Liner Shipping Regulations

In United States, Federal Laws applicable to Liner Shipping started with Shipping Act 1916. Shipping Act 1916 exempted liner conferences operating in United States foreign commerce from United States federal antitrust laws. Liner Conferences are subject to liner conference agreements filed with and approved by federal government. Liner Shipping acts according to amendment dates:

  • Shipping Act 1916
  • Shipping Act 1984
  • Ocean Shipping Reform Act 1998

In shipping business, liner shipping or liner service is generally understood to be an ocean carrier that provides:

  • Advertised service
  • Definite service
  • Service between fixed ports
  • Scheduled basis

In United States, liner service is also usually common carrier service. Common Carrier service holds itself out to the public as providing service and permits direct booking by the public. Opposite of Private Carrier. Liner Service is typically performed on the basis of standard Bills of Lading (B/L). Bills of Lading (B/L) serve as standard contract of carriage for the various individual cargoes carried on the ship. On the other hand, ocean tramp service is the opposite of liner service. Ocean Tramp Service is irregular ocean carriage service provided upon inducement by a shipper or charterers. Charterers or shippers arrange when and which loading, discharging ports. Ocean Tramp Service is typically arranged on a carrier-shipper or shipowner-charterers contract basis through voyage charter, time charter, contract of affreightment (CoA).

In shipping business, Liner Conference is an association of ocean common carriers permitted, pursuant to an approved or effective agreement, to engage in concerted activity and to utilize a common tariff. In United States, the first shipping liner conference was established in 1875.

Shipping Act 1916 provided shipping liner conferences with:

  • immunity under United States antitrust law and also imposed certain requirements on conferences like free entry and exit for conference members
  • prohibited discriminatory rates or services.
  • prohibited ocean carriers from entering into private arrangements with customers in areas where a conference agreement prevailed

In United States, Liner Conference antitrust immunity changed over time. Shipping Act of 1984 and Ocean Shipping Reform Act 1998:

  • endorsed situation specific transportation contracting
  • made it easier for carriers and shippers to negotiate one-on-one agreements on a confidential basis

United States Federal Maritime Commission (FMC) estimates that large percentage of current ocean common carriage is handled by confidential service contracts rather than pursuant to conference tariffs. For example, Ocean Shipping Reform Act 1998, eliminated filed rate doctrine, which required strict adherence with Federal Maritime Commission (FMC) filed tariffs as well as me too requirement for similarly situated shippers.

Ocean Common Carriers continue to have antitrust immunity under Ocean Shipping Reform Act 1998 for certain collective activities. Ocean Common Carriers can enter into conference agreements or discussion agreements where they jointly fix or discuss tariffs and jointly offer service contracts. According to Ocean Shipping Reform Act 1998, these agreements must be strictly voluntary and are not enforceable as contracts.

United States Federal Maritime Commission (FMC) is an independent federal agency that has most of the responsibility under the shipping acts to

  • oversee the economic regulation of ocean shipping
  • oversee functions in relation to ports and terminals and passenger ships

United States Federal Maritime Commission (FMC) was established in 1961 in an amendment to the Shipping Act 1916. United States Federal Maritime Commission (FMC) took over certain functions from the Federal Maritime Board.

Generally, all cooperative agreements by or between ocean common carriers must be filed with the United States Federal Maritime Commission (FMC).

Following subjects must be file with United States Federal Maritime Commission (FMC):

  • Ocean Common Carrier agreements between ocean common carriers to:
  • discuss, fix, or regulate transportation rates, cargo space accommodations, and other conditions of service
  • Pool or allocate traffic, revenues, earnings, or losses
  • Allot ports or restrict or otherwise regulate the number and character of sailings between ports
  • Limit or regulate the volume or character of cargo or passenger traffic to be carried
  • Engage in exclusive, preferential, or cooperative working arrangements among themselves or with one or more marine terminal operators
  • Control, regulate, or prevent competition in international ocean transportation
  • Discuss and agree on any matter related to service contracts.
  • Marine Terminal Operator agreements between marine terminal operators and/or ocean carriers to:
  • Discuss, fix, or regulate rates or other conditions of service
  • Engage in exclusive, preferential, or cooperative working arrangements related to foreign commerce by ocean transportation.

