U.S. Senate approves Ocean Shipping Reform Act, bill to head to conference

The Ocean Shipping Reform Act (OSRA) took another step on its course to being signed into law, with the United States Senate late last week unanimously voted to sign off on it on a voice vote.

The bill will head back to the House of Representatives, with the expectation it will head to President Biden’s desk to be signed into law, following conferencing between the House and Senate on differences that need to be hammered out between the chambers.

This represents the most recent sign of progress for the OSRA, getting bipartisan approval from United States 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 364-40 vote and its subsequent introduction into the Senate in February by Senator Amy Klochubar (D-Minn.) and Senator John Thune (R-S.D.).

The House version of the bill was introduced by Representatives John Garamendi (D-CA) and Dusty Johnson (R-SD) in August, with the objective of making the Federal Maritime Commission (FMC) “a more effective federal regulator.”

Key components of the Ocean Shipping Reform Act of 2021 include:

• requiring ocean carriers to certify that late fees —known in maritime parlance as “detention and demurrage” charges—comply with federal regulations or face penalties;
• shifting burden of proof regarding the reasonableness of “detention or demurrage” charges from the invoiced party to the ocean carrier;
• prohibiting ocean carriers from unreasonably declining shipping opportunities for U.S. exports, as determined by the FMC in new required rulemaking;
• requiring ocean common carriers to report to the FMC each calendar quarter on total import/export tonnage and 20-foot equivalent units (loaded/empty) per vessel that makes port in the United States;
• authorizing the FMC to self-initiate investigations of ocean common carrier’s business practices and apply enforcement measures, as appropriate; and
• establishing new authority for the FMC to register shipping exchanges

“Congestion at ports and increased shipping costs pose unique challenges for U.S. exporters, who have seen the price of shipping containers increase four-fold in just two years, raising costs for consumers and hurting our businesses. Meanwhile, ocean carriers that are mostly foreign-owned have reported record profits. This legislation will help American exporters get their goods to market in a timely manner for a fair price,” said Klobuchar in a statement. “By passing this bill, we are one step closer to leveling the playing field for American manufacturers and consumers.” 

The Senator’s office added that OSRA is co-sponsored by a bipartisan group of 29 senators and endorsed by more than 100 organizations, including the American Association of Port Authorities, also noting that the bill will level the playing field for American exporters by making it harder for ocean carriers to unreasonably refuse goods ready to export at ports.

The Senate’s approval of OSRA was strongly supported by the Washington, D.C.-based National Industrial Transportation League (NITL), the nation’s oldest trade association representing industrial freight transportation shippers.

“NITL members continue to face substantial delays, costs, and business interruption with respect to cargo transported in the ocean delivery network,” it said. “We strongly support the Senate’s bi-partisan leadership in modernizing the Shipping Act to help address present day challenges. This commitment, combined with continued support of the White House and the House of Representatives, shown for competitiveness in the supply chain is a crucial step toward addressing systemic issues contributing to the challenges at U.S. seaports and unprecedented disruption to the ocean shipping network.

NITL also said it will continue to work with Members of Congress, the Federal Maritime Commission (FMC), NITL’s OSRA Coalition, and aligned stakeholders to smooth out certain differences between this bill and the Ocean Shipping Reform Act of 2021 (OSRA21), H.R. 4996, as passed by the U.S. House of Representatives.

The House’s December passing of this bill followed a November endorsement issued by the White House, amid various federal efforts to help curtail the ongoing port congestion and global supply challenges, stemming from the pandemic. At the time, the White House noted that Congress needs to provide the FMC with an updated toolbox needed to protect exporters, importers, and consumers from what it called unfair practices, adding that this bill serves as a good first step on the path to the “longer-term reform to shipping laws that would strengthen America’ global competitiveness.

National Retail Federation (NRF) Vice President for Supply Chain and Customs Policy Jonathan Gold told LM that the NRF strongly supports this legislation.

“We are working very closely with the bill’s sponsors to get it done,” he said. “It addresses many of the key issues our members have been dealing with like unfair charges related to detention and demurrage…as well as challenges that were intact prior to the pandemic that further exacerbated and highlighted the need for changes.”

The World Shipping Council (WSC) recently panned the OSRA, saying that the bill addresses none of the root causes of what it called U.S. landside congestion.

“Americans continue to import goods at record levels—so much so that the U.S. ports and landside logistics workforce is unable to process all the cargo,” it said. “Ocean carriers have deployed every vessel and every container available, and are moving more goods than at any point in history, but the U.S. landside logjams are keeping vessels stuck outside U.S. ports. This import congestion is also consuming the capacity and space needed to ensure the uninterrupted flow of U.S. exports. While the Senate is taking a more deliberative approach that the House’s flawed process in passing the Ocean Reform Act of 2021, H.R.4996, neither chamber’s version of the bill does anything to fix the landside logistics breakdowns that are at the heart of America’s supply chain problems.”

WSC added that the House bill would make existing congestion worse, whereas the Senate bill— despite carrying some of the same risks of unintended negative consequences—provides regulators enough authority to get the final rules right.  

And a report in The Loadstar observed that shipping lines have railed against the OSRA, claiming the legislation will “up-end” the global system for shipping cargo and see a worsening of the services offered to US importers and exporters.

“It is disappointing that unfounded allegations are being levied against an industry moving more cargo now than at any time in history in order to meet the unprecedented demand for imported goods during the pandemic,” said Butler in the report.