Key to untying the Gordian knot known as the supply-chain crisis is recognizing and addressing unreasonable business practices by ocean carriers. Some of these practices can likely be attributed to consolidation, and a recent report by Commissioner Carl Bentzel, Federal Maritime Commission (FMC), finds the shipping container (“containerization”) was a key factor in this consolidation.
Bentzel’s report explains that containerization caused the production of bigger ocean vessels with more mammoth cargo capacities that only larger companies could operate. As a result, the ocean carrier industry went from 25 major companies in the 1990s to nine now. And these companies have arguably amassed even more power by being segmented into three ocean carrier alliances.
Ocean carrier dominance in the shipping equation, along with modest governmental oversight, caused festering grievances from others in the supply chain that finally boiled over when post-pandemic consumer demand stretched the system. Complaints from three major constituency groups—importers (including IHA members), agricultural exporters, and truckers—created a powerful coalition that spurred Congress to move at an extraordinary pace to address these problems.
Last August, a bipartisan group of House members introduced the Ocean Shipping Reform Act of 2021 (OSRA21), which is basically a “Shippers Bill of Rights” that would give the FMC more enforcement tools to curb unreasonable ocean carrier practices. OSRA 21 also would boost shippers’ legal standing when filing complaints with the FMC and provide more ocean carrier accountability.
The House passed OSRA21 (H.R. 4996) in December by a vote of 364-60. This swift victory was due in part to IHA members using an e-platform to urge their members of Congress to vote for the bill. IHA members and others also helped generate momentum in the Senate for the bill and on Feb. 3, 2022, a bipartisan group of Senators introduced OSRA22 (S. 3580).
OSRA22 was approved in committee with language similar to the House bill and then it passed the Senate on March 31 by voice vote. While this was happening, the House passed OSRA21 two more times; first as an amendment to a China competition bill (the America COMPETES Act) and then as part of the Coast Guard Authorization bill.
OSRA21 and 22 now go to a House-Senate conference to reconcile differences. Once done, a final bill could be taken up in both chambers as stand-alone legislation, or as part of a China competition package, or in the Coast Guard Authorization that’s added to the National Defense Authorization Act.
On April 20, the OSRA coalition sent a letter to House and Senate leaders signed by 91 trade associations including IHA urging a quick conference and recommending provisions where there are differences. These include: a requirement for ocean carriers to adhere to minimum service standards that meet the “public interest;” a certification requirement for a demurrage and detention charge; a provision 1) prohibiting carriers from failing to furnish or 2) causing a contractor to fail to furnish the facilities and instrumentalities needed to perform the transportation services; and a provision allowing third parties to intervene in FMC action against ocean carriers alleging anticompetitive conduct.
