S3.E22 - Captain's Log: FMC Updates // Shipper Advisory Committee's Role // Gemini Cooperation Agreement // Rising Shipping Rates Discussion

Topic of the Week (7/19/24):

Taking inventory of industry news and catching up on a few things - it's the Captain's Log Edition!

The Maritime Professorᵀᴹ presents By Land and By Sea Podcast - 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 - Rulemaking Round-Up

2 - National Shipper Advisory Committee recording from May 20th is posted.
https://www.fmc.gov/about/national-shipper-advisory-committee-nsac/ 

3 - FMC issued a Request for Additional Information re: the Gemini Cooperation Agreement (A.P. Moller - Maersk and Hapag-Lloyd AG and Hapag-Lloyd USA, LLC) - open comment period until Aug 15. 

FMC Announcement:
https://www.fmc.gov/articles/fmc-issues-request-for-additional-information-regarding-gemini-agreement/

Federal Register: 
https://www.federalregister.gov/documents/2024/07/17/2024-15640/notice-of-request-for-additional-information

Hapag-Lloyd website:
https://www.hapag-lloyd.com/en/landingpage/gemini.html

4 - Shipping rates are rising - cause for concern? A discussion.

gCaptain (a repost of Bloomberg News):
https://gcaptain.com/global-shipping-strains-spark-fears-of-an-inflation-comeback/

gCaptain:
https://gcaptain.com/ships-fleeing-the-red-sea-now-face-perilous-african-weather/

5 - Offshore wind turbine breaks off into water at Vineyard Wind offshore wind farm

gCaptain:
https://gcaptain.com/u-s-coast-guard-issues-warning-after-wind-turbine-blade-breaks-off-at-vineyard-wind-farm/

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#ByLandAndBySea

Transcript

Speaker 1: 0:26

no-transcript. Yeah, I walk 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 15th hour of the world.

Speaker 1: 0:58

We've been having some marathon by land and by sea episodes recently, so today I thought let's just keep it quick and take inventory of some of the major stories happening in the week. As always, I'll sprinkle in my take, but let's hop into our Captain's Log edition. Hi, welcome to, by Land and by Sea, an attorney breaking down the week in supply chain presented by the Maritime Professor. Me. I'm Lauren Began, founder of the Maritime Professor and Squall Strategies, and I'm your favorite maritime attorney. Join me every week as we walk through both ocean transport and surface transport topics in the wild world of supply chain. As always, the guidance here is general and for educational purposes only. It should not be considered to be legal advice and there's no attorney-client privilege created by this video or this podcast. If you need an attorney, contact an attorney. So usually we go through my top three stories of the week, but today every story is a top story, so let's get right into it. All right, story number one.

Speaker 1: 1:52

First stop, let's check in on the FMC's rulemakings. We really haven't checked in much. We've been talking a lot about the D&D rule, but we haven't checked in on kind of the whole roundup. So over the past year or two, right, the FMC has been working through three rulemakings that they were directed to take undertake by the Ocean Shipping Reform Act of 2022, which was given to them by Congress, as we're kind of talking a lot more after Chevron about things that are doled out by Congress directly, and we're also watching a request for information that was part of the Maritime Transportation Data Initiative undertaken by Commissioner Carl Bensel. So where are we with all of these rulemakings, right? So the billing practices of detention and demurrage as we know, that went into effect May 28th, but there's some notable things that we should kind of talk about. So we've talked about these before, but, as we're doing our roundup, right, these are things that we want to make sure that we're mentioning and keeping aware of and just noticing.

Speaker 1: 2:49

So the commission issued a correction to the final rule preamble text. So that's that discussion part at kind of the meat of that final rule. They clarified the rules application to carrier-trucker relationships, which seemed to me and this is what I mentioned at the time was that it seemed to me that that was kind of a nod toward the World Shipping Council petition, right, I mean, how could it not be and I say that kind of in jest, but it seemed like it was aligning there, almost to kind of have the FMC say look, we fixed the problem. But I've said it before and it's certainly true now, just because the FMC made that correction does not mean that the court's going to agree. And in this post-Chevron world the petition is still very much alive and on the table.

Speaker 1: 3:33

Prior to Chevron I thought that there might have been some deferral to the FMC or to the agency With Chevron gone and I'm not necessarily doom and gloom, and I mentioned this previously in one of the previous episodes and I'm not necessarily doom and gloom, and I mentioned this previously in one of the previous episodes I'm not necessarily doom and gloom about Chevron being gone, but I do think that it's interesting because now it will create more of a discernment from the court itself, whereas previously it may have been encouraged, slash directed through the Chevron case, to defer to the agency where the statutory authority so like, where Congress made a clear directive. So all that to say, now that the agency, the Federal Maritime Commission, might not get that automatic deferral or like encouraged to defer to the agency, we're going to see the court probably look at it a little bit more thoroughly. And all that to say. I think that's why the petition is potentially if it was never, if it was, it may have been partially, I guess, on its face, potentially partially resolved, or at least that would have been the FMC's argument for it. Now, post Chevron, I think that this is something that is fully on the table. I don't think that we're going to see this go away. I think that we're going to see the FM excuse me that I think we're going to see the court ultimately weigh in on it.

