S3.E21 - A Tale of Two Overturns: TCW v. Evergreen and Chevron v. NRDC - what it all means for the Federal Maritime Commission

Topic of the Week (7/12/24):
 
What a few weeks it’s been for the judicial system and ocean shipping – the overturning of Chevron (impacting federal agencies) and the vacating and remanding of TCW v. Evergreen (a discussion of the incentive principle and FMC’s May 18, 2020 Interpretive Rule) – there’s a lot going on, let’s break it down.

The Maritime Professorᵀᴹ presents By Land and By Sea - an attorney breaking down the week in supply chain

with Lauren Beagen (Founder of The Maritime Professorᵀᴹ and Squall Strategiesᵀᴹ)

Let's dive in...

1 -Federal Maritime Commission announced they added Hyundai Merchant Marine (HMM) to its controlled carrier list

https://www.fmc.gov/articles/fmc-designates-korea-based-container-company-a-controlled-carrier/ 

https://www.federalregister.gov/documents/2024/07/01/2024-14447/controlled-carriers-under-the-shipping-act-of-1984

2 – TCW v. Evergreen – vacated and remanded, a discussion.

https://www.cadc.uscourts.gov/internet/opinions.nsf/E1A6024AD38C427E85258B510054FE2A/$file/23-1052-2063141.pdf

3 – The U.S. Supreme Court overturns Chevron deference – what does that mean for the FMC?
 
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Transcript

Speaker 1: 0:00

I got soul coming through, flying free. Skies are blue, all the waves. It makes a room. I got soul coming through. Won't stop in the deep end On top of the world. Catwalk to the beat when you see me coming. Make some room. Everywhere I go, I'm in the spotlight. This is a good life I'm living bold. This is what it looks like On the tip of the world. Oh boy, do we have to talk?

Speaker 1: 1:01

There has been a lot of stuff coming out of a few different courts that is going to impact global ocean shipping world. You know what? It's time to sit up and pay attention. Honestly, I'm still digesting it all Evergreen case being vacated, so canceled and remanded back, so sent back to the Federal Maritime Commission. And we're also talking about a little thing you probably heard in the news Chevron was overturned, which will have some impact on the Federal Maritime Commission. Let's get into it.

Speaker 1: 1:46

Hi, welcome to, by Land and by Sea, an attorney breaking down the weakened supply chain presented by the Maritime Professor me. I'm Lauren Began, founder of the Maritime Professor and Squall Strategies. I'm your favorite maritime attorney. Join me every week as we walk through both ocean transport and surface transport topics, the wild world of supply chain. As always, the guidance here is general, for educational purposes only. It should not be construed to be legal advice and there is no attorney-client privilege created by this video or this podcast. If you need an attorney, contact an attorney. Again, this is general and for educational purposes.

Speaker 1: 2:21

I just want to hit that today because we're covering legal cases. So today we're only doing our top three stories of the week and stories number two and three. Well, they're doozies, so let's get into it. All right, story number one we're going to be hitting those two major cases that are going to have impacts on the us ocean, on the global ocean shipping world in the us. But first let's start with a little appetizer, shall we? Let's start with something a little bit lighter. Uh, I wanted to highlight something that came out, and again, last week was the fourth of of July holiday, so we took the week off, so we're kind of catching up for the month of July anyways.

Speaker 1: 3:09

But on July 1st the FMC announced that they would be designating a new controlled carrier to its controlled carrier list. So on July 1st 2024, the FMC announced and I'm going to be pulling most of this off of their announcement that they classified Hyundai Merchant Marine HMM as a controlled carrier of the government of the Republic of Korea and added it to the agency's controlled carrier list. Did you know that they hold this? So I've talked a little bit about the controlled carrier list but I'm going to rely on actually what they said in the announcement. This is a very kind of complete announcement where they talk about what is a controlled carrier. So it says from the FMC announcement here controlled carriers are ocean common carriers operating in the US foreign trades that are or whose operating assets are directly or indirectly owned or controlled by a foreign government. So that's that name right Controlled carriers that either is directly or whose operating assets are directly or indirectly owned or controlled by a foreign government. Controlled carriers are subject to enhanced regulatory oversight by the commission unless a treaty exists between the United States and the controlled carriers host nation. A treaty of friendshiphip, commerce and Navigation and there's a link in the announcement signed in 1957 between the US and the Republic of Korea entitles HMM to this exception at 46 USC 407061. This is again from the announcement and in 407061, it says this chapter does not apply to any controlled carrier of a foreign country whose vessels are entitled by a treaty of the US to receive national or most favored nation treatment or trade served only by controlled carriers. So I mean some interesting things, right? So I just because there's some statutory references, I wanted to let you know what all that those numbers mean. So that's 46 USC 407061.

