House Bill to Address Unfair Ocean Carrier Practices Receives Broad Exporter Support

More than 80 agricultural trade groups are endorsing a bipartisan House bill they say would address unreasonable detention and demurrage practices and ocean carriers’ refusal to carry U.S. exports in favor of imports. The Ocean Shipping Reform Act of 2021, introduced Aug. 10 by Reps. John Garamendi, D-Calif., and Dusty Johnson, R-S.D., aims to support the “growth” of exporters by holding carriers accountable for their unfair fees and declined export bookings, according to a fact sheet from the Agriculture Transportation Coalition.

In a letter to the lawmakers, the trade groups said an average of 22% of U.S. agricultural exports can’t be delivered because of high ocean carrier rates, carriers declining to carry the cargo, unreasonable fees and other practices. “There is nothing we produce in agriculture and forest products in this country that cannot be sourced in some other country,” said the letter, signed by AgTC, the U.S. Dairy Export Council, the U.S. Meat Export Federation, the National Pork Producers Council, the American Farm Bureau Federation and others. “If we cannot deliver, affordably and dependably, our foreign customers will find alternatives to our exports.”

The public endorsement of the House bill comes about two weeks after the Federal Maritime Commission issued a series of long-awaited recommendations to address issues in the international freight delivery system, including detention and demurrage fees, that have been exacerbated by the COVID-19 pandemic (see 2107290021). Although the recommendations called for “double reparations” for shippers that prove carriers imposed unfair fees and would designate more staff to handle export-related issues, it remains unclear whether those measures will convince carriers to treat export and import bookings equally. Nearly 300 agricultural groups and companies have urged the Biden administration to intervene, as carriers continue sending empty containers back overseas rather than filling them with exports because the carriers can charge higher rates for imports (see 2104280031).

Although agricultural exporters praised the bill, it wasn’t universally applauded. The World Shipping Council, which represents Hapag-Lloyd, Cosco Shipping, Maersk and other ocean carriers, said the legislation includes “serious due process of law concerns” and advocates solely for agricultural exporter interests. “The suggestion that ocean carriers are solely responsible for the current supply chain congestion is simply untrue,” the WSC said Aug. 10. “It is unrealistic, inequitable, and unproductive to try to address these supply chain-wide challenges by regulating only one class of supply chain participants -- ocean carriers.”

The House bill includes a provision that says carriers may not “unreasonably” decline export cargo if the exports “can be loaded safely, can arrive timely to be loaded, and is destined to a location to which the carrier is already scheduled,” AgTC said. It also includes measures to try to hold carriers more accountable, including a requirement that carriers submit quarterly reports on total import and export tonnage per vessel, which would show whether they are “carrying the export cargo as required.”

Another provision would mandate an FMC rulemaking to require carriers to provide notice of cargo availability, container return locations and “adequate notice of dates when the export container must arrive at the terminal.” It would also “require carriers, under defined conditions, to accept export cargo bookings.”

Other measures would address unreasonable fees, including one provision that would require carriers to accompany each charge with a certification that it complies with the FMC’s May 2020 rule on detention and demurrage fees, which industry has complained is not being followed (see 2009140045). Under the legislation, the FMC could investigate, order refunds or impose penalties for false certifications. The FMC in July began an audit of ocean carriers’ compliance with the rule (see 2107210010).

The bill also includes provisions against carriers restricting access to containers, chassis and other “equipment that creates inefficiencies,” and would require carriers to provide shippers “specific information” to support each demurrage or detention charge and provide a “reasonable dispute resolution process.”

The bill received support from a wide range of agricultural export sectors. Nancy Foster, president of the North American Renderers Association, said in a statement that many U.S. animal protein exports have faced delays and rising shipping costs, especially for shipments destined for Asia, due to ocean carrier issues. Dave Puglia, president of Western Growers, said farmers are “still pressing to regain lost overseas markets after years of trade upheaval” and shipping issues are “diminishing our opportunity to so.” Other representatives from the U.S. soybean, alcohol, potato and fruit industries said they have experienced similar problems.

“We are supportive of this legislation,” said William Allen, president of the American Cotton Shippers Association, “and believe that it will systemically enhance integrity and performance throughout the intermodal supply chain, increasing the competitiveness of U.S. agricultural exports.”

The WSC disagreed. The representative for the carrier industry called the bill unfair and said efforts to regulate ocean carriers are “doomed to fail.” Provisions in the legislation would require ocean carriers to “guarantee the performance of other parties over whom they have no control, the WSC said, such as ensuring chassis and trucks are available from third-party providers. It would also infringe upon the due process rights of carriers by requiring them, “under threat of penalty,” to “make certifications of fact on why customers do not return equipment on time, in situations in which the facts are not, and in most cases cannot be known to the carriers.”

“This approach will not improve supply chain performance, and it risks undermining the regulatory and market structure that has served the nation’s international trade well for many decades,” the WSC said. “It is possible to make the situation worse, and this bill would do just that.”

The council said Congress should “pause and reflect” on whether the bill would encourage trade partners to pursue similar regulations and urged lawmakers to allow “commercial solutions and market forces to mitigate and balance” the supply chain issues. It also said the FMC should investigate and enforce any laws regarding unreasonable practices.

“Starting a protectionist race to the bottom in the regulation of international ocean transportation is not a winning strategy for the U.S. economy,” the WSC said. “For U.S. consumers and businesses, today’s bill runs a serious risk of making transportation contracts less flexible, slowing cargo velocity, and making all imported and exported goods more expensive.”