The Supply Chain Matters blog highlights a ramification of this year’s unprecedented U.S. port delays, the initial passage of legislation addressing needed reforms in ocean shipping commerce.
This week, the U.S. House of Representatives passed what was titled as the Ocean Shipping Reform Act of 2021. The bi-partisan sponsored legislation passed by a vote of 360 to 60 and included the favorability of a substantial number on U.S. industry groups including the National Retail Federation (NRF).
This development is noteworthy because the legislation revises provisions related to ocean shipping policies, support the growth and development of U.S. exports and promote reciprocal trade in the foreign commerce of the United States. The legislation further modernizes existing ocean shipping regulatory language to account for current day challenges and actions and adds additional regulatory tools for the U.S. Federal Maritime Commission (FTC). It is the first piece of legislation specifically directed this purpose in over twenty years.
The House passage of this legislation follows Biden Administration directed actions into investigating the causes and remedies of 2021’s U.S. West Coast port backups and consequent logistics disruptions and the need for longer-term reforms of shipping laws that have not been addressed in many years.
Highlighted provisions of the House legislation include:
- Requirements for operating a shipping exchange involving ocean transportation in the foreign commerce of the United States. That includes definition of a shipping exchange, whether platform, digital, over the counter, which connects shippers with common carriers.
- Prohibits ocean common carriers and marine terminal operators from retaliating or discriminating against shippers because such shippers have utilized other carriers of filed a compliant against a vested carrier.
- Requires ocean common carriers to adhere to minimum service standards that meet the public interest.
- Directs the FMC to establish rules prohibiting ocean common carriers and marine terminal operators from adopting and applying unjust and unreasonable demurrage and detention fees, which has been alleged by U.S. businesses over the past two years. The legislation additionally requires carriers and terminal operators to maintain all records supporting the assessment of any demurrage or retention charges for a period of five years.
- Authorizes the FMC to initiate investigations of an ocean common carrier’s fees or charges and apply enforcement measures, as appropriate. It further grants authority for the FMC to issue emergency orders that require information sharing in deemed situations of a substantial adverse effect on the competitiveness and reliability of the international ocean transportation supply system. Information sharing involves ocean carriers and terminal operators to relevant shippers, rail or motor carriers related to cargo throughput and availability.
- There is added rulemaking addressing the unreasonableness of ocean common carriers in prioritizing the shipment of empty containers while excluding, limiting, or reducing shipment of full loaded containers while such containers are readily available to be shipped. This provision was lobbied for by U.S. exporters, particularly agricultural exporters, who had their containers bypassed for shipping when container lines established specific priority in moving empty containers to other overseas ports.
- Revises annual reporting requirements for the FMC on foreign laws and practices to include practices by ocean common carriers.
A rather interesting part of this legislation calls for no later than 60 days after enactment, for the U.S. Secretary of Transportation to seek to enter an agreement with the National Academy of Sciences to conduct a study on the United States supply chain. The bill describes the study contents to include where bottlenecks and choke points are most prominent, what common shipping data elements are created at hand-offs, data constraints that impede the flow of maritime cargo along with data sharing systems that can be employed to improve the functioning of the U.S. supply chain.
This legislation now moves to the U.S. Senate where it will likely face additional lobbying by various industry stakeholder interests.
Regardless of the final outcome of this legislation, and with so many industry action group sponsors, the bill sends a discernable message for modernizing practices and for updated regulative reforms.
A final note relates to our just published themes for what industry supply chain should expect in 2022 and beyond. One of the obvious priorities brought out by the events of this year was the need for the global shipping industry, private industry and government to assess what reforms are needed to alleviate the port and consequent nationwide logistics disruptions that have occurred. Indeed, the opportunity presented in not only needed legislative reforms, but more integrated inter-modal information flows and execution planning.
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