What Is Happening in Congress

Congress has seen a major effort meant to empower the shipping industry’s regulator and strengthen the hand of shippers introduced in the Senate. The Ocean Shipping Reform Act (OSRA) has been introduced in the Senate after passing the House in remarkably bipartisan fashion, 364-60. The bill’s aim is to give more power to the FMC and take action against those engaging in anti-competitive behavior, which has resulted in a negative impact on US importers, exporters, and retailers. The proposed changes also require carriers to meet minimum service standards. 

 

The goal of the Ocean Shipping Reform Act of 2021 (H.R.4996) is:

• 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.

 

Focusing on detention and demurrage that predated the pandemic, the main concern leveled on this new bill is that it misses the point of the complaints about inability to ship cargo during the pandemic. The main concerns surrounding disruption in the supply chain on a historic level have not been addressed, though the bottlenecks have moderately abated when the White House put intense political pressure on carriers and terminals to get the flow moving. 

 

The House of Representatives also passed the America Creating Opportunities for Manufacturing Pre-Eminence in Technology and Economic Strength (America COMPETES) Act on February 4, 2022. Contained in this legislation are:

 

• The reinstatement of the Generalized System of Preferences, retroactive to December, 31, 2020.
• Providing for two cycles of the Miscellaneous Tariff Bill.
• Imposing restrictions on the use of the Section 321 “de minimis” exemption for non-market economies like China.

 

For both bills, the Senate will face pressure from interests to water down or remove provisions from the House bill. Ocean carriers do not want to be exposed to violations for incorrect demurrage and detention bills – a common occurrence right now. With the COMPETES Act, companies have made major changes to take advantage of the de minimis rule and e-commerce platform operators and e-tailers would have a seismic shift in returning to processes that included holding inventory in the US and paying ad valorem duties and – more importantly right now – Section 301 duties on many of those items.

 

We will continue to monitor these two pieces of legislation and update clients on what ultimately is agreed to and passed through Congress.