Ocean Shipping Reform Act Passed by U.S. Senate Voice Vote
In a rare moment of bipartisanship in a deeply divided U.S. Congress, the Senate today passed the Ocean Shipping Reform Act with a simple voice vote. According to the sponsors, the bill, which received bipartisan co-sponsorship and broad industry endorsement, strengthens the authority of the Federal Maritime Commission and will level the playing field for American exporters. It is designed to make it harder for ocean carriers to unreasonably refuse goods ready to export at ports and charge shippers exorbitant fees.
“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,” said Senator Amy Klobuchar, one of the bill's sponsors. “Ocean carriers that are mostly foreign-owned have reported record profits. This legislation will help American exporters get their goods to market in a timely manner for a fair price.”
The bill represents the first significant reform of the regulations governing the movement of goods at U.S. ports taking direct aim at the criticisms that have emerged of the container carriers over the past two years. The bill passed by the Senate focuses on fees charged by the carriers as well as business practices that U.S. manufacturers and the agricultural sector have said are the reasons behind the dramatic declines in U.S. exports.
Addressing the concerns on exports, the bill prohibits ocean carriers from unreasonably declining shipping opportunities for U.S. exports, with the FMC determining the policies in a new rule making authority. Further, it requires ocean common carriers to report to the FMC each calendar quarter on total import and export tonnage and TEUs (loaded/empty) per vessel that call at U.S. ports.
The FMC’s authority is also expanded with new authorization to self-initiate investigations of ocean common carrier’s business practices and apply enforcement measures. Further, to address the concerns raised by the Biden Administration regarding the domination of the three shipping alliances, the bill establishes a new authority for the FMC to register shipping exchanges.
One of the key points of contention from shippers has been fees, with several pending complaints currently in front of the FMC. Under the bill, the burden of reasonableness is shifted to the ocean carriers which would be required to certify that late fees, i.e. detention and demurrage charges, comply with federal regulations along with giving the FMC the authority to level penalties. Previously, the invoiced party was required to demonstrate when the fees were unreasonably applied to their shipments.
“I’m glad the Senate unanimously passed this important legislation that would level the playing field for American farmers, exporters, and consumers by making it harder for ocean carriers to unreasonably refuse goods that are ready to export at U.S. ports,” said Senator John Thune who developed the Senate version of the legislation with Klobuchar. “Especially with record inflation in prices of goods, this legislation would also benefit consumers by promoting the fluidity and efficiency of the supply chain.”
The bill moved quickly through the U.S. Senate after being first introduced by Klobuchar and Thune at the beginning of February. The draft cleared committee and moved to the floor of the Senate just over a week ago. Passage of the Senate version of the bill means that it now proceeds to conference to resolve differences with the bill passed the House with overwhelming bipartisan support by a vote of 364-60 in December 2021.
The bill and especially the house version however has faced strong opposition from the shipping industry as represented by the World Shipping Council. The lobby group has said the bill fails to address the root causes of the U.S. landside congestion, saying that instead of making it more difficult for carriers the U.S. needs to invest in its ports and infrastructure.
President Biden called on the U.S. Congress during his State of the Union Address to pass reform legislation governing ocean shipping. It is widely anticipated that the president will sign the bill when it reaches his desk.