FMC sets up task force to weed out extraneous regulations and administrative burdens on shipping industry
The U.S. Federal Maritime Commission (FMC) is creating a Regulatory Reform Task Force that will identify burdensome, unnecessary and outdated directives, and recommend how they should be remedied.
“Relief from regulatory requirements that have outlived their usefulness is one of the easiest contributions the Federal Maritime Commission can make to increased efficiencies and creating economic benefits,” FMC Acting Chairman Michael A. Khouri said.
He pointed to the FMC’s unanimous vote last week to amend its rules involving service contracts entered into between liner companies and shippers, and similar contracts called NVOCC Service Arrangements (NSAs) between non-vessel-operating common carriers and shippers as emblematic of what else could be accomplished.
“The positive response from what the commission ordered recently in terms of creating more realistic filing requirements for service contract amendments demonstrates the benefits that can be achieved from simply asking, ‘is there a better way to do this?’” Khouri said.
Khouri named Karen V. Gregory, managing director of the commission, as the regulatory reform officer to lead the task force, although the operational details of the task force are not yet known.
The FMC said the Regulatory Reform Task Force is consistent with the intent of President Trump’s Feb. 24 Executive Order and the “deregulatory spirit” of the 1984 Shipping Act, as amended by the 1998 Ocean Shipping Reform Act (OSRA), as well as the agency’s regulatory review initiatives ongoing since Nov. 4, 2011.
The ocean shipping industry applauded the FMC’s establishment of the task force.
The positive response from what the commission ordered recently in terms of creating more realistic filing requirements for service contract amendments demonstrates the benefits that can be achieved from simply asking, ‘is there a better way to do this?
“We welcome the effort and look forward to working with the commission and the new task force as they undertake this important initiative,” John Butler, president and chief executive officer of the World Shipping Council, said in a statement.
“We’re very excited about it,” said Geoff Powell, president of the National Customs Brokers and Forwarders Association of America. “We believe there are still some regulations that are antiquated and can be changed.”
Peter Friedmann, executive director of the Agriculture Transportation and Commodities Coalition, also praised the FMC for setting up the task force.
“There are many provisions of the Shipping Act which could stand review,” he told the Adam Smith Project. “The commission has discretion, and should use it.”
Friedmann specifically urged the commission to act in a manner consistent with the Act’s declaration policy, particularly Section 2, “To promote the growth and development of United States exports.”
“Towards that end, the commission might pivot to be a consumer protection agency, with the shipper being the consumer,” he said. “If a regulation serves the interests of the U.S. exporter, keep it; if it does not, consider revising or eliminating it.”
For example, he noted years ago the FMC was asked whether service contracts could be amended. Some within and outside the commission argued it required an act of Congress to amend the Shipping Act.
“The commission, under Chairman Chris Koch, acted on its own to allow amendments, to the benefit of the entire industry,” Friedmann said. “So, don’t be timid, the [Shipping] Act gives the commission authority to act substantively.”
The threat of bankruptcy is no less for ocean carriers than for NVOs and forwarders. Yet, the NVOs and forwarders must jump through many licensing, bonding, and contracting hoops.
Friedmann said there have also been significant changes with the NVO, freight forwarder and third-party logistics services industry since the enactment of the 1984 Shipping Act and OSRA in 1998.
“More cargo is moving via NVOs and today’s logistics services offered by third parties are far more comprehensive than existed in the previous century when those acts were written,” he said.
“For example, some NVOs are now as large and well capitalized as some ocean carriers (FedEx, UPS, etc.). The threat of bankruptcy is no less for ocean carriers than for NVOs and forwarders. Yet, the NVOs and forwarders must jump through many licensing, bonding, and contracting hoops. We certainly do not suggest extending the constraining regulations under which shippers/carrier/NVOs/forwarders must labor to the ocean carriers, but rather, to eliminate the outdated regulations constraining shipper/forwarder/NVO relationships,” Friedmann explained.
He said NVOs and forwarders should be able to sign service contracts with each other, as well as with shippers, and even have a financial interest in the cargo. NVOs who have a contract with an ocean carrier should also be allowed to market those contract terms to other forwarders or NVOs, unless the underlying carrier-NVO contract specifically precludes this.
In addition, Friedmann said the provisions which allow the FMC to impose penalties against NVOs and forwarders for violations of the agency’s regulations can at times appear to “bear little relationship to current business practices” and “should be reviewed and revised, if not deleted.”
“Current FMC regulations, which constrain a carrier from reviewing and revising its charges, and even refunding charges that it subsequently believes were inappropriately charged, should be reassessed,” he said. “A current example are the per-diem fees for shipper violations of free-time limits during periods of terminal congestion which made compliance impossible. Carriers, which charged and collected those, should be free to refund them if they so wish.”
The narrowly focused FMC is a tough agency to sell against larger, more diverse departments and agencies in the competition for budget dollars.
Former FMC Chairman Richard Lidinsky said there is always room for the FMC to “streamline regulations and remove red tape,” but warned that the agency shouldn’t give up oversight of important industry matters such as protecting the nation’s ports and shippers against potential commercial abuses from newly formed liner carrier alliances.
Friedmann hopes the commission’s Regulatory Reform Task Force will actively reach out to shippers, forwarders and carriers to gather specific industry suggestions and recommendations.
While it’s yet unclear how the task force will interface with the industry, Edward Greenberg, NCBFAA’s general counsel, said “it would be nice if it operated similar to the Commercial Customs Operations Advisory Committee (COAC), where government and industry sit at a table with each other to discuss ideas. We have found that [this format] serves as a better exchange of ideas.”
Powell said he’s been happy with the level of communication coming from the FMC.
“They’re not working in a vacuum,” he said. “We’re very pleased with what the FMC is doing.”
There is concern, however, that the FMC could lose steam behind programs like the Regulatory Reform Task Force in the coming year, especially if its operating budget is slashed by the Trump administration and Capitol Hill.
Lidinsky said the narrowly focused FMC is a tough agency to sell against larger, more diverse departments and agencies in the competition for budget dollars. But he said unlike other agencies, “the commission is used to doing business with less funds and a smaller group of people,” adding that he believes the FMC continues to serve an important purpose and will be around for many years to come.