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Retailers applaud as Ocean Shipping Reform Act sails through Congress
The House of Representatives on Monday, following an earlier vote by the Senate, approved legislation that retailers believe will help reign in ocean carriers who have used the coronavirus pandemic as a rational to jack up rates to transport goods to the U.S.
The bill, known as the Ocean Shipping Reform Act of 2022 (OSRA), passed in a vote of 369 to 42. It seeks to improve oversight of ocean shipping practices by granting more investigative authority to the Federal Maritime Commission (FMC), providing greater clarity on prohibited business practices and giving the FMC the authority to order refunds.
President Joe Biden supports the bill.
“During the pandemic, ocean carriers increased their prices by as much as 1,000 percent. And, too often, these ocean carriers are refusing to take American exports back to Asia, leaving with empty containers instead. That’s costing farmers and ranchers—and our economy—a lot of money,” Mr. Biden said in a statement.
The National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) advocated for OSRA’s passage.
“Making OSRA federal law helps address longstanding systemic supply chain and port disruption issues that existed well before the pandemic by providing the Federal Maritime Commission the additional authority it needs,” said David French, senior vice president for government relations at the NRF. “Additionally, it provides critical updates to the international maritime transportation system, which has been severely impacted by COVID-19.”
“Today’s global supply chain disruptions are multifaceted, but the lack of oversight or shipper protections as ocean carriers overlook service commitments in favor of soaring rates and punitive fees, has been particularly challenging for retailers,” said Jess Dankert, RILA vice president of supply chain. “This legislation will ensure that American businesses have fair access to ocean shipping capacity, and protection from unreasonable fees and retaliatory measures.”
The passage of OSRA may serve as a start to address supply chain issues that existed before the start of the pandemic and exacerbated over the past two years. It will not address, however, many issues such as the lack of truckers and other supply chain workers that has driven up the cost of goods. It will also not have any effect on China’s zero tolerance COVID-19 policy that has caused factories and ports in the nation to close for extended periods of time.
- Ocean Shipping Reform Act of 2022 (S.3580 and H.R.4996) – Congress.gov
- Statement by President Joe Biden on Congressional Passage of Ocean Shipping Reform Act – The White House
- Congress Approves Shipping Reform Legislation to Help Ease Supply Chain Challenges – The House Committee on Transportation and Infrastructure
- NRF Praises House Passage of Ocean Shipping Reform Act – National Retail Federation
- Retailers Reiterate Support for Ocean Shipping Reforms – Retail Industry Leaders Association
Discussion Questions
DISCUSSION QUESTIONS: What do you see as the greatest challenges for U.S. retailers when it comes to efficiently moving goods through the supply chain and keeping costs down? Will the Ocean Shipping Reform Act of 2022, when in force, be successful in helping retailers get goods to the U.S. at a reasonable cost?
Poll
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Lisa Goller
B2B Content Strategist
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
My question is, why this did not happen earlier? How soon will companies be able to see some relief on container charges?
It will only be successful if it has teeth. The supply chain problems are multifaceted and not easy to solve. We embraced just in time (JIT) like it was a long lost lover only to find that disruptions like the pandemic hastened a quick divorce. We need a real-time view into the supply chain along with legislation that stops the gouging by ocean shipping suppliers and, today, by big oil.
The part of the Ocean Shipping Reform Act that addresses the use of inland yards to store containers will help break the bottleneck of containers in the ports. Congress needs to revisit the Build Back Better funding and enable the use of better technology to help make that possible.
U.S. retailers’ top challenges are ambiguous availability and opportunistic pricing, which harm business continuity and planning.
The Ocean Shipping Reform Act will alleviate some retail pressure by protecting affordable access to ocean routes. Swift implementation and consistent enforcement are critical to the Act’s success.
The OSRA is one of those political solutions to the wrong problem. It doesn’t recognize that the U.S. is involved in global commerce. The shipping firms that don’t like the U.S. will simply change their shipping routes.
The other and perhaps more important problem is that U.S ports have not kept up with the growth of global commerce. Eight of the 10 largest ports in the world are in China. The other two in the top 10 are Singapore and Netherlands. Ships currently wait for port access more time than it takes to cross the ocean.
Ships have been increasing in size for decades in order to carry more on each voyage. The number of containers that ships can carry has increased by 1,500 percent over the past 50 years. Even the Panama Canal had to expand to deal with the massive size of these ships. Those ships currently under construction are larger than the biggest in service today. It seems to me that most of all we have an infrastructure problem. In the U.S., we are decades behind other ports around the world. We have identified the enemy in the supply chain, and it is us.
The rise of globalization, offshoring manufacturing, and depending on the seamless operation of the West Coast ports was an operating model that, while imperfect, was adequate for quite a while. With the impacts of the pandemic and the surge of consumer demand, plenty of weaknesses were exposed with the cargo operations, which contributed to the supply chain disruptions that have become too familiar.
The Ocean Shipping Reform act is a step in the right direction. However it will all come down to execution, and it’s encouraging to see that the federal government has granted investigative authority to the Federal Maritime Commission (FMC) against any corruptive acts in the U.S. ports. This is an excellent first step, and more regulations will be necessary to help mitigate the supply chain disruptions.
There are a few old truisms that come to mind here: anything worth doing was done long ago and any effective legislation would certainly be opposed by someone, therefore anything that gets passed is toothless. I think most people recognize high prices are a result of supply/demand imbalances, which can’t be legislated away.
I’ll put this in the “probably won’t help, but can’t hurt” category (and cross my fingers the latter doesn’t prove incorrect).