Speaker 1: 4:59

But we haven't seen a lot of actual court discussion. We've just seen some procedural things going back and forth in this case. So in previous episodes we talked a little bit more about the World Shipping Council's petition against the D&D billing requirements, final rule. So go take a listen if you want to hear more. But to be clear, like I said, I think that the petition is still very much on the table, even though it seemed like the FMC kind of, in their press release, nodded to the. I mean alluded to the fact that we're all set here right now that now that the FMC has made that correction, potentially the FMC was starting to kind of build the argument of, like well, we're good, we solved that problem.

Speaker 1: 5:40

The petition is in front of the US Court of Appeals for the DC Circuit. Um, the petition is in front of the U? S court of appeals for the DC circuit, so it's out of the FMC's hands, right, um, and not much has really happened there. But, like I said, I'm I'm still watching. There's. I shouldn't say nothing much has happened. There's been some procedural back and forth and right now they're kind of talking about whether some of this email discussion over the the this rule and the um ambiguity, I guess, of the final rule where they made that correction, if some of that email discussion back and forth between the World Shipping Council and the General Counsel's Office of the FMC and just the FMC generally, should be included in the record. So, like I said, it's getting a little bit legal, procedural. Once we start getting into content and some of the decisions related to this final rule, I'll come back and let you know, but I'm still watching. I think this is pretty interesting from a procedural standpoint. But OK, so boil down.

Speaker 1: 6:33

What did the petition say? Like I said, if you want a deeper dive, go check out one of the episodes previously. But what did the petition say? Essentially, the petitioners challenged the final rule on grounds that it is contrary to statute so that's what Congress gave the authority that Congress gives the agency, including that it exceeds the commission's authority under the Shipping Act and Ocean Shipping Reform Act and that it is arbitrary, capricious and an abuse of discretion and otherwise contrary to law. Petitioner seeks an order vacating and setting aside the final rule.

Speaker 1: 7:03

So, like I said, we still don't have a ton of information here on kind of the meat of it, but it clearly is going back and forth about the trucker and the motor carrier and the relationship and that direct contractual relationship and the motor carrier having a direct contractual relationship. In some instances it goes back to the announcement that was on the World Shipping Council's website, I believe, because some of the discussion back and forth about the email exchanges that's in the procedural seems to be centering around that. So, like I said, once the court comes out with some more information, I'll keep reporting back. But this petition, like I said after I said this when we talked about Chevron it just got a lot more interesting, and it was always pretty interesting, but it just got a lot more interesting.

Speaker 1: 7:57

But so what does all of this mean? Right as of right now, may 28th was the rule's effective date. There has been no word otherwise. The entire rule, this detention to merge rule remember there was a talk about maybe the contents might not go into effect because the Office of Management and Budget still needed to approve. Nope, all of that happened. May 28th was the date. That's when it all went into effect.

Speaker 1: 8:17

But what could happen with this petition? So the court could decide to somehow modify this final rule based on that petition has? So the court could decide to somehow modify this final rule based on that petition. Hasn't happened yet. Nothing has changed yet, but it could. But there could be something that could happen here. There could be some change.

Speaker 1: 8:34

I think that as a general statement, I mean this is a fairly big overhaul. I mean arguably it's still parameters or guardrails on the industry, but it's a pretty big administrative overhaul, right, but now we have these 20 invoice requirements and direct contractual rule and timing requirements and how to do disputes and all of the things that are in this billing requirements final rule. I mean the court could vacate, they could turn it over, they could say no, everybody, stop everything. I just don't think that they're likely to do that because the rule did go into effect. What might happen? They might start taking out pieces, right. Maybe it's the 20 invoice requirements that they're going to keep, because for the most part they were kind of expansions and clarifications of the 13 invoice requirements that Congress created. But on the other hand, they could go after direct contractual relationship, right, because that's kind of an issue here with the motor carriers and that's what World Shipping Council is kind of getting to. That might be something. That direct contractual relationship might be something that we're going to want to watch closely as a impact of this petition. We'll see. Now I'm just kind of speculating, but nothing has happened yet.

Speaker 1: 9:45

The D&D final rule is still in effect. It went into effect May 28th. There's also another petition that I think we should watch and I'm not going to talk about it too much here, but I think I have mentioned it at least previously a petition to delay the effective date, which is obviously passed right. We keep talking about that. May 28th was when this effective date started, date which is obviously passed, right, we keep talking about that. May 28th was when this effective date started, but what I see that petition because it was only filed a few days before the effective date or maybe the day of it was a really quick turnaround. So the effective date has obviously passed.

