A major shipping reform act has been signed into law

Michael Ford

Michael Ford

Vice President, Government and Industry Affairs

The Ocean Shipping Reform Act of 2022, “or “OSRA” was signed into law on June 16, 2022, and set to take effect immediately. The regulation provides the Federal Maritime Commission (FMC) with some new tools to monitor the shipping activity by the carriers and attempt to eliminate unfair shipping charges, prevent unreasonable denial of U.S. exports, and improve the oversight and enforcement tools needed to crack down on unfair practices.

The maritime industry has consolidated from over 22 major ocean carriers to only 11 today which are grouped into 3 official alliances: 2M (Maersk and MSC), THE Alliance (Hapag-Lloyd, ONE, Hyundai Merchant Marine and Yang Ming), and the Ocean Alliance (COSCO, CMA CGM and Evergreen). This group of carrier powerhouses provides unprecedented market strength during a time when massive volumes of imports from Asia are overwhelming the entire supply chain.  

Ocean carriers have been imposing demurrage and detention fees (cumulatively, nearly hundreds of millions of dollars) when they deem exporters and importers are not picking up or returning equipment efficiently. However, because such delays are often not the fault of the shipper, the (FMC) determined many of these charges to have unreasonable processes and practices.,

Meanwhile, global demand for US exports remains strong, even with growing competition from other source countries. Currently, ocean carriers are declining to carry US export cargo while taking containers back to Asia empty, in order to expedite the loading of US-bound Asian exports, which generate higher carrier freight rates/revenue.  
So, what are the Provisions of OSRA 2022?

  • Prohibit ocean carriers from unreasonably declining opportunities for U.S. exports, as determined by the FMC in a new required rulemaking;
  • Promote transparency by requiring ocean common carriers to report to the FMC each calendar quarter on total import/export tonnage and twenty-foot equivalent units (loaded/empty) per vessel that makes port in the United States;
  • Authorize the FMC to self-initiate investigations of ocean common carrier’s business practices and apply enforcement measures, as appropriate; and
  • Establish new authority for the FMC to register shipping exchanges to improve the negotiation of service contracts. 

The OSRA is the latest regulatory change in ocean shipping and only enacts some of the issues that have impacted shippers over the past several years. However, it's important to keep in mind that OSRA does not solve every problem that has been taking place at the ports in the US. Some of the parties involved in ocean shipping see these changes as a solution but rather as an issue that may be creating additional challenges. Being fluid in today’s hectic world of supply chains is the best approach that all parties involved need to adopt to ensure the level of service that is required.

It is imperative for shippers to stay alert to the changes taking place within the industry as they are frequent and often swift. In the meantime, please reach out to me with any questions or concerns.