FMC wants to resolve service contract disputes

FMC wants to resolve service contract disputes    The U.S. Federal Maritime Commission told Congress Wednesday it is undertaking a number of initiatives to assist shippers who are experiencing difficulty moving containerized cargo because of container and ship capacity shortages.
   But FMC Chairman Richard A. Lidinsky Jr. also said he would like the agency to be given additional powers to resolve disputes arising under shipping service contracts.

Lidinsky

   Lidinsky made that call as he and fellow commissioner Rebecca F. Dye testified before the House Committee on Transportation and Infrastructure Subcommittee on Coast Guard and Maritime Affairs Wednesday on the results of a continuing investigation launched March 17 into vessel capacity and container availability in the U.S. import and export trades.

Dye

   Dye, the fact-finding officer for the capacity investigation, told a hearing chaired by Rep. Elijah Cummings, D-Md., that during a meeting last week, the FMC adopted four preliminary recommendations from her interim report:
   ' Establish a 'Rapid Response Teams' within the commission's Office of Consumer Affairs and Dispute Resolution Services to quickly address and help resolve disputes between shippers and carriers. These problems include canceled bookings, rolled cargo, and container unavailability that have intensified with global economic recovery and a shortage of shipping containers. Dye said if shippers call the FMC's consumer affairs office and identify their problem as urgent, the agency would attempt to resolve their problem as soon as possible.
   ' Beef up oversight of the two powerful carrier discussion agreements in the transpacific. The FMC will require the Transpacific Stabilization Agreement (TSA) and the Westbound Transpacific Stabilization Agreement (WTSA) to supply it with verbatim transcripts of certain agreement meetings.
   ' Increase oversight of global shipping alliances. Dye said the FMC has directed its staff to prepare recommendations for prompt commission action on ways to increase oversight of vessel alliances.
   ' Extend the end of the fact-finding investigation from July 31 to Nov. 30, through the peak shipping season. Dye said this would help the FMC fully develop additional solutions.

Cummings

   Cummings said that while Dye's investigation is continuing, 'exporters and importers are continuing to report cargo rolling, cancelled bookings, container shortages and attempts to force charges that were not agreed in contracts that were just agreed in contracts that were just executed last month. What else can be done to address these problems?'
   Lidinsky told Cummings the FMC has 'an open door to shippers who have experienced these unfortunate incidents so we can go directly to the carriers and try and get them resolved.'
   But he added, “the ultimate solution, I believe, is a legislative one.”
   Today, the shipping act states, 'unless the parties agree otherwise, the exclusive remedy for a breach of a service contract is an action in an appropriate court. The contract dispute resolution forum may not be controlled by or in any way affiliated with a controlled carrier or by the government that owns or controls the carrier.'
   A change in the law is needed, Lidinsky said, to 'let the commission mediate, arbitrate these disputes immediately. Don't put an importer or exporter in the position where they have to wait 18 months for a decision to come from a court and then come to the commission for relief. If we work to that goal, we can resolve much more quickly these issues shippers are confronting,' he said.
   Lidinksy wants the 'exclusive remedy' language in the Shipping Act to be modified to make clear that parties, at the request of either side, can come to the FMC as a first step in resolving disputes.
   His office explained this does not mean that the FMC should be the 'exclusive remedy' for shipping disputes — just that the 'exclusive remedy' language in the shipping act should be adjusted.
   Under questioning from Cummings, Lidinksy said the FMC would probably need to double the size of its consumer affairs division to handle such duties, adding perhaps 20 people to an agency with a total staff of about 130.
   Lidinsky said he thought that expenditure would be worth it because 'we are all working toward the goal of the president of doubling our exports. To the extent that anyone leaves the export business out of frustration over treatment by an ocean carrier, that's a loss for the country. Any investment we make in speeding these cases along is an investment well made.'
   'This reform you are asking for, this is major stuff,' said Cummings.
   He asked Lidinsky to submit to the committee within a month a list of changes he would like to see.

Friedmann

   'I think the commission is working hard to come up with some short-term remedies that do not require significant amendment of the shipping act,' said Peter Friedmann, executive director the Agriculture Transportation Coalition, who listened to the testimony. 'That's the trick, if you want to implement something you can't wait for Congress, because Congress does nothing quickly.'
   Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation, who also was on hand, said his members are continuing to face difficulties in getting capacity on ships for imports as well as early imposition of peak season surcharges.
   But Lidinsky told the subcommittee there are indications vessel capacity is returning. 'We are projecting that capacity for July will be 18.7 percent higher than when we testified in March.'
   Dye said the FMC is asking each carrier to name a representative to work directly with its 'rapid response teams' to quickly address capacity problems.
   The FMC is also developing model contract terms that can be included in shipping contracts.
   Lidinsky said there are more than 2 million service contracts, but that issues that spark many disputes between shippers and carriers such as cargo rolling, phantom booking of cargo and emergency and early peak season surcharges, are not addressed in the agreements.
   Shippers and carriers often say they don't have time to address such issues when they make contracts, but Lidinsky said he believes they should start negotiations earlier so those issues can be addressed.
   Dye said the FMC is also forming two working groups: one consisting of shippers and ocean carriers to discuss the availability of vessel capacity for exports, the other to discuss the 'chronic unavailability of export containers for certain American exporters, particularly in certain parts of the country.'
   Lidinsky told the subcommittee that four carriers in the WTSA are participating in a pilot project with the U.S. Department of Agriculture that would give shippers increased visibility into the location of containers that might be available for export loading in areas such as the upper Midwest where shippers often have difficulty getting equipment. ' Chris Dupin