Speaker 1: 10:17

But I think it's worth watching because this could have impacted some of those compliance complaints, particularly about noncompliance from members of the industry or certain parties in the industry, noncompliance on that May 28th date. Maybe not everybody as of May 29th, may 30th, was complying with it, and so those are some of those complaints that might come in If the effective date gets bumped back. It might even not get bumped back to current time, it might even just get like bumped two weeks or three weeks or a month off of that initial May 28th date. But where I see the impact potentially is if it does get bumped back, any of those complaints on noncompliance during that time period. Again, nothing has happened here yet, but just something I'm kind of watching and some of the potential impacts, right, I mean. So it's almost like, okay, all that happened in the past. How is this going to impact anything it comes down to if somebody is trying to bring a complaint saying, look, they didn't comply and this rule went into effect May 28th, that's where I think that there might be potential for a shake up. So that's the detention demerge rule.

Speaker 1: 11:29

We still have two other rules that we're watching. So we have the defining unreasonable refusal to negotiate with respect to vessel space accommodations provided by an ocean common carrier. Those comments closed up a year ago, july 2023. It's been a year since we've had much activity here and I should be fair, last fall there was still some filings and still some back and forths, and some filings with federal agencies and US Transcom Transportation Command was still filing, I believe in December, even of 2023. So there's been some activity. But from the agency itself, that supplemental notice of proposed rulemaking closed up a year ago.

Speaker 1: 12:06

We keep hearing that potentially, this rule is on its way, will come out anytime. It always happens. I feel like that. I'll go live and then, within two or three hours after the live, we get the final rule text and perhaps it'll pop up in my emails while we're chatting here. But as of right now, we do not have the final rule for the defining unfair, unreasonable refusal to deal or negotiate with respect to vessel space accommodations provided by an ocean common carrier. Perhaps it's time to do a refresh episode on the status of this rule and what was last proposed, just so that we're all kind of aware of what was last done here, because I do think that we're probably close to getting a final rule on that.

Speaker 1: 12:43

Chairman Maffei has said previously that it's more important to get it right than get it quick. He said that this has been a particularly nuanced rule and that they didn't want to get it wrong. Remember, this rulemaking was something that the FMC was supposed to finish up in six months. So it certainly has not been six months, it's been about two years, just over two years. But, like I said, he was saying right off the bat, this one had some pitfalls, that they didn't want to step into landmines that they didn't want to step into and they didn't want to have accidental, accidental bad effects I guess is a poor way of saying it through this rulemaking process. So they want to try to get it as right as they can.

Speaker 1: 13:27

I'm going to encourage everybody to still go look up the last text on this yourself, because there are some definitions here right, obviously, defining unreasonable physical deal and negotiate. There's some definitions around reasonableness and, for me, whenever you take big, broad strokes at big terms like that, like reasonableness, you're going to want to check it on your own industry. You're going to want to check to see if this is something that has an impact on you and if the way that that definition is applied to you works with you or not. This is one to pay attention to. I think the D&D rule got a lot more attention. This one, I think, is going to have more of a commercial impact. Although the other one had the administrative impact, I think this one has some potential for that commercial impact, but pay attention to it.

Speaker 1: 14:17

The last rule that we were watching is defining unfair or unjustly discriminatory methods. We're still waiting on any language right to be released on this, although, to be fair, the FMC said that they included some of this in their unreasonable refusal to deal and negotiate language. So we are still waiting on a independent rulemaking on defining unfair or unjustly discriminatory methods. I think what's probably happening here is because they included part of it in the unreasonable refusal to deal. They didn't want to double up efforts or parallel efforts in their own house, so they wanted to get the unreasonable result, to deal and negotiate out, see what pieces remain in the final version of the kind of edging into defining unfair and just the discriminatory methods and then if there's anything left over, they'll tackle that. I'm sure that they're tackling it in-house right now, but that's probably part of it. They don't want to be announcing something over here and then ultimately maybe forgetting something that didn't get in the final rule of the unreasonable, frizzled deal. That's probably what's happening. So I don't fault them for not having any text on that, because it's not exactly accurate that they have no text, but they have not released any standalone rulemaking process for the defining unfair or unjustly discriminatory methods.

Speaker 1: 15:29

All right, the last one that we were watching the Maritime Transportation Data Initiative. This was the RFI, the Request for Information number two. It closed up about a month ago. They received just over 22, 23 comments, which is really, really encouraging because it shows that the industry is still engaged on the topic. To have 22 comments in an FMC initiative is a great thing, like I said before I and like I said actually in the interview with Commissioner Bensel a few weeks back if you missed it, go check it out I think that the MTDI's role in being a major catalyst of starting the conversation and engaging the industry, got people talking about data and data dissemination and data standards. Just that alone makes this whole project a success in my eyes. Prior to the initiative, it felt like data conversations were a little disjointed, but Commissioner Bensel has helped organize that conversation, with a little more structure to the discussion, and I think the industry is stepping up with some pretty smart solutions.

