FMC finalizes Rule on Unreasonable Refusal to Deal or Negotiate for Vessel Space Accommodations
The Federal Maritime Commission (FMC) has published a rule on July 23, 2024, affecting ocean common carriers (VOCCs) and their practices related to unreasonable refusal to deal or negotiate with respect to vessel space accommodations. This new rule aims to provide clear guidelines and enforceable standards for such refusals. The rule will go into effect on September 23, 2024.
The Big Picture
The new regulation implements the Ocean Shipping Reform Act of 2022, which prohibits VOCCs from unreasonably refusing cargo space accommodations and negotiations related to vessel space. The rule purports to provide a standardized approach in defining unreasonable refusals. The standards include certain regulatory elements that must be met before a shipper can bring a claim. Further, the rule sets forth non-binding factors that the Commission may look to when determining whether a refusal was unreasonable.
Why It Matters
The clarifications of terms, such as "unreasonable" and "documented export policy," among others, aim to guide stakeholders on what constitutes fair practices and set proper expectations for vessel space allocation. See 46 C.F.R. § 542.1(b). This is crucial for ensuring that shippers, including non-vessel-operating common carriers (NVOCCs), have meaningful access to vessel space accommodations and are not subject to arbitrary or discriminatory refusal practices.
Yes, But
The update in 46 C.F.R. § 542.1(c) requires that refusals are based on legitimate transportation factors (defined under 46 C.F.R. § 542.1(b)) and that ocean common carriers make a good faith effort to mitigate the impact of such refusals. NVOCCs must understand the intricacies of these requirements to ensure they can effectively challenge any refusals they deem unreasonble. Documentation of shipping related commnications as a matter of course should be complete and accurate.
The Takeaway
Key sections like 46 C.F.R. § 542.1(b), (d), and (e) detail the non-binding considerations and examples of unreasonable conduct, providing a framework for assessing whether a VOCC’s refusal to deal or negotiate was unreasonable.
The framework is designed to help NVOCCs and other shippers assess and challenge refusals more systematically, leading to more predictable legal outcomes. As the shipping industry adjusts to these new rules, the broader implications on how businesses operate and negotiate will need to be ironed out.
For the Final Rules, Please Click the Following Link:
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