Biden Signs Ocean Shipping Reform Act

Joe Biden
President Joe Biden signs the Ocean Shipping Reform Act. (Evan Vucci/AP)

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President Joe Biden on June 16 signed the Ocean Shipping Reform Act, a legislative package designed to bolster the domestic shipping industry, and which drew praise from transportation and business leaders.

The legislation is the most extensive reform of the shipping industry since 1998, and broadens the regulatory oversight of the Federal Maritime Commission. The bill is intended to increase competition, promote U.S. exports and lower prices for shipping at a time when the influence of the ocean carrier market has been dramatically elevated by the advent of vessel alliances. Supporters of the legislation say these alliances have caused a huge spike in shipping prices, and have been a significant factor in surging inflation.

"Tackling inflation is my No. 1 priority,” Biden said moments before he signed the bill. “I promised to crack down on ocean carriers whose price hikes have hurt American families and American businesses. One of the factors raising prices is that nine major shipping companies consolidated into three alliances and control the vast majority of ocean shipping in the world and during the pandemic these companies increased their prices by as much as 1,000%. And while families and businesses around the world struggled, these companies made $190 billion in profit in 2021.”

In a statement, American Trucking Associations President Chris Spear said the federation supports the legislation.

“This bill provides important tools to address unjustified and illegal fees collected from American truckers by the ocean shipping cartel — fees that have contributed to the shipping lines raking in $150 billion in profits just last year. Those fees hurt American motor carriers and consumers — helping to drive record inflation,” Spear said.

ATA’s Intermodal Motor Carriers Conference believes the legislation will be beneficial to the trucking industry. “This is the first significant change to ocean shipping regulations in more than two decades — a period of time when the industry has been shaped into a cartel of 10 foreign-owned companies who have exercised a tremendous amount of power over American truckers and consumers,” IMCC Director Jonathan Eisen said. “Thanks to this bipartisan legislation, those carriers will no longer be able to charge truckers exorbitant and illegal detention and demurrage fees, increasing efficiency and reducing costs across the supply chain.”

The bill significantly expands the role of FMC in terms of regulating the shipping industry, especially when it comes to improving the efficiency of the supply chain and also putting into law efforts the agency is already taking concerning demurrage and detention oversight. Specifically, FMC will be authorized to begin a rulemaking process to define prohibited practices by common carriers, marine terminal operators and ocean transport intermediaries concerning demurrage or detention charges.

FMC will also be given budget authority to hire several new investigators to oversee the shipping industry to comply with the new regulations.

Regarding the supply chain congestion, 60 days after the law takes effect, FMC is scheduled to begin taking public comments seeking to discover if the situation at the ports, railroads and trucking terminals has created an emergency situation. If it’s determined it has created an adverse impact, FMC could issue a temporary emergency order to alleviate it, which would require ocean carriers or marine terminals to share information with shippers, railroad and motor carriers relating to cargo throughput and availability to ensure the freight gets moved.

The Washington-based National Retail Federation said passing the OSRA was one of its top legislative priorities.

“Retailers and thousands of other businesses depend on the global maritime transportation system to move goods through the supply chain every day and continue to face significant challenges, including unfair business practices by ocean carriers,” the NRF said. “Making OSRA federal law helps address long-standing systemic supply chain and port disruption issues that existed well before the pandemic by providing the Federal Maritime Commission the additional authority it needs.”

The approval of the legislation came days after FMC Commissioners Carl Bentzel and Max Vekich announced on June 13 a $2 million settlement agreement with the German international shipping and container transportation company Hapag-Lloyd with regard to unreasonable assessment of detention and demurrage charges. An FMC administrative law judge found that Hapag-Lloyd violated federal law by unjustly and unreasonably assessing detention charges when there were insufficient appointments available.

“We have more work to do in reviewing the assessment of detention and demurrage. We anticipate that we will soon be considering proposals to strengthen protections against unfair assessment of such charges, as well as other unfair billing practices,” Bentzel and Vekich said in a statement. “Further, we will be following up with commission staff to ensure that Hapag-Lloyd complies with the terms and conditions of the settlement agreement. Finally, we will remain vigilant in addressing other potentially unreasonable practices which hinder an already overburdened supply chain. It is our priority to do everything we can to keep the cargo moving.”

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