Industry News

Is the Tide Turning on Container Carriers? A Look at the Ocean Shipping Reform Act of 2021

 

Everything about ocean shipping is considerably large—the vessels, the oceans they sail across, the ports, and now a way less cool aspect—the fees they charge. We all know importers and exporters are getting hit with astronomical bills when shipping their goods these days and as a result, U.S. businesses are taking the hit.

Sometimes, things as large as this can get the attention of a few folks in Washington. Enter Representatives John Garamendi (D-Calif.) and Dusty Johnson (R-S.D.) who have decided that ocean carriers need a time out. Both have proposed a bipartisan bill titled, The Ocean Shipping Reform Act of 2021, which seeks to address service and rate complaints from ocean carriers. The bill would give the Federal Maritime Commission a lot more power in overseeing shippers, such as:

Establish rules prohibiting common carriers and marine terminal operators from applying unjust and unreasonable demurrage and detention rules. This would shift the burden of proof for complaints onto the service providers to prove their practices are reasonable and in compliance with the rules.

This implies taking the weight off the shoulders of the shippers and creates a level playing field for all parties involved, according to Rep. Garamendi. Opponents argue that instead of creating fairness, this puts most of the weight or burden onto ocean shippers, which represent 90% of global container capacity. The World Shipping Council argues that regulating only one aspect of the supply chain is “doomed to fail”.

While this argument is comprehendible, reform has not been addressed in this arena since the early 2000s when ocean carriers held only 12% of total shipping volume and now currently sits around 80%.

Here’s another important highlight of the proposed bill:

Clarify the obligations of common carriers with respect to equipment and vessel space allocations and contract performance by requiring them to adhere to minimum service standards that meet the public interest.

This recommendation is largely aimed at U.S. exporters and vessel space. Because of the immense increase in imports, this has actually diminished export options for American businesses. Ocean shippers are expediting the need to get empty containers back to Asia so quickly that many containers hit the U.S. and return to Asia completely empty. Jen Sorensen, President of the National Pork Producers Council stated, “China wants chilled pork, not frozen. However, shippers’ refusal to ship without unreasonable delays or the highly unpredictable shipping environment forces the freezing of pork, and in turn limits the premium that could otherwise be received in the Asian market for fresh, rather than frozen, pork”[National Hog Farmer]. In a sense, Sorensen believes there is discrimination with regard to U.S. agricultural products and could be fixed by giving the FMC more oversight. Minimum service standards, as laid out in the proposed bill, would require ocean carriers to meet minimum service standards and best practices in the industry. In other words, if you’re going to send a container back overseas empty, you better have a good reason for doing so.

Clearly, there are numerous issues in the supply chain right now that must be addressed sooner than later. There is no definite direction to point the finger, but there needs to be measurable change and fast. Ocean shippers have grown exponentially over the course of the past two decades and carry a responsibility to influence fair trade and reasonable fees for businesses of all sizes. This shouldn’t be the wild west—we should welcome regulatory oversight from the FMC to assist U.S. businesses in operating on a level playing field, thereby helping our economy flourish.

M.E. Dey is in the business of being there for our customers with organizations of all sizes. The Ocean Shipping Reform Act of 2021 is a big step in promoting fair business practices by all parties involved in the supply chain. We encourage you to learn more about the bill by viewing the full text here as well as a summary document here. We also encourage you to show your support of the bill by signing the letter of support and writing to your representatives.

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