After two years of supply chain woes, the U.S. government is stepping in to try to alleviate some of the shipping bottlenecks that are key drivers of materials shortages and spiking inflation across the country.
The Ocean Shipping Reform Act (OSRA) was approved unanimously in the Senate on March 31st, 2022, and is expected to be signed by the President soon.
What is OSRA and what will it do? Let’s dive in!
What is the Ocean Shipping Reform Act?
The Ocean Shipping Reform Act is a bipartisan bill introduced late last year to address problems in the global supply chain related to ocean carriers. It’s designed to ease shipping backlogs by updating the framework of reporting requirements at the port.
OSRA is the first major overhaul to the U.S. Shipping Act since 1998. Once signed into law, this bill will require ocean carriers to certify that late fees comply with federal regulations, or face stiff penalties. It will also prohibit carriers from unreasonably declining shipping business from American exporters.
In addition to these high-level protections, OSRA is expected to increase reporting requirements to the Federal Maritime Commission, and it will allow for a commission to initiate probes into a carrier’s business practices and apply enforcement actions as needed.
Legislation to address issues with late fees and reporting has been on the government’s radar for a few months now. During his State of the Union address in February, President Biden called out ocean carriers in particular, claiming that their rates are passing costs through “to American businesses and families and contribut[ing] to inflation.”
OSRA has widespread support among organizations representing American logistics, and has drawn endorsements from the American Association of Port Authorities and more than 100 other organizations.
What would OSRA do?
OSRA’s supporters claim that ocean carriers have started charging high rates or denying service to American exporters representing farmers and manufacturers in recent years. At a time when the shipping container industry posted record profits, container ships are regularly leaving stateside ports empty, because importing goods is so much more lucrative than exporting. This leaves fewer carriers handling exports from the U.S., causing serious backlogs and driving up costs.
OSRA is designed to make ocean carriers operate under a set of fair and transparent rules if they want access to the lucrative U.S imports market. It’s expected to shift the burden of proof for ensuring accurate, reasonable demurrage and retention charges from the party being billed (shippers, truckers, etc.) onto ocean carriers. It will make refusing service to American exporters more challenging for ocean carriers.
But how does this help to streamline the supply chain and reduce inflation? While it’s not immediately clear how this would affect cargo transfers on the whole, the hope is that this bill will begin to level the playing field for shippers and help to reduce congestion at the ports. At a time when imports are increasing due to ecommerce, this bill should help ensure that exporters are getting a fair deal.
Of course, the wider impact of this bill is still to be seen. In order to be effective, OSRA will need favorable economic conditions, in tandem with the pandemic easing, labor market improvements, and infrastructure fixes at the ports. Imbalances caused by continued supply chain disruptions due to global conflict, new COVID variants, and the effects of climate change could dampen its success.
What’s next?
We’ll be keeping an eye on OSRA as it lands on the President’s desk, and watching for the wider impact on shipping and receiving in the months following its signing.
In a time of uncertainty for logistics professionals, staying ahead of the curve is more important than ever. Staying up on current trends at the port goes beyond reading the latest news. A partnership with a leading firm at a major port can help expedite your imports and exports, and give you access to advanced technology that improves your customer experience.
Globecon is an experienced 3PL partner at the Ports of Los Angeles and Long Beach that can help ensure your cargo gets through.
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