Speaker 1: 5:10

Continuing on with the announcement, which exempts it from the requirements of Title 46 407. However, hmm remains subject to the provisions of 46 USC 40502F. What is that? It talks about? Breach of contract, breach of service contracts and the court or forum of 46 USC 40502F. What is that? It talks about? Breach of contract, breach of service contracts and the court or forum of the remedies. And then it also it continues to say and 46 USC 46106B7, which is it talks about the FMC's annual report, and that they must include an IDing of otherwise concerning practices of a controlled carrier. And there's some other USTR, united States Trade Representative authorities through the Trade Laws Trade Act that remain intact. So they're saying look, hmm remains subject to the provisions there for the annual report and also the breach of service contract.

Speaker 1: 6:03

So, continuing on with the announcement, the controlled carrier list is not a comprehensive list of all foreign owned, foreign controlled or government linked companies and assets. It is a list of companies meeting statutory requirements found at 46 USC Chapter 407. Commission regulations related to controlled carriers are found and they reference the regulation, the reg 46 CFR 565. So who's on the list? Well, hyundai Merchant Marine right, we just talked about them. There's actually five total companies on the list. So it's Costco Shipping is number one, and they're not necessarily ranked, they're just when they're added to the list and when they're taken off. So first one is Costco Shipping. Second one is Orient Overseas Container Lines Limited. So OOCL Limited, oocl Europe Limited is number three. Number four is HEDA, it's Hong Kong International Shipping Limited, and number five, as we just announced, was HMM Hyundai Merchant Marine. So four of the five are from the People's Republic of China and the fifth one there is Republic of Korea. So that's the relatively non-controversial story of the day. I guess, unless you ask the Republic of Korea or the People's Republic of China right, they might find that announcement a little more controversial.

Speaker 1: 7:19

But these next two stories and I want to couch this appropriately because these next two stories are big, right, I mean, these are big stories and I've been chewing on them, thinking about them, gosh. So look, the Evergreen Vacate and Remand and Chevron Deference. They are both so much still being digested in the industry, or just I mean generally right. I mean they've only been out a few weeks, days, weeks, I kid you not. I've been thinking about both of them probably at least daily, if not every few hours, since they both came out.

Speaker 1: 8:01

Since they both came out, I'm not entirely sure where I'm landing on how I feel about them, but we couldn't wait any longer. Right, we had to talk about them, we had to start diving into them. So that's what today is is the attempt to kind of bring them into the conversation, bring them into the collective awareness. If you haven't paid attention to them, pay attention to them, go read them. The TCW case is only 11 pages. The Evergreen case is only 11 pages. The Chevron overturn case, the Raimundo, it's a hundred and something pages. But yeah, I couldn't wait any longer.

Speaker 1: 8:48

But please, I want to, like I said with the qualifier here, forgive me if I get something wrong here, or mischaracterized, or miscategorized, because clarity really isn't going to come for a while on either of those and what the significance of both of these cases is. Certainly, chevron, deference has a national impact. The Evergreen case, while it's very important to us in the ocean shipping world is maybe not likely to find its way to nightly news, but still it's a very impactful thing. So I want to be fair in the presentation of both of these cases, but they are both very significant, very impactful, and so they're ripe for discussion and interpretation. And so look since, to make sure that the way I'm presenting them is fair, and it's still being determined how best to present them, but I'm diving into it anyways. So, all this to say, look, I want to hear from you on this. It's not a shameless plug for you to engage in my platforms. I'm trying to absorb every conversation and every webinar and every blog post I can, just to really kind of make sense of it all and see what all of this means for the next steps and where we go from here on both the incentive principle of the Evergreen case, but then also the deference and the overturning of the Chevron deference and what that means for federal agencies. So that's the caveat, right, that's the entry. With all of that said, again, I'm trying to be as fair as I can and as accurate as I can and as kind of neutral right as I can for both of these. So, with all of that said, I move into the next two stories with the best of intentions, and I hope that you'll meet me there for that. So, story number two TCW versus Evergreen. Stories with the best of intentions and I hope that you'll meet me there for that. So, story number two TCW versus Evergreen.

Speaker 1: 10:48

It has been vacated and remanded at the DC Court of Appeals, federal Court of Appeals for the DC Circuit. This is a big deal, so let's walk through the case a bit here. Right, I'm going to mostly be pulling the text from the actual opinion because, well, that's the document, right, that's causing the shakeup. Plus, if I'm pulling from the actual opinion, that's a horse's mouth. Right, I'll do a little bit of interpretation, but I want you to hear what the court said here, because they did a pretty good job of explaining things and walking through it and walking through their rationale and it's the did they get it right? Did they not get it right? That's the piece of the qualifier that I really was doing just a minute ago to make sure that everybody is still digesting this. So let's get into it right. So, as the DC Court of Appeals said in the background, and like I said, I think they did a pretty good job of kind of laying things out.

