U.S. Houses Passes First Reform of FMC and Ocean Shipping in Decades

In a rare bipartisan vote, the U.S. House of Representatives on December 8 passed a sweeping bill designed to overhaul federal regulations of the global shipping industry. According to the bill’s sponsors, the Ocean Shipping Reform Act addresses the ongoing supply chain issues by ensuring a more competitive industry, protecting American businesses, and establishing reciprocal trade to address the U.S.’s longstanding trade imbalance with export-driven countries like China.

The bill, which passed by a vote of 364 to 64, is seen by some as a knee-jerk reaction to the port congestion and complaints especially from America’s agricultural and manufacturing communities of unfair business practices by the carriers that hurt American businesses during the so termed “supply chain crisis of 2021.” The act which now makes its way to the U.S. Senate for consideration is supported by more than 360 national, state, and local groups and business organizations ranging from the agricultural community to retailers, manufacturers, and trucking associations, but also drew stiff criticism from elements of the shipping community that said the bill would have little impact on the problems in the container shipping market and ports.

“We’ve all been impacted by the backlog in the supply chain and shipping delays,” said Dusty Johnson a representative from South Dakota and co-sponsor of the bill. “China and the foreign flagged ocean carriers aren’t playing fair, and accountability is long overdue. If you want to do business with American ports, you need to play by our basic rules.”

The act would create new authorities for the Federal Maritime Commission, including added responsibility to ensuring that reciprocal trade that promotes U.S. exports is part of the FMC’s mission. The FMC would also be responsible for determining if ocean carriers were unreasonably declining opportunities to carry U.S. exports as well as requiring carriers to report to the FMC each quarter on the tonnage and TEUs imported and exported on each vessel at U.S. ports. 

Other elements specifically target detention and demurrage charges that have been a point of major contention, especially for the U.S. agricultural community. Ocean carrier and marine terminal operators would have to certify to the FMC compliance with regulations pertaining to the fees. The responsibility for demonstrating the reasonableness of the D&D fees would also shift to the carrier from the invoiced party.

The act also includes the requirement that ocean carriers, “adhere to minimum service standards that meet the public interest.” The services would have to reflect what is considered “best practices in the global shipping industry.”

Co-sponsor of the bill John Garamendi, a representative from California, added, “Access to the American market and its consumers is a privilege, not a right. Congress must restore balance at our ports and tackle the longstanding trade imbalance our nation has with China and other countries head-on. I am pleased that the ‘Ocean Shipping Reform Act’ has passed the U.S. House of Representatives with overwhelming bipartisan support, bringing us one step closer to protecting American consumers and businesses from price gouging by foreign-flagged ocean carriers.”

The World Shipping Council responded to the passage of the bill saying that it proceeded without proper debate or committee process. The lobby organization for the shipping industry called the bill “a political statement of frustration with supply chain challenges.”

“The problem is that the bill is not designed to fix the end-to-end supply chain congestion that the world is experiencing, and it will not and cannot fix that congestion,” said John Butler, President & CEO, World Shipping Council. “The World Shipping Council will continue to work with the Congress to seek real solutions that further strengthen the ocean transportation system that has supported the U.S. economy throughout the pandemic.”

Many other organizations, however, were quick to hail the passage of the bill and called on the U.S. Senate to quickly address the legislation. The White House has indicated its support for the act.

The National Retail Federation, which helped to organize a coalition of more than 150 companies across the supply chain to support the bill, hailed the passage. Senior Vice President of Government Relations David French said in a written statement, “This bipartisan legislation provides much-needed updates and reform to an archaic system that retailers and thousands of other businesses depend on each day to transport goods. These improvements could not come at a more critical time, as the amplification from the pandemic has been severe.”

The U.S. Congress last overhauled the Federal Maritime Commission’s authority to regulate the global ocean shipping industry under the Ocean Shipping Reform Act of 1998. Independent of the current legislative initiative, the FMC has been taking a series of actions to respond to the problems in the supply chain. The FMC has been conducting fact finding sessions and also launched an investigation into the actions of the major carriers and alliances. They also formed the new National Shipper Advisory Committee made up of members of the community to council the FMC on issues.