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Wanting to crack down on unfair shipping prices levied by foreign-owned ocean carriers, strengthen a weakened supply chain and reduce costs for consumers, President Biden recently signed the Ocean Shipping Reform Act into law.
According to the U.S. Senate Committee on Commerce, Science, and Transportation, the law addresses the “skyrocketing” international ocean shipping costs and supply chain backlogs that are raising prices for consumers, and making it harder for domestic farmers and exporters to get their goods to the global market.
Senators Amy Klobuchar and John Thune first introduced the Ocean Shipping Reform Act in February 2022. It was passed by the Commerce Committee on March 22. The Senate unanimously passed the legislation on March 31 and it passed the House on June 13. President Biden signed it into law on June 16.
The new law really can’t come soon enough. The Committee says pre-pandemic shipping rates for a 40-ft. container were as low as $1,300, but that by September 2021 those fees jumped to $11,000 per container. The price escalations continued based on several factors. For example, according to a recent Reuters report, global port congestion could continue until at least early 2023 and spot freight rates will remain elevated.
“The COVID-19 outbreak has lengthened ship delivery times since 2020, pushing up freight costs,” Reuters reports, “while the Russia-Ukraine conflict and lockdowns in Shanghai have added to supply chain disruptions this year.”
What the Act Covers
This new bipartisan act aims to level the playing field for American exporters and importers by providing the Federal Maritime Commission (FMC) the tools it needs to improve oversight over international ocean carriers and crack down on rising shipping fees facing consumers.
“During the COVID-19 pandemic, American consumers shifted to buying goods online. The resulting port and intermodal congestion left exporters, including American farmers, struggling to get their products to global markets because of unpredictable sailings, ocean carriers denying American cargo, and skyrocketing freight costs,” the U.S. Senate Committee on Commerce, Science, and Transportation explains in a one-pager on the new law.
In summary, the Ocean Shipping Reform Act will:
- Stop international ocean carriers from unreasonably declining American cargo, as determined by the FMC in new required rulemaking.
- Direct the FMC to self-initiate investigations of ocean carrier business practices and apply enforcement measures.
- Shift the burden of proof regarding overcharging certain fees, called “demurrage and detention” charges, from the complainant to the international ocean carriers to help level the playing field and improve the FMC’s enforcement capacity.
- Improve transparency of movement of U.S. agricultural and other exports by requiring international ocean carriers to report to the FMC regarding how many empty containers are being transported.
- Stop retaliation by international shipping companies against exporters and importers.
- Formally establish the FMC Office of Consumer Affairs and Dispute Resolution Services to improve the complaint and investigation process for American businesses seeking assistance from the FMC.
- Improve management of chassis, or the specialized trailer used to transport ocean containers over the road.
- Provide the FMC with temporary emergency authority to collect data during times of emergency congestion, among other improvements.
A Step in the Right Direction
Calling the Ocean Shipping Reform Act the first major revision to U.S. maritime regulation in over 20 years, CNBC says several industry groups applauded its passage into law. “The bill will directly address price gouging in the ocean shipping industry, which played a large role in the empty shelves, late deliveries, and increased prices American consumers have faced during the past year,” Steve Lamar, CEO of the American Apparel and Footwear Association, told CNBC, “and will protect American companies from predatory practices that threaten their businesses.”
CNBC says the National Retail Federation (NRF) also got behind the new bill. “We applaud the President for supporting and quickly signing the Ocean Shipping Reform Act,” NRF President and CEO Matthew Shay said. “Signing OSRA will provide the FMC with the additional authority it needs to address unfair business practices that have existed for decades and have been exacerbated by the pandemic.”