Speaker 1: 11:48

Um, this case arises from the federal maritime commission's application of its incentive principle this is text from the opinion to hold evergreens late fees did not provide an economic. Um, I'm going to, I'm going to restate that because I I missed a word and the whole thing went. You know, this case arises from the FMC's application of its incentive principle to hold evergreens late fees did not provide an economic incentive to prompt return of a container. So I often talk about how agency is the subject matter experts right? The agencies, the federal agencies, particularly the FMC, right? They're the subject matter experts. I get a little weary of the court making some of these decisions in this very nuanced world very nuanced world that even the agencies and the experts within right. There's discussion and discrepancy all throughout, and so I just get a little bit cautious when courts who really probably aren't maritime or global ocean shipping or even supply chain experts try to dive into this world. But that's what the world of litigating attorneys that's. Their job is to provide the information so that the court can make that determination. But, like I said, I think that the court did a pretty nice job of setting the stage for the case and the background discussion. So I tend to err on the side of reading it off and I'm going to do that again here with that discussion.

Speaker 1: 13:13

So from the background, from the opinion, the shipping industry, undergirding the shipping industry, is a system for borrowing and returning equipment, particularly shipping containers and the chassis on which they are moved. Yes, they got that right. The efficiency of the system, which the FMC terms its freight fluidity, depends upon prompt return to port of borrowed equipment for its next voyage. Essentially so, continuing on, any breakdown in the operation of the cycle can have costly ripple effects. When a carrier borrows a container and does not promptly return it this is the court saying this in the opinion the lender has one fewer container to use or to lease out. I mean, they're, for the most part, getting it right. Right. If the number of unreturned containers builds up over time, then there will be a shortage in supply of containers available to pick up shipments. Simple enough.

Speaker 1: 14:10

In the commission's own words, congestion begets further congestion, which in turn, may result in higher costs for everyone in the supply chain, and the court got that from the congestion report of 2015. We've often referenced that, so it's the Federal Maritime Commission's report rules, rates and practices relating to detention, demurrage and free time for containerized imports and exports moving through selected United States ports. That was pulled from page 21,. But this is the 2015 report that we often talk about, because that 2015 report that was six, five years prior to COVID really, looking back on it feels like it hinted at some ways in some of the supply chain problems, and it's probably not that surprising, right, because we were starting to have congestion problems happening in the 2010s, that 2015 time period, and so they were on full display right during COVID congestion years. But there's a lot of relevancy still still now, nine years later, to that 2015 report. So I encourage you to go read it Every time we talk about it. I encourage you to go read it, definitely go read it. But the court read it and they incorporated it into their opinion.

Speaker 1: 15:24

So, continuing on with the opinion, detention under detention charges under the Shipping Act. In order to encourage the timely return of equipment, ocean carriers imposed detention charges, defined by the commission as any charges, including per diem, assessed by ocean common carriers related to the use of shipping containers, not including freight charges, and they referenced the CFR, the regulatory, the reg. The practice in the shipping industry is that the party responsible for retrieving a loaded container from a port and delivering its cargo to the addressee is allotted a certain number of days to return the empty container and any related equipment before detention charges begin to accrue. The amount of this so-called free time is either set forth in the ocean carrier's tariff of published terms and conditions for transportation or established by contract right, a service contract. We know that Per diem detention charges provide an incentive for the timely return of equipment and compensate the ocean carrier for the opportunity cost of its late return. That's interesting.

Speaker 1: 16:34

I'm only pausing here and this is a real. Like I said, I'm still digesting all of this right. So per diem detention charge this is what the court said per diem detention charges provide an incentive for the timely return of equipment and compensate the ocean carrier for the opportunity cost of its late carrier, for the opportunity cost of its late return. That opportunity cost of its late return, I think, is something that the FMC addressed in the D&D rulemaking and some of their discussion and preamble, not in the final rule but previously. I paused because I think that I don't know, maybe they'll address it in the remand, but that is the court going a little bit the other way on. Just this little teeny tiny thing or maybe not teeny tiny thing, I don't know, I'm just there's going to be more there I can imagine Compensate the ocean carrier for the opportunity cost, right, the opportunity cost of its late return. I guess why I'm pausing. The FMC has kind of said look, lost opportunity or lost business revenue is not necessarily something that falls under. I think in the example the FMC gave was demurrage. But now the court is saying this opportunity cost of its late return for detention. I don't know, I'm like chewing on this in real time. So let's keep going. But all right.

