The Federal Maritime Commission (FMC) issued a final report on May 31 that presents the results of a two-year fact-finding investigation into the effects of the Covid-19 pandemic on U.S. international ocean transportation. Two critical areas were discussed: the increased cost of ocean freight and demurrage and detention processing that resulted in excessive charges.
The investigation also determined that “although certain ocean transportation prices, especially spot prices, are disturbingly high by historical measures, those prices are exacerbated by the pandemic, an unexpected and unprecedented surge in consumer spending, particularly in the United States, and supply chain congestion, and are the product of the market forces of supply and demand.”
The FMC Commissioner Rebecca Dye released twelve recommendations for supply chain improvement in her Final Report for Fact Finding 29 (FF 29) on the effects of Covid-19 on the international ocean transportation supply chain. This final report is the culmination of a two-year investigation involving hundreds of ocean transportation industry stakeholders.
The recommendations are as follows:
- A new Commission “International Ocean Shipping Supply Chain Program” to study supply chain issues and propose solutions;
- A rulemaking to provide coherence and clarity on Empty Container Return practices;
- A rulemaking to provide coherence and clarity on Earliest Return Date practices;
- Continued Commission support for the new FMC “Ocean Carrier Compliance Program” including a new requirement for ocean common carriers, seaports, and marine terminals to employ an FMC Compliance Officer;
- An FMC Outreach Initiative to provide more information to the shipping public about FMC competition enforcement, service contracts, forecasting, and shippers associations, among other topics;
- Enhanced cooperation with the federal agency most experienced in agricultural export promotion, the Department of Agriculture, concerning container availability and other issues;
- A Commission investigation into practices relating to the numerous charges assessed by ocean common carriers and seaports and marine terminals through tariffs;
- A rulemaking to provide coherence and clarity on merchant haulage and carrier haulage;
- A new “National Seaport, Marine Terminal, and Ocean Carrier Advisory Committee” to work cooperatively with the Commission’s National Shipper Advisory Committee;
- A revival of the Export Rapid Response Team program as agreed by all ocean carrier alliance CEOs;
- An FMC Supply Chain Innovation Teams engagement to discuss blank sailing coordination and information availability; and
- A reinvigorated focus on the extreme supply chain equipment dislocations in Memphis railheads, other rail facilities, and other facilities around the country.
Many of the recommendations are centered around changes in current practices that ocean carriers and terminals have instituted under the Shipping Reform Act of 1984. Recommendation number 4 calls out for the ocean carrier to designate a compliance person for their organization and recommends where that person needs to be reporting to within the organization. These recommendations presented by the FMC in the report were done in cooperation with importers, exporters, ocean carriers, and terminals; all parties with great involvement in the movement of cargo. The voice of the industry was an important step in helping craft the recommended changes.
While the changes will not solve the entirety of current pandemic-related issues in ocean shipping, they are a step in the right direction for putting processes in place to move the industry to a more “normalized” and streamlined supply chain. The FMC took action and now it will take some determination and hard work to implement the 12-step program.
Should you have any questions about any of the content in the report or this article, please feel free to contact me.
