By a vote of 364 to 60, the U.S. House of Representatives overwhelmingly passed the Ocean Shipping Reform Act of 2021 (OSRA) on Wednesday. The bipartisan legislation moves to the U.S. Senate, where lawmakers are preparing a companion bill they say will be introduced soon.
Spearheaded by Rep. John Garamendi, D-Calif., and Dusty Johnson, R-S.D., the bill gives the Federal Maritime Commission the power to impose minimum requirements on ocean carrier service contracts, and shifts the burden of proof in regulatory proceedings from shippers to the container lines.
It also establishes reciprocal trade as part of the FMC’s mission — including mandating that ocean carriers cannot decline export cargo if the containers can be loaded safely and within a reasonable time frame.
OSRA was endorsed by 360 state and local groups, Johnson pointed out. The White House officially endorsed the legislation last month.
“I’m a big fan of the free market — many buyers and many sellers. But that is not in place today” with respect to the international container ship industry, Johnson asserted on the House floor.
“We have seen unprecedented rejection of American container loads by the large ocean carriers. They are in contravention of their contractual obligations, just refusing to haul that cargo, preferring instead to take the empty containers and getting them back to Asia for a quick turn. That has caused serious problems, not just conceptual — real dollars, real cents. The American dairy industry has seen $1 billion worth of losses just in the first six months of this year.
“This bill is no silver bullet. But shame on us if we fail to act. This supply chain crunch has laid bare many inefficiencies in the market today, and we have a chance to address those inefficiencies.”
Among other new powers given to the FMC in overseeing the ocean carriers, the legislation:
- Updates requirements on ocean common carriers to incorporate best practices in the shipping industry.
- Requires ocean common carriers or marine terminal operators to certify that any demurrage or detention charge complies with FMC regulations or face penalties.
- Limits exemption for marine terminal operators for any terminal detention or demurrage charges if such charges are based on public port tariffs set under state law.
- Effectively codifies the FMC’s Interpretive Rule on Demurrage and Detention Under the Shipping Act and obligates ocean carriers to adhere to minimum service standards that meet the public interest, determined by the FMC in new required rulemaking.
- Requires ocean carriers or marine terminal operators to maintain all records regarding invoiced demurrage or detention charges for at least five years and provide such records to the FMC or invoiced party on request.
In addition, the legislation allows third parties to challenge anti-competitive agreements in FMC complaints and establishes a new process for addressing demurrage and detention complaints, giving the FMC a more active role in investigating them.
“These improvements could not come at a more critical time, as the amplification from the pandemic has been severe,” commented David French, senior vice president of government relations for the National Retail Federation. “We thank Reps. Garamendi and Johnson for their leadership and the House for their swift vote to approve this measure. We encourage the Senate to follow suit.”
The World Shipping Council, which represents 90% of global container capacity, has opposed the legislation. Instead of creating a level playing field, the reforms would tilt the market in favor of shippers in commercial disputes, WSC has asserted.
“The bill is a political statement of frustration with supply chain challenges – frustrations that ocean carriers share,” WSC President and CEO John Butler asserted in a statement following the vote.
“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. WSC 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.”
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