Carriers Say House Shipping Reform Bill Includes 'Troubling' Export Measures

Exporters for months have complained that carriers send empty containers back overseas rather than filling them with exports because the carriers can charge higher rates for imports (see 2104280031). Shippers say the House version of the Ocean Shipping Reform Act (OSRA) could hold carriers accountable for this practice, although it remains unclear if the provision will make it into the final version of the bill after reconciliation (see 2204050050 and 2204070041).

Butler, the World Shipping Council's CEO, said carriers have several objections to the proposed legislation, including two in the House bill that he said are contradictory. While one provision states it’s the “carrier's duty to provide all equipment and facilities,” including empty containers, to importers and exporters that need them, Butler said another provision suggests carriers should prioritize carrying exports “over repositioning empty equipment.” He said he doesn’t understand how carriers can comply with both provisions, particularly because they have to quickly move empty containers “to keep the ports from completely filling up.”

“You have a situation where the carrier, in a time of congestion, cannot possibly at the same time fulfill both of those mandates,” Butler said during an April 19 event hosted by the Journal of Commerce. “Basically the instruction is: Tell these guys to do the impossible and fine them when they can’t.” He called the provisions “quite troubling.”

Booth, a Thompson Hine lawyer and counsel for the National Industrial Transportation League, said shippers have a “different interpretation” of the provisions, adding that the House bill includes specific language to describe when carriers can be found at fault.

Booth said the provision isn’t “an absolutism” that states carriers must prioritize space and equipment for exporters over importers. “I don't really read the proposal as doing that in the House bill,” she said. The House bill “is trying to call attention to potential unreasonable practices related to exports,” including those specifically “subject to an unreasonable declination, not any declination.”

While the Federal Maritime Commission will have to “flesh out” the definition of reasonableness, Booth said she doesn’t expect it to result in “outright favoritism of exports over imports.” She also stressed that exporters, like carriers, don’t want the government making decisions on “every box that a carrier can load.”

“I think it's an issue of: Are so many empties getting moved back to Asia to maximize the higher freight rates on imports, is that happening to such a degree that it could be discriminating against exports in an unfair way?” Booth said. “There needs to be more oversight into the issue in question, and that's what I think the House is trying to address.”

But carriers believe the bill may lead to too much oversight and result in an overcorrection of a temporary problem caused by the COVID-19 pandemic, Butler said. Before the pandemic, he 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.

“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. “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.”

Booth said the goal of both the House and Senate 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 bill, 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 bill's final version 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. 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 said, 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.”