USDA Calls on FMC to Tighten Rules on Carriers for Exports

The U.S. Department of Agriculture (USDA) is renewing its calls on the Federal Maritime Commission to tighten the rules governing the actions of carriers as the FMC moves forward with rulemaking under the Ocean Shipping Reform Act. The agricultural agency was vocal in criticizing carriers’ actions toward the agricultural community and now is responding to the FMC’s rulemaking calling for enhancing the language defining the behaviors of carriers toward shippers.

“Over the past two years, a host of challenges have prevented agricultural shippers from reliably shipping sold products to buyers worldwide,” writes USDA Secretary Thomas Vilsack in his letter to the FMC chairman and commissioners. Saying that the USDA believes exporters endured systematic neglect by carriers of exports in favor of higher-value import cargo, Vilsack says the USDA believes the FMC could improve its proposed rules by broadening the definition of unreasonable refusal to negotiate, narrowing the guidance of reasonable refusals, and encouraging more specific actions by the carriers to guard against unreasonable refusals.

The USDA writes that shippers had to contend with broken export contracts, canceled bookings, inadequate receiving windows, and shortages of empty containers and other equipment. They say that it was all too common for the carriers’ actions to constitute what it calls “effective refusals,” with steps such as no-notice cancellations and perpetually rolled bookings. Vilsack says the result was reduced prices paid to producers, compromised bottom lines for agricultural companies, and damage to U.S. agriculture’s standing with global customers.

The letter notes that the FMC rightly recognizes the high priority placed on U.S. exports in the reform act and commends the FMC for its actions in implementing the act. The USDA believes the current rulemaking by the FMC is one step toward righting the unfair situation experienced by exporters and specifically the agricultural community. They say that shippers and producer groups have raised specific concerns with the USDA and the agency is encouraging the FMC to revise and strengthen its proposed rules.

USDA says it believes the FMC’s rulemaking should explicitly detail what constitutes an “unreasonable refusal to deal,” as provided for in the act.  “A more useful definition would name actions, such as cancellations without sufficient notice, perpetual re-bookings, failure to provide the necessary equipment (e.g., containers and chassis), and other ‘effective refusals.’ All these actions—which repeatedly appear in shippers’ comments—show a lack of good faith effort by carriers,” writes Vilsack.

They are also calling for narrowing the rulemaking’s guidance on reasonableness. They want the rulemaking to “clarify that the existence of multiple factors will not absolve problematic practices, and focus more on illuminating actions it would consider to be unreasonable.” The USDA cites the unreasonable types of “effective refusals” as well as expanding on what would be considered “illegitimate transportation factors.”

While recognizing the FMC’s approach of considering unreasonableness on a case-by-case basis, the USDA wants greater definitions and the ability of the proponent to only make a prima facie case to trigger a review of the carrier’s actions. 

The USDA also supports the requirement for carriers to document and ensure the reasonableness of their practices. The USDA is encouraging clear, more affirmative duties for carriers and greater specificity with the respect to the requirements for carriers. 

Looking beyond the proposed rule on a refusal to negotiate or deal, USDA is also encouraging the FMC to continue working toward enhancing information, providing fair rules, and promoting competition in the industry. They conclude by saying that the FMC needs to consider the effects of market power gained through carrier consolidation and alliances in recent years while encouraging the FMC to continue to work with ports, ocean carriers, and railroads to facilitate a more efficient and reliable export transportation system.