Here below agreements are exempt from United States Federal Maritime Commission (FMC) filing requirements:

  • Agreements for the acquisition of assets
  • Maritime Labor agreements
  • Agreements for transportation between or within foreign countries
  • Agreements to establish, operate, or maintain a marine terminal in United States
  • Agreements involving only interstate commerce
  • Husbanding Agreements between an ocean common carrier and another ocean common carrier or marine terminal operator acting for an ocean common carrier, under which the agent handles routine ship operating activities in port, such as
    • notifying port officials of ship arrivals and departure
    • ordering pilots, tugs, and line-handlers
    • delivering mail
    • transmitting reports and requests from the ship’s master to ship owner or ship operator
    • dealing with passenger and crew matters
    • providing similar services related to the foregoing

Husbanding Agreement does not include:

– An agreement that provides for the solicitation or booking of cargoes, or signing contracts or bills of lading and other related matters, nor does it include an agreement that prohibits the agent from entering into similar agreements with other carriers.

– Agency Agreements between an ocean common carrier and another ocean common carrier or marine terminal operator, acting as the former’s agent, under which the agent solicits and books cargoes and signs contracts of affreightment (CoA) and bills of lading (B/L) on behalf of the ocean common carrier. The exemption does not apply to an agreement under which a common carrier is to be the agent for a competing ocean common carrier in the same trade; or which permits an agent to enter into similar agreements with more than one ocean common carrier in a trade

  • Equipment Interchange agreements between two or more ocean common carriers for the exchange of empty containers, chassis, and related equipment; and the transportation of the equipment as required, payment for such services, management of the logistics of handling the equipment, use of the equipment by the receiving carrier, repair and maintenance of the equipment, and liability incidental to the interchange of equipment.
  • Nonexclusive Transshipment agreements, under which an ocean carrier serving a port of origin and another ocean carrier serving a port of destination agree to provide transportation between the two ports by transferring cargo at a common intermediate port, provided that the agreement does not restrict the carriers from entering into similar agreements with other carriers, guarantee any particular volume of  cargo or capacity, or provide for fixing rates, conditions of service, or other matters.
  • Agreements Between or Among Wholly-Owned Subsidiaries and/or Parent Companies
  • Marine Terminal Services agreements between marine terminal operator and an ocean common carrier covering marine terminal services provided to the ocean common carrier. Exemption does not include agreements with regard to rates, charges, rules, and regulations set through a marine terminal conference agreement between or among two or more marine terminal operators and/or ocean common carriers with regard to marine terminal operations.
  • Marine Terminal Facilities agreement between or among two or more marine terminal operators, or between one or more marine terminal operators and one or more ocean common carriers, related to foreign commerce by ocean transportation, that conveys rights to operate any marine terminal facility by means of lease, license, permit, assignment, land rental, or other similar arrangement for the use of marine terminal facilities or property.
  • Ship Charter Parties

 

Tariffs are no longer have to be filed with the United States Federal Maritime Commission (FMC). Before Ocean Shipping Reform Act 1998, tariffs established by conferences or carriers had to be filed with the Federal Maritime Commission (FMC), but Ocean Shipping Reform Act 1998 eliminated the Federal Maritime Commission (FMC) filing requirement in favor of a requirement that tariffs be publicly available. Federal Maritime Commission (FMC) retains investigative authority over tariffs that are considered anti-competitive. Confidential Service Contracts have to be filed with Federal Maritime Commission (FMC), but pricing and similarly sensitive terms are kept confidential by Federal Maritime Commission (FMC) and are not available to the public. All parties will be further subject to record-keeping requirements and Federal Maritime Commission (FMC)audit.

Marine Terminal Operator agreements are no longer required to be filed with the Federal Maritime Commission (FMC). Nevertheless, all parties to marine terminal operator agreements are required to make copies available to any requesting person or company. Marine Terminal Operators are subject to Federal Maritime Commission (FMC)’s enforcement authority. No antitrust immunity is conferred under Shipping Act with regard to terminal services provided to a common carrier under a marine terminal services agreement that is not filed with Federal Maritime Commission (FMC).

Charter Parties for the whole of the ship do not need to be filed with Federal Maritime Commission (FMC). On the other hand, space charter parties are subject to the filing requirements.

Agreements filed with Federal Maritime Commission (FMC) in accordance with Federal Maritime Commission (FMC) regulations, including agreements that may be exempt from filing by Federal Maritime Commission (FMC) regulations, are exempt from United States antitrust laws.

