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Ocean Shipping Reform Act Moving Closer to Reality

A bill aimed at overhauling the regulatory environment for ocean carriers has taken another step closer to becoming law with its unanimous passage by the United States Senate.

A House version of the Ocean Shipping Reform Act (OSRA) passed in December. Differences between the two versions of the bill will now be worked out between the House and Senate before a final version goes before President Biden.

Industry watchers are closely monitoring the bill’s progress, given that OSRA marks the first time in nearly two decades the Shipping Act has undergone such major changes. What’s proposed is seen by some as a way of modernizing the law for today’s more complex goods movement infrastructure.

Fashion and retail industry groups have been vocal in their support of the bill.

“Many factors contribute to today’s global supply chain disruption, but the lack of oversight or shipper protections as ocean carriers overlook service requirements in favor of soaring rates and punitive fees, has been particularly challenging for retailers,” Retail Industry Leaders Association (RILA) vice president of supply chain Jess Dankert said in a statement on the Senate vote. “This legislation will bolster the Federal Maritime Commission’s work providing oversight of ocean carriers and carrier alliances—sending the message that fair and open supply chains are essential to the American economy. This is an important component to untangle supply chain congestion and remove barriers to the movement of goods.”

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OSRA gives greater oversight powers to the Federal Maritime Commission (FMC) to investigate carrier business practices, oversee carrier import and export loads and regulate carrier activity around U.S. exports.

The proposed legislation also aims to rein in detention and demurrage late fee charges, a pain point for shippers, to ensure the charges are consistent with the law.

RILA’s Dankert went on to blame carrier alliances and industry consolidation for the decline in capacity on ships and the subsequent spike in freight costs and fees that have fallen on shippers since the start of the pandemic.

Carriers have long operated under alliances in which they work together, sharing vessels to expand services and geographic reach without creating ship congestion on the water.

RILA is not the only industry association to cast blame on ocean carriers for the skyrocketing freight costs retailers and apparel manufacturers have seen in the past couple years.

American Apparel & Footwear Association president and CEO Steve Lamar echoed those sentiments at the time of OSRA’s introduction in the Senate.

“Long delays, contract breaches, price gouging and excessive and unjust fees by carriers, and lack of access to equipment to move our product have resulted in huge delays and exorbitant costs that have translated into surging inflation that threatens our economic recovery,” Lamar said.

The National Retail Federation said, also at the time of the bill’s introduction in the Senate, OSRA would “support a modern-day transportation system.”

Senator Amy Klobuchar (D-Minn.), who introduced the bill with John Thune (R-S.D.), said the bill is “leveling the playing field for American manufacturers and consumers.”

“Congestion at ports and increased shipping costs pose unique challenges for U.S. exporters, who have seen the price of shipping containers increase four-fold in just two years, raising costs for consumers and hurting our businesses. Meanwhile, ocean carriers that are mostly foreign-owned have reported record profits,” Klobuchar said in a statement following the Senate vote. “This legislation will help American exporters get their goods to market in a timely manner for a fair price.”

The World Shipping Council, which represents carriers, said the bill “addresses none of the root causes” of supply chain congestion, arguing the country’s logistics system cannot keep pace with the record import levels of the past two years.

“Instead of passing legislation that would do nothing to address the nation’s supply chain congestion, Congress should seek real solutions that take a comprehensive, forward-looking view,” it said, pointing to infrastructure investments and promoting more partnerships and communication across the transportation system.