The Federal Maritime Commission (FMC) is an agency responsible for ensuring a “competitive and reliable international ocean transportation supply system that supports the U.S. economy and protects the public from unfair and deceptive practices.”

Formed as an independent agency in 1961, the FMC provides alternative dispute resolution in cases where maritime terminal operators, common carriers, or other parties within the ocean shipping industry have disagreements. Among the commission’s staff are administrative law judges who make binding decisions in such cases.

Key Takeaways

• The Federal Maritime Commission was formally established in 1961, representing the evolution of shipping regulation going back to the World War I.

• The FMC is an independent federal agency with five president-appointed commissioners.  

• The mission of the FMC is to ensure a “competitive and reliable” ocean shipping industry that protects the U.S. public from unfair ocean transportation practices. 

Understanding the Federal Maritime Commission

The Federal Maritime Commission is made up of five commissioners who are appointed by the president and confirmed by the U.S. Senate. The commissioners serve staggered five-year terms, which helps ensure the bipartisan nature of the body; no more than three members of the commission can represent the same political party. The president designates one of the commissioners to serve as the agency’s chair, chief executive, and chief administrative officer.

The commission’s staff is composed largely of attorneys, economists, and ocean transportation experts. Most of the employees work in the agency’s Washington, D.C., headquarters, although the agency also operates six other port-based locations throughout the country.

The FMC performs several functions designed to ensure the fairness and efficiency of ocean-based shipping. These include:

  • Reviewing agreements between ocean common carriers, which transport passengers or goods across international waters, and marine terminal operators (MTOs), which provide loading, unloading, and storage of items at a port.
  • Ensuring that such agreements do not result in unfair hikes in transportation costs or a loss of services.
  • Offering relief to exporters, importers, and other parties who are harmed by unreasonable ocean shipping practices.
  • Providing a dispute resolution process for matters concerning the shipment of cargo and for complaints between cruise vessel operators and passengers.
  • Seeking redress when foreign governments or business entities impose unfair business conditions on U.S. exporters.
  • Regulating ocean transportation intermediaries (OTIs), which don’t transport cargo or passengers, but often facilitate shipping transactions.
  • Ruling on disputes that involve rates, classifications, and practices of common carriers, MTOs, and OTIs.
  • Maintaining a fleet of U.S. liner vessels capable of responding to potential international conflicts.

When the commission adjudicates disputes, the rulings are binding for all parties. However, the initial decision can be appealed by any of the parties involved in the dispute or at the request of one of the five commissioners. The FMC would then act as an appellate court, reviewing the case and issuing a final ruling.

History of the Federal Maritime Commission 

The Federal Maritime Commission was officially created in 1961, during the Kennedy administration. However, its roots go back several decades earlier—to the Shipping Act of 1916.

During World War I, the demand for American exports, and therefore shipping capacity, had grown immensely. Fearing that ocean liners were colluding to raise shipping rates and reduce the quality of services during this critical period, Congress created the United States Shipping Board to protect American exporters and importers from unfair trade practices.

Shortly after the war, Congress passed the Merchant Marine Act, which gave the U.S. Shipping Board a second mission: responding to foreign shipping laws and practices that put the United States at a disadvantage in international trade. By 1950, the organization evolved into the Federal Maritime Board, an agency within the Department of Commerce.

However, in 1961, President John F. Kennedy signed an executive order assigning these two primary tasks to separate organizations. The newly formed Maritime Administration, or MARAD, was charged with supporting merchant marines and managing a reserve of cargo ships in the event of future international hostilities. The Federal Maritime Commission, as an independent agency, would focus on U.S. shipping activities.

The creation of an independent FMC coincided with a critical development in overseas shipping—the advent of standardized shipping containers that could be transported via ocean liner, rail, or truck. That breakthrough greatly increased the efficiency of international trade, leading to a boom in ocean shipping traffic.

Key Statutes

Several key pieces of legislation serve as the backbone of U.S. ocean transportation law and are the basis of many FMC rulings. These laws include:

The Shipping Act of 1984

The 1984 Act helped modernize existing laws in light of important developments in how cargo was transported. For example, it defined “contract carriage,” or the negotiated pricing of ocean liner services, as opposed to pricing based on public tariffs. The act also eliminated the need for carriers to file tariffs with the commission, instead allowing them to simply publish tariffs.

The Foreign Shipping Practices Act of 1988

This legislation reflected a desire to protect U.S. ocean-based carriers from unfair foreign shipping practices. It bolstered the FMC’s power to investigate—and potentially impose penalties—in cases where U.S. shippers were put at a competitive disadvantage.

The Ocean Shipping Reform Act of 1998

This amendment to the 1984 Act took steps to deregulate the ocean shipping industry. Among its key components was a provision that enabled common carriers to privately negotiate rates with shippers, rather than filing them publicly.

Ocean Shipping Reform Act of 2021

In August 2021, Rep. John Garamendi (D-Calif), and Rep. Dusty Johnson (R-S.D.) co-sponsored the first major overhaul of ocean shipping legislation since 1998. The bill is aimed, in part, at addressing supply chain issues stemming from interruptions related to the coronavirus pandemic as well as a spike in demand for imported goods. Namely, the legislation’s goal is to address unfair shipping practices by China and other foreign governments. 

The Ocean Shipping Reform Act of 2021 would put the burden of proof on carriers, not shippers, in disputes with common carriers over unfair practices. It would give the FMC a greater role in promoting reciprocal trade by requiring common carriers to accept export cargo from the United States. The bill would also allow the commission to impose additional penalties on carriers on behalf of exporters who have been harmed by their practices.

The proposed legislation has met stiff resistance from the World Shipping Council (WSC), an organization that represents common carriers, which argues the bill would unfairly hinder its members. “If the government is going to step in, it must be to assure fairness for all parties, and that means that the law must spell out responsibilities and consequences for nonperformance by all parties,” the WSC said in a statement.

What Is the Mission of the Federal Maritime Commission?

The Federal Maritime Commission was established in order to ensure a “competitive and reliable international ocean transportation supply system that supports the U.S. economy and protects the public from unfair and deceptive practices.” It carries out that goal by adjudicating disputes between common carriers, shippers, and other parties. The commission also has the authority to impose penalties when U.S. shippers face unfair practices.

Are the Federal Maritime Commission's Rulings Binding?

Arbitration rulings made by the FMC are binding on all parties. However, the commission also has methods of alternative dispute resolution, which are non-binding. These include offering an ombudsman service and mediation, whereby it helps the parties negotiate business and regulatory matters.

Who Serves on the Federal Maritime Commission?

The Federal Maritime Commission is made up of five commissioners, who serve staggered five-year terms. The commissioners are appointed by the president, but have to be confirmed by the U.S. Senate.