Agreements filed with Federal Maritime Commission (FMC) will be reviewed by its Bureau of Trade Analysis and noticed to the public in the Federal Register. After agreements filed with Federal Maritime Commission (FMC), all parties to proposed agreements (except exempt agreements) must then wait 45 days from filing or 30 days from notice in the Federal Register before commencing operations under agreement. Agreements found to be not in compliance with law or with Federal Maritime Commission (FMC)’s precise format requirements, will be rejected and not authorized. If agreements filed with Federal Maritime Commission (FMC) is accepted, agreements will be made publicly available on Federal Maritime Commission (FMC) webpage, except confidential service agreements.

Ocean Common Carriers must first enter into a discussion agreement and file agreement with Federal Maritime Commission (FMC). Generally, there is no Pre-Filing Discussions among Ocean Common Carriers. After the agreement has become effective, all parties may then discuss the matters set forth in the agreement, but all parties of agreement may still be required to record and file minutes of such meetings with Federal Maritime Commission (FMC).

Liner tariffs has not become irrelevant with the prevalence of service agreements. Liner tariffs still often govern ancillary terms by providing a foundation of standard requirements that do not necessarily vary service contract by service contract, such as ocean carrier’s general rules, and terms relating to accessorial charges and surcharges.

United States Federal Maritime Commission (FMC) have authority to monitor and address certain unfair shipping practices like:

  • provision of liner services contrary to a tariff or service contract
  • imposing unfair or unjustly discriminatory rates or charges pursuant to a service contract to give undue or unreasonable preference or advantage, or to impose an unreasonable disadvantage on any port; retaliating against a shipper by refusing or threatening to refuse cargo space accommodations when available, or resort to other unfair or unjustly discriminatory methods because the shipper has used another carrier, filed a complaint, or for any other reason
  • for service under a tariff, engaging in any unfair or unjustly discriminatory practice with regard to rates or charges, cargo classifications, cargo space accommodations, loading or handling freight, or adjusting or settling claims
  • using a ship in a particular trade for the purpose of excluding, preventing, or reducing competition by driving another common carrier out of that trade
  • offering or paying any deferred rebates
  • unreasonably refusing to deal or to negotiate
  • knowingly and willfully accepting cargo from or transporting cargo for the account of an ocean transportation intermediary that does not have a tariff or a bond, insurance, or other surety as required

United States Federal Maritime Commission (FMC) enforcement actions may be brought by a private party or by Federal Maritime Commission (FMC)’s Bureau of Enforcement, which acts in a prosecutorial capacity for Federal Maritime Commission (FMC).

Shipping Act also imposes requirements applicable to Ocean Transportation Intermediaries (OTIs) such as:

  • Non-Vessel Ocean Common Carriers (NVOCCs)
  • Freight Forwarders

In United States, Shipping Act also regulates Controlled Carriers. Controlled Carriers are ocean carriers owned or controlled by foreign governments.

Ocean Shipping Reform Act 1998 requires that Non-Vessel Ocean Common Carriers (NVOCCs) and Freight Forwarders in the United States be licensed with Federal Maritime Commission (FMC) and hold bonds to secure potential penalties and claims arising from their transportation related activities.

Non-Vessel Ocean Common Carriers (NVOCCs) must file their service agreements and negotiated rate arrangements with Federal Maritime Commission (FMC). Non-Vessel Ocean Common Carriers (NVOCCs) are also subject to record-keeping and audit requirements. Federal Maritime Commission (FMC) regulations further dictate how Ocean Transportation Intermediaries (OTIs) conduct their operations, and how they share compensation.

Controlled Carriers are carriers that are owned, or whose operating ships are owned or controlled, directly or indirectly, by foreign governments. Controlled Carriers are required to notify Federal Maritime Commission (FMC) if or when it falls within the definition of a controlled carrier. Generally, Controlled Carriers are prohibited by Shipping Act and Federal Maritime Commission (FMC) regulations from maintaining rate or charge in a tariff, service contract, or otherwise, that is below a just and reasonable rate level.

Federal Maritime Commission (FMC) determine whether a rate or charge is just and reasonable level. Federal Maritime Commission (FMC) conducts a proceeding at which Controlled Carrier bears the burden of proof to show that the rate or charge is:

  • not below a level that is fully compensatory to the carrier, based on the carrier’s actual costs or constructive costs
  • similar to, or the same as, those published by other carriers in the same trade
  • required to ensure movement of particular cargo in the same trade
  • required to maintain an acceptable continuity, level, or quality of common carrier service

If Controlled Carriers maintain rates or charges below a just or reasonable level, Federal Maritime Commission (FMC) sends a notice and an opportunity for a hearing. Afterwards, Federal Maritime Commission (FMC) may prohibit the publication or use of the rates.