As shipping worldwide faces a slew of ongoing challenges, congressmen John Garamendi, D-Calif., and Dusty Johnson, R-S.D., have introduced the first major update of the federal law governing the global ocean shipping industry since 1998. The Ocean Shipping Reform Act of 2021 would implement new requirements to help address potentially unfair trading practices that may exacerbate the United States’ longstanding trade imbalance with China and other countries.
The act incorporates the four key elements from the legislative proposal to reform the Shipping Act of 1984 submitted by the National Industrial Transportation League (NITL):
- Addressing demurrage and detention practices;
- Modifying the prohibited acts to address unfair business practices related to the allocations of equipment and space on vessels;
- Common carriers’ service obligations to provide equipment and vessel space; and
- Expanding the FMC’s authority to act on complaints filed against the carriers.
“The reforms proposed by NITL would help address some of the unprecedented service problems and unfair business practices that importers and exporters are experiencing,” says Karyn Booth, partner and practice group leader for transportation at Thompson Hine, who drafted the NITL proposal. ISRI is excited to see the legislative proposal take hold in Congress, as the association has aligned with NITL on reforming the Shipping Act, and recently hosted a webinar on the NITL proposal for its members.
Like the NITL proposal, the Ocean Shipping Reform Act of 2021 focuses on targeted reforms to address service deficiencies and unfair business practices, rather than elimination of ocean carrier antitrust immunity and a complete overhaul of federal law.
- 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 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 U.S.
- Authorizes the FMC to self-initiate investigations of ocean common carrier’s business practices and apply enforcement measures, as appropriate.
Obliging carriers to adhere to minimum service standards and shifting the burden onto service providers to prove their practices are reasonable should give shippers some needed relief. “The proposal would shift the burden of proof from the invoiced party onto the carriers to show their demurrage and detention charges are reasonable and consistent with the FMC’s Interpretive Rule governing such charges,” Booth explains. “The legislation also empowers the FMC to create a new expedited process for handling these types of complaints. It would put more pressure on the agency to investigate these issues.”
The reforms will provide the FMC with more oversight and authority to act on complaints filed against ocean carriers. “You’re reaching over a long way to get some control over [carriers],” explains Billy Johnson, ISRI’s chief lobbyist. “The FMC can get some control because the ships are coming into U.S. waters and using U.S. ports to unload.”
Requiring ocean carriers to make reports to the FMC should give the agency the data it needs to take necessary action before something becomes a problem. “NITL’s proposal gives the FMC the right kind of authority to take proactive action,” Johnson explains. “It’s signaling to the shipping lines that there’s a new sheriff in town. They may start rethinking their actions and straighten out.”
ISR has long advocated for relief of the port congestion, shipping, and container issues faced by the recycling industry. “ISRI staff and members helped raise the profile of the problems and the need for reforms through various Hill meetings,” Booth says. In May, ISRI organized a virtual fly-in where ISRI members met with their members of Congress who serve on the House and Senate transportation committees. “During those meetings, ISRI highlighted how these issues affect the circular economy and other industries to raise significance and importance of the issue with members of the Hill,” explains David Eaton, ISRI’s director of government relations.
Passage of the bill would help to alleviate some of the challenges ISRI members face moving materials. “It gives ISRI members a bit more space to bring up issues and be confident that they’ll have support from the law,” Eaton explains. “It’s a signal of support with bigger changes to hopefully come down the line.”
According to Booth, the next steps are to find more House cosponsors for the bill, and to draft a companion bill in the Senate.
