The US Federal Maritime Commission (FMC) has issued a Notice of Inquiry (NOI) that will examine certain billing practices by Vessel Operating Common Carriers (VOCCs), which are shipping lines.

Referring to the earlier investigation that led to its recent Final Rule on Detention and Demurrage, the FMC said: “Comments filed in Docket No. 19-05, Interpretative Rule on Detention and Demurrage Under the Shipping Act, raised concerns about the billing practices of ocean carriers.  Allegations were made that VOCCs have expansively defined “merchant” in their respective bills of lading to include persons or entities with no beneficial interest in the cargo and who had not consented to be bound by the terms of the underlying bill of lading,” the FMC said. 

In issuing its Final Rule on Demurrage and detention the FMC declined to prescribe any specific billing practices, or “to address the application of the merchant definition as it related to such practices”. Complaints about abuse of the merchant definition have continued. In the notes on the new NOI the FMC said: “The Commission has been advised by third-party logistics providers, harbour truckers, stevedores, customs brokers and freight forwarders, many of whom have no connection to the cargo or the shipment, other than providing service to entities that may own or have a proprietary interest in the cargo covered by a VOCC bill of lading, that VOCCs seek payment from such third parties for rates and charges pursuant to the terms and conditions of the bill of lading. Allegations have also been received that VOCCs threaten to discontinue allowing such third parties to provide service for future shipments unless amounts due on current shipments are paid”.

The FMC is now revisiting this issue, with a view to determining “whether such carrier enforcement (i.e., seeking to collect freight and other charges) is unfairly or unjustly wielded against third parties who have not directly contracted with the VOCC nor assented to be bound by the contract of carriage”. It is asking for public comment, and will see specific information from shipping lines directly.

“The NOI seeks information related to how VOCCs apply the term “Merchant” in their bills of lading. For example, does the VOCC apply the term “Merchant” in a manner that subjects third parties that are not in a direct mutually agreed business relationship with the VOCC to liability?  The NOI also asks whether ocean carriers have sought to enforce the definition of “Merchant” against third parties that have not consented to be bound by, or otherwise accepted, the terms of the bill of lading,” the FMC stated.

“We encourage ocean container stakeholders to share their experiences with bills of lading that contain these described “Merchant” clauses. Without public comment and involvement, it is difficult for the Commission to address alleged commercial abuse in this area,” said FMC Chairman Michael Khouri.