FMC investigating final-leg delivery cancellations

Date: Wednesday, April 25, 2018
Source: American Shipper

 The U.S. Federal Maritime Commission said Monday that is has launched an inquiry into complaints from some U.S. cargo owners that “some ocean carriers are unilaterally changing service contract terms by cancelling the port/container yard to final customer destination leg of the cargo shipment. These cancellations are allegedly due to lack of inland truck availability.”
   “The Commission’s Bureau of Enforcement has initiated an expedited inquiry into these ocean carrier actions. Letters were sent last Friday, April 20, to those shipping lines whose service contract actions have been called into question,” said the FMC in a press release. Responses are expected within 30 days.
   The FMC added it is “seeking information that will assist in understanding the timing, fairness and lawfulness of the alleged unilateral changes to ocean carriers’ obligations for inland trucking services.”
   Edward Greenberg, the general counsel of the National Customs Brokers and Forwarders Association of America, said that he has forwarded two notices customers received to the FMC.
   One is a letter dated March 16 from MOL, now part of the ONE liner consortium, which says it is cancelling door moves in Detroit because of a “shortage of truck capacity in the United States.”
   “The situation has worsened to such an extent that, pursuant to MOL’s FMC tariff, all door moves for imports and exports in Detroit are being cancelled. Imports that are already en route will be converted to container yard delivery. Customers will need to make their own arrangement for truck power for pickup of export containers and for delivery of import containers.”
   The notice from Hapag-Lloyd says the company is “suffering major trucking power in Chicago area” and adds “rail storage will be secured by Hapag and then invoiced to customer.”
   The tariff says the “carrier shall make a good faith effort to coordinate delivery prior to expiration of free time applicable at any facility where the container is stored while in the custody and control of carrier prior to delivery. However, in the event that carrier is unable to execute delivery prior to expiration of free time for reasons beyond the carrier's control, any demurrage charges that are accrued including but not limited to delays in documentation, delayed clearance, acts or omissions of governmental agencies, holds, exams, shortage of trucking power, tri-axle and/or chassis availability, volume surge, consignees delivery or acceptance windows, terminal congestion, vendor/subcontractor failure or any other causes beyond the control of the carrier are to be billed for the account of the cargo.”
   It is not clear if these changes are permanent.
   Hapag-Lloyd declined to comment.
   Greenberg said the notices seemed “most unfair and unreasonable to me. If a party enters into a contract to provide for a service, it seems to me inappropriate that during the pendency of the contract you unilaterally change the terms and make the liner’s problem your problem.”
   He said it is not clear what the geographic scope of the actions are. While the Hapag-Lloyd letter mentions a problem with trucking power in Chicago, the tariff itself is not limited to Chicago. 
   Carriers can modify a rules tariff, but Greenberg said there is a question “about whether or not it’s appropriate while a contract is in force to be able to amend a tariff in a way that disadvantages the other party.”
   The ability of a carrier to amend a rules tariff would depend on how a service contract is written, he said. And while he did not have any empirical evidence, he suspected in most cases “service contracts would adopt the rules tariff as the rules may be amended during the term of the contract.”
   “Whether that’s appropriate or lawful is another question. My view is that merely because you stick in a tariff rule doesn’t mean that it is consistent with the Shipping Act,” Greenberg said.
   “My view is it could be considered an unreasonable practice in violation of the act to essentially unilaterally change provisions of a contract.”
   He pointed to 46 U.S.C. Section 41102 (c), which says, “A common carrier, marine terminal operator or ocean transportation intermediary may not fail to establish, observe and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing or delivering property.”
    Greenberg said, “My view is this is not reasonable. This affects the delivering of property, receiving of property and it’s not a reasonable regulation or practice.”
   Larry Gross, president of Gross Transportation Consulting of Durango, CO, an independent consulting practice specializing in freight transportation matters, said he is in the process of developing a “Drayage Demand Index” with drayage.com, a service that helps companies locate drayage trucks.
   That index found demand for drayage particularly high in Chicago earlier this year.
   “Typically I think where you’re finding the problem is on the long haul drays. That’s where the shortage lies. It’s the drays that now are in danger of going to two days because of the ELD (electronic logging device) requirement and now people have to actually take the hours of service seriously.”
   Gross said the index, which he plans to publish in his company’s monthly newsletter, will be the first time that demand for drayage can be tracked in a methodical way. 
   “I would term it a candle in a dark room kind of an indicator,” he said. Instead of anecdotal information, the new index will offer continuity and “a baseline of what normal is versus what we’ve been seeing.” 
   It estimates demand for drayage by looking how many searches a company has to perform in order to find a truck. A composite average was developed by looking at how many “clicks” it took customers to find a truck with the number 100 being the average over the three year period from 2015 to 2017. The higher the number, the more difficult it is to find a drayage truck.
   Using that index, he said the national average climbed over 300 at the end of January and has been falling since then to about 192. He notes the index has fairly large swings and that he would consider anything from 50 to 150 to be in the normal range.
   “I can tell you the situation in Chicago was quite severe but it has eased out,” he said. Using the same methodology, the index shot up to the 600 range at the end of January, beginning of February and is back down in the 270 range.”
   “So it’s better than it was—it was bad, really bad. Now it is better, but still not great.”
   He said the same index indicates finding drayage has not been difficult on the West Coast where the index for Los Angeles is around 87 and Seattle at 135. 
   He said the index shows the drayage markets in several cities such as Denver, Charleston, Atlanta, Norfolk, Montreal, Toronto, and Vancouver “are fairly tight.”

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