Final Rule Addressing Unjust and Unreasonable Practices and Regulations Under Shipping Act Taking Effect

An interpretive rule going into effect on Monday, December 17, 2018, will clarify that a claimant in a Section 10(d)(1) action must show that the regulated entity engaged in [1] a practice or regulation that is unjust or unreasonable, and [2] did so on a normal, customary, and continuous basis. This rule follows a notice of proposed rulemaking (NPRM) and public comment on this clarification of the Commission’s interpretation of 46 USC 41102(c).

Section 10(d)(1),46 USC 41102(c), of the Shipping Act of 1984 prohibits unjust and unreasonable practices and regulations related to or connected with receiving, handling, storing or delivering property. Beginning in 2010, the Federal Maritime Commission issued a series of decisions that diverged from prior consistent Commission precedent dating back to 1935 which required that a regulated entity must engage in a practice or regulation on a normal, customary, and continuous basis and that such practice or regulation was unjust or unreasonable in order to be found to have violated 46 USC 41102(c).

The interpretation going into effect restores the standard of what constitutes a practice to its traditional and proper definition under Section 41102(c) of the Shipping Act of 1984. This interpretation reflects the clear intent of Congress and reflects longstanding Commission case law and precedent.

Acting Chairman Michael A. Khouri stated, “I am pleased that the Commission has acted to restore the scope of 46 USC 41102(c) to the proper interpretation of the statutory language of the provision that is, as outline in the NPRM, consistent with the statutory and legislative history, judicial precedent and Commission case law, and comports with accepted rules of statutory construction.”

While this rule may curtail some claims previously brought to the Commission under 46 USC 41102(c), potential claimants continue to enjoy many avenues for redress, including other provisions of the Shipping Act. Additionally, parties could turn to common law, state statutes, admiralty law, and other applicable federal statutes to pursue recovery of losses or damages.