Speaker 1: 17:52

So, continuing on from the opinion here, the Shipping Act leaves to the commission determination whether a detention charge is just and reasonable. Okay, so then the court goes through the history that led to the interpretive rule. And that interpretive rule what was it? May 18th 2020. In that interpretive rule came the incentive principle, which is ultimately what this whole decision hinges on. So the aspect this is what the court said the aspect of the interpretive rule at issue here is the incentive principle, which provides the reasonableness of detention charges will be judged by the extent to which they are serving their intended primary purposes as financial incentives to promote freight fluidity. The interpretive rule also specifies that, absent extenuating circumstances, practices and regulations that provide for imposition of detention when it does not serve its incentivizing purposes, such as when empty containers cannot be returned, are likely to be found unreasonable.

Speaker 1: 18:51

At the same time, however, the FMC acknowledged that the rule, being interpretative, did not create any new requirements, mandates or dictates. On the contrary, it specifically rejected some commenters' requests for a bright line rule. So what the court is saying? Look, the FMC said this does not mandate, this does not require. This interpretive rule was not a new requirement, mandate or dictation by the FMC. It was not a bright line rule or dictation by the FMC. It was not a bright line rule. See, this is all still happening like real time in my head. These are all the different things that I've been thinking about. Now. I'm thinking about how Azra pointed to the interpretive rule and so, as we're going to talk about Chevron, deference and this return to statutory authority and and the intentions of statutory authority, I'm I'm going to, after we're done here, I'm going to go back and look at the statutory authority that was given by Congress to the FMC and on this interpretive rule, okay, I mean this is sorry, this feels a little chaotic, but this is still me digesting all of this in real time.

Speaker 1: 20:14

So we've talked about the Evergreen facts before, but essentially at issue here was the objection over a $510 charge over Memorial Day holiday weekend right, it was May 23rd through the 25th 2020. The objection was because the Port of Savannah was closed. Evergreen refused to waive the charges and TCW paid the invoice and then filed in small claims at the FMC. It was informal proceedings is what it is. They called it small claims. I mean, yeah, that's essentially what it is. There's the small claims which is under a certain monetary threshold. I mean it's only $510 here, but a big issue.

Speaker 1: 20:53

So then, yeah, continuing on, that's kind of what the court said. So the settlement officer the court says small claims officer ruled in favor of TCW, the FMC settlement officer, and then the commission then had 30 days to determine if they wanted to review the case. That's the sua sponte review. We've kind of talked about that every once in a while, but after the settlement officer or the administrative law judge, the ALJ, makes their decision, the FMC then has 30 days, has an opportunity to decide. Do the five commissioners want to weigh in on this. Do they want to pull the case and weigh in on it? They did, and what the court said is that the FMC referenced that they were quote particularly interested in arguments regarding application of the interpretive rule on demurrage and detention. I mean, right, that's the whole thing. Even though this was a small claims case, an informal docket, the magnitude, as we've now seen, was properly identified at that time.

Speaker 1: 21:49

So, continuing on with the opinion, the FMC underscored that during the rulemaking the commission was clear that no amount of detention can incentivize the return of a container when the terminal cannot accept the container. The FMC also rejected the argument that failing to impose detention charges during the May 23rd, 25th port closure quote would have disincentivized the return of the container before the closure, noting that these arguments were previously raised and similarly dismissed during the rulemaking process and that the disincentivizing arguments neglects the commercial incentives to returning empty containers. So the court continues here without explaining what those commercial incentives might be. The FMC then dismissed Evergreen's argument that TCW could have returned the containers prior to May 23rd, through 25th. So the court then continues and brings in FMC Commissioner Carl Bensel's dissent.

Speaker 1: 22:41

So, dissenting, Commissioner Bensel reasoned that the incentive principle and the interpretive rule did not displace the reasonableness standard in the Shipping Act. So the Shipping Act is statutory authority right. The Shipping Act was created by Congress giving FMC their authorities. So he said, even though the FMC, through this interpretive rule, had this incentive principle, it does not displace the reasonableness standard in the Shipping Act. So, continuing on from the opinion, in his view the commission was at risk of overstating the manufactured and the court provides bracket incentive principle, they say. Commissioner Brunsell said at risk of overstating the manufactured principle at the peril of usurping reasonableness. So the court continues, he thought the commission was overly concerned with the methodology of assessing detention charges, rather than asking whether the charges reasonably achieved the objective of providing fluidity of movement of cargo. Continuing on, the court said in any event, commissioner Bensel would have held Evergreen's detention charges were consistent with the Continuing on, the court said that were beyond or outside the control of TCW, justifying the denial of detention penalties.

