What the Ocean Shipping Reform Act Means For the Supply Chain
Before President Joe Biden signed the Ocean Shipping Reform Act of 2022 into law last month, it had been more than two decades since the shipping industry had seen major regulatory container shipping reforms. With inflation soaring to a 40-year high this month as ocean carriers have continued to charge record rates, many American brands and retailers say the changes were long overdue.
The most significant overhaul of maritime regulations since 1998, the law expands the regulatory authority of the Federal Maritime Commission (FMC) and challenges the market power of ocean carriers, which have raised shipping rates and fees considerably since the pandemic.
The act passed with bipartisan support in both the House and the Senate. Biden called the bill a “crack down on ocean carriers whose price hikes have hurt American families and American businesses” and said it will lower the price of consumer goods.
It also aims to ease supply chain backlogs. Port congestion that began during the COVID-19 pandemic has left American exporters unable to ship their products because of surging freight costs, unpredictable sailings and denied cargo. American farmers particularly struggled. In 2021, 22% of U.S. agricultural exports were not delivered because of unreasonable shipping practices, according to the Agriculture Transportation Coalition.
For businesses that have had to pay higher shipping rates despite service delays, the reforms are welcome news.
“The bill will directly address price gouging in the ocean shipping industry, which played a large role in the empty shelves, late deliveries, and increased prices American consumers have faced during the past year, and will protect American companies from predatory practices that threaten their businesses,” said Steve Lamar, CEO of the American Apparel and Footwear Association.
The Ocean Shipping Reform Act will:
Prevent international ocean carriers from declining American cargo without good reason. The burden of proof is now on carriers to show their policies are reasonable.
Shift the burden of proof regarding demurrage and detention charges to international ocean carriers. A Container xChange report showed that these charges more than doubled between 2020 and 2021 across the world’s largest ports.
Require international ocean carriers to report to the FMC how many empty containers they are transporting, with the goal of improving transparency of movement of U.S. exports.
Stop international shipping companies from retaliating against exporters and importers.
Improve the complaint and investigation process for businesses seeking assistance from the FMC.
Authorize the Bureau of Transportation Statistics to collect data on dwell times for the trailers used to transport ocean containers over the road, in hopes of better managing these trailers.
Provide the FMC with emergency authority to collect data during times of severe congestion.
How much impact the law will have, of course, depends on how it’s enforced, and whether the FMC uses the full powers it has been granted. As Supply Chain Dive reports, shippers believe the law’s impact on rates could be modest, and the law won’t address the fundamental lack of competition in the industry. Still, they say, any change in an industry that’s seen so little regulation over the last 20 years is likely to help.
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