IMO Net-Zero Framework: FMC Oversight and Shipping Act Implications for U.S. Maritime Trade

The International Maritime Organization's (IMO) proposed Net-Zero Framework (NZF) represents an ambitious international effort to decarbonize the maritime sector. The initiative establishes a target of achieving net-zero greenhouse gas (GHG) emissions from international shipping by or around 2050. The NZF is the first in the world to combine mandatory emissions limits and GHG pricing across an entire industry sector. For example, under the proposed system, fleets failing to meet the base target would pay Tier 2 penalties set at $380 per tonne of carbon dioxide (CO₂) equivalent, while those meeting the base target but not the more ambitious direct compliance target would pay a Tier 1 price of $100 per tonne of CO₂ equivalent. Depending on their design, fuel mandates could affect supply chains and shipping costs. Stakeholders have noted that such effects may raise questions under the Shipping Act's prohibition on unjust and unreasonable practices affecting U.S. commerce.

The Federal Maritime Commission (FMC or Commission) plays an important role in protecting U.S. importers and exporters from unjust practices, and international environmental mandates that impact shipping costs and service availability may warrant the Commission's oversight. The Ocean Shipping Reform Act (OSRA 2022) enhanced the Commission's ability to address carrier conduct that affects American exporters and importers, reinforcing its role as a safeguard for fair and efficient maritime trade.

IMO NZF: Commercial Impact of Fuel Regulation

Though the environmental objectives are significant, the framework's current structure presents questions regarding implementation feasibility and commercial impact that stakeholders on all sides of the debate continue to assess.

A central point of discussion involves the framework's approach to fuel regulation. Certain proposals within the NZF would establish prescriptive requirements that could limit the fuel options available to vessel operators in the near term. This approach – transitioning from established petroleum infrastructure through regulatory mandate – may affect a supply system that currently derives resilience from multiple suppliers, refining capacity and distribution networks. Proponents of the framework argue that clear mandates are necessary to drive the capital investment and infrastructure development required for decarbonization at scale.

Implications Under the Shipping Act

The Shipping Act of 1984, as amended by OSRA 2022, prohibits common carriers from engaging in unjust or unreasonable practices in connection with the receipt, handling, storage or delivery of cargo. The statute also bars carriers from implementing practices that result in unreasonable increases in transportation costs or unreasonable decreases in service.

International environmental mandates that significantly increase operational costs or constrain service availability may implicate these statutory standards when their effects are passed through to shippers engaged in U.S. foreign commerce. If fuel-related requirements lead to cost increases borne by American exporters and importers, affected parties may seek to challenge related carrier practices before the FMC.

Additionally, proposals that would mandate adoption of fuels before they reach demonstrated commercial viability raise questions about realistic availability, affordability and scalability. Stakeholders continue to debate whether implementation timelines should be tied to verifiable fuel readiness metrics or whether firm deadlines are necessary to accelerate investment and adoption.

FMC Authority and Expanding Regulatory Reach

The FMC has demonstrated a strong commitment to protecting U.S. ocean commerce in recent years. OSRA 2022 enhanced the Commission's ability to address carrier conduct that affects American exporters and importers, reinforcing its role as a safeguard for fair and efficient maritime trade. As international regulatory frameworks such as the NZF gain traction, the FMC is well positioned in its statutory authority to ensure that carriers implement compliance strategies in ways that remain fair to U.S. shippers. The Commission's oversight helps ensure that surcharges, service modifications and operational changes affecting ocean transportation remain reasonable and transparent.

Chairman DiBella has commented on the proposed fund at the heart of the framework, stating: "In the end, it's inflationary. It's going to hit us in our pockets." She also questioned whether a global IMO regime would replace existing regional carbon pricing mechanisms such as the European Union Emissions Trading System (EU ETS), stating: "If anything were to be adopted, we want all fuels. We absolutely positively want no fund. And the EU ETS needs to go." Though Chairman DiBella was careful to distinguish her own assessment from a formal position of the FMC or the wider U.S. administration, her comments reflect the ongoing policy discussion in Washington, D.C., regarding the economic structure of the current proposal.

Most notably, Chairman DiBella has publicly stated that the NZF could become the subject of a FMC investigation. Though she has not said the FMC has plans to open proceedings against any specific country, she has placed the FMC's seldom-used Section 19 authority squarely within the international climate policy discussion. Under 46 U.S.C. §§ 42101–42109 and the Commission's implementing regulations, the FMC may open an investigation on its own motion or in response to a petition when a foreign government's laws, regulations or practices (or even the competitive methods, pricing practices or other practices of foreign vessel owners and operators) create or could create conditions unfavorable to shipping in U.S. foreign trade. Potential triggers include differential fees or requirements, unfair or discriminatory effects on carriers, shippers, importers, exporters or ports, increased operating or cargo costs, burdens on maritime activities, or other conditions detrimental to U.S. foreign commerce or the public interest.

Thus, implementation of the framework by flag states or carrier practices used to recover its costs could attract FMC scrutiny if the resulting charges or restrictions produce such conditions. A Commission finding would be required per 46 C.F.R. Part 550 before relief is imposed, but the available remedies are significant: equalizing fees, limits on sailings or cargo, suspension of tariffs or service contracts, fees of up to $1 million per voyage and, in appropriate circumstances, a request that vessels be denied entry to U.S. ports.

The FMC's oversight extends to environmental compliance costs incorporated into carrier tariffs and service contracts. The intersection of international environmental regulation and domestic maritime oversight underscores the Commission's continued relevance in monitoring conditions affecting American trade.

Recommendations for Industry Stakeholders

Shippers, carriers and other maritime industry participants should closely monitor developments at the IMO as the NZF advances. Key considerations include:

• assessing potential exposure to increased transportation costs resulting from fuel mandates and developing strategies for cost management and allocation in service contracts
• monitoring the evolving U.S. regulatory posture and any retaliatory trade measures the U.S. may pursue against flag states supporting the framework
• engaging with policymakers and industry associations to advocate for NZF provisions that recognize commercially viable alternative fuels
• preparing for regulatory fragmentation, as the continued delay in NZF adoption may result in an expanding patchwork of regional carbon pricing systems imposing varying compliance obligations depending on trading routes
• evaluating service contracts and tariff provisions in light of potential environmental surcharges and compliance cost pass-throughs
• leveraging the FMC's protective oversight to address carrier practices that may raise concerns under the Shipping Act

Looking Ahead

With the industry awaiting global GHG reduction regulations, delegates are under pressure to chart a path forward without further delay. A central sticking point remains whether the framework should retain financial penalties on vessels reliant on conventional fuels, with those payments directed to an IMO-administered fund.

A central question emerging from this debate may not be climate language – it may be whether Washington views a global shipping levy as a trade policy matter. Chairman DiBella has raised this point directly, noting that the U.S. is not obligated to accept a multilateral framework that imposes costs on American cargo. With the Commission's Section 19 authority now part of the international climate policy discussion, an adopted framework that produces conditions deemed unfavorable to U.S. foreign commerce could shift from a diplomatic outcome to an FMC regulatory matter.

Several near-term milestones will shape this trajectory: whether fuel alternatives remain on the table at the current London session, developments at the November intersessional and IMO Marine Environment Protection Committee, and the resumed extraordinary session now penciled for December 4, 2026. Industry participants should monitor these developments, including Chair DiBella's statements and the broader U.S. posture, as negotiations continue.

Holland & Knight's Maritime Team monitors these developments and advises clients on regulatory compliance, FMC proceedings and strategic planning in the evolving maritime regulatory landscape. For questions regarding the potential impact of the FMC and NZF on your operations, please contact the authors.