Speaker 1: 16:28

So I'm going to continue to watch what's happening with the Maritime Transportation Data Initiative. I'm going to continue to go through all of the comments filed and certainly if there are additionally comments filed on this but go check that out as well. I think that this is something to stay engaged on, pay attention to. It's a really great conversation and if you still haven't seen the stakeholder interviews that happened, from the initial 18 interviews I mean it's an hour each. So over 18 hours of conversation with stakeholders of the supply chain system all over the place talking about data and data dissemination and what data is important to them and what data they don't have. It's really, really interesting. And how often do you get that? And you have access to it on the FMC's YouTube page. All right.

Speaker 1: 17:17

So story number two, what else is happening with the FMC? Well, there's plenty. We're going to keep talking about a few more stories at the FMC. For those of you watching the National Shipper Advisory Committee, they finally posted the recording of the last meeting, so that last meeting was May 20th. I had mentioned that it was going to happen and then they didn't post the recording so I didn't want to talk too much about it, but it looks like it was posted just about two weeks ago, a week ago. I expect a likely August or September date for their next meeting, just so you know. They usually have about four quarterly meetings, four meetings in a year, quarterly. I'm going to keep watching to let you know, but if history repeats itself, it looks like we're looking at probably an August, maybe September date for their next meeting. And remember, they're closing in on their two-year time limits and that's what they mentioned in this recording at the beginning was that these charter, these nominations, are for two years and so they're closing in on their two-year terms. So they said that they would be closing down in the fall slash, winter for this. We've talked about this committee plenty of times before, but I always like to make sure that we're all on the same page From the Federal Maritime Commission's announcement on the meetings and just generally what's on their NSAC website and that's kind of how you refer to it as NSAC.

Speaker 1: 18:28

The National Shipper Advisory Committee is a federal advisory committee. This is from the FMC Operates under the provisions of the Federal Advisory Committee Act, so that's why sometimes these federal advisory committees are called FACAs. It's the Federal Advisory Committee Act and so that's what the National Shipper Advisory Committee and really all federal advisory committees are called FACAs. It's the Federal Advisory Committee Act and so that's what the National Shipper Advisory Committee and really all federal advisory committees are beholden to is this Federal Advisory Committee Act. The committee was established on January 1, 2021, when the National Defense Authorization Act for fiscal year 21 became law.

Speaker 1: 18:57

The committee provides information, insight and expertise pertaining to conditions in the ocean freight delivery system to the commission. Specifically, the committee advises the FMC on policies relating to the competitiveness, reliability, integrity and fairness of the international ocean freight delivery system. Yes, the committee will receive an update from each of its subcommittees. The committee may receive proposals for recommendations to the Federal Maritime Commission and may vote on these recommendations. Any proposed recommendations will be available to the Federal Maritime Commission and may vote on these recommendations. Any proposed recommendations will be available to the public to view in advance of the meeting on the NSEC's website. So this was their announcement for this May 20th meeting, but also that background is what they usually post when they're talking about NSEC.

Speaker 1: 19:38

So, like I said, this is the Federal Advisory Committee to the FMC, meaning it is the avenue for private industry to engage with the FMC on a regular basis and provide recommendations and input on the federal agency. So this is how private industry, private stakeholders, can engage with the FMC. Outside of otherwise, notice and comment periods would be these requests for information, rfis from the MTDI or potentially the rulemaking notice and comment period where they put out to the industry hey, we're looking for feedback and so that's when you can submit comments. This is outside of that. This is opening it up so that there is a regular relationship with the private industry through these federal advisory committees. So a really important piece to general federal advisory or federal engagement with the private industry.

Speaker 1: 20:31

I do think the federal advisory committees are so important and the FMC, I think, does a good job of taking their recommendations into consideration. They respond to each one of those and house the recommendations on their landing page on the FMC's website. So go take a look. They have some pretty interesting recommendations and actually, if you track some of the recommendations and track some of the movement over the last two years in the ocean global shipping world, you'll see a lot of NSAC's work and maybe recommendations finding its way into movement and progress, which is great right. I mean, if the private industry is coming together and telling the FMC here's some things that we think need some work and then that, either through the FMC or just through speaking it out into existence, is is affecting change, that's a great thing. Um, one more thing that I want to mention um, that might be worth watching generally.

Speaker 1: 21:22

So NSAC said that they had previously made recommendations on government holds for D&D charges, detention to merge charges, and at the time the FMC wasn't able to fully respond to it because they had some pending things and obviously the D&D rule was going. But what NSAC was saying at the beginning of this May 20th meeting recording is that they are hoping to get more clarity on this. They're going to be revisiting some of their previous recommendations in their sunsetting of their two-year terms that, like I said, is closing up at the end of 2024. They're planning to revisit some of those previous recommendations and perhaps weigh in on some of those topics again that might need an extra little push. So I think the I think NSAC has really done a great job on this initial round of a federal advisory committee to the FMC right. This is the importers and exporters national shipper advisory committee.