Speaker 1: 24:09

In essence, tcw knew when the port was closed and failed to timely re-deliver Evergreen's equipment before the stipulated time. And that was both court and reference to the dissent. So, continuing on in the court opinion, our review under the arbitrary and capricious standard is deferential, but we nonetheless require the commission to articulate a satisfactory explanation for its action, including a rational connection between the facts found and the choices made. So an agency action is arbitrary and capricious if the agency has and they list entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. So what did the court ultimately rule? That the commission had followed the incentive principle as a bright line rule, which was in direct opposition to what the court said, that the FMC claimed that they did not create. Right. So let me pull in the text again. In effect, the commission treated the incentive principle as just the sort of bright line rule it had denied creating when adopting the rule. Yet, as the commission itself noted when it published the rule, and as Commissioner Bensel explained in his dissent, an interpretive rule does not create any legal obligations. Terms such as incentive principle do not replace reasonableness, which is underpinning of the Shipping Act.

Speaker 1: 25:38

Continuing on, in the opinion, the illogic of the FMC's position is illustrated by the very reason it offered in its support to the need to consider the broader context of freight fluidity throughout the supply chain, such as potential log jams if there is a rush to get equipment in before a weekend closure. The court continues if the commission is right that there is no incentivizing effect from charging detention fees on a weekend when a port is closed, then why would there be a log jam to avoid the detention charge? Right, they're saying, if there's no incentivization because they know they got to get it out, otherwise they're going to get charged three days then why are they talking about congestion happening right before those three days? Happening right before those three days? Because people are the, the, the. What the court is trying to say is that naturally, if there's a log jam on that day before the three-day weekend, that's probably because they don't want to get charged those three days. That's what they're saying. There's kind of this disconnect.

Speaker 1: 26:42

The court says this logical inconsistency alone renders the commission's order arbitrary and capricious. And they go on to reference and cite a case here where the quote in the case is certainly, if the result reached is illogical on its own terms, the agency's order is arbitrary and capricious. Order is arbitrary and capricious. So the commission, or the court, again continues on saying under the APA, so the Administrative Procedures Act. The commission cannot rest upon a bare assertion that a detention charge assessed for a day when a port is closed has no incentivizing effect. It must at a minimum provide a logical explanation for its view. That's the crux of this whole problem. The court is saying look, you said that it wasn't incentivizing, but you didn't say why. And actually the way you referenced it you kind of said it was incentivizing. So, like I said, the court said it must at a minimum provide a logical explanation for its view. It continues on and says perhaps it can do so on remand, but so far it has done the very opposite. Ouch, it's so fascinating, right.

Speaker 1: 27:55

I mean, I'm still digesting how I feel about it. There's some nuggets here and there that I think we're going to see reappear. I think we're going to be dissecting this for a while. But what I'm really interested in is what the FMC has to say, and they're going to get their opportunity when they remand or revisit this right, the incentivization principle, the interpretive rule. They're getting kind of another opportunity to what they meant to say. But as of right now, the decision is vacated and it's sent back to the FMC to try again, and so that's what it is. The FMC is going to get another opportunity to address this case, but yeah, for now the FMC is doubling down on the incentive principle and its enforcement activity. Remember, when they sent out that there was a press release that said look, evergreen is a decided case through the FMC and we're going to be watching this and making sure that we're enforcing enforcement activity for those not following the Evergreen case. Right, remember, they said that it was last spring, I believe it was. I mean, I don't know. I mean, that feels moot. Maybe the FMC is going to have to address that. There's a lot of gray area here and right. Business loves, business thrives on certainty, and this, this throws a lot of uncertainty into the mix. We'll get there, we'll get there, and it's very fresh off the off the presses. So take a look, read this decision. I'm so interested to see how everybody is is taking this in. So I hope I did that case justice. I hope I did the explanation justice there, all right.

Speaker 1: 29:51

Story number three Chevron deference. Let's just go, let's just go, let's just get into it. Chevron deference. Chevron deference has been overturned. So what is this? What am I talking about?

Speaker 1: 30:02

Chevron was a case right, and it was a pinnacle staple in legal training. Every lawyer that took administrative law or any relation to anything that had to do with the federal agencies and government kind of was aware of Chevron deference. So Chevron was Chevron, usa versus Natural Resources Defense Council, and it was a case from 1984. That case created a two-part test. This is where the Chevron deference comes in. It created a two-part test on when an agency should be given that deference. Yes, like deferred to. Yes, like when the agency should just be like believed and whatever is being challenged. Well, the agency, you're the experts. We're just going to, you know, we're going to go with what you said Deferred right, deference like deferred to.

