreign carriers of that country in the US under the laws of the US or as a result of the United States carriers or other persons providing maritime or maritime-related services. So an investigation what they can do is they initiate an investigation. It may be initiated by the commission on its own motion or a petition can be filed of any person, including another component of the US government. So somebody from the US government or some private entity or the commission itself can initiate this investigation Under this law. It says the commission shall complete an investigation under the section and render a decision within 120 days after it's initiated. However, the commission may extend its 120 day period for an additional 90 days. So it does have kind of a time component to it 120 with an additional 90 with sufficient justification.
Speaker 1:They can also request additional information To further the purpose of this title. The Federal Maritime Commission may order any person, including common carrier, shipper, shippers, association, ocean transportation, either intermediary or maritime terminal operator, or an officer, receiver, trustee all these people to file with the commission any periodic or special report, answers to questions, documentary materials or other information the commission considers necessary or appropriate. The commission may require the response to any such order to be made under oath and the response shall be provided in the form and within the time specified by the commission. So it's kind of further outlining how the commission can ask for information under their investigation. And then here's where we get into action against foreign carriers, whenever the FMC after notice and opportunity for comment or hearing determines that the condition specified of this title exists, the commission shall take action to offset those conditions it considers necessary and appropriate against any foreign carrier that is a contributing cause, foreign carrier that is a contributing cause or whose government is a contributing cause. So you can go after the ocean carrier or foreign carrier I should say that is a contributing cause or whose government is a contributing cause, and the actions may include limitations on voyages to and from US ports or the amount or type of cargo carried, a suspension of any or all tariffs and service contracts.
Speaker 1:Again, remember, service contracts and agreements are all part of this limited antitrust immunity that otherwise would be monopolistic, but because it's under the Shipping Act, the FMC is monitoring it. They're going to allow at least a little bit of an ability to file those Number three suspension or right to operate under any agreement. So again, remember these agreements. I mean, these are the ocean carrier agreements, they're cooperative working agreements. There's a million different kinds of slot charter agreements. There's lots of agreements, but this could suspend them and then the last one that they could use is a fee not to exceed a million dollars per voyage.
Speaker 1:Now this law has been in effect since 1988. In 1988, a million dollars per voyage was wild. It still is wild, a million dollars per voyage. So it's a pretty big deal. Then if they do refuse clearance, the FMC can then go ask the Secretary of Homeland Security to tell the Coast Guard to deny entry for purposes of oceanborne trade of a vessel of a foreign carrier. So this is a pretty significant authority that the FMC has under this title becomes effective, or a request to the Department of Homeland Security for that refusal of entry is made. This determination shall be submitted to the president immediately to the president. The president, within 10 days after receiving it, may disapprove it in writing setting forth the reasons for the disapproval. If the president finds that disapproval is required for reasons of national defense or foreign policy, which kind of has this connotation of it automatically is approved unless the president within 10 days said no, no, you can't go that way. So that's the foreign shipping practices act.
Speaker 1:Section 19 is a little bit more streamlined. We often see the FMC kind of referring to section 19 authority more than the foreign shipping practices of the two, but they kind of are around the same theme right. It authorizes the FMC to prescribe regulations to correct unfavorable conditions to shipping in foreign trade. I'm going to go directly into the law, the actual text of the law here, because it says unfavorable conditions. To further the objectives and policies, federal Maritime Commission shall prescribe regulations affecting shipping in foreign trade to adjust or meet general or specific conditions unfavorable to shipping in a foreign trade. To adjust or meet general or specific conditions unfavorable to shipping in a foreign trade. So they can create regulations to adjust if they find unfavorable shipping conditions. They can rebalance it essentially. So they can do that if they find these unfavorable conditions in a particular trade on a particular route or in commerce generally. Right, so that they list out here, but including intermodal movements, terminal operations, cargo solicitation, agency services, oti services and operations and other activities and services integral to transportation systems. And they could say that this can arise out of results from laws or regulations of a foreign country or competitive methods, pricing practices or other practices employed by owners, operators, agents or masters of a vessel of a foreign country. Initiation of a regulation or regulation may be initiated by the commission on its own motion or on the petition of any person, including the US government. So that's it.
Speaker 1:This second one doesn't need a full investigation and can be undertaken to correct unfavorable conditions. I mean connecting this to the Panama Canal, depending on what they ultimately find as part of their initial conversations with Panama. 20% of the world's fleet is flagged under Panamanian flag. So if, under the Foreign Shipping Practices Act, flagged under Panamanian flag, so if under the Foreign Shipping Practices Act, they determine that they should do something to the Panamanian flagged vessels, 20% of the world's fleet, almost 20%, I think it's 18% of the world's fleet is Panamanian flagged. That's significant. The US could, I mean, threaten or suggest that 20% of the world's fleet can no longer come into the US? And that's why I say this is a maybe right, because this is a giant authority that the FMC has. I don't know if it's going to be used and I don't know if anybody really knows about it, right? Maybe they do, and I'm sure that the FMC commissioners and certainly the new chairman, chairman Sola, know about it, because he and former chairman Dan Maffei just were down in Panama over the fall to do a little bit of an investigation on the drought and the Panama Canal, generally unrelated to all the current conversation, but I just wanted to bring this up because I wanted to make you aware of it, should the conversation continue past the neutrality agreement of Panama, don't be surprised if you see the FMC coming back into the forefront. Certainly, the FMC found itself in the spotlight during COVID congestion years. Fmc might find itself in the spotlight again in 2025 with respect to this Panama Canal discussion.
Speaker 1:All right, so that's it for this week. Keep it here for all the updates on what you need to know in the global supply chain. 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 company, skoll Strategies. Otherwise, for the non-legal questions, e-learning and general industry information and insights, come find me at the Maritime Professor.
Speaker 1: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 Landed by Sea. If you prefer to see the video, they live on my YouTube page by Land and by Sea, presented by the Maritime Professor. And while you're at it, check out the MaritimeProfessorcom. We have been releasing webinar, live webinar sessions. We refresh the website. Coming soon, we're going to have e-courses that you can actually purchase and take at your own leisure, so keep an eye on the Maritime Professor. Go sign up for our newsletter. We'll be dropping a lot of information on all the different happenings with the Maritime Professor and the e-learning and educational resources for everybody. So until next week. This is Lauren Beacon, the Maritime Professor, and you've just listened to by Land and by Sea. See you next time.