Speaker 1: 22:12

There's been some call for a national ports and terminals advisory committee and I think I do think that it's a fair critique to say that this is a little imbalanced by having only a shipper advisory committee and not having that terminal or carrier presence, because if you just have one advising of a regulated entity pool and not the other, you're probably not getting the full story either. So there's been some push for a marine terminal operators and ocean carriers advisory committee. I really think that it's time to get that scooting because that would be a I think that would be an interesting group to pull together for advising the commission but for nothing else to balance the conversation. It's one thing to get the shippers pulling together and making recommendations and I think that's great and, like I said, engagement with agencies is what it's all about, because they're regulating the industry but they need to know what's happening in the industry and this engagement is how they know that. But additionally, you need the full story right, and so getting the other side of the regulated entity story is important. All right, story number three.

Speaker 1: 23:21

So one last FMC story before we move on to the other supply chain areas. The FMC issued a request for additional information regarding the Gemini cooperation agreement. So the public comment period is open and it's open until August 15, 2024. They don't give a lot of information about what they're requesting additional information on, but they are opening it up. But when they first received it they opened it up for, I believe, seven days and then now they're opening it back up for open comments, general public comments, without knowing much about what they've asked of the cooperation agreement here. But from the announcement from the FMC last week, a global operational alliance between the two of the world's largest container shipping companies will not go into effect next week because more information is needed by the Federal Maritime Commission to determine the potential competitive impacts of the arrangement.

Speaker 1: 24:10

So Maersk and Hoppig-Lloyd filed the Gemini cooperation agreement. It's agreement number 201429. In case you want to go look it up, there's an agreements library that you can go look up these agreements and certainly they'll reject any of the sensitive information. But for the most part you can just go look at these agreements. So, continuing on in the announcement, it was filed at the commission on May 30th 31st, excuse me filed at the commission May 31st 2024. The agreement would allow these companies to share vessels in the trades between the United States and Asia, the Middle East and Europe. Share vessels in the trades between the United States and Asia. The Middle East and Europe. Agreements become effective 45 days after filing, unless the commission issues a request for additional information, as it's doing here.

Speaker 1: 24:51

The commission uses the RFAI process to identify and achieve clarity on matters that were not addressed by the filing parties or were insufficient information was provided in the originally filed agreement. The commission has determined that the Gemini cooperation agreement has, as submitted, lacked sufficient detail to allow for a complete analysis of its potential competitive impacts. Information sought as part of an RFAI is commercially sensitive and is not publicly published, so that's why they're not letting you know what the questions are that they're sending back to the parties to this agreement. Reconsideration of the agreement will not commence until the commission has received a fully compliant response to its inquiry. The commission has 45 days from when it determines responses to the RFAI are deemed complete to review the agreement for competitive and legal concerns before it becomes effective. So after they get the responses and the commission determines that they have answered all the questions, they have 45 days from when they feel as though that response is complete to then review the new information. So we went from the 45 initial days of automatic implementation unless there was a request for additional information. That came in right under the wire. So now the commission, upon receipt of all of the answered questions, will get an additional 45 days to review, review the answers and complete the review for competitive and legal concerns. So a 15 day public comment period will open once public notice of the RFAIA is published and so that we know happened. So August 15th is when the public comment period will close up.

Speaker 1: 26:31

Remember, this entire cooperative agreement, cooperation agreement is set to go into effect February 2025. So we do have some time here and that's part of the reason why you would want to submit these agreements early is because that's always a potential right that there might be requests for additional information. So from the Hoppe-Gloyd website, they provide a bit of information on the cooperation, the cooperation agreement. So Hoppe-Gloyd and Maersk have signed an agreement for a new long-term operational collaboration called Gemini Cooperation, which will start February 2025. The ambition is to deliver a flexible and interconnected ocean network, with industry-leading reliability being its cornerstone. Gemini Cooperation will cover seven trades and offer 26 mainline services. The network will be centered around 12 key hub ports, 10 owned and or controlled terminals, as well as Singapore and Cartagena. We will, in addition and this is from the Hoppe-Lloyd website we will, in addition, run 32 dedicated shuttles to and from these key hubs to ensure seamless connections to many major ports. The fleet of our new partnership will consist of some 290 modern and efficient vessels with a total standing capacity of 3.4 million TEUs, many ready to adopt cleaner fuels. Now, like I said, you can go back and look at the agreement specifically. They talk a little bit more about how many vessels from which company will be coming in and they start to kind of dissect it with potential up to numbers. But if this, then that. So you get to kind of peer into the arrangement and it's a publicly filed agreement.

