“Ocean Shipping Reform Act” Passes the U.S. House of Representatives

Dec 13, 2021 | DTJ Online

The U.S. House of Representatives passed the “Ocean Shipping Reform Act” (H.R.4996) by a bipartisan vote of 364-60 on December 8. Introduced by Congressman John Garamendi (D-CA) and Congressman Dusty Johnson (R-SD), the reform legislation seeks to make the Federal Maritime Commission (FMC) a more effective federal regulator.

H.R. 4996 will ensure a more competitive global ocean shipping industry, protect American businesses and consumers from price gouging, and establish reciprocal trade opportunities to reduce the United States’ longstanding trade imbalance with export-driven countries like mainland China. The bipartisan legislation passed by the U.S. House of Representatives now heads to the United States Senate for consideration.

Last month, the Biden White House endorsed the legislation in a press release outlining progress that has been made to reduce port congestion and resolve disruptions in the global supply chain due to the ongoing COVID-19 pandemic. The White House’s November 17 statement reads: “Congress should provide the FMC an updated toolbox to protect exporters, importers, and consumers from unfair practices. There is bipartisan support for doing this, including a bipartisan bill sponsored by California Democrat John Garamendi and South Dakota Republican Dusty Johnson. Their proposed legislation includes good first steps towards the type of longer-term reform to shipping laws that would strengthen America’s global competitiveness.”

“Access to the American market and its consumers is a privilege, not a right,” Garamendi said. “Congress must restore balance at our ports and tackle the longstanding trade imbalance our nation has with China and other countries head-on. I am pleased that the ‘Ocean Shipping Reform Act’ has passed the U.S. House of Representatives with overwhelming bipartisan support, bringing us one step closer to protecting American consumers and businesses from price gouging by foreign-flagged ocean carriers. I continue working with my Republican colleague, Congressman Dusty Johnson of South Dakota, to enact our bipartisan bill into law.”

“We’ve all been impacted by the backlog in the supply chain and shipping delays,” said Johnson. “China and the foreign-flagged ocean carriers aren’t playing fair, and accountability is long overdue. If you want to do business with American ports, you need to play by our basic rules. I am proud of the coalition Congressman Garamendi and I have worked to build over the last year. The Ocean Shipping Reform Act puts American consumers, farmers, retailers, truckers, manufacturers, and small businesses first. Our bill passed the U.S. House with strong bipartisan support and I look forward to seeing it pass the Senate.”

The “Ocean Shipping Reform Act of 2021” (H.R.4996) would:

  • Establish reciprocal trade to promote U.S. exports as part of the Federal Maritime Commission’s (FMC) 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 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/export tonnage and twenty-foot equivalent units (loaded/empty) per vessel that makes port in the United States.

Congress last overhauled the Federal Maritime Commission’s authority to regulate the global ocean shipping industry under the Ocean Shipping Reform Act of 1998 (Public Law 105-258). The People’s Republic of China was granted permanent normal trade relations with the United States, so-called “most-favored-nation” status, in December 2001 following the country’s admission to the World Trade Organization. In 2001, the United States’ trade imbalance with the People’s Republic of China was approximately $83 billion in nominal dollars, according to the U.S. Census Bureau. In 2020, our trade imbalance with mainland China was $310 billion, having increased year-over-year most years.

In late April 2020, the Federal Maritime Commission announced “Fact-Finding No. 29” to investigate congestion, bottlenecks, and fees at our ports. In November 2020, the Commission expanded this investigation (Fact Finding No. 29) to include reports of ocean carriers declining to ship American exports.

On July 20, 2021, the FMC launched a new audit program to assess ocean carriers’ compliance with federal regulations on detention and demurrage and increase the agency’s monitoring of the marketplace for ocean cargo services. This action underscores the need for legislation.

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