Government shutdown sidetracks US shipping agency’s new mandates

On December 4, 2018, President Trump signed into law a bill re-authorizing the Federal Maritime Commission (FMC). The legislation included some of the biggest revisions to shipping statutes in 35 years, including new protections for U.S.-based maritime operations.

But with the partial government shutdown in its fourth week and no end in sight, those changes, as well as the FMC’s ability to oversee service and rates in container shipping, are stuck treading water.

An independent regulatory agency responsible for protecting the international ocean trades that support the U.S. economy (whereas the U.S. Maritime Administration oversees coastal transport), the FMC administers the Shipping Act of 1984. The act gives the FMC oversight authority on container carrier rates and service, as well as on practices that can affect port congestion.

The FMC’s reauthorization included amendments to the act that address, among other things, antitrust issues related to recent consolidation in the maritime industry, and the emergence of three major alliances among container carriers. The alliances include companies such as Maersk (Nasdaq OMX: MAER.B), COSCO, and NYK (OTCMKTS: NPNYY), and they represent roughly 80 percent of all trade moving in ocean containers.

The changes mean that the Commission can now investigate alliances that engage in anti-competitive action during negotiations with other carriers. It must review the effects of alliances on an annual basis and include this information in its report to Congress.

Christopher DeLacy, a maritime specialist with the law firm Holland & Knight, said the new provisions are intended to protect U.S.-based marine terminal operators, harbor pilots, tug boat operators, and equipment suppliers from being forced to accept ocean-carrier pricing that could slow or block investment in infrastructure and technology.

“From our perspective, this is the biggest change” within the FMC reauthorization, DeLacy told FreightWaves. “For the first time the FMC has to take into consideration other service providers  – which make up a significant chunk of the U.S. economy – when conducting their economic analysis. These are the companies operating within U.S. ports that facilitate trade on daily basis, making the supply chain run efficiently.”

With no staff in place due to the shutdown, however, such policy changes will be delayed from an administrative standpoint.

“When you have a change to the statute, as you have with the FMC Act, at a minimum you’ll have internal changes beyond regular rulemakings and investigations,” DeLacy said. “But if this [shutdown] lasts for a couple of more months, it makes it all the more difficult to implement broader policy changes moving forward.”

Some of the new protections included in the reauthorization designed to protect U.S. companies were championed by William Doyle, a commissioner at the agency from 2013 until early last year.

Doyle, who now heads a group that lobbies for companies that dredge and deepen waterways and ports, is hoping the Trump Administration and Congress can resolve their differences so that all federal workers can get back to their jobs.

“It’s an unfortunate situation they find themselves in,” Doyle told FreightWaves. “I have the utmost respect for FMC’s employees – they work very hard and their regulatory work is so important to the economy even though it’s not particularly visible.”

Aside from added new policy initiatives, Doyle noted that every FMC function has been suspended, including the processing of ocean carrier and marine terminal operator agreements, renewals or amendments to service contracts, and applications for certification of financial responsibility for cruise lines leaving U.S. ports.

Therefore, he said, it’s important that ocean carriers, terminals, non-vessel operating common carriers, and freight forwarders maintain accurate records and an accounting of all their activities during the shutdown. “This is because once the shutdown concludes, they will be required to back-file with the FMC all their activities that otherwise would have been filed but for the shutdown,” Doyle stressed.

There are some affected by FMC policy who are not particularly concerned about the agency being temporarily closed. The Agriculture Transportation Coalition (AgTC), which has sought FMC intervention on behalf of the U.S. agribusiness export supply chain, says that until such action is imminent, the shutdown will have no immediate or significant impact on matters affecting rates and service.

The group has most recently spoken out against new fees that ocean carriers plan to charge for so-called “street turns”, which drayage companies are opposing and which AgTC asserts will disincentivize efficient truck backhauls.

“With the shutdown, we are looking to environmental agencies at the state and local level that are concerned about the effect these charges will have on generating increased diesel emissions at the ports,” AgTC executive director Peter Friedmann told FreightWaves.

The shutdown did not affect the process of filling two empty board seats at the five-member agency. Headed by acting chairman Michael Khouri, the FMC was operating for months last year with just one commissioner, Rebecca Dye. Commissioners Daniel Maffei and Louis Sola, nominated by President Trump in November, were confirmed by the U.S. Senate on January 2.