United States: FMC Final Rule Exempts Ocean Carriers From Publication Of Service Contract Essential Terms

The Federal Maritime Commission (FMC) has issued a final rule exempting vessel operating common carriers (VOCCs) from publishing "essential terms" of service contracts. The final rule took effect on its publication date of June 25, 2020.

The final rule adopted the exemption from the existing requirement that VOCCs publish essential terms of otherwise confidential service contracts as proposed in the FMC's Feb. 14, 2020, notice of proposed rulemaking, but it did not adopt the proposal that would have added a new requirement to publish certain generally applicable service contract rules and notices.

As modified in the final rule, VOCCs may voluntarily publish generally applicable service contract terms and notices but will not be required to do so.

The final rule was an outgrowth of the September 2018 service contract exemption request from the World Shipping Council (WSC) and the FMC's resulting order on Dec. 20, 2019 (the P3-18 Order), which denied the request for an exemption with respect to filing service contracts but granted an exemption with respect to publication of essential terms. At that time, the FMC indicated that a rulemaking would follow.

Consistent with the P3-18 Order, the FMC proposed eliminating the need to publish the "essential terms" for each VOCC service contract: i.e., the 1) origin and destination port ranges, 2) commodity, 3) minimum volume or portion, and 4) duration.

However, in a departure from the P3-18 Order, the proposed rule would have added a new requirement that VOCCs publish a generally applicable "statement of service contract rules and notices." As highlighted in Holland & Knight's previous alert on the proposed rule, the proposed replacement publication requirement would have imposed a new regulatory burden representing a substantial change for some VOCCs. (See "FMC Proposes to Change Ocean Service Contract Publication Requirements," Feb. 25, 2020). Recognizing the additional regulatory burden, the final rule provides that VOCCs may voluntarily publish certain generally applicable service contract terms and notices but are not required to do so.

Originally published July 1, 2020.

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