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Service Contract Filings A "Vestige Of An Old Regulatory Regime'

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The World Shipping Council (WSC) has expressed disappointment in a recent decision by the U.S. Federal Maritime Commission (FMC) to reject a portion of its petition calling for the elimination of service contract filing with the agency. 

"We are waiting to see the official order so that we can better understand the commission's reasoning," John Butler, WSC's president and CEO, told American Shipper. "Based on what was said at the meeting, there was no basis articulated for the denial of relief on service contract filing that is consistent with the applicable legal standard." 

He added, "The fact is that service contract filing is a vestige of an old regulatory regime that no longer exists, and it is time that the commission recognizes that the requirement has no place in today's competitive and fast-moving marketplace." 

Washington, D.C.-based WSC – which counts most of the major container shipping companies as members – petitioned the FMC in September 2018 to exempt the vessel-operating common carriers (VOCCs) from service contract filing requirements of the Shipping Act. 

The council stated in its petition that the continued filing of service contracts with the FMC has "no bearing whatsoever on the functioning of the competitive marketplace."

WSC also said the exemption would bring the ocean carriers in parity with the non-vessel-operating common carriers (NVOCCs), which are exempt from filing their NVOCC Service Arrangements with the commission. 

"Exempting the service contracts from the requirement to file them with the commission will not reduce competition between VOCCs or between VOCCs and NVOCCs, who will continue to compete with one another in the market as they currently do," WSC said in its petition. 

In addition, WSC pointed out in its petition that "few, if any, other countries require the filing of contractual arrangements between VOCCs and shippers" and there is "no indication" that either shippers or the commerce of those countries has been harmed by not filing service contracts. 

The WSC's petition received letters of support from the National Industrial Transportation League, the country's oldest and largest shipper organization, as well as the Caribbean Shipowners Association and Atlantic Container Line. 

However, based on the FMC staff's recommendations, FMC Chairman Michael Khouri, along with Commissioners Daniel Maffei and Louis Sola, on September 26 approved the retention of service contract filing for VOCCs due to competition concerns. 

Commissioner Rebecca Dye opposed the decision to retain the service contract filing requirement for the ocean container carriers and said she plans to submit a more extensive decision of dissent to her fellow commissioners for their consideration. 

The commission, however, approved the second part of the WSC's petition to exempt ocean container carriers from essential terms publication requirements in the Shipping Act, based on the FMC staff's recommendation that it would not be a detriment to commerce or result in a reduction to competition. 

Essential terms are prepared by the ocean container carriers in tariff format when they file each service contract with the commission. They include the origin and destination port ranges, commodities involved, minimum volumes and the service contract duration.

The FMC said a rulemaking in regards to the WSC's petition will not be initiated until after Dye circulates her dissenting opinion to the other three commissioners for their review.

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