US shipping reform bill passes first legislative hurdle

Avatar photo
by Emily Atkins

The U.S. House of Representatives voted to approve the Ocean Shipping Reform Act (OSRA) of 2021.

The bipartisan legislation, sponsored by Congressmen John Garamendi (D-CA) and Dusty Johnson (R-SD), proposes to add restrictions on contracts between shippers and ocean carriers, and will require the carrier to provide the proof in disputes where previously the onus was on the shipper.

The legislation also makes it illegal for ocean carriers to decline export cargo providing the containers can be safely loaded in a timely manner.

The law would also allow third parties to challenge anti-competitive agreements with the Federal Maritime Commission (FMC).

Specifically, the legislation will:

  • Establish reciprocal trade to promote U.S. exports as part of the Federal Maritime Commission’s (FMC) mission.
  • Require ocean carriers to adhere to minimum service standards that meet the public interest, reflecting best practices in the global shipping industry.
  • Require ocean carriers or marine terminal operators to certify that any late fees —known in maritime parlance as “detention and demurrage” charges—comply with federal regulations or face penalties.
  • Shift burden of proof regarding the reasonableness of “detention or demurrage” charges from the invoiced party to the ocean carrier.
  • Prohibit ocean carriers from declining opportunities for U.S. exports unreasonably, as determined by the FMC in new required federal rulemaking.
  • Require ocean common carriers to report to the FMC each calendar quarter on total import/export tonnage and twenty-foot equivalent units (loaded/empty) per vessel that makes port in the United States.

According to Garamendi, the law will ensure a more competitive global ocean shipping industry, protect American businesses and consumers from price gouging, and establish reciprocal trade opportunities to reduce the United States’s longstanding trade imbalance with export-driven countries like mainland China.

“We’ve all been impacted by the backlog in the supply chain and shipping delays,” Johnson said.

“China and the foreign flagged ocean carriers aren’t playing fair, and accountability is long overdue. If you want to do business with American ports, you need to play by our basic rules. The Ocean Shipping Reform Act puts American consumers, farmers, retailers, truckers, manufacturers, and small businesses first.”

Happy shippers

U.S. shipper organizations welcomed the bill’s passage through the House.

“The Shipping Act has remained unchanged for nearly 20 years, as the global supply chain has continued to grow and evolve to meet increased consumer demand. This bipartisan legislation provides much-needed updates and reform to an archaic system that retailers and thousands of other businesses depend on each day to transport goods,” said David French the National Retail Federation’s senior vice-president of government relations.

“These improvements could not come at a more critical time, as the amplification from the pandemic has been severe.”

Tom Madrecki, vice president of supply chain and logistics for the Consumer Brands Association, said the consumer packaged goods industry is grappling with a supply chain in crisis and skyrocketing demand for essential goods.

“We cannot afford a wait-and-see approach from policymakers,” he said.

“The Ocean Shipping Reform Act will address longstanding, systemic supply chain and port disruption issues exacerbated by the pandemic, improving competitiveness for maritime transportation and helping CPG companies efficiently produce and deliver the essential products American consumers rely on every day. Consumer Brands strongly supports this action and urges the Senate to immediately take up and pass this bill.”

Liner companies, not so much

Ocean carriers, however, are not pleased with the legislation. The World Shipping Council (WSC), which represents most of the world’s largest liner operators, including A.P. Moller Maersk, COSCO, CMA-CGM, Hapag-Lloyd and many more, asserted the bill was passed without proper debate or committee discussion.

The bill is a political statement of frustration with supply chain challenges – frustrations that ocean carriers share,” said John Butler, president and CEO of the WSC.

“The problem is that the bill is not designed to fix the end-to-end supply chain congestion that the world is experiencing, and it will not and cannot fix that congestion. The World Shipping Council will continue to work with the Congress to seek real solutions that further strengthen the ocean transportation system that has supported the U.S. economy throughout the pandemic.”

The legislation will now move to the U.S. Senate for consideration.