Senate Amends Ocean Shipping Reform Act

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Mar. 29, 2022
By: Chaney A. Finn

As we have previously discussed, investigations by the Federal Maritime Commission (FMC) into discriminatory shipping practices by ocean carriers on U.S. imports and exports would likely lead to additional shipping regulations. On March 22^nd, the Senate Commerce, Science and Transportation Committee approved an amended version of the Ocean Shipping and Reform Act that strengthens the FMC’s rulemaking and enforcement ability. The bill is similar in nature to the legislation that passed the House of Representatives late last year.

The Key highlights of the bill include:

• - Require ocean carriers to certify that 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;
• - Prohibit ocean carriers from unreasonably declining shipping opportunities for U.S. exports, 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 20-foot equivalent units (loaded/empty) per vessel that makes port in the United States;
• - Authorize the FMC to self-initiate investigations of ocean common carrier’s business practices and apply enforcement measures, as appropriate; and
• - Establish new authority for the FMC to register shipping exchanges.

Under the bill, the FMC has the ability to declare an emergency order that would require “any common carrier or marine terminal operator to share directly with relevant shippers, rail carriers, or motor carriers information relating to cargo throughput and availability" that aims to ensure cargo is transported efficiently. Any emergency order should last no longer than 60 days with an option for renewal.

A new Office of Consumer Affairs and Dispute Resolution Services under the FMC will also be created for enhanced investigative ability and to assist in managing submissions of comments and complaints. This will be facilitated by shipping data that will begin being collected by the Bureau of Transportation Statistics for analytical purposes.

As background, Congress called on the FMC to investigate reported discriminatory shipping practices by ocean carriers when U.S. agriculture exports were being rejected, and market manipulations that exploited supply chain vulnerabilities, led to record high shipping costs for imported containers. Additionally, the President called on the Department of Justice to assist the FMC investigate the nine largest ocean carriers that service the U.S. market to determine if they are abusing their market power to profit from overcharging shipping rates in a formal audit. As a result of the investigation, The FMC submitted its ‘Fact Finding No. 29’ investigation report which aimed to identify operational solutions to cargo delivery system challenges, issuing a series of recommendations for Congress to consider.

The bill has received praise and criticism from various groups. U.S. agricultural associations and other shippers that have been impacted by capacity constraints and high shipping rates support the bill, while other industry professionals argue that the provisions of the bill will not fix the challenges shippers are facing. The World Shipping Council, which represents 90% of the world’s container ship capacity, suggested that Congress focus more on investing port infrastructure and improved communication and collaboration between logistics sectors, stating, “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.”

If you have any questions or would like more information, do not hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.