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Are Shipping Reform Changes ‘Solution in Search of a Problem’?

The U.S. Chamber of Commerce’s CEO warned the Senate of making “rash changes to existing law” as Congress weighs legislation that would make good on President Biden’s calls for an ocean carrier crackdown even as some question the efficacy of proposed policies in addressing freight rate inflation.

Neil Bradley, chamber executive vice president, chief policy officer and head of strategic advocacy, urged lawmakers in a letter Thursday to exercise caution as they weigh S. 3586, the Ocean Shipping Competition Reform Act of 2022 (OSCRA22).

“We urge you to consider the bill under regular order to fully study the need and effect it would have,” Bradley wrote. “It is not clear what problem the legislation is attempting to solve. Under current law, ocean carriers are subject to both significant regulatory and antitrust scrutiny with respect to price and non-price competition factors.”

Bradley said the letter is in response to reports that the bill could be pushed through the Senate without the typical hearings associated with the lawmaking process.

OSCRA22 expands the number of parties that can join anticompetitive lawsuits filed by the Federal Maritime Commission (FMC) against ocean liners to include shippers and ports among others. This would reverse carriers’ current anti-trust legal immunity.

The bill comes as policymakers weigh other levers that would tamp down on ocean carriers.

A related bill, called the Ocean Shipping Reform Act of 2021 (OSRA21), passed the House in a vote of 364 to 60 in December.

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OSRA21 stemmed from the global supply chain issues brought on during the height of the Covid-19 pandemic that caused congestion at the ports and has since seen container rates soar. The bill gives greater power of oversight to the FMC and also aims to stop the common practice of carriers bypassing U.S. exporters in favor of taking empty containers back to Asia to speed up import loading times there. The bill would also add more scrutiny to detention and demurrage late fees, while requiring greater transparency as it relates to import and export loads for ships anchored in the U.S.

The National Retail Federation and American Apparel & Footwear Association have both been vocal in their support of OSRA21.

A Senate version of OSRA21 was introduced last month by Senators John Thune (R-S.D.) and Amy Klobuchar (D-Minn.).

President Biden called attention to the surging container rates in his State of the Union address earlier this month when he accused carriers of anticompetitive behavior.

“During the pandemic, these foreign-owned companies raised prices by as much as 1,000 percent and made record profits,” the president said in his address, saying he was “announcing a crackdown on these companies overcharging American businesses and consumers.”

The comments drew criticism from the World Shipping Council, which represents the carriers, and head scratching from some.

“Curious what this ‘crack down’ might look like,” Ryan Petersen, founder and CEO of digital freight forwarder Flexport, tweeted in response. “What laws is he alleging the ocean carriers broke?”

Biden’s comments ran counter to statements made by FMC chairman Daniel Maffei this month during the TPM22 Conference in Long Beach, Calif. where he said the rate increases seen by shippers correlates to the surge in demand. The FMC, which oversees carrier contracts, has also documented no evidence of illegal activity on the part of carriers.

“Too often, we find that the spirit of the law was not followed, but the letter of the law was,” Maffei said at TPM.

The chamber’s letter also raised concerns about the increasing scope of the Department of Justice when it comes to maritime trade.

“Adding the Department of Justice (DOJ) to co-enforce the same law as the Federal Maritime Commission is already charged with enforcing is a solution in search of a problem,” Bradley wrote. “Further, authorizing third parties to bring civil actions raises obvious questions about the real intent of this legislation and whether it is really designed to support a competitive and efficient marketplace or to create more legal uncertainty.”

The Department of Justice and FMC said this month the DOJ will provide attorneys and economists from its Antitrust Division to help the commission with enforcement of the law. The additional resources follow a memorandum of understanding signed between the two last July focused on information sharing.