March 25, 2024

FMC Potpourri: OSRA 2.0, Recent FMC Complaints, Commission Updates

The Commission: The Essential Blog on the FMC
Christopher R. Nolan | Gerald A. Morrissey III | Carrol P. Hand | Allison N. Skopec
The Commission: The Essential Blog on the FMC

Ocean Shipping Reform Implementation Act of 2023

The U.S. House of Representatives overwhelmingly voted on March 21, 2024, to approve the Ocean Shipping Reform Implementation Act of 2023 (OSRA 2.0), which was introduced in March 2023 by Reps. John Garamendi (D-Calif.) and Dustin Johnson (R-S.D.). (See H.R. 1836, 118th Cong. (2nd Sess. 2024).) The bill's primary focus is to address the influence of the Chinese government on the U.S. shipping industry by prohibiting U.S. port authorities from using LOGINK or any similar Chinese state-affiliated software and by bolstering the FMC's authority to accept and investigate complaints about unlawful practices of shipping exchanges, such as the Shanghai Shipping Exchange.

The bill further requires the FMC to establish a "data standard" that will facilitate the voluntary sharing of information and data among stakeholders across the shipping industry. The data standard that is developed must allow stakeholders to share data in real time in a manner consistent with industry practices.

Finally, similar to the National Shipper Advisory Committee (NSAC), the bill establishes an industry advisory committee to be made up of members from marine terminal operators and port authorities.

The bipartisan bill is now headed to the U.S. Senate for consideration. Stay tuned.

Recent Complaints Filed With FMC

Over the past few months, there have been several complaints filed with the FMC alleging violations of the Shipping Act as a result of unreasonable practices related to detention and demurrage (D&D) charges. The influx of cases may well be attributable to the three-year Shipping Act statute of limitations for recovering reparations that may cut off claims and charges arising during COVID-19 before March 2021. The following is a brief summary of some of those recent filings.

Airboss Defense Group, LLC v. FedEx Trade Networks Trans. & Brokerage, Inc., Mediterranean Shipping Co. S.A., et al (FMC Docket No. 24-14)

Airboss Defense Group (ADG) alleges that FedEx Trade Networks Transport (FTN), Mediterranean Shipping Company (MSC), and terminal operator Total Terminals International (TTI) failed to supply invoices or information relating to its shipments, alleging $11 million is due to unfair charging practices. ADG alleges in its claims that certain details of disputed D&D charges and the location of 202 of its containers were withheld after U.S. Customs and Border Protection (CBP) imposed a hold on them in November 2021 because "unlicensed" ocean transport intermediary McWilliams Collective – which moved the goods for FTN – lacked a U.S. tariff or bond. ADG further alleges that 62 of its containers were held at TTI's terminal, 135 were sent to a CBP examination site, and five were purportedly held by a firm subcontracted by ITS Logistics, which itself had been contracted by FTN.

In the complaint, ADG alleges that, during this time, CBP informed it that the content of the boxes would not be allowed entry into the U.S. and must be returned to the country of origin, at which point ADG then discovered it had been billed $11.3 million in D&D charges in order to get the cargo released. After a seemingly confusing period regarding who D&D payments needed to be made out to, ADG alleges FTN and MSC failed to export the containers before CBP's deadline, and the goods contained in the boxes were destroyed over a nine-month period. Further, ADG then found itself facing D&D charges for the nine months while the respondents held onto the boxes during the destruction period.

Due to the above described alleged behaviors, ADG now brings claims under the Shipping Act against the respondents for 46 U.S.C. § 41102(c) (unreasonable practices), 46 U.S.C. § 41104(a)(15) (invoicing without required information), 46 U.S.C. § 41104(a)(14) (unreasonable charges), 46 C.F.R. §§ 545.4 and 545.5 (failure to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing or delivering property as it relates to the application of demurrage, detention, chassis charges and per diem), and 46 U.S.C. § 41104(a)(2) and (11) and 46 C.F.R. § 532.5 (FTN's failure to comply with the NVOCC negotiated rate arrangements requirements).

Access One Transport Inc. v. COSCO Shipping Lines Co. Ltd. (FMC Docket No. 24-13)

On March 1, 2024, motor carrier Access One filed a Shipping Act complaint against COSCO alleging violations of the Shipping Act, as interpreted by the FMC's interpretive rule, because it was charged detention in an unreasonable, arbitrary and capricious manner. (See Dkt. No. 24-13, Access One Transport Inc. v. COSCO Shipping Lines Co. Ltd. (March 1, 2024).) Access One alleges it suffered significantly more damages than just detention charges when an empty container could not be returned; it alleges additional damages as a result of operational difficulties created by the carrier.

Specifically, Access One alleges it was 1) required to keep empties on chassis in its yard for unreasonable periods of time, 2) forced to either invoice its customers or incur additional charges as a result, 3) forced to act as an involuntary, uncompensated storage yard for the carrier's equipment and 4) threatened with "shut out" at the terminal that would prevent it from picking up the additional containers for its customers. The complaint demands damages for compensation for all of the above.

In its complaint, Access One does not limit the reparations sought to unreasonable detention charges it paid – it seeks to recover significant consequential damages as well.

Impact Products, LLC and Safety Zone, LLC Multiple Complaints (Dockets No. 24-05, 24-06, 24-07, 24-08, 24-09, and 24-10)

In contrast to Access One's single, expansive complaint, on February 14, 2024, Impact Products, LLC and Safety Zone, LLC, shippers of cleaning products, filed six separate complaints against several ocean carriers, including MSC, CMA, OOCL, COSCO, Yang Ming, and Lihua. (See Docket No. 24-05, Impact Products, LLC and Safety Zone, LLC v. Mediterranean Shipping Company, S.A.; Docket No. 24-06, Impact Products, LLC and Safety Zone, LLC v. Lihua Logistics Company Limited LLHP; Docket No. 24-07, Impact Products, LLC and Safety Zone, LLC v. CMA CGM S.A.; Docket No. 24-08, Impact Products, LLC and Safety Zone, LLC v. Orient Overseas Container Line Limited and OOCL (Europe) Limited); Docket No. 24-09, Impact Products, LLC and Safety Zone, LLC v. COSCO Shipping Lines Co., Ltd.; and Docket No. 24-10, Impact Products, LLC and Safety Zone, LLC v. Yang Ming Marine Transport Corp.) Each complaint alleges violations of the Shipping Act for failure to establish, observe, and enforce just and reasonable practices related to the receiving, handling, storing, and delivering the property and unreasonable refusal to deal or negotiate. Impact Products alleges that each respondent has failed to provide adequate practices and facilities to handle and store empty containers, has failed to provide adequate facilities for its customers while continuing to accept goods, and has not provided reasonable free time allowances.

Notably, the Impact Product complaints contain broad, high-level allegations of Shipping Act violations related to D&D charges, but appear to track similar allegations in pending complaints pertaining to D&D practices and the FMC interpretive rule.

Commission Updates

On March 11, 2024, FMC Chairman Daniel Maffei announced a key personnel change: the FMC hired Mohammad "Ali" Usman as its new chief information officer (CIO). Mr. Usman is an information technology (IT) professional who joins the FMC after serving as the chief technology officer at the U.S. Department of Agriculture's (USDA) Food Safety and Inspection Service.

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