The U.S. Congress recently introduced the Ocean Shipping Reform Act of 2021. The purpose of the new bill is to alleviate congestion at marine terminals by addressing issues with detention and demurrage charges.
Specifically, the bill will make the Federal Maritime Commission’s recent ruling, which prohibits carriers from charging penalties for dwell times when circumstances to retrieve containers are beyond the control of importers, exporters and truckers, into federal law. The full ruling can be found here.
According to Congressman Dusty Johnson’s website, the proposed legislation will also:
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 or marine terminal operator.
Prohibit ocean carriers from declining opportunities for U.S. exports unreasonably, as determined by the FMC in new required 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.
Authorizes the FMC to self-initiate investigations of ocean common carrier’s business practices and apply enforcement measures, as appropriate.
“Government agencies may mean well with this proposed legislation, but it does not address the core problem,” said Peter Hsieh, Vice President of Sales & Marketing for OEC Group’s Northeast Region. “The main issue is not just increased dwell times, which are substantial, but also a lack of equipment, labor shortages, travel restrictions and high consumer demand. All of these issues have played a significant role in our current supply chain challenges.”
Many industry experts believe that this legislation could aggravate congestion further. Detention and demurrage fees were created to cover the cost of storing containers, offset the cost of that storage space being unavailable for additional freight, and generate an added incentive for shippers to pick their goods up promptly. Deleting these penalties may encourage importers to keep their goods at the ports until they are ready to retrieve them, thus taking up vital space for new containers trying to enter the country.
“Carriers are using these fees to encourage shippers to pick up their freight so that ports remain fluid and give others an opportunity to import products,” said Happy Chau, Director of Sales for OEC Group’s Northeast Region. “The bottom line is, the only way out of this situation is to get freight moving more quickly and at a more consistent clip.”