The Ocean Shipping Reform Act of 2021: Boon or Burden?
If the 364-60 bipartisan passage in the U.S. House of Representatives and the many organizations that support it are any indication of its popularity, the Ocean Shipping Reform Act of 2021 (OSRA 2021) may have no trouble moving through the Senate, too.
For those feeling the negative effects of supply chain congestion in terms of service and price, OSRA 2021 may spell some semblance of hope—especially for issues like burdensome detention and demurrage fees, as well as the challenges exporters are facing in shipping their goods overseas.
But for the ocean carriers and others who will undergo increased scrutiny if the bill ends up enacted as law, the outlook may not be as rosy.
In that light, it’s no wonder perspectives differ about whether OSRA will be a boon or burden for the supply chain players it could potentially impact.
Ocean Shipping Reform Act of 2021
On August 10th, U.S. Representatives Dusty Johnson (R-S.D.) and John Garamendi (D-CA) introduced the Ocean Shipping Reform Act of 2021. According to a press release announcing the bill, the bipartisan legislation is “the first major update of federal regulations for the global ocean shipping industry since 1998. The legislation would support American exports by establishing reciprocal trade opportunities to help reduce the United States’ longstanding trade imbalance with China and other countries.”
“Foreign ocean carriers aren’t playing fair, and American producers are paying the price,” said Congressman Dusty Johnson (R-SD) in the release. “It’s time for updated rules of the road. That’s what our bill does.”
“Foreign businesses’ access to the American market and its consumers is a privilege, not a right. California’s agricultural exporters and other businesses are willing to pay to ensure that American-made products reach key markets in the Asia-Pacific. In turn, companies looking to offload foreign-made products at West Coast ports must provide opportunities for American exports. Even during a global pandemic, trade must be mutually beneficial, and that is exactly what our bipartisan bill ensures,” Congressman Garamendi (D-CA) said in the release. “Congress has not updated federal regulations for the global ocean shipping industry since China was granted permanent, normalized trade relations under the World Trade Organization in 2001. Now is the time to ensure reciprocal opportunities for American exporters in trade with other countries to reduce the United States’ trade imbalance with cheap Asian imports.”
According to the release, OSRA 2021 would:
“Establish reciprocal trade to promote U.S. exports as part of the Federal Maritime Commission’s (FMC) mission.
Require 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.
Shift burden of proof regarding the reasonableness of ‘detention or demurrage’ charges from the invoiced party to the ocean carrier or marine terminal operator.
Prohibit ocean carriers from declining opportunities for U.S. exports unreasonably, as determined by the FMC in new required rulemaking.
Require 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.
Authorizes the FMC to self-initiate investigations of ocean common carrier’s business practices and apply enforcement measures, as appropriate.”
In the following video, Representative Johnson discusses OSRA 2021 and the impact it may have with Steptoe partner Jeff Weiss.
Opposition to OSRA 2021
With the increased scrutiny that OSRA 2021 intends for carriers, it’s not surprising that the bill isn’t popular in this sector. According to The Loadstar, the World Shipping Council (WSC)—which represents the carriers—referred to the bill as “horrible transportation policy.”
In an exclusive interview published on September 9th, WSC president and CEO John Butler told The Loadstar that the policy wouldn’t work, since there are so many factors impacting supply chain congestion and carriers are just one link in the chain.
Along those lines, Butler doesn’t believe more legislation is the answer. “There’s virtually nothing from a policy or legislative standpoint that’s available to make cargo move faster. You can vent your anger. But the real problem here is cargo velocity and you can’t legislate for cargo velocity,” he said in the interview.
After the bill passed in the House of Representatives on December 8th, Butler issued this statement: “The House today passed HR 4996 without proper debate or committee process. 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.”
Support for OSRA 2021
However, others wholeheartedly support the bill—including the coalition of 152 U.S. companies and trade associations that submitted an open letter to Congress on September 13th endorsing it. A press release from the National Retail Federation (NRF) announced the submission.
Quoted in the release, David French, Senior Vice President of Government Relations, NRF said “The supply chain ecosystem is instrumental to American retailers’ ability to deliver products across the country to customers each day. Now is the time for the Shipping Act to be modernized to address a 21st century supply chain. We appreciate the efforts of Congressmen Garamendi and Johnson to address these complex challenges so many businesses currently face and encourage Congress to move fastidiously on this crucial legislation.”
Jennifer Hedrick, Executive Director, National Industrial Transportation League added, “The National Industrial Transportation League is grateful to Congressmen Garamendi and Johnson for their recognition of the challenges that maritime exporters and importers are experiencing, and for their commitment to seeking practical and workable solutions to the myriad issues affecting the entire maritime shipping network. NITL provides its full endorsement of the Ocean Shipping Reform Act of 2021 and is pleased to see that it not only addresses current challenges, but also provides a framework for a more robust maritime supply chain for all stakeholders. …”
Peter Friedmann, Executive Director, Agriculture Transportation Coalition was also quoted: “Agriculture and forest products are our country’s largest ocean export. Yet, there is nothing we produce in ag/forest products that cannot be sourced elsewhere in the world. We are pleased that Congressmen Garamendi and Johnson and over 140 members of Congress recognize that unless U.S. agriculture exporters can deliver affordably and dependably, our foreign customers will shift to other global suppliers. The Agriculture Transportation Coalition and our members in all 50 states are committed to build broad House and Senate support for OSRA21, even as we seek and support Federal Maritime Commission intervention, and as we engage with ocean carriers, ports, terminals, labor and truckers to find and implement solutions.”
When the bill passed in the House, the NRF issued an additional release, noting that “The House passage of the Ocean Shipping Reform Act is the final piece of NRF’s ‘Save Our Shipments’ grassroots campaign. The targeted advocacy effort focuses on legislative solutions to address the retail industry’s supply chain challenges, including passing the Bipartisan Infrastructure Bill and adding more truck drivers to the workforce.”
In an interview for Bloomberg, Port of Los Angeles Executive Director Gene Seroka said he expects OSRA 2021 to create more transparency in the industry. The following video from Bloomberg Television provides more details about Seroka’s perspective.