The recent US FMC regulation marks the end of carriers’ inadequate justifications for rolling over contracted cargo.
The US Federal Maritime Commission (FMC) has introduced a new directive prohibiting shipping companies from rejecting reserved container space, offering shippers increased safeguards during negotiations.
The regulation, Effective September 23, aims to tackle a recurring issue in which shippers have reported carriers’ misconduct to the FMC.
Sara Dandan, the founder of maritime law consultancy FourOneOne, highlighted instances during the pandemic where Beneficial Cargo Owners (BCOs) held contracts. Yet, carriers declined to honor the agreed space, opting instead for the spot market to maximize profits.
Despite carriers’ evident true motives, they resorted to fabricating other feeble justifications. Ms. Dandan’s firm was established to address disputes arising from the 2022 Ocean Shipping Reform Act, which empowered shippers to file claims against carriers for alleged contract breaches during the pandemic.
The Loadstar estimated that aggrieved shippers were seeking approximately $70 million in damages, with most claims revolving around detention & demurrage (D&D) fees and allocation disputes.
The new regulation shields shippers from carriers’ tactic of strategically refusing to transport containers to gain negotiation leverage.
Carriers have opposed the regulation, arguing that it leans towards price control. However, the FMC rebuffed these claims, emphasizing that it merely offers a pricing reference for carriers’ negotiations compared to market rates.
Despite carrier resistance, the FMC’s objectives have garnered support from various retail and shipper stakeholders.
Additionally, the regulation includes provisions safeguarding the right to lodge complaints, as carriers have been known to retaliate by refusing to transport cargo if a valid complaint is filed with the FMC.
