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FMC Chairman Says Permission Process for Surcharge Waivers 'Relatively Limited'

The Federal Maritime Commission may need to change the way it adjudicates emergency surcharge waivers requested by carriers, at least one shipping industry official said during an informal Feb. 7 FMC hearing on Red Sea shipping disruptions.

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Since the Yemen-based Houthis began attacking commercial cargo ships transiting the region, the FMC has granted multiple carriers with special permissions to immediately hike rates on impacted cargo, allowing them to bypass the 30-day notice that is usually required for rate changes.

Some of those Red Sea surcharges were granted very soon by the FMC after being requested by the carrier, Peter Friedmann, the executive director of the Agriculture Transportation Coalition, said during the hearing.

"Was there any calculation of the cost to the carrier, the cost to the shipper, the savings to the carrier not going through the Suez [Canal], the impact of the amount of surcharges?” Friedmann said. He said he didn’t think the FMC could have evaluated those criteria within the time frame the requests were sent and approved, which sometimes occurred within days (see 2401290052 and 2401050066). Yet the carriers got "carte blanche" approval to insert the surcharges, Friedmann said.

FMC Chair Daniel Maffei said approvals don’t imply that the FMC approves of the "level" of the surcharge, and it doesn’t prevent the commission from investigating the charge. He also said that the scope of special permissions is "relatively limited.”

Maffei also said that if the FMC were to deny most of the special permission requests they received, shippers would still face increased rates. He said many carriers didn’t request a special permission but instead were able to increase their rates after giving a 30 day-notice. Carriers can also impose an additional charge by invoking a force majeure clause in their contract or another "relevant clause," Maffei said during the hearing.

If the special permission process were eliminated or if the requests were just denied, shipments could be put at risk because carriers may decide that the shipment is not worth it for them financially.

“I will review this, but I definitely want to review it in context, because I don’t think it would be justified,” Maffei said. “If we just sort of said, well, we won’t do these waivers anymore, I do fear that that would have some unintended consequences.”

Maffei also said that a fee approved under special permission doesn't apply to goods or cargo that already has been received by a carrier or their agent.

In response, Friedmann said that he wasn't asking the FMC to deny these requests but rather to look at why the carriers are requesting the special permissions. "You can't just say to the carrier 'request it, and you can do whatever you want,'" Friedmann said. There has to be some mechanism or process to look at these requests and ask questions about why they need the carriers to need the surcharges approved quickly, he said.

Maffei did say he's concerned that the surcharges were part of "hidden rate increases."

"If a carrier wants to raise its rates, raise your rates," he said. "That's not up to us, that's up to the market and competition to decide. But if you're going to hide that, that's a deceptive practice," Maffei said.