House passes Shipping Reform Act

In the face of ongoing worldwide supply chain difficulties that have had broad effects on the whole economy, agriculture and retail groups applauded as the House of Representatives passed the Ocean Shipping Reform Act of 2021 on Dec. 8. The act has been described as the most significant change to United States shipping laws in more than 30 years.

The bipartisan Ocean Shipping Reform Act of 2021 was introduced by Reps. John Garamendi, D-CA, and Dusty Johnson, R-SD, and was approved by the House with a vote of 364 to 60. The bill now goes before the Senate for further consideration. President Joe Biden had already signaled his support in November.

John Butler, president and CEO of the World Shipping Council, which represents ocean carriers, responded with a terse statement. “The House today passed HR 4996 without proper debate or committee process. The bill is a political statement of frustration with supply chain challenges—frustrations that ocean carriers share. 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.”

The act has gathered support from more than 360 groups, including every ag and commodity group, as well as a broad range of other business, retail and consumer groups dependent on containerized shipping. A Dec. 6 letter of support signed by a long list of ag and commodity groups stated, “There is nothing we produce in agriculture and forest products in this country, that cannot be sourced in some other country. If we cannot deliver, affordably and dependably, our foreign customers will find alternatives to our exports. Our survey suggests that on average 22% of U.S. agriculture foreign sales cannot be completed due to ocean carrier rates, declining to carry export cargo, unreasonable freight and demurrage or detention charges, and other practices.”

Bill follows FMC investigation

The bill follows a months-long investigation of shipping practices by the Federal Maritime Commission. According to AgWeb, the bill “would further help agricultural exporters by improving the Federal Maritime Commission’s ability to enforce its interpretive rule on predatory detention and demurrage fees as well as prohibiting ocean carriers from continuing to unreasonably decline export bookings. The bill would help place guardrails on the ocean carriers’ actions.”

According to co-sponsor Rep. Johnson, the act will:

• Establish reciprocal trade to promote U.S. exports as part of the Federal Maritime Commission’s mission.

• Require ocean carriers to adhere to minimum service standards that meet the public interest, reflecting best practices in the global shipping industry.

• Require ocean carriers or marine terminal operators to certify that any late fees—known in maritime parlance as “detention and demurrage” charges—comply with federal regulations or face penalties.

• Shift the burden of proof regarding the reasonableness of “detention or demurrage” charges from the invoiced party to the ocean carrier.

• Prohibit ocean carriers from declining opportunities for U.S. exports “unreasonably,” as determined by the FMC in new required federal rulemaking.

•Require ocean common carriers to report to the FMC each calendar quarter on total import and export tonnage and 20-foot equivalent units (loaded or empty) per vessel that makes port in the U.S.

Among the earliest and most vociferous critics of shippers’ practices, including the use of detention and demurrage fees, have been specialty ag shippers represented by the Specialty Soya and Grains Alliance, who ship identity-preserved products in containers. A major complaint has been shippers sending empty containers back to Asia for more-lucrative retail cargoes instead of waiting for them to be filled with agricultural exports, which earn up to ten times less per container. According to the American Farm Bureau, across California’s three major ports, the shipment of empty containers jumped 56%, from an average of 1.16 million TEUs in the first quarters of 2018-2020 to 1.81 million TEUs in the first quarter of 2021.

In an earlier statement of support, the National Retail Federation had said the bill “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 problems at our ports have been exacerbated by the unreasonable practices of foreign-owned ocean carriers, including delays of shipments of American made goods to overseas trading partners,” said Julie Anna Potts, president and CEO of the North American Meat Institute. “These delays result in major costs to meat and poultry companies as their perishable products await transport.”

David Murray can be reached at [email protected].