Speaker 1: 30:55

So the test was it was a two-part test, right, so one a court must determine whether Congress expressed intent in the statute and, if so, whether or not that statute was ambiguous. So like Congress creates a statute right, so whether or not that statute was ambiguous, so like Congress creates a statute right and then the agency creates a regulation that interprets that statute or not even interprets it, implements. It's the way that that statute then kind of turns into. Here's how we're going to do it. Here's how we're going to be implementing that statute. Congress creates that statute, right, that's the law. And then the the agency, the FMC in this case. But the agency will then take that authority given to it by statute and, if needed, um, either explain it or kind of turn it into. Here's how we're going to do it.

Speaker 1: 31:40

So if the statute intent wasn't clear, then the agency must carry out. So if it was clear, the agency must carry out the clear intent, right, like that. That's simple. If it was clear and it said agency, you should do this, and like it was clear, there was no interpretation, then that's, that's fine and that's where you go. But if it was ambiguous, right?

Speaker 1: 32:00

So if Congress gave that statute to the agency and it was a little bit ambiguous, what Chevron deference did is it said look, the court must defer to the agency's interpretation of the statute if it relied on a permissible construction. So like there were a few different ways of what permissible construction. And this is not a law class, this is purely for educational purposes. We are just kind of chatting, but I want to keep it light. So that's the background on Chevron deference, right? So like, if it's clear, that's what you go with, that's what the court goes with. If it was a little bit unclear, if it was ambiguous, then as long as it was kind of like permissible construction, as long as it was I mean reasonable I guess I want to oversimplify it then the court must defer to the agency's interpretation, must? They were given the deference for the agency's interpretation. So that's the background. That's all old law. Now, right?

Speaker 1: 32:55

So Chevron deference has been overturned by Loper Bright Enterprises versus Raimondo. Yes, raimondo, like Department of Commerce Secretary Gina Raimondo, yes, like former governor of Rhode Island, raimondo. I'm up in New England, so I mean Gina Raimondo is from the Rhode Island area, and so it's just so wild that this case, chevron, which everybody knows, is now the Loper right, the Loper case, or I mean it's Loper v Raimondo, all right. So just a reference there for anybody who is listening in the New England area. So what did they say? So what did the Supreme Court say when they overturned Chevron deference? Right, so well, the automatic deference, that was the Chevron ruling, so that automatic.

Speaker 1: 33:42

If it's ambiguous, it goes to the agencies. It's now clawed back a bit. It goes to the agencies. It's now clawed back a bit, basically. And the court must exercise this is from the opinion independent judgment, but they can quote, seek aid from the interpretations of the federal agency. So, and they say the federal, they don't say federal agency necessarily, they say those responsible for implementing particular statutes. So I mean that's the agency. So now the court independent judgment, but they can still seek aid on those interpretations. So it's not an automatic, you just have to go with what the agency says.

Speaker 1: 34:23

So there's still a deference principle, though I want to kind of immediately there was so much doom and gloom out there and once I started diving into it I moved away from kind of the doom and gloom conversations to a little bit more intrigue and interested and just wanting to know more right. So there's still a deference principle out there. It's not ironclad or. I mean even Chevron wasn't iron know more, right. So there's still a deference principle out there. It's not ironclad. I mean even Chevron wasn't ironclad, right, it wasn't as direct as Chevron. But there's the Skidmore deference and I'm not going to go too far into it all because it gets pretty legally, technically complex pretty quick. But just know that there's still something out there called the Skidmore deference. It's not as direct and not as kind of bright line, I guess, as Chevron, but there is still a form of deference and, like I said, there is a lot of doom and gloom here being kind of portrayed with this overturning of Chevron deference, but there are still a few things that I want us to consider. Overturning of Chevron deference, but there are still a few things that I want us to consider. And I'm, like I said, not going too far into all the specifics here, because this really is more legal than it is global ocean shipping, and this is a podcast about things that I know well and that's global ocean shipping. But it's important for anybody who deals with any federal agencies to at least have some awareness and maybe some kind of baseline understanding. And so I also want to mention the court said that this doesn't affect past cases that relied on that Chevron doctrine, so it's not overturning anything previously. By this I mean except for Chevron, but anything that relied on the Chevron doctrine at the time when it was still good law. They're saying we're not touching that. So to me, here's what I see the Supreme Court intended on rebalancing, checks and balances right, and that's what one of the concurrences focused on it was.

