Ocean Shipping Reform Act of 2021 is passed by U.S. House of Representatives

The United States House of Representatives yesterday signed off on the bipartisan Ocean Shipping Reform Act of 2021, H.R. 4996, yesterday by a convincing 364-60 vote.

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.”

The bill’s next step is for it to be sent to the U.S. Senate, to be considered.

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

• establishing reciprocal trade to promote U.S. exports as part of the Federal Maritime Commission’s (FMC) mission;
• requiring 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;
• shifting the burden of proof regarding the reasonableness of “detention or demurrage” charges from the invoiced party to the ocean carrier;
• prohibiting ocean carriers from declining opportunities for U.S. exports unreasonably, as determined by the FMC in new required federal rulemaking; and
• requiring 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.

The House’s passing of this bill follows 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.
Rep. Johnson said in a statement that the U.S. has been impacted by the backlog in the supply chain and shipping delays, noting that China and the foreign-flagged ocean carriers are not playing fairly, with accountability long overdue.

“If you want to do business with American ports, you need to play by our basic rules,” he said. “I am proud of the coalition Congressman Garamendi and I have worked to build over the last year. The Ocean Shipping Reform Act puts American consumers, farmers, retailers, truckers, manufacturers, and small businesses first. Our bill passed the U.S. House with strong bipartisan support and I look forward to seeing it pass the Senate.”

And Rep. Garamendi observed that Congress needs to restore balance at U.S. ports and address the longstanding trade imbalance the U.S. has with China and other nations directly, with the House’s passing of the bill bringing U.S. consumers and businesses another step closer to protecting U.S. businesses and consumers from price-gouging by foreign flagged carriers.

FMC officials did not reply to a request for comment from LM at press time.

This legislation represents the first type of its kind going back to the Ocean Shipping Reform Act of 1998, the Representatives said.

Since then, China was granted permanent normal trade relations, or “most-favored nation” status with the U.S. in December 2001 after it was admitted to the World Trade Organization. In 2001, the U.S. trade imbalance with China stood at around $83 billion, based on U.S. Census Bureau data, with the trade imbalance at $310 billion in 2020.  

This bill was welcomed news by the National Retail Federation (NRF).

“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,” said NRF Senior Vice President of Government Relations David French. “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. These improvements could not come at a more critical time, as the amplification from the pandemic has been severe. 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.”

Conversely, John Butler, President and CEO of the World Shipping Council, said it does not do enough to materially move the needle towards making meaningful improvements.

“The House today passed HR 4996 without proper debate or committee process,” said Butler. “The bill is a political statement of frustration with supply chain challenges—frustrations that ocean carriers share. 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.”