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August 28 2023

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36 Journal of Commerce | A ugust 28, 2023 www.joc.com Government Weighing business motives RILA and the National Associa- tion of Chemical Distributors also support narrowing the scope of rea- sonable factors for refusal to include issues relating to vessel safety and stability, weather-related scheduling considerations and other factors sur- rounding vessel operation outside the vessel operators' control. What others such as the Agri- culture Transportation Coalition and North American Meat Institute (NAMI) have come out against is allow- ing business factors, such as the car- riers' pursuit of maximizing revenue, to be reasonable justification to deny cargo, particularly agriculture exports. But making broad generaliza- tions could hurt a carrier's business, carriers CMA CGM and Zim Inte- grated Shipping Services said in comments to the FMC. CMA CGM noted that it is not a viable business model if carriers cannot refuse "cus- tomers who present risks such as non-payment, misdeclaring cargo, improperly packaging hazardous cargo and/or causing 'fall down' by placing bookings for vessel space that they failed to fulfill." Zim added that limiting the reasons for legitimate service refusal takes control away from carriers and their ability to be agile in evolving market conditions. The restrictions could also be dangerous, prohibiting a carrier, for example, from refusing to transport hazardous goods that are incompati- ble with other cargo, Zim added. Mediterranean Shipping Co. and the World Shipping Council, which much feedback the agency circled back in June with a modified version and gave the industry 30 days to provide comment. Maersk told the FMC in its com- ments that contract breaches go both ways as shippers often redirect cargo to other shipping options for lower rates and faster transits, not- ing that is "part of everyday busi- ness under US and international contract law." The carrier added that those actions should be anticipated — especially since shippers agree to contracts that provide options if space is denied — and that dis- putes should be resolved by both parties, not the FMC, since contract breaches are not violations of the US Shipping Act. "The regulation should not transform the Shipping Act into a loaded gun pointed at ocean carriers for each difficult negotiation with individual customers about vessel space in a tight demand market," Maersk said. The Retail Industry Leaders Association (RILA) backed the FMC's suggestion to include a good faith clause on whether the ocean com- mon carrier made a legitimate effort to mitigate the impact of a refusal. "This is a critical addition to the rule since it incentivizes a carrier to have a contingency plan in place to respond to reasonably foreseeable events and make good faith efforts to help the impacted shipper move its goods to the ultimate destination as quickly and efficiently as possi- ble," RILA said in its comments. CONTAINER LINES ARE warning federal maritime regulators that rulemaking that directs when it is considered "unreasonable" for them to refuse cargo will be weaponized against them, while shippers are ask- ing for good faith clauses and tighter documentation requirements in that rulemaking. Those sentiments were expressed in comments interested parties provided to the US Federal Maritime Commission (FMC) on the proposed rulemaking and made pub- lic by the agency on July 31. The rulemaking, which centers on defining what it means for an ocean carrier to unreasonably refuse to deal or negotiate with respect to vessel space, has underscored sharp divisions in the industry on whether the FMC needs to take a heavier hand with liners following complaints by shippers — partic- ularly from agricultural exporters during the height of the pandemic disruption — that their bookings were being refused, costing millions of dollars in damages. The FMC originally proposed a rule in September 2022, but with so A 'loaded gun' Carriers warn FMC not to 'weaponize' proposed rule on refusal of service By Teri Errico Griffis The FMC received more than 20 comments on its latest dra rule on "unreasonable" refusal of service. Shutterstock.com International | Washington | Customs | Security | Regulation

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