WSC comments to FMC proposed rulemaking “Definition of Unreasonable Refusal to Deal or Negotiate with Respect to Vessel Space Accommodations Provided by an Ocean Common Carrier” (Docket No. 22-24)
Executive Summary
Section 7 of the Ocean Shipping Reform Act of 20222 (OSRA 22), requires the Federal Maritime Commission (FMC or Commission) to define when a carrier has unreasonably refused to negotiate or deal with respect to vessel space accommodations. See 46 U.S.C. § 41104(a)(10). To meet this Congressional direction the FMC issued a Notice of Proposed Rulemaking (NPRM), FMC Docket No. 22-24. In its NPRM, the Commission states that the term “unreasonable” must be determined on a case-by-case basis, reviewing the circumstances presented at the time of the claim. To help define what scope of actions will be reviewed, the Commission has proposed a factor test to guide their Administrative Law Judges (ALJ).
WSC agrees with the Commission that allegations of “unreasonable refusal to deal or negotiate” be dealt with on a case-by-case basis and that using a suite of non-exclusive factors is both appropriate and consistent with its past precedent. This is the approach that the Commission has consistently used when adjudicating cases brought under 46 U.S.C. § 41104(a) and its predecessors. It is important to remember in this regard that OSRA 22 did not create the “unreasonable refusal to deal” prohibition. Instead, OSRA 22 merely added language to the section by expressly naming vessel space accommodations as a factual situation to which the prohibition applies. Thus, adherence to past Commission precedent is required absent a reasoned explanation why its prior policies and standards are being changed.
Although WSC agrees with the Commission’s general approach, there are four specific points on which WSC urges the Commission to amend its proposal before publishing a final rule:
Delete proposed subsection 542.1(b)(2)(i). This subsection lists the first factor in the test for unreasonableness as: “Whether the ocean common carrier follows a documented export strategy that enables the efficient movement of export cargo.” Listing adherence to a written “export strategy” as the first factor in a reasonableness test creates a de facto requirement that carriers create such a document, and the Commission has no authority to impose such a requirement. Not only does the Commission not have the authority to require the development and production of such a document, the Commission has also failed to explain how an export strategy document would have any relevance to or evidentiary value in evaluating the reasonableness of subsequent action or inaction by an ocean carrier as it pertains to any individual decision on whether to deal or negotiate with respect to vessel space accommodations.
Delete the statement in the preamble that: “A common carrier granting customers special treatment to one party because that party is a regular customer is likewise likely to be viewed as unreasonable.” 87 FR 57677. This statement is contrary to law as it is categorically at odds with the confidential service contracting provisions added by the Ocean Shipping Reform Act of 1998 (OSRA 1998),3 which were left undisturbed by OSRA 22. This misstatement (citing to a marine terminal case from 19684) ignores the most consequential change made by OSRA 1998 and, if not removed, will taint the entire rulemaking.
Expand proposed subsection 542.1(b)(2)(ii) to include enumerated legitimate business factors, in the same way that the Commission has enumerated “transportation factors” in 542.1(b)(1), to correspond to the use of those factors in subsection 542.1(b)(2)(iii).5 This would be consistent with the Commission’s prior precedent finding actions to be reasonable that are connected to either legitimate business decisions or legitimate “transportation factors.” Failure to include legitimate business factors risks those factors receiving little to no weight in the adjudication of claims. This further leaves both regulated and protected entities with little insight into the Commission’s thinking as to what overall factors will be considered in evaluating “good-faith negotiations” and whether “business decisions … were subsequently applied in a fair and consistent manner.”6
Revise proposed subsection 542.1(d) by adding or clarifying the following – 1) add to the text of the regulation that the burden of production shifts to the carrier but that the burden of persuasion remains with the complainant; and 2) either eliminate the text regarding submittal of evidence through a certified statement by a “compliance officer” or set forth what other methods carriers may use to provide rebuttal evidence. The language of the proposed rule sets forth a very specific means by which a carrier may make that rebuttal – certification – which could be read to suggest that certification is the only way that a carrier may produce rebuttal evidence. WSC does not understand this to be the Commission’s intent, and therefore seeks clarifying language to either specify additional means of submitting rebuttal evidence or removal of the certification example.
Download the full WSC Comments to the FMC proposed rulemaking Docket No. 22-24.