Speaker 1: 28:09

Now there's been a little sensationalism on this, so I wanted to actually bring in the statutory authority on this 45-day review and this request for additional information out of the FMC because I wanted to dispel some of the sensationalism. It's one thing to report. I mean sure they're asking for more information right at the end of the 45 days and now they get an additional 45 days. Oh man, and they get to decide when the answers are fully answered and when they come in. I mean maybe there's some sensationalism there, but look, I'm here to tell you in general it doesn't feel sensationalized to me. This feels pretty routine. This feels pretty much like the FMC is kind of going through the process and at least recently I've been seeing them ask for more information when complicated global ocean shipping vessel sharing agreements come in. So the statutory authority to do this, this request for additional information, is under 46 USC, so the United States code 40304, and it says commission action. So it's notice of filing. Not later than seven days after the date an agreement is filed, the FMC shall transmit a notice in the Federal Register. So they did that Request interested person to submit relevant information documents. They did that right. So agreement comes in within seven days. It's got to be posted to the Federal Register and the Federal Register is kind of like the classified section of a federal newspaper. It's all online now and it does get printed out into a book and I don't I think it still does, but that's kind of how it's presented, is it's essentially the classifieds of a newspaper.

Speaker 1: 29:37

Going on to subpart B, preliminary review and rejection After preliminary review, the commission shall reject an agreement that it does not find meets the requirements of the filing requirements section and the content requirements section. And I'll tell you, I looked those up. They are very kind of administrative. They're not because we don't like it, because we don't think that it's good. These are. They can. The commission can reject an agreement and I've said the commission can't really deny agreements and certainly these vessel sharing agreements. They can reject them if they're not filed correctly, like administratively filed correctly, and that's an oversimplification, but I want to just kind of bring your attention to that. It continues on. It said the commission shall notify in writing the person filing the agreement of the reason for that rejection. Again, administrative, for the most part oversimplified Review.

Speaker 1: 30:25

An effective date, unless rejected under subsection B, which was that rejection administratively, an agreement other than an assessment agreement is effective on the 45th day after filing or on the 30th day after notice of the filing is published in the federal register, whichever is later. So that's why we're looking at that 45 days from the filing or 30 days right from when it was published, in case the federal register is backed up and it doesn't get into the federal register for a while. Usually there's a few day lag, so when it's submitted to the federal register from the agency it might be a few days later that it actually gets published in these federal classifieds. So that's what they're kind of accounting for there. So if additional information or documents are requested on the 45th day after the commission receives all the additional information, or if the request is not fully complied with, on the 45th day after the commission receives the information and documents submitted and a statement of the reasons for noncompliance with the request, so it said, unless rejected, an agreement is effective on the 45th day after the commission receives all the additional information. So, like I said, in that statement the commission said they need to determine when they get all the additional information. But then it said if the request is not fully complied with, on the 45th day after the commission receives the information and documents submitted and a statement of the reasons for non-compliance with the request. So if the parties to this cooperation say we're going to answer this, this and this, we're not going to answer this last part on the 45th day after the commission receives the information and that reason for non-compliance, that becomes effective.

Speaker 1: 32:01

This is where these agreements are pretty interesting, because there is a there's a nod toward trying to get an agreement in place and not letting the FMC get too in the way, and to me this looks like it's pro-business right. I mean, this feels a little bit more like let the industry move forward, let the industry have their agreements unless there's problems. And so if there's problems, if there's questions, they have this request for additional information, and so that's what they're doing. Not necessarily problems, just need more information. But you can also and we're not going to talk about this too much here, but this is if the FMC does not like it and they think that it's anti-competitive and violates the Shipping Act, they would need to file in court of appeals. They would need to file in court of appeals. They would need to file in a court actually. So that would be how they would need to file to enjoin this action. That's not what's happening here. That would be controversial.

Speaker 1: 32:57

This request for additional information does not feel very controversial to me, but I don't know what they're asking and all I'm saying here is that look, they are allowed to request additional information. So request for additional information before the expiration of the period specified in subsection C1. The commission may request from the person filing any additional information and documents the commission considers necessary to make the determinations. Modification of a review period, shortening on request of the party filing an agreement, the commission may shorten a period specified, but not to a date that is less than 14 days. So they can modify that 45 day window, but it also says it can't be shorter than 14, but then it also says it can't be longer without the period specified may be extended only by the US District Court for the District of Columbia in a civil action brought by the commission. So if the commission wants more than 45 days, they're going to have to go take that to court as well. So that's the statutory authority.

Speaker 1: 33:54

I mentioned this because, like I said, there has been some sensationalism about the commission tolling this 45-day period, which basically means stopping this 45-day period, stopping the agreement from going into effect right away. I really think that it's more administrative and more routine. I did receive a comment on my post, so if you're not following me on LinkedIn, I encourage you to do so, but I posted about this and I mentioned that sensationalism and the comment said while this may happen more now, it was rare previously. This request for additional information was rare until recently and I agree with that with recently being probably the last 10 to 15 years right, the advent of the Global Ocean Shipping or Global Ocean Alliance and major vessel sharing agreements. But as a general statement, this really doesn't raise my eyebrows too much as an agency taking extra time to make sure that they're doing their proper and complete review. Like I said, this is rooted in statutory authority. The FMC is fully within their or I shouldn't say fully, because now Chevron, everything's up for debate, right, but this seems to me that it is rooted in statutory authority and not necessarily rooted in a regulation that the agency had determined themselves. So it gives it a little bit more oomph. I really don't think that this is too sensationalized. I've seen some headlines where it's like ah, the FMC is stopping all things, they're asking for more information. They've done this before. All right.

