Court Upholds Carrier Limits in Refusing to Deal with Shippers

The Court of Appeals for the District of Columbia Circuit has upheld a September 2024 final rule amending the Federal Maritime Commission’s regulations to implement a statutory change prohibiting ocean common carriers from unreasonably refusing to deal or negotiate with shippers with respect to vessel space accommodations. This prohibition applies only to vessel-operating common carriers and containerized cargo.

The rule established non-binding factors the FMC may consider in evaluating allegations that a carrier violated the law: (1) whether the carrier followed a documented export policy that enables the timely and efficient movement of export cargo, (2) whether the carrier engaged in good faith negotiations, (3) whether the refusal was based on legitimate transportation factors, and (4) any other relevant factors or conduct. The rule specifies that a documented export policy should contain information on pricing strategies, services offered, strategies for equipment provision, and descriptions of markets served.

The plaintiff, a global carrier organization, argued that (1) the FMC does not have statutory authority to consider price in evaluating the reasonableness of a carrier’s offer and did not set forth a sound basis for doing so, (2) requiring a carrier to submit a documented export policy exceeds the FMC’s statutory authority, is arbitrary and capricious, and conflicts with another provision in the 1984 Shipping Act, and (3) the FMC’s removal of business decisions from a specific list of factors that may be considered in evaluating reasonableness is arbitrary and capricious.

The court rejected all three arguments, reasoning that (1) there is a difference between setting shipping rates (which the FMC cannot do) and occasionally evaluating whether one particular rate was unreasonably high as part of a broader review, (2) departing from the common practices and procedures set forth in a documented export policy can be evidence of unreasonableness and the information required in such policy is properly limited, and (3) the final rule makes clear that business decisions may still be considered.