What is the Ocean Shipping Reform Act, and What Can Shippers Expect?

Posted by Port City Logistics on Sep 21, 2022 12:30:16 PM

On June 16th, 2022, President Biden signed the Ocean Shipping Reform Act into law. The law, which represents the first major shipping legislation to come out of Washington in over twenty years, is ostensibly designed to help the U.S. ocean logistics industry remain competitive in a global logistics marketplace increasingly dominated by super-sized carrier alliances. However, the Ocean Shipping Reform Act (OSRA) of 2022 takes bold regulatory actions unexpected by many shippers. With regulatory bodies squaring off against ocean shipping mega-corporations for the first time in over twenty years, what do shippers need to know?

Why Reform?

In recent years, large ocean carriers have formed alliances, consolidating control over as much as 80% of global shipping capacity and 95% of trade capacity between the United States and Asian markets. The three carrier alliances targeted by the Ocean Shipping Reform Act–2M, Ocean Alliance, and THE Alliance–are constituted entirely of foreign-owned companies. Under these companies, U.S. Exporters found it difficult to bring their products to foreign markets, sometimes finding it more profitable to ship empty containers than to fill them with U.S. goods. Coupled with the steeply rising costs of demurrage & detention and other fees, the U.S. logistics industry was struggling to remain competitive in a global supply chain dominated by growing foriegn-owned monopolies. The Ocean Shipping Reform Act, drafted in the aftermath of the COVID-19 Pandemic supply chain shutdowns, sought to counter these issues by enabling the Federal Maritime Commission (FMC) to take stronger action on behalf of the American shipping industry. 

Ocean Shipping Reform Act of 2022 Summary

The primary goal of the Ocean Shipping Reform Act 2022 was to enable and embolden federal institutions such as the Federal Maritime Commission (FMC) to take a more active regulatory role in ocean shipping. Under OSRA 2022 guidelines, the FMC is now charged with ensuring a level-playing field for U.S. exporters, But what strategies are being employed by the newly empowered commission as it works toward a more equitable ocean playing-field, and what do they mean for ocean shippers? 

By focusing on ten key aspects of OSRA 2022, shippers can better understand what the FMC’s new global shipping guidelines mean for their business. 

Fair Fees

With the Ocean Shipping Reform Act, the newly empowered FMC is moving the burden of proof for demurrage & detention and other fees from the invoiced company to the ocean carrier. By placing the burden of proof upon the ocean carrier, the commission hopes to stand alongside fee-weary U.S.-based shippers in the fight against growing foreign-owned global shipping alliances. 

Working Against Retaliation

The Ocean Shipping Reform Act has also taken strides to prevent retaliation against shippers who report bad-faith actors to the FMC. Under the purview of OSRA, retaliation includes unfair refusal of available cargo space and any other unjust or discriminatory action. With the integration of anti-retaliation measures, the writers of the Ocean Shipping Reform Act hope to ensure that the consequences of OSRA 2022 don’t fall on U.S. shippers. 

Turning to Technology

As part of the Ocean Shipping Reform Act, the Comptroller General of the United States is tasked with providing Congress a report detailing a comprehensive assessment of the role technology plays at U.S. ports. This report, to be provided by June 16th, 2023 (a year after the enactment of the Ocean Shipping Reform Act) will compare the use of technology at U.S. ports to foreign ports and assess what regulatory barriers stand in the way of broader implementation of technology at U.S. ports. With this report in hand, the FMC hopes to implement technology more broadly throughout U.S. ports, helping to ensure that the U.S. remains competitive in global ocean transportation. 

Public Findings

Each year, the FMC will publish a full report detailing all instances of unjust demurrage & detention and the penalties placed upon the carriers that imposed those fees. By publicly publishing their findings online annually, the FMC hopes to discourage powerhouse common carriers from participating in unlawful shipping practices. 

