On June 16, 2022, President Biden signed into law the Ocean Shipping Reform Act of 2022 (“OSRA 22”), the first major revision of US maritime regulatory statutes since 1998. OSRA 22 received strong bipartisan support in Congress. It responds to complaints from US exporters, importers, and other interests experiencing disruptions and sharp spikes in international shipping costs that have occurred since the beginning of the COVID pandemic in early 2020. OSRA 22 grants new authority to the FMC to assert regulatory oversight of ocean carrier practices affecting consumers of international ocean carrier services. The new law took effect immediately on signing.
The legislation addresses a perception, particularly among US exporters, that international ocean carriers have discriminated against US-origin cargoes in terms of rate practices, equipment availability, and penalty charges for delays in returning containers and chassis (i.e., detention and demurrage charges). US exporters, particularly exporters of agricultural products, have cited substantial losses in overseas sales since the beginning of the pandemic, losses they attribute in substantial part to ocean carrier practices that constrain availability of ocean shipping containers. Both import and export shippers also have complained of major shipping rate increases, lack of competitive conditions in the ocean carrier industry, and what they see as sharp practices with regard to assessment of additional fees for overdue returns of container equipment – detention and demurrage.
The causes of these price hikes and disruptions of pre-Covid shipping patterns are complex. A recent Federal Maritime Commission (“FMC”) fact finding investigation (“Fact Finding 29”) was issued on May 31, 2022, and includes the core finding that, while rates are indeed at historic highs, rates and space unavailability are largely a function of record levels of pandemic induced import demand further exacerbated by volume related congestion.
The new law attempts to address these and other concerns as follows:
- Shipping Exchange Registry — OSRA 22 establishes a Shipping Exchange Registry to be administered by the FMC. These exchanges provide a service to ocean carriers and shippers by mediating contract disputes.
- Prohibition on Retaliation — OSRA 22 adds to pre-existing statutory prohibitions against retaliation. A common carrier, marine terminal operator, or ocean transportation intermediary may not retaliate against a shipper, an agent of a shipper, an ocean transportation intermediary, or a motor carrier by refusing, or threatening to refuse, otherwise available cargo space accommodation; or resort to any other unfair or unjustly discriminatory action as retaliation for patronizing another carrier; or filing a complaint with the FMC; or for any other reason.
- Annual Public Disclosure — The FMC will publish and annually update on a publicly available website all findings of false detention and demurrage invoice practices by common carriers and all penalties imposed or assessed against common carriers.
- Detention and Demurrage — Not later than 45 days after the date of OSRA 22’s enactment, the FMC must initiate a rulemaking further defining prohibited practices by common carriers, marine terminal operators, shippers, and ocean transportation intermediaries regarding the assessment of detention and demurrage charges. The rule seeks to further clarify reasonable rules and practices related to the assessment of detention and demurrage charges to address the issues identified in a previous FMC Final Rule, including a determination of which parties may be appropriately billed for any demurrage, detention, or other similar per container charges. OSRA 22 adds a new provision concerning the format of demurrage and detention invoices.
- Unfair, Discriminatory Methods — No later than 60 days after the date of enactment of this Act, the FMC will initiate a rulemaking defining unfair or unjustly discriminatory methods. Pre-existing law prohibited unjust or unreasonable preferences or advantages, but the language is vague and invited costly disputes over whether perceived preferences could be justified.
- Refusal to Deal — Not later than 30 days after the enactment of this Act, the FMC, in consultation with the Commandant of the U.S. Coast Guard, will initiate a rulemaking defining unreasonable refusal to deal or negotiate with respect to vessel space. The FMC will issue a final rule not later than 6 months after the date of enactment of this Act.
- Assessment of Penalties or Refunds – FMC is authorized to order refunds in enforcement proceedings in addition to, or in lieu of, civil penalties.
- Data Collection — The FMC will publish on its website a calendar quarterly report that describes the total import and export tonnage and the total loaded and empty 20-foot equivalent units per vessel (making port in the United States, including any U.S. territory or possession) operated by each ocean common carrier.
- Dwell Time Statistics — Each port, marine terminal operator, and chassis owner or provider with a fleet of over 50 chassis that supplies chassis for a fee shall submit for publication to the FMC statistics relating to the dwell time of equipment used in intermodal transportation at the top 25 ports, including inland ports.