Speaker 1: 35:16

Story number four what else is happening? What else is happening out there? Shipping rates are rising. Have you heard, as reported in Bloomberg and actually reposted by GCaptain. I want to read you an interesting section of this report where it talks about the rising rates and I've been hearing a lot about $9,000, $10,000 per TEU or for FEU 40-foot equivalent box. You'll recall that in 2021, 2020, kind of COVID congestion years in 2021, 2020, kind of COVID congestion years rates rose to above $20,000. That's wild. That was wild because normal rates prior to that were like $1,200. So you went from like $1,200, $1,500 to like $20,000. So now there's a little bit of a concern when the rates start to rise.

Speaker 1: 36:03

And so, reading right off of this Bloomberg report that was, like I said, reposted by G Captain, greg Davidson, co-founder and CEO of New York-based Miro, a baby products company that ships a few hundred containers annually from Asia, says the highest he paid for a 40-foot container box was about $21,000 in 2022. Now industry speculation is that rates are headed back to $20,000, he said that would be a major markup from the 9,000 he recently paid. So he said recently he has had to pay $9,000 for that same 40-foot equivalent box. So, continuing on in the report and this is a quote from Davidson himself, if container prices are rising to this level again, that's going to drive some amount of inflation and obviously some amount of goods. Davidson said hints of such and this is a end quote, hints of such pricing pressures have already surfaced. Us producers prices climbed slightly more than forecasted in June.

Speaker 1: 36:56

The latest crunch comes just as wholesalers and retailers in the US and Europe rushed to stock up inventory ahead of the back to school and year-end holiday shopping seasons. Adding to the impetus, the threat of higher US tariffs on Chinese imports. A new quote. The only bright side here is a better understanding of the problem that we continue to have. End quote with disruption, said Stephen Lamar, president of the American Apparel and Footwear Association, which represents over a thousand leading brand names. Open quote. That doesn't mean that problem is any easier to manage or deal with. End quote.

Speaker 1: 37:26

So I thought that that was a pretty interesting section of that reporting. I've said this before right Shipping rates, as I've seen them. I mean they're pretty unpredictable, for sure, but I also have seen them kind of swing like a pendulum. So right now it feels like it's starting to swing back up. Are we headed back to $20,000 rates? I mean, who knows? Right, first off, who knows? But I'm not so sure and I just don't think so. The demand spike that we saw in 2021, and certainly I'm not a rates expert, but the demand spike that we saw in those 2021 COVID congestion years to me felt like a true anomaly, right. It was just such a funky time and people were stuck at home and so they were ordering stuff, and they were ordering big stuff like furniture and house projects and all sorts of things that take up a lot of space, and so that was taking up a lot of room in these cargo boxes. So, on top of the increased ordering, you also saw an increase in size of things coming in.

Speaker 1: 38:27

But while I'm saying that, I also want to be a little bit cautious, because we still have some major things happening out there. We still have the Houthis and the Red Sea, without much of a resolution in sight. There's been some activities, some sad activity, happening on vessels in that area, but it's still happening and there isn't really a lot of clarity on how it's going to be solved. We're also hearing reports of major storms disrupting vessel traffic around the Horn of Africa. So as they're diverting around the Red Sea, they're going around the Horn of Africa. Now they're hitting really bad weather.

Speaker 1: 39:01

I've also heard of Panama Canal disruptions for East Coast ports. I previously was saying I thought that the Panama Canal was kind of on the up and up, it was for the most part moving forward and that it wasn't going to be that impactful anymore and who knows. But I was seeing that their depth levels of the vessels able to go through had returned almost to normal heights. But apparently there's still some effects happening and certainly they're impacting some of the East Coast ports. So, and remember, it's an ecosystem, so effects that are happening in one place can have knock-on effects elsewhere, right? So if a piece of the ecosystem gets gummed up, like the Panama Canal or access to the East Coast ports, that could have a larger impact.