Emergency Assessment

One ambition of the Ocean Shipping Reform Act is for regulatory bodies–namely the FMC–to develop an accurate understanding of the current state of ocean shipping. As part of this ambition, the FMC plans to take public comment on whether or not the current state of the ocean shipping industry constitutes an emergency situation. If the FMC can issue an emergency order, marine terminal operators and common carriers would be prompted to share vital cargo information with all relevant parties–including ocean shippers, rail carriers, and motor carriers. With this emergency order in place, the FMC hopes to streamline transportation processes on behalf of U.S. shippers. 

Mandatory Disclosures

As part of the Ocean Shipping Reform Act, all ocean shipping exchanges must be reported to the FMC. Doing so will allow the Commission to maintain better visibility over the operations of the carriers doing business at U.S. shores and hopefully encourage those carriers toward better behavior.  

Streamlined Chassis Management

While much attention has been paid in recent years to the logistics industry's capacity crisis, less has been said about the lack of available chassis. Without a ready-supply of chassis, intermodal transportation hubs are helpless to transport and manage containers. In hopes of guaranteeing a ready supply of chassis at U.S. ports, the FMC, with its newly granted powers from the Ocean Shipping Reform Act, plans to implement a set of best-practices guidelines for on-terminal and near-terminal chassis pools. In close cooperation with the Transportation Research Board of the National Academies of Sciences, Engineering, and Medicine, the FMC will complete a study of current chassis handling practices in the coming months, leading to a publicly available set of chassis management guidelines by April 1st, 2024. 

Dwell Time Practices

As the ocean shipping industry struggles against record-setting dwell times–an average of 7.6 days at the Port of Long Beach in October 2021–the Ocean Shipping Reform Act 2022 now requires ports and terminal operators with a fleet of over 50 chassis to submit data to the FMC regarding the dwell time of vital intermodal transportation equipment as well as the out of service percentage for that particular piece of equipment. 

Unjust Refusal of Hazardous Loads

As a result of the Ocean Shipping Reform Act, the Comptroller General of the United States will review practices used by common carriers to decide whether or not to take on maritime transport of hazardous loads. Through this study, the Comptroller General, acting on behalf of the FMC, will decide whether common carriers have systematically denied accommodations and equipment to shippers transporting hazmat. 

Transparency and Trust

While some aspects of the Ocean Shipping Reform Act may remain opaque to all but the most experienced ocean logistics professionals, the new law strides toward industry-wide transparency. At the end of each calendar quarter, the FMC will publish the total amount of empty TEU containers aboard each vessel operated by common carriers and the total import and export tonnage of each common carrier-making port in the United States and its territories overseas. With these quarterly reports, the FMC hopes to establish greater visibility within the ocean logistics industry, as well as ensure better shipping practices from common carriers. 

The Takeaway: What U.S. Shippers can Expect From the Ocean Shipping Reform Act of 2022

For U.S. Shippers, the Ocean Shipping Reform Act of 2022 is a double-edged sword: on one side, the promise of increased competitiveness with ever-growing common carrier alliances; on the other, the busy work that comes along with regular obligations to a newly-emboldened Federal  Maritime Commission.

For most shippers, the Ocean Shipping Reform Act will provide relief from skyrocketing demurrage and detention fees, exclusionary capacity allocation practices, and corporate retaliation. However, it remains to be seen whether the dollars saved will go to benefit struggling shippers or whether they’ll be subsumed into the daily hassle and expense of increased regulation: for U.S. ocean logistics professionals, only time will tell. 

Expect Excellence with Port City Logistics: 

Whether the Ocean Shipping Reform Act of 2022 brings sighs of relief or headaches to the U.S. logistics industry, shippers of all sizes should have a logistics partner they can trust. With port city logistics, shippers large and small can access best-in-class drayage service, lightning-fast container turnaround times, and unprecedented proximity to logistics hubs. Contact Port City Logistics today, and see what the perfect logistics fit can do for your business. 

Topics: Ocean Freight Shipping