- FMC Investigation and Oversight — Not later than 18 months after the date of enactment of this Act, the FMC will establish on the public website of the Commission a webpage that allows for the submission of comments, complaints, concerns, reports of noncompliance, requests for investigation, and requests for alternative dispute resolution. OSRA 22 places the burden of establishing the reasonableness of demurrage and detention charges on the issuing ocean carrier. The FMC will maintain an Office of Consumer Affairs and Dispute Resolution Services to provide non-adjudicative ombuds assistance, mediation, facilitation, and arbitration to resolve challenges and disputes involving cargo shipments, household good shipments, and cruises subject to the jurisdiction of the Commission.
- Emergency Order Authority — Not later than 60 days after the enactment of this Act, the FMC will seek public comment regarding (A) whether congestion of the carriage of goods has created an emergency situation of a magnitude such that there exists a substantial, adverse effect on the competitiveness and reliability of the international ocean transportation supply system; (B) whether an emergency order under this section would alleviate such an emergency situation; and (C) the appropriate scope of such an emergency order, if applicable. The FMC may issue an emergency order requiring any common carrier or marine terminal operator to share directly with relevant shippers, rail carriers, or motor carriers information relating to cargo throughput and availability, in order to ensure the efficient transportation, loading, and unloading of cargo to or from: Any inland destination or point of origin; Any vessel; or Any point on a wharf or terminal
- Chassis Pool Best Practices — No later than April 1, 2023, the FMC will enter into an agreement with the Transportation Research Board of the National Academies of Sciences, Engineering, and Medicine under which the Transportation Research Board will carry out a study and develop best practices for on-terminal or near-terminal chassis pools that provide service to marine terminal operators, motor carriers, railroads, and other stakeholders that use the chassis pools, with the goal of optimizing supply chain efficiency and effectiveness.
- Hazmat Transport Discrimination — Not later than 90 days after the date of enactment of this Act, the Comptroller General will initiate a review of whether there have been any systemic decisions by ocean common carriers to discriminate against maritime transport of qualified hazardous materials by unreasonably denying vessel space accommodations, equipment, or other instrumentalities needed to transport such materials.
- Storage and Transfer of Dwelling Containers — Not later than 90 days after the date of enactment of this Act, the Assistant Secretary for Transportation Policy, in consultation with the Administrator of the Maritime Administration and the Chairperson of the FMC, will convene a meeting of representatives of entities to discuss the feasibility of, and strategies for, identifying Federal and non-Federal land, including inland ports, for the purposes of storage and transfer of cargo containers due to port congestion.
- Adoption of Technology at U.S Ports — Not later than 1 year after the date of enactment of this Act, the Comptroller General will submit to Congress a report describing the adoption of technology at U.S. ports, including: The technical capabilities of U.S. ports compared to foreign ports; An assessment of whether the adoption of technology at U.S. ports could lower the costs of cargo handling; An assessment of regulatory and other barriers to the adoption of technology at U.S. ports; and An assessment of technology and the workforce.
As can be seen above, OSRA 22 is clearly the product of recent shipper frustrations with port congestion, container and chassis equipment shortages, record-high ocean freight rates, and aggressive assertion of demurrage and detention charges by ocean carriers. Many of these issues reflect global economic forces beyond the control of any one trading country. However, it is noteworthy that Congress, with little internal controversy, turned its gaze on the US regulatory structure governing ocean shipping for the first time in nearly a quarter century.
The primary impact will be on the FMC itself. Historically an agency more concerned with administering a broad antitrust exemption for ocean carriers, the Commission has now been tasked with several demanding rulemaking and information gathering projects. Its focus and internal administrative culture is changed by these statutory revisions from a carrier-oriented agency to more of a consumer protection agency. Current budget and staff levels are likely inadequate to execute on the new responsibilities assigned and will require commitments from Congress to expand the agency to meet its new responsibilities.
Consumers of ocean transportation services should be aware that these changes provide new avenues of disputing ocean carrier rates, charges, and equipment availability practices perceived to be arbitrary. Because the statute took effect immediately, invoices for demurrage and detention charges should be examined for form and content compliance with the new law.
Robert Shapiro, Jonathan Benner and Sean McGowan are members of Thompson Coburn’s International Trade practice group. Special thanks to summer associate Yasmin Younis for her assistance with this article.
