Ocean Shipping Reform Act Released by Committee to U.S. Senate Floor

Reform of the U.S.’s regulations governing the operation of ocean carriers and the Federal Maritime Commission oversight authorities cleared a key hurdle as it was released from committee today. The draft legislation, which previously passed the U.S. House of Representatives and has won support from President Biden, now moves to the floor of the U.S. Senate for debate. The bill is being co-sponsored by a bipartisan group of 27 senators and has won broad endorsements from more than 100 organizations, although it is being roundly criticized by the World Shipping Council lobbying for the containership industry.

The bill emerged as a response to U.S. manufacturers and the agricultural and food communities that cited the business practices of the carriers as major impediments to U.S. exports. Shippers have also strong criticized carriers for what they called abusive and exorbitant detention and demurrage charges while the World Shipping Council responded that the problem is with port infrastructure. They contend that carriers have deployed every available vessel and container and are moving more goods than at any time in history.

“Congestion at ports and increased shipping costs pose unique challenges for U.S. exporters, who have seen the price of shipping containers increase four-fold in just two years, raising costs for consumers and hurting our businesses,” said Senator Amy Klobucher one of the authors of the legislation. Marking the release of the bill from the committee, Klobucher commented, “This legislation will help level the playing field for American exporters so they can get their goods to market in a timely manner for a fair price. Now that this bill has passed the Commerce Committee, it is one step closer to being signed into law.”

The Ocean Shipping Reform Act represents the first significant effort in decades to overhaul the rules governing the operations of the carriers and is designed to enhance the authority of the Federal Maritime Commission. A number of elements were added to the bill in markup including giving the FMC new authority to register shipping exchanges as well as additional authority to initiate investigations of ocean carriers as well as enforcement measures. 

The proposed legislation increases the requirements for carriers calling at U.S. ports with new reporting requirements to the FMC on the number of containers for import and export as well as prohibiting carriers from “unreasonably declining” exports as determined by the FMC. Carriers would have to certify and justify D&D fees and the burden of proof over the reasonableness of D&D fees is placed on the carriers.

“This legislation would give the FMC greater rulemaking authority to regulate harmful practices by carriers,” said Senator John Thune who co-authored the legislation and argues that it levels the playing field for exporters. “These improvements would provide the FMC with the tools necessary to address unreasonable practices by ocean carriers and hold them accountable for their bad-faith efforts that disenfranchise American producers.”

The World Shipping Council quickly responded with a statement saying that “unfortunately” the Senate version of the legislation “addresses none of the root causes of the U.S. landside congestion... While the Senate is taking a more deliberative approach that the House’s flawed process in passing the Ocean Reform Act of 2021, neither chamber’s version of the bill does anything to fix the landside logistics breakdowns that are at the heart of America’s supply chain problems.”

The WSC did not address the issues of D&D fees instead saying the House’s version of the bill would make existing congestion worse. They are calling for investments in port infrastructure along with communication, innovation, and collaboration across the intermodal transportation system. The WSC however said that some elements of the Senate version provide “regulators enough authority to get the final rules right.”

Assuming the Senate passes the draft legislation, it would then have to undergo reconciliation with the House version passed in December 2021. President Biden in announcing efforts to have the Department of Justice and FMC step up enforcement of antitrust regulations against carriers also called for Congress to pass reforms of the regulations governing the operation of the ocean carriers.