United States: FMC Proposes New Rules For Ocean Common Carriers And Marine Terminal Operators

Michael J. Cavanaugh is a Partner in our Washington, D.C. office. Eric Lee is an Associate in our Washington, D.C. office. Farid Hekmat is a Associate in our Washington, D.C. office.

The U.S. Federal Maritime Commission (FMC) issued its Notice of Proposed Rulemaking (NPR) in FMC Docket 16-04 on Aug. 15, 2016. The FMC's July 2016 vote in favor of issuing the NPR advances a multiyear regulatory review. Docket 16-04 largely focuses on Part 535, which primarily provides the regulations governing ocean common carrier and marine terminal operator agreements subject to the Shipping Act of 1984. The full text of the FMC Docket 16-04 NPR is quite detailed.

The FMC is requesting comments regarding the NPR on or before Oct. 17, 2016.

Key Updates for Vessel-Operating Common Carriers and Marine Terminal Operators

  1. Capacity rationalization: The proposed rulemaking would broaden the existing definition to include any authority "to discuss, or agree on, the amount of vessel capacity supplied by the parties ..."
  2. Space charter exemption: The proposed rulemaking may add a new exemption for agreements among ocean common carriers that contain nonexclusive authority to charter or exchange vessel space between two individual carriers, so long as there are no provisions that place conditions or restrictions on the parties' agreement participation and/or use or offering of competing services.
  3. Low-market share agreements: A new definition would replace the 30 percent threshold with a 35 percent threshold analysis that considers the "combined market share, based on cargo volume, of the parties in any of the agreement's sub-trades."
  4. Terminal services agreements: The FMC was inclined to significantly modify, if not repeal, the filing exemption in Section 535.309 in the Advance Notice of Proposed Rulemaking (ANPR), dated Feb. 23, 2016. However, the FMC backs off that initial position in the NPR and does not propose to modify or repeal the exemption.
  5. Retention of agreements: Section 535.301(d) may be modified to include a new provision requiring parties to an exempt agreement to provide a complete copy of the agreement to the FMC within 15 days of a written request.
  6. Complete and definite agreements: Section 535.402 may be amended to explicitly require agreements that arise from filed agreements to also be filed unless they fall within one of the exemptions in Section 535.408.
  7. Activities without further filing: Section 535.408(b)(3) may be modified to explicitly define the types of stevedoring and terminal services agreements that fall within the filing exemption. The existing definition of "stevedoring, terminal, and related services including the operation of tonnage centers or other joint container marshalling facilities" would be replaced by a more narrow definition: "(i) joint contracting for marine terminal services (as that term is defined in Section 535.309) or stevedoring services by parties to an ocean common carrier agreement if such services are provided to and paid for by the agreement parties; (ii) operation of tonnage centers or other joint container marshalling facilities by parties to an ocean common carrier agreement." (Emphasis added.)
  8. Information form requirements: Section 535.502(a) would explicitly exempt space charter agreements from the information form requirements. Simple operational agreements would also be exempt from the information form requirements.
  9. Reporting requirements: Section 535.701(c) may be amended to authorize the FMC to prescribe, on an agreement-by-agreement basis, "periodic reporting requirements" for parties to any agreement subject to the filing requirements of Section 535.201 but not subject to the monitoring requirements of Section 535.702(a). Additionally, parties to capacity rationalization agreements subject to Section 535.502 must submit quarterly reports with data on vessel capacity and utilization separately showing each month of the quarter for the liner services pertaining to the agreement.

The proposed rulemaking is part of the long-term regulatory review undertaken by the FMC. This NPR follows the February 2016 ANPR and is still not a final rule; the final rule may include even more changes. While some of the key changes are highlighted above, your particular business may be affected by the proposed changes in other unique ways.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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