United States: FMC Potpourri: OSRA Updates, Notable Rulings

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OSRA 2022 Updates

We begin with a topic of interest for maritime industry participants: the Ocean Shipping Reform Act of 2022 (OSRA 2022) (Pub. Law No. 117-146, 2022 Enacted S. 3580). Since OSRA 2022 was passed on June 16, 2022, the process of disputing carrier and port terminal accessorial charges, such as detention and demurrage (D&D), has become more streamlined. (See Holland & Knight's previous alert, " Beyond the Ocean Shipping Reform Act: Recent FMC Decisions and Settlement Implications," June 22, 2022).

During the Commission meeting on Sept. 21, 2023, FMC staff  advised the Commissioners that "approximately $1.7 million in fees or surcharges have been voluntarily waived or refunded by common carriers since July 2022 through the filing of charge complaints." The FMC was instructed under OSRA 2022 to address pandemic-related supply chain issues by simplifying the process by which shippers, consignees, truckers and third parties can dispute charges like D&D that common carriers have assessed. The D&D refunds/waivers illustrates that the FMC is meeting its recent mandate from President Joe Biden and U.S. Congress in the less than two years since it was signed into law.

Notable Federal Maritime Commission (FMC) Rulings

A few recent notable case studies are detailed below related to how OSRA 2022 has impacted outcomes in Shipping Act cases.

TCW, Inc. v. Hapag-Lloyd AG and Hapag-Lloyd (America) LLC (FMC Dkt. 1992(I))

On Dec. 5, 2023, FMC Small Claims Officer Theresa Dike published her Initial Decision on the above-captioned case. Claimant TCW has filed several small claims against ocean carriers in the small claims division. TCW brought causes of action under 46 U.S.C. §§ 41102(c), 41104(a)(8), and 40101(2) of the Shipping Act, as well as 46 CFR § 545.4(d) of the FMC's Regulations due to one ocean carrier's alleged practice of billing motor carriers performing merchant haulage charges a "street turn" fee when they reutilized an empty container to load cargo for export shipments. The FMC dismissed TCW's case with prejudice, stating that it failed "to demonstrate that [the carrier] violated the Shipping Act by charging it a street turn fee."

Interestingly, with regard to this claim, the FMC found that the ocean carrier's argument that §§ 41102(c) was inapplicable was in contradiction to the FMC's Interpretive Rule. But ultimately, the complainant was unable to prove its claim, because it could not demonstrate that "street turn fees is a more efficient practice than imposing them, the fact that one practice is more efficient than the other, does not, without more, make the less efficient practice unreasonable." It was noted that the movant had not taken any meaningful discovery in the case, which hurt its position. Since it was only seeking $30 in reparations (and, of course, favorable precedent going forward), it is understandable that discovery was not sought, but the consequence was no evidentiary foundation on which to succeed.

The case is a reminder that proceedings before the FMC are fact-intensive and require the collection of key evidence to provide a foundation to prevail. On Jan. 2, 2024, the FMC issued a Notice of Commission Determination To Review, meaning this may not be the last word on the matter. Stay tuned.

Mediterranean Shipping Company – Investigation for Compliance with §§ 41104(a) and 41102 of Demurrage or Detention Charges Under the Charge Complaint Procedures of 46 U.S.C. §§ 41310 (Docket No. CC-001)

On Sept. 29, 2023, the FMC dismissed a charge complaint and Order to Show Cause (OSC) proceeding against Mediterranean Shipping Company (MSC) after confirming MSC had refunded the charge at issue and determining the record was insufficient to establish a violation of §§ 41102(c) had occurred.

The original charge complaint was filed pursuant to the FMC's new charge complaint process. The charge complaint process allows a person to submit information related to a charge assessed by a common carrier and requires the FMC to promptly investigate whether the charge is compliant with the Shipping Act. If a charge is in violation of the Shipping Act, the FMC will order a waiver or refund of the charge. Here, the charge complaint was filed by SOFi Paper Products (SOFi) regarding the ocean carrier's $1,000 congestion surcharge. When the ocean carrier failed to justify the reasonableness of the charge, the FMC issued the OSC.

Despite involvement of a non-vessel operating common carrier (NVOCC), the FMC found that the ocean carrier – the party ultimately responsible for the charge – was the proper party in the proceeding. The ocean carrier refunded the charge following the issuance of the OSC, making any order to issue a refund for the charge moot. Notwithstanding the charge being refunded or waived, the FMC confirmed a penalty could still be assessed.

Significantly, the FMC's majority opinion stated the purpose of the charge complaint process was for the Commission to determine "whether there is a violation with respect to specific charges assessed or paid" and not "with respect to a common carrier's 'entire practice'." Docket No. CC-001, at 12. In his dissent, Commissioner Max Vekich specifically disagreed, stating it was "illogical" that the FMC could not review a common carrier's entire practice.

This matter is the first instance of the FMC issuing an Order to Show Case in relation to a charge complaint. The FMC's decision is instructive for how it will approach charge complaints going forward, including its readiness to impose civil penalties where the record is fully developed.

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.