On June 16, 2022, US President Joe Biden signed the bipartisan Ocean Reform Act – a significant revision to address the high detention and demurrage charged by ocean carriers and terminals.
The Federal Maritime Commission (FMC) now has more tools so that it can move forward on recommendations made by FMC Commissioner Rebecca Dye, who has been leading the investigation into supply chain challenges linked with the Covid-19 pandemic.
During the investigation, importers and exporters highlighted two recurring pandemic-related concerns: the high cost of shipping cargo, and excessive demurrage and detention charges. You can read the full list of recommendations here.
According to Noatum Logistics, the bill allocates the FMC up to USD164 million through fiscal year 2025. This will allow the FMC to hire more staff, including another administrative law judge, in order to increase monitoring of international ocean transportation and initiate rule-making regarding fair export practices.
Dan Maffei, chairman of the FMC, said: “I am bullish on the bill restoring credibility to the supply chain… In terms of detention and demurrage (D&D) charges, [the bill] gives us the authority we need. We don’t want to go too far. Not all D&D charges are unreasonable.”
The action has been met with disdain by the World Shipping Council, which said: “Recent weeks have seen several attempts to demonise ocean carriers by deploying ‘us versus them’ rhetoric. That is not only inaccurate but dangerous, as it undermines the ability to understand and work towards solving the root causes of America’s supply chain problems. Ocean carriers are the longest link in the global supply chain that delivers vital supplies to American business, government and consumers. The supply chain is not foreign; it is global.
“It is understandable that regulators ask questions with the current market conditions. Liner shipping is a very closely monitored industry, and carriers have answered and will continue to answer those questions. But the fact is that ocean carriers actively compete against one another in the global marketplace, including on the shipping lanes most relevant for US trade. The expert US regulator that oversees international shipping – FMC – just completed a two-year investigation into the international ocean supply chain, finding that ocean carrier competition is ‘vigorous’ and that while ocean freight prices are high, they are ‘exacerbated by the pandemic, an unexpected and unprecedent surge in consumer spending particularly in the USA, and supply chain congestion, and are the product of the market forces of supply and demand.’
“The FMC also stated that ‘competition officials of the European Union, China, and the FMC regularly discuss our ocean shipping markets and we have, to date, observed no indication that the current prices for liner shipping are a result of collusive or illegal conduct on the part of the major ocean carriers in our markets.’”