The Federal Maritime Commission has again warned ocean carriers to ensure that any rate increases imposed in response to attacks on commercial vessels in the Red Sea are compliant with FMC regulations. The FMC has announced an informal public hearing for Feb. 7 to examine how these attacks are impacting commercial shipping and global supply chains.
The Houthi militant group (which is based in Yemen and supported by Iran) is continuing to attack commercial vessels transiting the Red Sea, an important approach to the Suez Canal that handles a significant share of global seaborne trade. In response, some international shipping companies are suspending voyages through the Red Sea and rerouting their vessels around Africa’s Cape of Good Hope, resulting in higher costs and shipment delays that are now expected to last at least several months. The U.S. and others are responding with military action in an attempt to secure this trade lane.
The FMC has noted that ocean common carriers are announcing rate increases and/or instituting fees or surcharges in conjunction with their operational adjustments. The Commission said again recently that it is closely monitoring these changes for compliance with FMC regulations, which require carriers to provide at least 30 days’ notice before implementing a change to their tariffs that results in higher costs for shippers unless specifically authorized by the FMC. Carriers are also responsible for ensuring that service contracts and amendments are filed in a timely and accurate manner, the FMC said, and for complying with the Shipping Act's prohibitions against unjustly discriminatory practices, unreasonable prejudices, and unreasonable refusals to deal.
The FMC also reminded shippers that filing suit in a court of law is the exclusive remedy for any alleged breach of a service contract (e.g., carriers imposing rates, charges, or rules other than those in effect at the time cargo is received if the service contract incorporates all or a portion of a carrier's published tariff), unless parties agree to an alternative dispute resolution forum. However, alleging breach of contract is different than alleging a Shipping Act violation, which can result in fines or damages against the carrier.
ST&R’s team of former FMC and DOJ litigation personnel, freight forwarders, and former administration and congressional staffers can help shippers facing higher costs from carriers. For more information, please contact Andy Margolis at (305) 894-1021 or via email.
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