FMC launches ocean carrier audit program

Written by Nick Blenkey
FMC Chairman Maffei

FMC Chairman Daniel B. Maffei:  “I and the other Commissioners need rapid access to the perspectives of importers and exporters on the ground dealing with the realities of ocean shipping every day.”

Federal Maritime Commission Chairman Daniel B. Maffei has lost little time in responding to President Biden’s “all of government” executive order aimed at enhancing competition. Among the many targets of the order were “unjust and unreasonable practices in the context of detention and demurrage.”

In response, the FMC has established a new audit program and dedicated audit team to assess carrier compliance with the agency’s rule on detention and demurrage. It will also provide “information beneficial to the regular monitoring of the marketplace for ocean cargo services.”

The “Vessel-Operating Common Carrier Audit Program” was established Monday at the direction of Maffei and launched immediately.

The program will analyze the top nine carriers by market share for compliance with the FMC rule interpreting 46 USC 41102(c) as it applies to detention and demurrage practices in the United States. The commission will work with companies to address their application of the rule and clarify any questions or ambiguities. Information supplied by carriers may be used to establish industry best practices.

Other focus areas of the audit process may include practices of companies related to billing, appeals procedures, penalties assessed by the lines, and any other restrictive practices.

“The Federal Maritime Commission is committed to making certain the law is followed and that shippers do not suffer from unfair disadvantages,” said Maffei. “The work of the audit team will enable the commission to monitor trends in demurrage and detention practices and revenue, as well as to establish ongoing dialog between staff and carriers on challenges facing the supply chain. Of course, if the audit team uncovers prohibited activities, the commission will take appropriate action. Furthermore, the information gathered by the audit process might lead to changes in FMC regulations and industry guidance if warranted.”

The audit program will begin with an information request establishing a database of quarterly reports allowing the commission to assess how detention and demurrage is administered. Responses will be followed by individual interviews with the carriers. Each of the nine largest carriers by market share will be audited irrespective of whether a formal or informal complaint has been filed at the FMC.

Lucille Marvin, the commission’s managing director, will lead both the audit program and the audit team, which will initially be comprised of existing FMC employees.

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