Carriers Caution Against Too Much Oversight in Ocean Shipping Reform Bills
Carriers believe Congress’ ocean shipping legislation may lead to too much oversight and result in an overcorrection of a temporary problem caused by the COVID-19 pandemic, said John Butler, CEO of the World Shipping Council. Before the pandemic, Butler said, rising and falling export and import seasons “helped carriers and exporters work together to move product,” partly because ports weren’t congested with record amounts of cargo. But because of the “huge influx of imports, for which there’s been no seasonality,” the system has been thrown off balance, Butler said.
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“When things get back a little more to normal, the problems that we're having now moving both import and export cargo will recede,” Butler said during an April 19 event hosted by the Journal of Commerce. “I'm afraid that some folks in Congress believe that by mandating a particular outcome with respect for what gets put on the ship in times of crisis, that they're somehow going to change the trade imbalance. And if that's their expectation, I'm afraid they’re going to be disappointed.”
Karyn Booth, a transportation lawyer with Thompson Hine, said the goal of both the House and Senate ocean shipping reform bills is to define what shipping practices should be considered unreasonable and to provide the FMC with more enforcement authority to “influence behavior in advance.” The bills could also lead to more “efficient” dispute resolution if all parties have a clearer idea about “this reasonableness question,” Booth said.
“Shippers don't want to have these disputes. They don't want to have to hire lawyers. They don't want this distraction,” she said. “They're trying to get product moved as efficiently as possible.”
Regardless of what provisions are included in the final ocean shipping reform bill after reconciliation (see 2204050050 and 2204070041), it’s “clear” the FMC is going to issue more rules on detention and demurrage practices, Butler said. Carriers hope the FMC hits the “right balance” and doesn’t cater too heavily toward shippers by disincentivizing detention and demurrage fees altogether, he said.
“I think everybody agrees some additional clarity around detention and demurrage would probably improve shipper-carrier relationships,” Butler said. “But if we swing the pendulum so far that we lose detention and demurrage as tools to keep cargo moving, then we all pay the price.”
Booth said she doesn’t believe that concern is “realistic,” partly because shippers recognize the value of the fee to help move containers. She said shippers hope the final version of the bill ensures the charges are imposed “consistent with the law” and aren’t unreasonable.
“It's not going to go away,” Booth said. “Shippers are not here to say, ‘We don't ever want to pay demurrage and detention,’ because they need to get their cargo out of the ports and certainly don't want the ports and terminals to be used as storage.”
Whichever provisions make it into law, the FMC “has the capability to handle the issues in OSRA as currently drafted,” Booth said. She pointed to the fact that the commission did a “darn good job” on its 2019 interpretive guidance on detention and demurrage charges (see 1909130026). “I think they could do that here as well,” Booth said, adding that the commission will “benefit” from significant input from both carriers and shippers.
She did say, however, that the FMC may need more staff or resources to enforce any authorities. “The FMC can handle this,” Booth said. “I think that they may want more staff and budgeting for it, but I believe they're in the best position to advocate for that.”