Speaker 1: 36:18

Justice Thomas said that it, quote, curbs the judicial power afforded to courts. That's what he was saying Chevron deference or Chevron did courts. That's what he was saying Chevron deference or Chevron did. So to say it another way, he was saying in this opinion, where they were overturning Chevron, he said, look, chevron forced the judicial to just roll over to the executive. So judicial being the court, right, and the executive being these federal agencies. And he said, instead of making their own, well, he didn't say this, but essentially said they're rolling over to the executive, the agencies, instead of being able to make their own informed decision, right. He said, curbs the judicial power afforded to courts. So, and as the checks and balances provided, right, that's the separation of the judicial, which is the courts, the legislative, which is Congress, and the executive, which is the president, the legislative, which is Congress, and the executive, which is the president. So he was kind of saying, look, I'm okay with overturning this because we're returning the power of the judicial.

Speaker 1: 37:18

I mean, I'm only pausing because there's a whole. You could talk about that for days and days and days. And I'm still like, yeah, I'm still digesting all this. I think the entire legal world is so, does agency expertise still count for something? I want to kind of distill some of these things down and I pulled a news, an article from Federal News Network. But I thought that they did a really good job of kind of explaining some of these things and they had a former OIRA administrator.

Speaker 1: 37:45

So OIRA is the Office of Information and Regulatory Affairs. It's a branch of the Office of Management and Budget, omb, which is part of the executive offices of the president. They often work in the OIRA, often works in the regulation and regulatory side of things. So in this Federal News Network article it said in legal challenges to agency rulemaking, former OIRA administrator Susan Dudley, a distinguished professor of practice at GW in the Public Policy Administration School of Public Policy and Public Administration, said courts will still defer to the agency's expertise, including technical, scientific and economic analyses. And now when I'm reading this kind of federal news network, this isn't ocean shipping specific, this is just generally. So she continues on. That will not change. She said when agencies justify their regulation it starts with here's our statutory authority. It has to start there. But the bulk of that regulatory impact analysis, the preamble of their regulation, is all these other factors, the alternatives they considered and why this is the best alternative, given their expertise.

Speaker 1: 38:58

And so, actually having just spent the last few days in DC myself. I was in town this weekend Jeez, oh Pete, was it hot. But I heard, aside from that, I did hear a lot of general discussions on kind of statutory authority. Of course, right, I mean, this is a major thing and it happened in DC and the Supreme Court's there. So, you know, maybe I was just listening more for it or maybe my feeling was that maybe it was that, you know, when we were talking to people who worked in agencies, maybe they were making a greater intention to ensure that statutory authority was a focal point. I mean, maybe I was just listening more for it, but it felt like conversations were more intentionally rooted in some of that statutory authority.

Speaker 1: 39:48

One of the critiques of Chevron deference as of recently was that agencies may have been taking bolder moves in their interpretation of statutory authority. And the argument is that I've heard is that because they knew they had the deference, they knew that if it came down to well, this was an interpretation of an ambiguous statutory authority piece from Congress. Perhaps they were being more bold because they knew they had the difference. So now the thought is does this mean that agencies might not be so bold on new regulations that might have shaky statutory authority and so, going back to this Federal News Network, a chilling effect on new regulations. So it says when it comes to proposing new regulations, dudley, that former OIRA administrator, said agencies may be a little less ambitious and that they may think twice before finding some novel authority in an older statute.

Speaker 1: 40:45

She continues what will change is there will be a greater focus on that first step. What does the law say? What are we authorized to do? She said we may see agencies engaging the Department of Justice and the White House counsel the cross-cutting legal parts of the government on those questions before they go down a path. There may be earlier engagement on that and I think that that's. I think that we will, I think she's, I think she's right in that, in that prediction, I think we will get there. I don't know if that's going to happen right away. My feeling is that right away people are going to be okay.

Speaker 1: 41:22

Let's go back to basics. What is the specific statutory authority and let's directly point to it. And so that's the next piece here is that what this article said is that agencies may take an extra level of precaution when drafting rules, at least in the immediate and certainly probably beyond that. So what does the Chevron deference overturn mean for the FMC and what about some of the pending cases? And we will probably dive into all of this more because this is still part of that Chevron deference overturn as a general concept across the whole legal spectrum and then now kind of focusing it more on the FMC.

Speaker 1: 42:00

So for the FMC, I anticipate that the FMC and really all agencies, but certainly the FMC, will be careful to stay within their clearly defined statutory authority. I think they try to do that. And I say try because there's still some critiques on them moving outside of that statutory authority sometimes. But the Shipping Act and the Ocean Shipping Reform Act of 1998, and again the Ocean Shipping Reform Act, asra of 22, give the FMC some pretty clear authority. So their actual operations and enforcements might not change too much, right, because they were kind of delegated this specific thing to do. Watch the monopolistic and anti-competitive impacts, and I'm oversimplifying and kind of just paraphrasing, but that's what they're charged to do, right, and so that's kind of the meat and potatoes of what they are doing. So I don't think I don't see a lot of things changing there, but some of the more novel questions and certainly the things that they were maybe being challenged on mission creep and expansion of congressionally delegated authority through the statutes. Those just became a lot more interesting.

