Ocean Carrier Behavior and FMC Final Rule: Implications for US Exporters

Recent allegations by US shippers highlight a troubling trend among ocean carriers. According to a JOC.com article titled "Two US Shippers Latest to Allege Carriers Bumped Contract Cargo to Spot Market", carriers have been accused of sidelining contract cargo in favor of higher-paying spot market shipments. This practice, if proven true, not only undermines contract rate integrity but also increases the risk of missing cargo receiving windows (CRWs), leaving US exporters scrambling to maintain reliable schedules.

This article explores the potential impacts of such carrier behavior on vessel schedules for US exporters and outlines strategies to mitigate these risks.

The FMC Final Rule on Refusal to Deal

The Federal Maritime Commission’s (FMC) Final Rule on Refusal to Deal is intended to ensure fair treatment for shippers, mandating that carriers honor their contractual obligations. However, the JOC.com article underscores ongoing challenges in enforcing these rules.

• Spot Market Preference: Some carriers allegedly prioritize spot market shipments over contract cargo, citing higher profitability.
• Implications for Shippers: US exporters relying on fixed-rate contracts face uncertainty, risking delayed shipments and higher costs.

How This Affects Vessel Schedules for US Exporters

1. Increased Risk of Missing Cargo Receiving Windows

When contract cargo is deprioritized, exporters face increased risks of missing their CRWs at port terminals. This can lead to:

• Missed Cutoffs: Containers not delivered within the specified window may face rolling to the next vessel.
• Operational Bottlenecks: Last-minute schedule changes disrupt drayage coordination and terminal operations.

Adaptation Tip:

Use real-time data platforms to track vessel schedules and adjust CRW management proactively.

2. Disrupted Vessel Schedules

If contract cargo is bumped, vessel schedules can become increasingly unpredictable:

• Irregular Load Patterns: Sudden changes in loading priorities affect vessel balancing and departure times.
• Port Congestion: Unscheduled shipments can lead to delays in loading and unloading, exacerbating congestion at US ports.

Adaptation Tip:

Collaborate with carriers to obtain pre-validated ERDs and CY Cutoffs to minimize surprises.

3. Financial Implications for Exporters

The move to prioritize spot market shipments has direct financial consequences for exporters:

• Higher Costs: Exporters may need to renegotiate contracts or resort to more expensive spot rates.
• Dispute Costs: Filing FMC complaints or engaging in legal disputes increases administrative burdens.

Adaptation Tip:

Adopt Standard Operating Procedures (SOPs) for filing disputes, including thorough documentation and evidence collection to support claims.

Strategies for Exporters to Mitigate Risks

1. Leverage the FMC Final Rule

The FMC Final Rule empowers shippers to file complaints against carriers refusing to honor contracts. Exporters should:

• Document Discrepancies: Maintain detailed records of contract terms, communications, and shipment histories.
• File Prompt Complaints: Engage the FMC promptly if contract cargo is bumped in favor of spot shipments.

2. Prioritize Carrier Collaboration

Strong relationships with carriers can help mitigate the risk of contract breaches:

• Open Communication: Engage carriers early to confirm loading priorities and schedule changes.
• Strategic Partnerships: Partner with carriers that demonstrate a commitment to honoring contracts.

3. Invest in Predictive Analytics

Predictive analytics can help exporters anticipate and address schedule disruptions:

• Cargo Receiving Windows: Optimize drayage operations with tools like TradeLanes’ Vessel Schedule Monitor.
• Spot Market Trends: Monitor shifts in spot rates to prepare for potential contract disruptions.

Conclusion

The allegations of contract cargo being deprioritized for spot market shipments highlight an urgent need for US exporters to adapt their logistics strategies. The FMC Final Rule provides a framework for addressing such behavior, but proactive measures—like leveraging data, collaborating with carriers, and maintaining strong documentation—are critical for minimizing risks.

Key Takeaways:

1. Missed CRWs: Exporters risk operational delays and rolled shipments.
2. Financial Implications: Spot market prioritization drives up costs and creates uncertainty.
3. Proactive Strategies: Real-time data and collaborative relationships with carriers are essential for navigating this challenge.

What steps is your organization taking to ensure contract cargo is prioritized? Share your thoughts in the comments below!