Senate Committee on Commerce, Science, and Transportation approves Ocean Shipping Reform Act

The momentum driving the Ocean Shipping Reform Act (OSRA) continues to build momentum, with the United States Senate Committee on Commerce, Science, and Transportation’s bipartisan approval of the legislation earlier this week.

This follows 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.). To advance, the bill now needs full Senate approval.

The main objectives of the bill are to update federal regulations for the global shipping industry, adding that the bill “would level the playing field for American exporters by making it harder for ocean carriers to unreasonably refuse goods ready to export at ports, and it would give the Federal Maritime Commission (FMC) greater rulemaking authority to regulate harmful practices by carriers.”

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

• requiring ocean carriers to certify that late fees —“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;
• establishing new authority for the FMC to register shipping exchanges;
• allowing for third parties to participate in legal cases brought by the FMC against ocean carriers for anticompetitive harm; and
• letting successful third parties in those legal cases receive money damages, with additional financial penalties designed to deter anticompetitive conduct

“We also know here, in the Committee, that these ocean shipping companies are making record profits,” said Sen. Maria Cantwell, D-WA, the Majority Chair of the Senate Committee on Commerce, Science, and Transportation, in a statement. “They have made $150 billion dollars in profits in 2021, and ocean import volume for the first quarter of this year is forecast to increase by more than 30 percent. Our farmers don't want special treatment. They just don't want to be exploited for the sake of record profits.” 

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

NITL said that its members continue to face substantial delays, costs, and business interruption with respect to cargo transported in the ocean delivery network.

“We strongly support the Senate Committee’s bi-partisan leadership in modernizing the Shipping Act to help address present day challenges,” it said. “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. Updating this important federal law, via OSRA, is essential for US importers, exporters, and consumers affected by the broken ocean shipping supply chain.”

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.”

From the ocean carrier perspective, the World Shipping Council (WSC) panned the Senate Committee’s approval of 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.  

“Instead of passing legislation that would do nothing to address the nation’s supply chain congestion, Congress should seek real solutions that take a comprehensive, forward-looking view,” it said. “That means continued investment in port infrastructure and promoting communication, innovation, and collaboration across sectors to further strengthen the intermodal transportation system that has supported the U.S. economy throughout the pandemic. The World Shipping Council will continue to partner with Congress and other stakeholders on these worthwhile efforts.”