The S.3580: Ocen Shipping Reform Act of 2022 (OSRA)was signed into law by President Biden on June 16, 2022, after passing the US House of Representatives with a 369-42 vote. The law provides more oversight and investigatory authority to the Federal Maritime Commission (FMC), which seeks to reduce excessive pricing from ocean carriers, increase industry transparency, and may reduce the high inflation rates impacting the US. The new law marks the first change to US regulations on international shipping since 1984.
With increased authority to the FMC, they now have the ability to initiate investigations of unfair or unreasonable business practices hampering the movement of goods and price gouging by the ocean shipping industry. While many of these issues have been addressed before the global pandemic, COVID-19 amplified the weaknesses in supply chains and caused uncertainty worldwide.
The law aims to prevent ocean carriers from unreasonably refusing to fill containers with US exports and shipping empty containers back to Asia for a quick refill. This practice has greatly impacted North Dakotaians, Minnesotians, and many more throughout the Midwest; agricultural producers and processors across the region have struggled to get their products moving beyond US borders. The Agriculture Transportation Coalition estimates that 22% of US agricultural exports in 2021 were not delivered because of unreasonable shipping practices.
Investigation of late fees will be carried out by the FMC. The law will prevent excessive detention and demurrage fees (charges to exporters and importers for the use of the containers when they are not moved or returned within a set timeframe or storage at ports). The burden of proof for reporting unreasonable fees shifts from the invoiced party to the ocean carriers themselves. This law states that carriers will not be allowed to retaliate against shippers who bring about formal complaints or vary their business across different ocean carriers.
The FMC will also require quarterly tonnage reporting from ocean carriers, including both import/exports per vessel. The key to this provision is that a detail of loaded imports/exports and empty containers must be provided. This requirement provides the FMC with awareness of the (now common) practice of shipping empty containers for a refill in Asia. Moreover, the FMC will be provided more transparency into the intermodal chassis pool and chassis supply.
The large shipping conglomerates have gone from twenty companies now to just nine, which have further siphoned into three alliances. This decrease in competition has been attributed to the rising costs of more than 1000% in international shipping fees and record profit postings by these large conglomerates in recent years. The Biden Administration hopes to curb inflation by reducing unreasonable, and inflated overseas shipping prices that they believe are passed along directly to consumers. Although this makes up only a small portion of the inflation issues across the US, it is seen as a step in the right direction.
As the FMC gains more authority to reign in some of the challenges at the ports, experts remind us that seaports are only part of the supply chain backlog issues. There is continued stress on the infrastructure, inland transportation, and storage capabilities in the US that need upgrades and attention.
The FMC and parties like the World Shipping Council will need to work together for the bill’s implementation, and the WSC says they will do their best to minimize supply chain disruptions. Time will tell as the new regulations come into effect. Many say that progress will still be slow as the measures are adopted.
NDTO will continue to monitor and update on the latest news for the implementation of OSRA.
Additional Resources:
CNBC: How President Biden’s Ocean Reform Act Could Impact Shipping and Inflation
Freight Waves: Will the Shipping Reform Act Help Rebalance Scales? The FMC chairman Thinks So
gCaptain: President Biden Signs The Ocean Shipping Reform Act Into Law
National Hog Farmer: Biden signs Ocean Shipping Reform Act
S.3580 – Ocean Shipping Reform Act of 2022
Pork Business: Pork At the Port: Industry Praises the Ocean Shipping Reform Act Approval
Reuters: Biden Signs Ocean Shipping Bill in Bid to Reduce Export Backlogs
Yahoo Finance: Fragrance Creators Applauds Passage of the Ocean Shipping Reform Act Into Law