The new legislation aims to combat US inflation and export delays

On June 16, President Joe Biden passed the new Ocean Shipping Reform Act (OSRA), with an overwhelming 369-42 majority vote in the US House of Representatives.

General consumer inflation reached 8.6% in May over the last 12 months, with specific costs like food and gasoline hitting 10.1% and 48.7% respectively.

The President has recently put the onus for peaking inflation on pandemic-fueled disruptions, the Russia-Ukraine war, and ocean carrier alliances. Trans-Pacific sea freight rates skyrocketed up to 1000% over the previous year, bringing ocean carriers more than $190 billion in profit in 2021, seven times greater than in 2020.

The new legislation increases the Federal Maritime Commision’s (FMC) oversight authority on ocean shipping. Concretely, this means the Ocean Shipping Reform Act will:

  • Allow the FMC to deeper investigate business practices of ocean carriers, apply enforcement measures, and require vessels to report total import/export tonnage regularly.
  • Prohibit ocean carriers from unreasonably refusing to transport US exports.
  • Aim to curb inflation for US consumers and businesses, and expedite cargo pileups at US coastal ports.

The new legislation has caused mixed reactions

Although OSRA was a landslide victory for US lawmakers, not everyone is on board with the new regulations.

Organizations like The Agriculture Transportation Coalition and The National Industrial Transportation League supported passage of the bill, believing stronger FMC authority will lower spot rates, increase carrier accountability, and improve supply chain logistics in the long run.

But some shipping experts like consultancy Sea Intelligence are skeptical, stating “carriers make the perfect target when there is a need to blame someone for the current problems.” They insist that “the true solution lies in policies improving inland issues.”

Other critics voice similar concerns, doubtful that the new measures will resolve what they perceive to be more pressing issues causing inflation: US supply chain infrastructure problems and widespread labor shortages.

Liner lobby group the World Shipping Council (WSC) added to this, “Until the import congestion is remedied, export congestion will persist. Ocean carriers continue to move record volumes of cargo and have invested heavily in new capacity. America needs to make the same commitment and invest in its landside logistics infrastructure.”

How OSRA will affect US shippers

With the latest Ocean Shipping Reform Act, the White House has stated it plans to "make progress reducing costs…and ensuring fair treatment for American businesses."

But what will this actually translate to, in terms of tangible differences for shippers? For starters, the FMC’s increased monitoring and influence over container line operations means shippers can expect greater transparency and accountability in ocean carrier collaborations. That means fewer exorbitant price fluctuations, while mitigating the risk of carrier price gouging.

Shipping cargo across the Trans-Pacific trade route should also become more predictable and efficient, as carrier alliances must disclose more detailed information behind their vessel capacity, pricing and fees.

With the new regulations going into effect, US importers and exporters hope to see more stability in an industry that continues to struggle with pandemic-fueled disruptions and supply chain bottlenecks.

Sources:

https://www.bls.gov/news.release/pdf/cpi.pdf

https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/28/fact-sheet-lowering-prices-and-leveling-the-playing-field-in-ocean-shipping/

https://www.reuters.com/business/autos-transportation/biden-sign-ocean-shipping-bill-bid-reduce-export-backlogs-2022-06-16/

https://splash247.com/bidens-targeting-of-liners-earns-sharp-rebuke/

https://theloadstar.com/shippers-welcome-reform-of-shipping-act-but-wsc-slams-biden-comments

https://support.ovrsea.com/global-ocean-carrier-alliances-subject-to-increased-fmc-reporting-requirements/