When President Biden signed the Ocean Shipping Reform Act (OSRA) into law, the aim was to broaden the regulatory oversight over ocean ship lines and increase competition of the in the industry. But there is doubt the act will be able to succeed.
“During the pandemic, ocean carriers increased their prices by as much as 1,000%,” Biden said at the June 16 signing ceremony. “And, too often, these ocean carriers are refusing to take American exports back to Asia, leaving with empty containers instead. That’s costing farmers and ranchers – and our economy – a lot of money.”
The legislation grants the Federal Maritime Commission (FMC) greater authority to regulate certain ocean carrier practices while promoting the growth of exports from the United States “through a maritime system that is transparent, efficient and fair,” the president claimed.
According to the National Industrial Transportation League, one of the bill’s biggest boosters, said the FMC now “will have better tools at its disposal to address global ocean carriers’ operating practices which have contributed to high inflation and supply chain disruptions experienced by NITL members and their customers.”
One of those members is Lori Fellmer, vice president, logistics and carrier management with BassTech International and chair of the NITL’s Ocean Transportation Committee.
“Our members, like all U.S. businesses for which the ocean transportation network is fundamental, continue to suffer under a system plagued by deteriorating service levels and unreasonable fees and charges,” she asserted.
Fellmer added that OSRA will further empower the FMC to address these concerns, which she said, “will greatly benefit U.S. exporters and importers.”
American Trucking Associations also hailed the measure, which it hopes will address ocean carrier container demurrage practices truckers have had to contend with for many years. In ATA’s view, these fees have been administered unfairly by the ocean lines, imposing unreasonable costs on truckers and shippers.
“This day has been a long time coming,” ATA President Chris Spear said when the bill was signed. “This bill provides important tools to address unjustified and illegal fees collected from American truckers by the ocean shipping cartel – fees that have contributed to the shipping lines raking in $150 billion in profits just last year.”
Jonathan Eisen, director of the ATA Intermodal Motor Carrier Conference, observed, “This is the first significant change to ocean shipping regulations in more than two decades – a period of time when the industry has been shaped into a cartel of 10 foreign-owned companies who have exercised a tremendous amount of power over American truckers and consumers.”
He added, “Thanks to this bipartisan legislation, those carriers will no longer be able to charge truckers exorbitant and illegal detention and demurrage fees, increasing efficiency and reducing costs across the supply chain.”
What the New Law Does
Among its many provisions, the new shipping act:
- Prohibits ocean carriers from unreasonably refusing cargo space accommodations for U.S. exports as well as from discriminating against U.S. exporters.
- Promotes transparency by requiring ocean common carriers to report to the FMC each calendar quarter on total import/export tonnage and twenty-foot equivalent (TEU) units (loaded/empty) for every vessel that makes port in the U.S.
- Authorizes the FMC to self-initiate investigations into any ocean common carrier’s business practices and apply enforcement measures where appropriate
- Establishes new authority for the FMC to register shipping exchanges to improve the negotiation of service contracts
- Directs the FMC to initiate new rulemakings regarding prohibited practices involving the assessment of detention and demurrage charges.
- Adds provisions dealing with charge complaints, allowing them to be submitted directly to the FMC regarding the kinds and levels of charges assessed by a common carrier.
- Expands prohibited carrier activities to include unreasonable refusal of otherwise available cargo space, improperly assessing charges, and the imposition of inaccurate/incomplete detention and demurrage invoicing.
The World Shipping Council, which represents the ocean liner companies, took issue with the heated rhetoric coming from Biden and several of the industry’s other critics among shippers and other modes. It said these too often fail to note changes that have reshaped the ocean shipping industry.
“Recent weeks have seen several attempts to demonize ocean carriers by deploying ‘us versus them’ rhetoric,” it said. “That is not only inaccurate but dangerous, as it undermines the ability to understand and work towards solving the root causes of America’s supply chain problems.”
WSC made the point that ocean carriers are the longest link in the global supply chain which delivers vital supplies to American business, government and consumers. “The supply chain is not foreign; it is global,” the council said.
The council also referred to an earlier FMC investigation that found the industry is actually quite competitive at present, with a 13 more ocean liner companies added so far this year alone, which are currently responsible for more than 30% of the sailings from Asia to the U.S.
“There is no dispute that carriers, after two decades of low or no margins and cheap and abundant capacity for shippers, are actually making profits. These profits are invested in building capacity for the future on land and sea,” WSC declared.
It also pointed out that in 2021, carriers ordered a record-breaking 561 new ocean-going vessels worth $43.4 billion, and 208 vessels worth $18.4 billion have been ordered year-to-date in 2022.
The council also didn’t hesitate to be quite blunt about where it believes the bulk of the supply chain failures occur – in this country
“As long as America’s ports, railyards and warehouses remain overloaded and unable to cope with the increased trade levels, vessels will remain stuck outside ports to the detriment of importers as well as exporters.”
The FMC is required to begin rulemaking processes in the next few months to establish new regulations related to OSRA, and some of the new final rules must be issued within one year of the law’s enactment, no later than June 2023.
Just before OSRA was enacted, the FMC launched three initiatives to help U.S. shippers and improve performance in the ocean supply chain. They include establishing a new International Ocean Shipping Supply Chain Program, re-establishing the Export Rapid Response Team, and requiring carriers, marine terminal operators and ports to employ a designated FMC Compliance Officer