Biden just signed a law to lower shipping costs. Will it work?

President Joe Biden signed the Ocean Shipping Reform Act of 2022 into law on Thursday, promising sweeping changes to the ocean shipping industry after more than two years of port congestion, delays and rising costs.

The high-profile bill, which sailed through the House earlier this week, is part of the Biden administration’s attempt to rein in consumer price inflation that hit a new 40-year high this month.

“I promised to crack down on ocean carriers whose price hikes have hurt American families and American businesses,” Biden said in a press conference Thursday. “And today I’m proud to say that we got that done on a bipartisan basis.”

Many shippers celebrated the legislation as a significant step forward in addressing shipping disruptions that have arisen during the pandemic, including soaring fees and a lack of containers for agricultural exports. Biden added the law will address the inflation that has plagued businesses and “bring down prices on goods American families need.”

But the true impact will largely depend on how it’s enforced by the Federal Maritime Commission — an agency with limited funding and staff that shippers say has been historically slow to regulate the shipping industry.

While the law will grant the agency more enforcement power to crack down on potential malpractice, FMC Commissioner Carl Bentzel acknowledges there’s only so much the agency can do to address congestion and rising prices.

“A lot of the problems are really problems of supply and demand, and those may be beyond the ability of any agency to handle,” Bentzel said in an interview with sister publication Supply Chain Dive.

Congress responds to rising fees, congestion

Lawmakers were spurred to act last year after soaring shipping rates, higher fees and unpredictable schedules disrupted business operations and pushed many companies to raise prices. Companies have said they’ve had to pay significantly more to transport products while also experiencing major delays in service.

“We have received hundreds of complaints from shippers,” said Rep. John Garamendi, a Democrat from California who sponsored the initial House version of the bill.

The law gives the FMC greater authority over shipping companies and empowers the agency to self-initiate investigations into carriers’ business practices. But one of the biggest impacts of the bill, shippers say, is that it pushes the FMC to act more aggressively on detention and demurrage, which carriers charge when cargo isn’t moved quickly enough from terminals.

The legislation shifts the burden of proof to show the reasonableness of these fees to ocean carriers instead of shippers. It also requires the FMC to issue rulemaking within 45 days “further defining prohibited practices by common carriers” in regards to demurrage fees.

Demurrage and detention charges increased 104% from 2020 to 2021 across the world’s 20 largest ports, a Container xChange report found. In March, shippers paid approximately $43.03 million in demurrage fees through the Port of Los Angeles, according to an analysis from the Dray Alliance.

“Is it going to be a silver bullet? No, it’s going to be completely contingent in the enactment of it.”

Aubrey Bettencourt

President and CEO of the Almond Alliance

“Today, American manufacturers, farmers and consumers are at the mercy of declining ocean shipping performance and rising costs,” said Tom Madrecki, vice president of supply chain and logistics for the Consumer Brands Association. of container availability, which impacts US agriculture stakeholders including many of our member companies. “

Carriers have reduced the amount of free time that containers are allowed to sit at terminals before demurrage fees take effect, contributing to soaring costs, said Peter Friedmann of the Agriculture Transportation Coalition. Port congestion has also made it difficult for shippers to make appointments to get into terminals and remove containers.

“We’ve had instances where the container is still on the darn ship and hasn’t even been offloaded onto the terminal, but for whatever reason, the carrier started the free time,” Friedmann said.

Leave a Comment