Speaker 1: 39:44

If, if the pieces are are getting uh stuck, uh, operational pieces, whatever it is, uh, we also have the threat of the ila. Right, like, looking forward, we have the threat of the ila, us mx discussions um the maritime us maritime alliance and the international longshoremen's association. So they, it's the, it's the terminals and the labor I'm certain that you've heard of this, but they might be moving toward a strike, right, the ILA has said look, we will not be continuing to work. We don't want to have to, but we will be striking if we need to. That contract concludes that master contract concludes September 30th. But just this week we had an announcement from USMX, us Maritime Alliance, that regional conversations were still moving forward and that they hope to return to the master contract discussion soon. But all of that said, right, there seems to be some certain norm to the ocean shipping disruptions and I think Stephen Lamar of American Apparel and Footwear Association said it well that there's a better understanding of the problems. Right, it doesn't make it easier, but having to identify it used to be part of the problem, identifying what was happening in the moment. But now we've learned something and hopefully can better mitigate some of those previously identified problems.

Speaker 1: 40:59

I'm going to keep watching this, but my gut, my gut and do not rely on this right, this is not legal advice and certainly not financial advice, but my gut is that this is just part of the pendulum swing. For now, 20,000 rates to me feels like it was a unique thing for the time and I don't think that our population and associated like worldwide population and associated demand for goods has grown in the three short years enough to normalize that $20,000 rate high cycle as kind of a normal cycle. I don't know, I don't think so. I'm certainly not an expert on rates, I'm just kind of anecdotally watching. But I think that it's something to pay attention to. But I don't know, I don't see it going back to $20,000 now, perhaps in the future as inflation and all sorts of things kind of modify those numbers. So we're no longer looking apples to apples, but $20,000 rates right now seem a little bit outside of the realm of what I would expect.

Speaker 1: 41:58

All right, story number five. This last story and I promise it's the last story has to do with offshore wind. The US Coast Guard is issuing a warning to mariners to exercise extreme caution following reports of a 300-foot-long piece of debris in the water near Vineyard Wind offshore wind farm off Nantucket. G-captain was reporting on this, so here's a quote from Vineyard Wind. They said in a statement this morning a significant part of the remaining GE Vnova blade detached from the turbine. Maritime crews were on site overnight preparing to respond to this development, though current weather conditions create a difficult working environment. Despite these challenging weather conditions, a fleet of vessels remains at sea managing the situation and working to remove bulk debris. We have deployed additional crews to nantucket island in anticipation that more debris could wash ashore tonight and tomorrow as we continue to monitor additional coastal communities. That's what Vineyard Wind said in a statement, continuing on in that reporting the US Bureau of Safety and Environmental Enforcement so BSEE is how it's usually pronounced, b-s-e-e, which is the sister agency to BOEM Bureau of Ocean Energy Management. So Bessie has issued a suspension order to Vineyard Wind, halting all power production and new construction of wind turbines due to the blade failure. Operations will remain suspended until further notice. Additionally, a preservation order has been issued to protect evidence related to the incident. Again, this is continuing on in that GCAPTAN article. Bessie has been on site with Vineyard Wind as investigations are underway and will conduct an independent assessment to ensure the safety of future offshore renewable energy operations.

Speaker 1: 43:32

The Vineyard Wind project, located 15 miles offshore of Martha's Vineyard, connects to the New England grid using underground cables, subsea cables to a substation on Cape Cod. The project delivered its first power to the grid in January with one turbine generating approximately five megawatts of power. As of June, the project had 10 turbines in operation. So, being based up here in Massachusetts, that's where I'm home, ported, you could say that's where I live up here in Massachusetts.

Speaker 1: 43:58

This has hit our local news and reports of debris washing up on beaches was actually slowly building over the past week it was actually last Saturday, july 13th, but the blade reportedly broke. So then, after it broke, it was kind of hanging there, and it wasn't until yesterday when the turbine actually detached from the pillar and fell into the water. I'm still not exactly clear on what happened, and perhaps it's not exactly known what happened. But I'm more curious to know how this is dealt with in European wind farms. Right, they've arguably been there for much longer. Well, they certainly have been there for much longer than the US wind farms. But I'm also wondering to know has this happened before and with what regularity? If it does happen, you know what usually happens, because you're having a lot of pieces of this broken up wind turbine scattered into the water and they're, they're, they're coming up on beaches, and I mean these are some beaches that, especially in the summertime, here, beach goers, right, swimmers, and you could get hurt. So, um, I'm going to keep an eye on this, but, uh, this is. This is an interesting thing too, all, but this is an interesting thing too, all, right. Well, that's it for today.

Speaker 1: 45:07

I'm so sorry, this was a little bit longer than I expected, but, as always, the guidance here is general for educational purposes. It should not be construed to be legal advice related to your matter, directly related to your matter. If you need an attorney, contact an attorney, but if you have specific legal questions, feel free to reach out to me at my legal company, squall Strategies. Otherwise, for the non-legal questions, the e-learning and general industry information and insights, come find me at the Maritime Professor. Again, this is not legal advice directly related to your matter. 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 Landon Bysse and if you prefer to see the video they live my YouTube page by land and by sea, presented by the maritime professor. While you're at it, check out our website, the maritime professorcom. So until next week. This is Lauren Began, the maritime professor and you've just listened to by land and by sea. See you next time.