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What Is The Ocean Shipping Reform Act?

Last week, President Joe Biden signed the first significant shipping reform law in 24 years- The Ocean Shipping Reform Act 2022 (OSRA22). The law, which was based on the Ocean Shipping Reform Act of 2021, aims to support the growth of US exports and the promotion of international trade.

So What’s Changed?

In short, there are four main features to the new law. The first is it authorizes appropriations for the Federal Maritime Commission (FMC) for the fiscal years between 2022 and 2025. Secondly, it creates additional standards and requirements whilst also prohibiting conduct for ocean carriers. It also authorizes the FMC to be able to issue an emergency order which would oblige common carriers to share information directly with ships, trains and other motor vehicles.

Finally, the act allows the FMC to issue rules and regulations related to fee assessments, prohibited practices, and the establishment of a shipping registry. This is one of the most influential changes, as it will hopefully help keep shipping costs low, which would in turn help to protect consumer prices.

The regulations have been imposed by President Biden as a way to maintain his promise to “crackdown on ocean carriers whose price hikes have hurt American families and American businesses.”

The President outlined that during the pandemic nine major international shipping companies were able to consolidate themselves to join three alliances to control the majority of shipping worldwide. Further, he said that these three alliances had increased their prices by 1000% during the pandemic, restricting the pockets of consumers and businesses who suffered during the lockdown.

Upon signing the act he stated, “In just a few minutes I’m going to be signing the ocean shipping reform act to put a stop to shipping companies taking advantage of American families, farmers, ranchers, and businesses and to bring down prices and give the American people a little bit of breathing room.”

The second priority for the act is to help ease supply chain constraints which have been suffocating the US economy. As mentioned previously, the new act looks to restrict the power of the big three alliances that have formed and encourage and protect American business. However, what is unknown is whether it can fix the supply issues that the US is now facing.

This is mainly because of six main challenges; operational inefficiencies within US ports; the operation of chassis procedures; overcharging by foreign shipping companies; retaliation between OSRA22 and Multimodal Transport Operators and Ocean Transportation Intermediaries; the rejection of cargo; and finally the invoicing of demurrage and detention by ocean carriers.

All these factors have impacted supply chains in one way or another, and where OSRA22 is a good start for protecting consumer and business prices many are worried it’s not enough. Visible action has already been taken against some ocean carriers. For example, Wan Hai and Hapag Lloyd are currently paying penalties for violating US laws. Hopefully, the act will enact some more visible action and bring home Biden’s policy of protecting American business.

Only time will tell whether the Ocean Shipping Reform Act will serve its purpose, it might not be able to bring solutions to all the issues facing supply chains but hopefully, it will be able to make a positive impact where it matters.

Photo: Newscom / Alamy Stock

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