The Ocean Shipping Reform Act cleared Congress last Monday with the expectation of President Biden signing it into law in the coming days.
Supported by the RV Industry Association (RVIA), the bill will be the first overhaul of ocean shipping rules since 1998. It will effectively turn the Federal Maritime Commission (FMC), which oversees the industry, from an agency passively investigating shippers’ complaints to one proactively policing ocean carriers, as per the News & Insights report of the RVIA.
The bill presents the first significant changes to the ocean shipping industry in 25 years, marshaling a rare bipartisan legislative victory spurred by high container prices and complaints from American exporters, who are frustrated that they can’t ship their goods abroad.
“Like many other industries, the RV industry has dealt with supply chain challenges in the wake of the COVID-19 pandemic,” said Samantha Rocci, senior manager of RVIA’s government affairs team.
“The RV Industry Association supports the Ocean Shipping Reform Act and its potential to lower costs on American manufacturing. Although there’s no quick fix for the ongoing supply chain issues we face, our government affairs team is excited to see Congress and the Biden administration working to alleviate part of the strain on American businesses.
The Ocean Shipping Reform Act will give the FMC more strength to oversee the ocean shipping industry, dominated mainly by many large overseas companies. The bill’s supporters said the companies had created monopolistic practices that drove prices up, locking American exporters from the rest of lucrative cargo.
The legislative effort to pass the bill began a year ago when Reps. John Garamendi (D-CA) and Dusty Johnson (R-SD) began hearing from agricultural producers in their districts that container shipping companies were refusing to take their goods.
Instead, the companies preferred to ship empty containers back to East Asia, where they could be more quickly filled with more profitable exports to the U.S., according to the report. Ocean carriers opposed the bill, arguing that land supply chain issues cause ongoing issues with containers at ports.
The bill shifts the burden of proof for complaints from the shipper onto the ocean carriers. It allows the FMC to initiate formal investigations without waiting for a third party to issue a complaint.
It also requires ocean carriers to prove that the shipper acted unreasonably when any detention and demurrage fees are placed on a shipper, a reversal of the current burden of proof that requires the shipper to show they did nothing wrong.
Detention and demurrage fees are charged when the shipper has not picked up containers or if a container is in use by a shipper for more than an agreed-upon timeframe.
The bill also calls for the FMC to start two rulemakings. One regulation would define unfair and unjust container shipping practices, and another defines the unreasonable refusal of goods on containers leaving U.S. ports.
Within 30 days of the bill becoming law, the FMC will issue a rule regarding the unreasonable rejection of products. Then, the final rule has to be released within six months. A rulemaking defining unjust and unfair container shipping practices must be initiated within 60 days, with a final rule coming within a year.
Additionally, Congress has provided the FMC with additional funds to oversee the sector, even though lawmakers also said that shifting burdens onto ocean carriers will require fewer resources to investigate complaints.
The bill also requires the FMC to publish additional data on the container shipping market online to give shippers an additional resource to determine if rates are unreasonably excessive.
While the bill would have effects at ports across the country, lawmakers and staffers acknowledged that the most egregious price fluctuations and frequent use of detention and demurrage fees are at the ports of Los Angeles and Long Beach for goods traveling across the Pacific. Those two ports account for 31 percent of all U.S. trade that moves in containers through seaports.