US House passes Ocean Shipping Reform Act, and Biden set to sign it
Following its passage by the US Senate in late March, the US House of Representatives followed suit last night, passing the Ocean Shipping Reform Act (OSRA) of 2022 by a margin of 369-42. The bill is now headed to President Biden’s office for signing into law and will represent the first overhaul of US shipping laws dating back to 1998.
This represents the latest, and most significant, sign of progress for OSRA, including: moving to voice voting; seek bipartisan approval from the US Senate Committee on Commerce, Science, and Transportation on March 22; and OSRA being passed in December 2021 by the United States House of Representatives by a convincing vote of 364 to 40 and its subsequent introduction to the Senate in February by Sen. Amy Klochubar (D-Minn.) and Sen. John Thune (RS.D.) . The House version of the bill was introduced by Representatives John Garamendi (D-CA) and Dusty Johnson (R-SD) in August 2021, with the goal of making the Federal Maritime Commission (FMC) “a regulator more efficient federal government”.
Key elements of the House version of the Ocean Shipping Reform Act 2022 include:
- prohibiting shipping carriers from unreasonably denying accommodation of cargo space for US exports and discriminating against US exporters;
- promote transparency by requiring common carriers to report to the FMC each calendar quarter total import/export tonnage and twenty-foot equivalents (loaded/empty) per vessel calling in the United States;
- authorize the FMC to itself initiate investigations into the commercial practices of public maritime carriers and to apply enforcement measures, if necessary; and
- establishing a new authority for the FMC to record maritime trade to improve the negotiation of service contracts, among other things
The passage of this bill by the House in December followed a November approval by the White House, as part of various federal efforts to help reduce port congestion and global supply problems, resulting of the pandemic. At the time, the White House noted that Congress needed to provide the FMC with an updated toolkit needed to protect exporters, importers and consumers from what it called unfair practices, adding that this project The bill was a good first step on the road to “longer-term shipping law reform that would strengthen America’s global competitiveness.”
FMC Chairman Daniel Maffei said OSRA is providing needed and overdue updates to laws enforced by the FMC.
“These changes will benefit the way US shippers are served and bring greater accountability to the way ocean freight services are provided,” Maffei said. “We will move quickly to implement the necessary steps to bring the benefits of the legislation to shippers, starting with developing rules for export shipments. OSRA will give the FMC enhanced authority to ensure that industry players have the right incentives and that all stakeholders in the ocean freight transportation system can have a voice.
President Biden explained that in his State of the Union address, he called on Congress to address high prices and unfair shipping practices, as rising shipping costs are a major factor contributing to increased costs for American families.
“During the pandemic, shipping carriers have increased their prices by up to 1,000%,” he said. “And, too often, these ocean carriers refuse to bring US exports back to Asia, leaving with empty containers instead. This is costing farmers and ranchers a lot of money, as well as our economy. This bill will reduce costs for families and ensure fair treatment for American businesses, including farmers and ranchers. I look forward to signing it into law.
National Industrial Transportation League (NITL) General Counsel Karyn Booth, who played a key role in writing and editing material for OSRA’s House and Senate versions, said ML that the OSRA represents an attempt to address current issues, as US importers and exporters have faced unprecedented challenges over the past two years.
“The service has just been horrible, and they can’t get timely or adequate ship space,” Booth said. “They have been unable to negotiate fair contract terms with their carriers to deal with these issues, which has led to the need to [assessing] what is the current state of the law and how can we update the law to ensure the right tools are there for FMC to deal with unfair business practices. Instead, OSRA focuses on the conduct and practices of international shipping carriers and is designed to address potential unfair trade practices, what the law calls “prohibited acts.” And Congress has now updated those provisions to specifically address today’s challenges…clarifying that unreasonable reductions in service and fundamentally unreasonable denials of space to ships may be specifically addressed now through FMC claims.
Additionally, Booth explained how the bill places a heavy emphasis on detention and demurrage, with much of the bill’s goals focused on raising costs. Although the FMC does not have jurisdiction over rates in the same way that the Surface Transportation Board must manage freight railroad rate setting, Booth focuses on issues of detention and demurrage assessed against freight left in a port beyond a free time period – when delays are not the cause or fault of the importer – will give the FMC more tools to address these issues through prohibitive acts, changes in custody and demurrage, among other actions.
“There are going to be rules to clarify what these new provisions mean, and I think that will be the next big step here,” she said. “The FMC is going to have to establish rules regarding detention and demurrage rules, unreasonable refusals to deal or negotiate on these vessel space issues, and any potential type of unfair or unfairly discriminatory conduct.”
Ben Hackett, founder of maritime consultancy Hackett Associates, said ML that OSRA provide the FMC with clearer guidance on its ability to consider the entire supply chain impacting shipping.
“What is surprising is that President Biden seems to take for granted that it is the container shipping sector that has been the main driver of inflation through his increases in freight rates and his manipulation of capacity,” he said. “This despite the finding by the FMC that the problem is on the landside and the difficulties with staffing due to Covid and the measures taken to furlough staff and only slowly bring them back. Not much mention is made of the fact that consumer demand for retail goods and online shopping has put significant pressure on the supply chain and available warehouses. Ships waiting two weeks or more to dock at US ports and some major Chinese ports due to Covid zero closures are the main culprits for capacity constraints.
The World Shipping Council (WSC) comments on OSRA took a different view of the factors driving the ongoing supply chain issues that the OSRA is taking steps to address.
WSC officials said that throughout the pandemic, shipping lines have been doing everything they can to keep goods moving, deploying all available ships and containers, as well as increasing crossings and investing in l ‘coming. He pointed out that in 2021, carriers ordered 555 ships worth $42.5 billion, with 208 ships worth $18.4 billion ordered year-to-date in 2022. .
“But as long as U.S. ports, yards and warehouses remain overcrowded and unable to keep up with rising levels of trade, ships will remain stranded outside ports to the detriment of exporters, as well as exporters.” , WSC officials said. “We are appalled by the continued mischaracterization of the industry by US government officials and concerned about the disconnect between hard data and inflammatory rhetoric. The 22 (not nine) international carriers that serve the American people, industry and government on Asia- US trade is part of the global supply chain that built this country, importing and exporting food, medicine, electronics, chemicals and everything we depend on. The increase in rate levels we have seen in recent years is a function of demand exceeding supply and landside congestion, exacerbated by pandemic-related disruptions. Until import congestion is resolved, export congestion will persist. Ocean carriers continue to transport record volumes of cargo and have invested heavily in new capacity – America needs to make the same commitment and invest in its land-based logistics infrastructure.
About the Author
Jeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics management, Modern material handlingand Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine where he covers all aspects of the supply chain, logistics, freight forwarding and material handling industries on a daily basis. Contact Jeff Berman