FMC Launches Audit Program Looking at Compliance Among Ocean Carriers

FMC audits ocean carriers for fee compliance
Containers at Port Elizabeth (file photo)

Published Jul 20, 2021 5:18 PM by The Maritime Executive

Responding to the ongoing complaints from shippers regarding fees being charged by the liner companies and terminal operators, the Federal Maritime Commission has established a new audit program focusing initially on the nine largest ocean carriers along with a dedicated audit team to assess carrier compliance with the rule on detention and demurrage. The FMC has recently announced a series of efforts, including partnering with the US Department of Justice, while President Joe Biden has called for actions to ensure competition, reduce monopolies and unfair pricing practices among the large carriers.

 “The Federal Maritime Commission is committed to making certain the law is followed and that shippers do not suffer from unfair disadvantages,” said Chairman Daniel B. Maffei. “The work of the audit team will enable the Commission to monitor trends in demurrage and detention practices and revenue, as well as to establish ongoing dialog between staff and carriers on challenges facing the supply chain.”

The “Vessel-Operating Common Carrier Audit Program” was established yesterday, July 19, at the direction of Chairman Maffei and launched immediately. The Audit Program will analyze the top nine carriers by market share for compliance with the FMC’s rules as it applies to detention and demurrage practices in the United States. Other focus areas of the audit process may include practices of companies related to billing, appeals procedures, penalties assessed by the lines, and any other restrictive practices. The FMC said it will work with companies to address their application of the rule and clarify any questions or ambiguities. Information supplied by carriers may be used to establish industry best practices.

“Of course, if the audit team uncovers prohibited activities, the Commission will take appropriate action,” added Maffei. “Furthermore, the information gathered by the audit process might lead to changes in FMC regulations and industry guidance if warranted.” 

The FMC said the Audit Program will begin with an information request establishing a database of quarterly reports allowing the Commission to assess how detention and demurrage is administered. Responses will be followed by individual interviews with the carriers. 

Each of the nine largest carriers by market share will be audited irrespective of whether a formal or informal complaint has been filed at the FMC. Lucille Marvin, the Commission’s Managing Director, will lead both the audit program and the audit team.

A month ago, Federal Maritime Commissioner Carl Bentzel predicted that the FMC would likely begin looking at enforcement action to ensure that ocean carriers are complying with their legal obligations under the U.S. Shipping Act. Bentzel speaking after a fact-finding visit to the Port of New York and New Jersey acknowledged complaints about excessive demurrage and detention fees as well as record-setting head-haul rates and equipment shortages possibly exacerbated by the liner companies’ policies.