A rare bipartisan effort brings much needed reform to U.S. shipping in an attempt to level the playing field through new regulatory authority that will impact ocean carriers, marine terminal operators, shippers, motor carriers, and others across the supply chain.
The Ocean Shipping Reform Act is on its way to President Biden’s desk following its passage in the House Monday night. This represents the first major revisions to the Shipping Act of 1984 in over two decades.
The bill revises requirements governing ocean shipping to increase the authority of the Federal Maritime Commission (FMC) to address the numerous challenges U.S. shippers have faced over the last few years. For example, the bill requires the FMC to:
- investigate complaints about detention and demurrage charges (i.e., late fees) charged by common ocean carriers;
- determine whether those charges are reasonable; and
- order refunds for unreasonable charges.
It also prohibits common ocean carriers, marine terminal operators, or ocean transportation intermediaries from unreasonably refusing cargo space when available or resorting to other unfair or unjustly discriminatory methods.
Detention and Demurrage: The Act provides a list of information that must be included on invoices for detention and demurrage and mandates the FMC to begin rulemaking to further define prohibited practices by common carriers, marine terminal operators, and ocean transportation intermediaries regarding the assessment of detention and demurrage charges.
Charge Complaints and Assessment of Refunds: A person may submit complaints to the FMC about charges assessed by a common carrier, upon which the FMC shall promptly investigate the charge for compliance and provide the common carrier an opportunity to submit additional information. The common carrier will bear the burden of establishing the reasonableness of any demurrage or detention charges. If the charge is non-compliant, the FMC shall order a refund and civil penalties.
Public Disclosure: The FMC will annually publish on its website all findings of false detention and demurrage invoice information by common carriers and all penalties imposed or assessed against common carriers.
Data Collection: The FMC will publish quarterly reports describing the total import and export tonnage and the total loaded and empty 20-foot equivalent units per vessel (making port in the U.S.) operated by each ocean common carrier. Ocean common carriers shall provide all necessary information for this report.
Service Contracts: The Act leaves the door open for the FMC to add to the list of “other essential terms” in service contracts between ocean common carriers and shippers that the FMC may deem necessary or appropriate in future rulemaking.
Shipping Exchange Registry: Upon the date of corresponding FMC rulemaking, a person may not operate a shipping exchange (platform connecting shippers with common carriers) involving ocean transportation in the foreign commerce of the U.S. unless that exchange is registered with the FMC. The Act provides a carve-out for shipping exchanges that are subject to comparable supervision and regulation by the foreign authorities where the exchange is headquartered.
What Does This Mean?
The Act requires the FMC to begin the rulemaking process on these changes within the next few months. While the intent of the bill is to provide transparency and private sector enforcement to detention and demurrage charges, as well as provide U.S. exporters with needed relief on cargo space, how these laws will ultimately be implemented through the FMC’s new regulatory authority remains to be seen. Ocean carriers, shippers, and others in the industry should stay tuned for updates on the FMC’s proposed rulemaking.