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Two Actions Approved: Inquiry into Disparities that Drive U.S.-Bound Cargo to Canadian and Mexican Ports, and Proposed Rule for Service Contracts that Link Rates to Freight Indices

October 5, 2011

NR 11-17

Contact: Karen V. Gregory, Secretary (202-523-5725)

During its meeting today, the Federal Maritime Commission voted unanimously to begin a Notice of Inquiry into disparities that may be causing U.S.-bound cargo to be driven to Canadian and Mexican ports. In a separate action, the Commission also voted unanimously to approve a proposed rule to provide flexibility and certainty to ocean carriers and customers who use service contracts with rates linked to freight-rate indices.

Inquiry into Disparities Driving U.S. Cargo from U.S. Ports to Canada or Mexico: In response to written requests from U.S. Senators and a bipartisan group of eight U.S. Representatives from Washington State and California, the Commission voted to commence a Notice of Inquiry, which will seek public comment and information to inform the Commission’s study of the U.S. Harbor Maintenance Tax and other disparities that may be driving U.S.-bound cargo from U.S. ports.

Chairman Richard A. Lidinsky, Jr. stated: "Canadian and Mexican ports are free to compete with U.S. ports for U.S. cargo. But they should do so on a playing field that is not artificially tilted by governments’ policies. So the primary question is: are we handicapping our own ports in international competition?"

The Commission will be seeking voluntary and full input on the issue from government, industry, and the public — both in the United States and Canada.

Proposed Rule for Service Contracts Linked to Freight-Rate Indices: The Commission also voted unanimously today to issue a proposed rule that would give more flexibility for ocean carriers and shippers to use service contracts with rates linked to freight rate indices. To date, the Commission has received more than fifty service contracts that reference freight indices.

Under the Commission’s current rules, service contracts can only reference outside terms, such as a rate in a freight index, that are "contained in a publication widely available to the public and well-known within the industry." The proposed rule would make clear that contracts can reference freight indices or other outside terms, so long as they are "readily available to the parties and the Commission."

Chairman Lidinsky stated: "This proposed rule is another example of the Commission implementing President Obama’s guidance to revisit regulations to reduce burdens and promote flexibility. To the maritime industry, my message is: go forth and innovate. The FMC will try to give you the certainty and flexibility you need, while continuing to protect the shipping public."

The Federal Maritime Commission is the federal agency responsible for regulating the nation’s international ocean transportation for the benefit of exporters, importers, and the American consumer. The FMC’s mission is to foster a fair, efficient, and reliable international ocean transportation system while protecting the public from unfair and deceptive practices.