Speaker 1: 43:05

So the first thing that comes to mind here for how it applies to the FMC would be maybe the gray area of through bills of lading We've talked about that before the FMC's authority over those per diem charges on the rail yard right, like the not the ocean side necessarily, but that's through bill of lading, because STB says it's not us but the FMC says, well, I'm through bill of ladings on on, uh, through ocean shipments. I mean the FMC says it is us, but then remember, don't forget, there was that industry stakeholders letter that asked Congress for clarity. I think that letter of 77 stakeholders just got more interesting as well. The other thing that I think I see this may be affecting well, maybe not maybe, maybe everything's a maybe right now when I see this also having creating more interesting conversations is with the World Shipping Council's petition at the US Court of Appeals for the DC Circuit. Right, we've talked about that before.

Speaker 1: 44:04

This is after the FMC issued their final rule correction on the detention to marriage billing requirements. It seemed to me at the time that perhaps, maybe that, paired with that Chevron deference from yestermonth, that maybe that deference, paired with them kind of making a correction to it, felt like solve the question of ambiguity. That was kind of at the heart, or at least piece of the heart of that petition. Maybe it felt like maybe the petition, the questions had been solved. And I guess my thought was, maybe it might make it difficult for the World Shipping Council's argument in the petition to find its way against that final rule. But now, now, after the Chevron deference overturn, now that the FMC doesn't have that kind of automatic deference and still it wasn't a complete blanket deference but you still have to make the arguments but there was a, there was a confidence in the deference right as a general statement across the board, not necessarily speaking for FMC, but like across the board.

Speaker 1: 45:15

Now I think that that petition just became a lot more interesting because because I mean, it's a petition about the statutory authority for that final rule and so I think that it's something that the court will have to address because they won't be able to kind of and this is oversimplifying it but they won't be able to kick it out and just say well, you know, we're going to have to go with the agency here. They're going to have to say well, the agency said this and independent review, we find who knows where they're going to go with it. So I don't know. I'm kind of just talking here, I guess, but I'm really interested to see how other people think that this is going to affect the FMC specifically. The other thing that I want to kind of throw into that petition conversation and this is where I really really I've always wanted to be fair on this because I really want to see how this all plays out and I've been watching, right, that petition but the other thing that I think we can't discredit is that this D&D billing requirements final rule is already effective.

Speaker 1: 46:32

Right, it went into effect at the end of May. I think that that's going to have some weight because that was kind of a major change for the industry. Right, we had the 13 invoice requirements coming out of OSRA 22, the Ocean Reform Act of 2022. That was from Congress, so that is not an issue. But the 20 invoice requirement expansion from the FMC and maybe it wasn't a full expansion but just like a dissecting of some of the 13. But then also, I mean there were some other pieces direct contractual relationship. I mean all those things. I mean those things went into effect the end of May and now I still hesitant here.

Speaker 1: 47:14

Right, I would suspect that a court wouldn't want to overturn that because it made an impact in the industry. But I mean, that's part of kind of the craziness of the Chevron overturn is that they could potentially tie the FMC's other parts right, not just the 13 invoice requirements but the other parts to that argument of the general argument on Chevron deference where they said basically agencies were going too far from initial statutory authority and so without that automatic deference that Chevron provided. I'm not saying it's right or wrong, I'm not saying anybody's right or wrong here, I'm just saying I think there's going to be a really interesting discussion on the topic now from the court. Did the FMC in the court's independent review have the authority through OSRA, through the Shipping Act, right to kind of go into those other pieces? This petition just got a lot more interesting and it's just so. I mean I'm nerding out here, right, so I'm going to continue to watch all of this. I hope I did it justice today. I hope that this was a good conversation. I hope that I fairly presented these two really impactful, significant, significant cases and the controlled carrier news.

Speaker 1: 48:40

But as always, I can't say it enough the guidance here is general and for educational purposes only. It should not be construed to be legal advice directly related to your matter. If you need an attorney, contact an attorney. But if you do have specific legal questions, feel free to reach out to me at my legal companies called Strategies. Otherwise, for the non-legal questions, the e-learning and general industry information and insights, come find me at the Maritime Professor. If you like these videos, let me know, comment, like and share. If you want to listen to these episodes on demand, or if you missed any previous episodes, check out the podcast by Land and by Sea. You can get it on pretty much all podcast platforms. If you prefer to see the video, they live on my YouTube page by Land and by Sea, presented by the Maritime Professor. While you're at it, check out the website themaritimeprofessorcom. So until next week. This is Lauren Began, the Maritime.