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Ocean Shipping Reform Act heads to President

AmyLaughinghouse_iStock_Thinkstock U.S. flag exports trade container ship port exports
Industry welcomes extra enforcement given to FMC to keep shippers accountable and help ag remain a reliable exporter.

UPDATE: President Biden signed the bill in a ceremony on Thursday afternoon, June 16. 

After nearly a year since first introduced, on Monday night the House passed by a vote of 369 to 42 the Senate’s version of the Ocean Shipping Reform Act, drawing widespread praise from agricultural groups who have seen ag exports drop by an estimated $25 billion over the last six months due to shipping constraints.

“During the pandemic, ocean carriers increased their prices by as much as 1,000%. And, too often, these ocean carriers are refusing to take American exports back to Asia, leaving with empty containers instead. That’s costing farmers and ranchers—and our economy—a lot of money,” says President Joe Biden in a statement following the vote. “This bill will make progress reducing costs for families and ensuring fair treatment for American businesses—including farmers and ranchers. I look forward to signing it into law.”

Lead sponsor of the bill, Rep. John Garamendi, D-Calif., says as he was hearing from exporters about problems with containers and ocean shipping. “The more we researched it, the more we discovered that the Federal Maritime Commission, which was supposed to be solving the problems of international trade imbalances, simply didn’t have the power to do so,” Garamendi says.

For the first time since 1998, the laws regulating international shipping were to be addressed and amended. Garamendi says the bill empowers the FMC to actually carry out its purpose to create a fair import and export marketplace.

“We also take on the big nine international shipping companies that dominate all ocean transportation. For the Western Pacific Ocean, its actually just five, which two of those five are directly connected to the Chinese government.”

The Ocean Shipping Reform Act would, in part strengthen FMC authorities to better protect American shippers, farmers and manufacturers from unfair or unreasonable anticompetitive actions by foreign-owned ocean carriers. It also allows the FMC to set minimum contract standards for ocean shipping service contracts to protect U.S. shippers from actions which leave export cargo stranded at U.S. ports. In addition, it increases protections for domestic shippers from retaliation by foreign ocean carriers if shippers file a complaint with the FMC.

When asked whether the bill offers enough teeth for FMC to do its job and hold shippers accountable, International Dairy Foods Association President and CEO Dr. Michael Dykes is optimistic and says, IDFA believes the legislation does provide the right amount of authority to FMC, but IDFA will be watching to see how the implementing regulations are written. “I know from our many meetings with FMC Chairman Daniel Maffei that his intention is to improve the process and improve the system,” Dykes adds.

Garamendi says the bill goes after a major inflation issue, and that is the cost of transportation. He adds the bill has already brought some success even before passage, as some of the ocean shipping companies realized they wouldn’t be able to do all the price gouging. “We’ve seen some moderation in the costs also for the American exports and more availability of bookings on ships as well as containers,” Garamendi adds.

The Act sets stringent standards for detention and demurrage charges and strict penalties for inaccurate charges. Dykes says he’s also optimistic the bill will help address the demurrage issues.

One of the co-sponsors of the bill, Rep. Jim Costa, D-Calif., says 44% of California’s agriculture is exported and it’s taken decades to perfect a lot of those markets. He says that different industries, including almond and dairy, have lost customers because they’ve been unable to ship in a timely manner.

“Commodity after commodity depends upon our ability to export what we can’t consume,” says Costa. “The good news is we’re prolific producers. The bad news is we can’t consume all the products that we produce.” Costa believes the Ocean Shipping Reform Act will help U.S. agricultural exporters again become reliable suppliers.

Ag industry welcomes passage

“Undue burden to our food system and supply chain has been lessened today with the passage of the Ocean Shipping Reform Act, which maintains fair ocean carrier practices,” says National Association of State Departments of Agriculture CEO Ted McKinney. “Today’s actions couldn’t have come at a more needed time for the United States and the world as changes from the Ocean Shipping Reform Act will enable more U.S. agricultural products to reach the global marketplace,” McKinney says.

U.S. Meat Export Federation President and CEO Dan Halstrom says, “In these times of rising input costs, it has never been more important to maximize the value of our agricultural products, and the best way to do that is to ensure access to the international marketplace. This legislation takes important steps forward in improving the shipping services available to U.S. exporters.”

“This day has been a long time coming,” says American Trucking Association President and CEO Chris Spear. “This bill provides important tools to address unjustified and illegal fees collected from American truckers by the ocean shipping cartel – fees that have contributed to the shipping lines raking in $150 billion in profits just last year. Those fees hurt American motor carriers and consumers – helping to drive record inflation.”

The bill also calls for a study to examine the severe supply chain bottlenecks at American ports and analyze their impact on the international ocean transportation system’s competitiveness and reliability.

Leading Democrats on the Ocean Shipping Reform Act including Costa, Sen. Amy Klobuchar, D-Minn., and Garamendi, also plan to introduce additional pieces of legislation to deal with problems that were not known at the time they began with the Ocean Shipping Reform Act including anticompetitive actions of the shipper alliances and the oligopolies that exist today in being able to manipulate the market. Other legislation looks to address the availability of the appropriate containers and infrastructure improvements.

“Presumably they don’t engage in price fixing. I don’t believe that for a moment,” Garamendi says, adding more is needed to empower the FMC to look at those anticompetitive actions.

TAGS: Exports
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